ROYALTY AND RELEASE AGREEMENT
This Royalty and Release Agreement (this "Agreement") is by and between
Prime Medical Services, Inc., a Delaware corporation ("PMSI"), KCPR, LLC, a
Texas limited liability Company ("Prime"), Vision Correction Centers of Kansas
City, P.C., a Missouri professional corporation ("VCC"), Kansas City Laser
Vision Correction Centers, L.L.C., a Missouri limited liability company ("KCL"),
Prime Refractive - Kansas City, L.L.C., a Delaware limited liability company
("Newco"), and Xxxxxxx Xxxxx, M.D., an individual residing in Kansas City,
Missouri ("Couch"), and shall be effective as of October 1, 2001 (the "Effective
Date").
Preliminary Statements
PMSI, Prime RVC, Inc. a Delaware corporation and predecessor in
interest to Prime ("RVC"), VCC, KCL, Couch and Newco have previously entered
into a Contribution Agreement (the "Contribution Agreement"), dated as of
September 1, 2000 (collectively, with substitution of Prime as a permitted
assignee of Prime RVC, Inc.'s interest, the "Original Parties").
Concurrent with the execution of this Agreement, the Original Parties
are executing a certain Dissolution Agreement pursuant to which Newco is to be
dissolved and VCC is to be distributed all of the assets upon the dissolution of
Newco other than a Moria Carrazio-Barraquer Automated Keratome and related
equipment (the "Dissolution Agreement").
In connection with the execution of the Dissolution Agreement, Couch,
VCC, KCL and Newco (collectively, the "Couch Parties") wish to be released from
all of the restrictive covenants and other obligations imposed upon any of them
under the Contribution Agreement and any other document or agreement executed in
connection with the Contribution Agreement (including the Contribution Agreement
but excluding the Dissolution Agreement, this Agreement, and any other documents
or agreements executed in connection with the Dissolution Agreement or this
Agreement, the "Original Transaction Documents").
PMSI and Prime are willing to release the Couch Parties upon the terms
and conditions stated in this Agreement.
Statement of Agreement
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
Section 1. Release; Termination of Original Transaction Documents. Each
of the Original Parties agrees that all of the Original parties are hereby
unconditionally and irrevocably released from any and all obligations that
either of them have (either now or in the future) under or arising out of the
Contribution Agreement and other Original Transaction Documents; provided,
however, this release does not limit the indemnification obligations contained
in the Dissolution Agreement. Each Original Party agrees that the Contribution
Agreement and each other Transaction document is hereby terminated. Each
Original Party agrees to take such further actions as are reasonably necessary
to give full effect to the provisions of this paragraph.
Section 2. Royalty. In partial consideration of the release in Section
1 above, Couch agrees to pay to RVC a per procedure royalty payment for
Refractive Surgery procedures (as defined in the Contribution Agreement)
performed by or at the direction of Couch on or prior to August 31, 2005,
regardless of where the procedure is performed and regardless of whose equipment
or facilities are used to perform the procedure ("Procedures"). Without limiting
the generality of the preceding sentence, Couch further agrees that all
procedures performed at VCC's or KCL's location(s) or using VCC's or KCL's
assets (including any current or future locations or assets held by VCC or KCL,
or their successors in interest, but not including any unrelated third party
purchaser of assets), are deemed to be done by or at the direction of Couch
regardless of who performs the procedure. As used herein, "Annual Royalty
Period" shall mean each 12-month period ending on September 30th of each year
through and including September 30, 2004, and the 11-month period ending on
August 31, 2005. Royalty calculations with respect to each Annual Royalty Period
are independent of calculations and Procedure information for other Annual
Royalty Periods. The royalty payment for each Annual Royalty Period shall be
calculated on the last day of the respective Annual Royalty Period and shall
equal $100 for each Procedure in excess of the first 3,600 Procedures performed
during the respective Annual Royalty Period. Each royalty payment shall be paid
to Prime not later than the 15th calendar day of the month immediately following
the date on which the royalty payment is required to be calculated. The parties
hereto agree that that once royalties actually paid under this Agreement total
$4,500,000 in the aggregate, no further royalties shall accrue or be payable
under this Agreement. In addition, and notwithstanding any contrary provision of
this Agreement, all Investments made by the Couch Parties to VCC shall be repaid
out of the royalties otherwise payable to RVC hereunder, before any royalties
are paid to RVC. The term "Investments" refers to all investments made by the
Couch Parties to sustain the business of VCC, including but not limited to (i)
investments to pay off the debts of Newco or VCC existing at or prior to the
closing, (ii) investments to purchase new equipment to replace old or obsolete
equipment, and (iii) investments when VCC's cash is otherwise inadequate to meet
working capital needs, and (iv) investments to open up a new office; provided,
however, Investments shall be net of all proceeds from operation of the business
(excluding the customary professional fee paid to Couch) that are distributed to
Couch or his affiliates (other than VCC).
Section 3. Information and Audit Rights. Couch agrees that each royalty
payment shall be accompanied by: (a) reasonably detailed calculations used in
determining the amount of the royalty payment, including, without limitation,
the total number of Procedures for the respective period; (b) other than the
3,600 Procedures per year exclusion described in Section 2, a description
(including the number) of any Refractive Surgery procedures that were not
included as "Procedures" in calculating royalty payments for which Couch
received any direct or indirect compensation from any source; and (c) a
certificate executed by Couch warranting that, to the best of Couch's knowledge,
the calculations and information provided pursuant to this Section are accurate
and complete. In addition, Couch agrees to permit RVC, upon at least ten (10)
days advance written notice, to inspect the books and records of any of the
Couch Parties to the extent necessary to verify the accuracy and completeness of
the royalty payment calculations, so long as the confidentiality of patient
records is not compromised.
Section 4. Guaranty by VCC and KCL. KCL and VCC, jointly and severally,
hereby unconditionally and irrevocably guarantee each of the payment and
performance obligations of Couch under this Agreement. Without limiting the
foregoing, each of KCL and VCC agrees that if Couch shall default in any
obligation to pay RVC any amount then due and payable under this Agreement, KCL
and VCC shall immediately pay such amount to RVC. Each of KCL and VCC hereby
agrees not to require RVC to proceed against Couch or any other person or to
pursue any other remedy before proceeding against KCL or VCC under this
guaranty.
Section 5. Further Assurances. Each party hereto agrees that it shall
take such further actions as are necessary to cause itself and each other party
under its control to perform all of their respective obligations under this
Agreement.
Section 6. Existence and Authority. Each of the parties to this
Agreement represents to the other parties that it has all necessary power and
authority to enter into and perform this Agreement, and that, if it is an
entity, it is duly organized, validly existing and in good standing under the
laws of the state in which it is formed. Each of the Original Parties agrees
that its execution and delivery of this Agreement shall be deemed its consent to
this Agreement, each of the agreements or instruments executed in connection
herewith, and all of the transactions contemplated hereby and thereby.
Section 7. Confidentiality. Each of the Original Parties agrees that
the terms and existence of this Agreement and each other agreement or instrument
executed in connection herewith are confidential. Each of the Original Parties
agrees that it will not, directly or indirectly, disclose such confidential
information to any other person (other than professional advisors, prospective
lenders, investors, employers or employees, or immediate family members who
agree in advance to maintain the confidentiality thereof) without the prior
written consent of each of the other Original Parties. Each Original Party
agrees that a violation on its part of this Section will cause the other parties
hereto 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.
Section 8. Miscellaneous.
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(a) Assignment. No party to this Agreement may assign this
Agreement or any or all of its rights or obligations hereunder without first
obtaining the written consent of all other parties hereto. Any assignment in
violation of the foregoing shall be null and void. Subject to the preceding
sentences of this Section, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns. This
Agreement shall not be deemed to confer upon any person not a party to this
Agreement any rights or remedies hereunder.
(b) Amendments. This Agreement cannot be modified or amended
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except by a written agreement executed by all parties hereto.
(c) Waiver of Provisions; Remedies Cumulative. Any waiver of
any term or condition of this Agreement must be in writing, and signed by all of
the parties hereto. The waiver of any term or condition hereof shall not be
construed as either a continuing waiver with respect to the term or condition
waived, or a waiver of any other term or condition hereof. No party hereto shall
by any act (except by written instrument pursuant to this Section), delay,
indulgence, omission or otherwise be deemed to have waived any right, power,
privilege or remedy hereunder or to have acquiesced in any default in or breach
of any of the terms and conditions hereof. No failure to exercise, nor any delay
in exercising, on the part of any party hereto, any right, power, privilege or
remedy hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power, privilege or remedy hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power,
privilege or remedy. No remedy set forth in this Agreement or otherwise
conferred upon or reserved to any party shall be considered exclusive of any
other remedy available to any party, but the same shall be distinct, separate
and cumulative and may be exercised from time to time as often as occasion may
arise or as may be deemed expedient.
(d) Entire Agreement; Other Agreements. This Agreement and the
Dissolution Agreement (a) constitute the entire agreement of the parties hereto
regarding the subject matter hereof, and (b) supersede all prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the subject matter hereof. Each of the parties hereto agrees that any material
breach by it of the provisions of this Agreement or the Dissolution Agreement
shall also be deemed a material breach by it of the other of these agreements to
which it is a party. PMSI, RVC and Prime acknowledge that, except for payments
expressly required under the Dissolution Agreement or this Agreement, none of
the Couch Parties has any liability to make payments to PMSI, RVC or Prime.
(e) Severability; Illegality. In the event any state or
federal laws or regulations, now existing or enacted or promulgated after the
Effective Date, are interpreted by judicial decision, a regulatory agency or
legal counsel in such a manner as to indicate that any provision hereof may be
illegal, invalid or unenforceable, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision that (a) preserves the underlying economic and financial arrangements
between the parties hereto without substantial economic detriment to any
particular party and (b) is as similar in effect to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
No party to this Agreement shall claim or assert illegality as a defense to the
enforcement of this Agreement or any provision hereof; instead, any such
purported illegality shall be resolved pursuant to the terms of this Section.
(f) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF MISSOURI. ANY CONTROVERSY BETWEEN THE PARTIES
REGARDING THIS AGREEMENT OR ANY OTHER AGREEMENT OR INSTRUMENT EXECUTED IN
CONNECTION WITH THIS AGREEMENT, ANY CLAIMS ARSING OUT OF ANY BREACH OR ALLEGED
BREACH OF THIS AGREEMENT OR SUCH OTHER AGREEMENT OR INSTRUMENT, AND ANY CLAIMS
ARISING OUT OF THE RELATIONSHIP BETWEEN THE PARTIES CREATED HEREUNDER SHALL BE
SUBMITTED TO BINDING ARBITRATION BY ALL PARTIES INVOLVED. THE ARBITRATION
PROCEEDINGS SHALL BE CONDUCTED BY A SINGLE ARBITRATOR PURSUANT TO THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION (SUBJECT TO THE
EXPRESS PROVISIONS OF THIS SECTION). THE ARBITRATION SHALL BE CONDUCTED IN
KANSAS CITY, MISSOURI. THE ARBITRATOR SHALL NOT HAVE THE RIGHT TO AWARD PUNITIVE
OR EXEMPLARY DAMAGES AGAINST EITHER PARTY.
(g) Notice. Whenever this Agreement requires or permits any
notice, request, or demand from one party to another, the notice, request, or
demand must be given in accordance with the procedures set forth in Section 10.6
of the Contribution Agreement.
(h) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
[Signature page follows]
S-1
SIGNATURE PAGE TO
ROYALTY AND RELEASE 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.
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Xxxxxx Xxxxxxxx, Senior Vice President
RVC: Prime RVC, Inc.
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Xxxxxx Xxxxxxxx, Senior Vice President
Prime: KCPR, LLC
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Xxxxxx Xxxxxxxx, Senior Vice President
Couch: _______________________________________________
Xxxxxxx Xxxxx, M.D.
VCC: Vision Correction Centers of Kansas City, P.C.
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Xxxxxxx Xxxxx, M.D., President
KCL: Kansas City Laser Vision Correction Centers, L.L.C.
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Xxxxxxx Xxxxx, M.D., President
Newco: Prime Refractive - Kansas City, L.L.C.
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Xxxxxxx Xxxxx, M.D., as manager of Newco and
individually as a member of Newco
