PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is made and entered into as
of this 31st day of May, 2002, (the "Effective Date") by and between Prime
Medical Manufacturing, LLC, a Delaware limited liability company ("Purchaser"),
Xxxxxxxx X. Xxxxxxxx, an individual ("Sodomire"), and Xxxxxx X. Xxxxxxx, an
individual ("Xxxxxxx"), (together with Sodomire, the "Sellers"), and Prime
Medical Services, Inc., a Delaware corporation ("Prime").
W I T N E S S E T H:
- - - - - - - - - -
For and in consideration of the mutual promises and covenants contained
in this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Sale of Membership Interests.
1.1 Membership Interests. Subject to the terms and conditions of this
Agreement, and in reliance on the representations and warranties of Prime, each
of the Sellers hereby sells to Purchaser, as of the Effective Date: (i) all
right, title and interest in or to any membership interest of AK Associates,
L.L.C., a Texas limited liability company (the "Company"), that is owned
(directly or indirectly) by such Seller, and (ii) any right, contingent or
otherwise, of such Seller to receive (either now or in the future) any
additional membership interest of the Company (collectively, the interest
described in clauses (i) and (ii) of this Section are hereinafter referred to as
the "Membership Interests").
1.2 Purchase Price. The price for the Membership Interests (the
"Purchase Price") shall be tendered by Prime and Purchaser on the execution and
delivery of this Agreement and consummation of the purchase and sale pursuant to
Section 1.1 (the "Closing"), and shall be comprised of and distributed as
follows: (i) One Million Eight Hundred Fifty Thousand Dollars ($1,850,000) in
cash or immediately available funds distributed one-half to each Seller upon the
Closing and (ii) two stock certificates, each representing, in aggregate,
364,075 shares of Prime's common stock, $0.01 par value (the "Prime Stock"),
issued one to Xxxxxxx and one to Sodomire and tendered by Prime to Xxxxxxx and
Sodomire within three business days of the Closing. The Sellers each hereby
agree and acknowledge that neither Purchaser nor Prime shall have any other
liability or obligation to ensure any division among the Sellers of proceeds
delivered hereunder.
Section 2. Representations and Warranties of Sellers. The Sellers,
jointly and severally, hereby represent and warrant to Purchaser and Prime that:
2.1 Authority. Xxxxxxx and Sodomire have all requisite power and
authority, to execute, deliver and perform this Agreement and any other
documents, instruments and transactions contemplated by this Agreement
(collectively, the "Documents"). This Agreement and the Documents have been and
will be duly and validly executed and delivered by the Sellers and this
Agreement and the Documents constitute valid and binding agreements of each of
the Sellers, enforceable against each Seller in accordance with their terms,
except to the extent such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights.
2.2 Ownership of the Membership Interests. To the actual knowledge of
each Seller, without due inquiry, the Membership Interests (together with all
membership interests of the Company held directly or indirectly by Prime)
constitute all of the membership interests of the Company, and there does not
exist any securities, warrants, options, or other rights that are exchangeable
or exercisable for, or convertible into, any membership interests of the
Company. Upon consummation of the transactions contemplated by this Agreement,
the Sellers shall not, directly or indirectly, own any Membership Interests.
Further, transfer of Membership Interests hereunder to Purchaser shall be made
free and clear of any and all liens, claims and encumbrances.
2.3 Financial Statements. The unaudited balance sheet and income
statement of the Company as of, and for the three month period ended, March 31,
2002 (the "Financial Statements") are attached hereto as Exhibit A. To the
actual knowledge of each Seller, without due inquiry, the Financial Statements
fairly present the financial position and results of operations of the Company
in all material respects as of, and for the three-month period ended, March 31,
2002. Except for liabilities disclosed in Schedule 2.3, liabilities incurred in
the ordinary course of business consistent with past practices, or liabilities
fully reflected by amount in the March 31, 2002 Financial Statements (including
any notes thereto), no Seller has any actual knowledge without due inquiry of
any claims, debts, liabilities, or obligations, whether known or unknown,
absolute, contingent or otherwise that have, or could reasonably be expected to
have, a material adverse effect on the Company or the Company's business, assets
or prospects taken as a whole (including, but not limited to, federal, state, or
local taxes for which any Seller has received verbal or written notice thereof,
and any liabilities arising from any pending or threatened litigation or civil,
criminal or regulatory proceeding involving or related to the Company, its
assets or business). To each Seller's actual knowledge without due inquiry,
except as set forth in Schedule 2.3 hereto, since March 31, 2002 there has been
no adverse change in the business, assets or prospects of the Company.
2.4 Conduct of Business; Certain Actions. Except as set forth on
Schedule 2.4 attached hereto, since March 31, 2002, to the actual knowledge
without due inquiry of the Sellers, the Company has conducted its business and
operations of the business in the ordinary course of business and consistent
with its past practices and has not (a) engaged in any action requiring consent
of the managers under either the Texas Limited Liability Company Act or the
Company's Regulations, (b) purchased or retired any indebtedness, or purchased,
retired, or redeemed any ownership interest from, any manager, member, officer,
employee or affiliate of the Company, or engaged in any other transaction that
involves or requires distributions of money or other assets from the Company to
any manager, member, officer, employee or affiliate of the Company if such other
transaction is not done in the ordinary course of business or is not consistent
with past practices of the Company, (c) increased the compensation of any
managers, members, officers, employees, agents, contractors, vendors or other
parties, except for increases made in the ordinary course of business and
consistent with the past practices of the Company, (d) made or committed to make
any capital expenditures, or incurred or committed to incur any debt or
obligation, exceeding $10,000 individually or $25,000 in the aggregate, except
in the ordinary course of business consistent with past practices, (e) except in
the ordinary course of business consistent with past practices, 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, (f) discharged or satisfied any lien or
encumbrance or paid any obligation or liability, absolute or contingent, other
than current liabilities incurred and paid in the ordinary course of business
consistent with past practices, (g) made or guaranteed any loans or advances to
any party whatsoever, (h) 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, (i) canceled,
waived, or released any of its debts, rights, or claims against third parties
other than settlement of accounts recorded in the ordinary course of business to
the extent such accounts are satisfied in accordance with their original terms,
(j) made or paid any severance or termination payment to any manager, member,
officer, employee, agent, contractor, vendor or consultant, (k) made any change
in its method of accounting, (l) made any investment or commitment therefor in
any person, business, corporation, association, partnership, limited liability
company, joint venture, trust, or other entity, (m) made, entered into, amended,
or terminated any written employment contract, created, made, amended, or
terminated any bonus, stock option, pension, retirement, profit sharing, or
other employee benefit plan or arrangement, or withdrawn from any
"multi-employer plan" (as defined in the Internal Revenue Code of 1986, as
amended (the "Code")) so as to create any liability under ERISA to any person or
entity, (n) amended, terminated or experienced a termination of any material
contract, material agreement, material lease, material franchise, or material
license to which it is a party, (o) made any distributions, in cash or in kind,
to its members, or to any person or entity related to or affiliated therewith,
in any capacity, except such distributions as are made in the ordinary course of
the Company's business consistent with past practices, (p) entered into any
contract, commitment, agreement, or understanding to do any acts described in
the foregoing clauses (a)-(o) of this Section, (q) suffered any material damage,
destruction, or loss (whether or not covered by insurance) to any assets, (r)
experienced any strike, slowdown, or demand for recognition by a labor
organization by or with respect to any of its employees, or (s) experienced or
effected any shutdown, slow-down, or cessation of any operations conducted by,
or constituting part of, it.
2.5 Investment Representations. Each Seller:
(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
Documents and the consummation of the transactions contemplated hereby and
thereby;
(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 the Prime Stock;
(c) Will acquire any Prime Stock for its own account for
investment and not with the view toward resale or redistribution in a manner
which would require registration under the Securities Act, the Texas Securities
Act, as amended, or the securities laws of any other state, and no Seller has
any reason to anticipate any change in its respective circumstances or other
particular occasion or event which would cause such Seller to sell its Prime
Stock, or any part thereof or interest therein, and such Seller has no present
intention of dividing the Prime Stock with others or reselling or otherwise
disposing of the Prime Stock 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 the other
Documents, and in making the investment decisions associated therewith, has
neither received nor relied on any representations or warranties from Purchaser,
Prime, or the officers, directors, shareholders, employees, partners, managers,
members, agents, consultants, personnel or similarly related parties of any of
the foregoing, other than those representations and warranties expressly set
forth in this Agreement;
(e) Is able to bear the economic risk of an investment in the Prime
Stock and 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 Prime Stock has 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 Prime Stock involves a high degree of risk,
and that the Prime Stock may be or become an illiquid investment.
2.6 Restricted Securities. The Sellers understand that the Prime Stock
may not be sold, transferred or otherwise disposed of without registration under
the Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Prime Stock or an available
exemption from registration under the Securities Act, the Prime Stock must be
held indefinitely.
Section 3. Representations of Prime. Prime represents and warrants
to the Sellers as follows:
3.1 Authority. Each of Prime and Purchaser has full legal capacity to
enter into and perform this Agreement and the other Documents to which it is a
party, and this Agreement and such other Documents have been duly executed and
delivered by it. This Agreement and the other Documents constitute valid and
binding obligations of each of Prime and Purchaser, enforceable in accordance
with their respective terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally.
3.2 Organization and Standing. Each of Prime and Purchaser is validly
existing and in good standing under the laws of the jurisdiction of its
formation and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Each of
Prime and Purchaser is duly qualified or registered as a foreign corporation to
transact business under the laws of, and in each jurisdiction where, the
character of its activities or the location of the properties owned or leased by
it requires such qualification or registration, except where the failure to be
so duly qualified or licensed and in good standing would not have a Material
Adverse Effect. For the purposes of this Section 3, "Material Adverse Effect"
shall mean an effect on the condition (financial or otherwise), properties,
assets, liabilities, rights, obligations, operations, business, or prospects
which effect, in the aggregate, could reasonably be expected to be materially
adverse to such condition, properties, assets, liabilities, rights, obligations,
operations, business, or prospects of Prime, taken as a whole.
3.3 Governmental Approvals. No consent from or with any governmental
authority on the part of Prime or Purchaser is required in connection with the
execution or delivery by Prime or Purchaser of this Agreement or the
consummation by Prime or Purchaser of the transactions contemplated hereby other
than (i) filings with the Securities and Exchange Commission (the "SEC"), state
securities laws administrators and the National Association of Securities
Dealers, (ii) consents from or with governmental authorities, (iii) filings
under the HSR Act, and (iv) those consents that, if they were not obtained or
made, do not or would not reasonably be expected to have a Material Adverse
Effect.
3.4 Ownership of the Company. Other than membership interests owned,
directly or indirectly, by Prime and Sellers, neither Prime nor Purchaser has
actual knowledge, without due inquiry, of the existence of any membership
interests of the Company or any securities, warrants, options, or other rights
that are exchangeable or exercisable for, or convertible into, any membership
interests of the Company.
3.5 Financial Statements. To the actual knowledge of Prime, without due
inquiry, the Financial Statements fairly present the financial position and
results of operations of the Company in all material respects as of, and for the
three-month period ended, March 31, 2002. Except for liabilities disclosed in
Schedule 2.3, liabilities incurred in the ordinary course of business consistent
with past practices, or liabilities fully reflected by amount in the March 31,
2002 Financial Statements (including any notes thereto), Prime does not have any
actual knowledge without due inquiry of any claims, debts, liabilities, or
obligations, whether known or unknown, absolute, contingent or otherwise that
have, or could reasonably be expected to have, a material adverse effect on the
Company or the Company's business, assets or prospects taken as a whole
(including, but not limited to, federal, state, or local taxes for which Prime
has received verbal or written notice thereof, and any liabilities arising from
any pending or threatened litigation or civil, criminal or regulatory proceeding
involving or related to the Company, its assets or business). To Prime's actual
knowledge without due inquiry, except as set forth in Schedule 2.3 hereto, since
March 31, 2002 there has been no adverse change in the business, assets or
prospects of the Company.
3.6 Conduct of Business; Certain Actions. Except as set forth on
Schedule 2.4 attached hereto, since March 31, 2002, to the actual knowledge
without due inquiry of Prime, the Company has conducted its business and
operations of the business in the ordinary course of business and consistent
with its past practices and has not (a) engaged in any action requiring consent
of the managers under either the Texas Limited Liability Company Act or the
Company's Regulations, (b) purchased or retired any indebtedness, or purchased,
retired, or redeemed any ownership interest from, any manager, member, officer,
employee or affiliate of the Company, or engaged in any other transaction that
involves or requires distributions of money or other assets from the Company to
any manager, member, officer, employee or affiliate of the Company if such other
transaction is not done in the ordinary course of business or is not consistent
with past practices of the Company, (c) increased the compensation of any
managers, members, officers, employees, agents, contractors, vendors or other
parties, except for increases made in the ordinary course of business and
consistent with the past practices of the Company, (d) made or committed to make
any capital expenditures, or incurred or committed to incur any debt or
obligation, exceeding $10,000 individually or $25,000 in the aggregate, except
in the ordinary course of business consistent with past practices, (e) except in
the ordinary course of business consistent with past practices, 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, (f) discharged or satisfied any lien or
encumbrance or paid any obligation or liability, absolute or contingent, other
than current liabilities incurred and paid in the ordinary course of business
consistent with past practices, (g) made or guaranteed any loans or advances to
any party whatsoever, (h) 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, (i) canceled,
waived, or released any of its debts, rights, or claims against third parties
other than settlement of accounts recorded in the ordinary course of business to
the extent such accounts are satisfied in accordance with their original terms,
(j) made or paid any severance or termination payment to any manager, member,
officer, employee, agent, contractor, vendor or consultant, (k) made any change
in its method of accounting, (l) made any investment or commitment therefor in
any person, business, corporation, association, partnership, limited liability
company, joint venture, trust, or other entity, (m) made, entered into, amended,
or terminated any written employment contract, created, made, amended, or
terminated any bonus, stock option, pension, retirement, profit sharing, or
other employee benefit plan or arrangement, or withdrawn from any
"multi-employer plan" (as defined in the Internal Revenue Code of 1986, as
amended (the "Code")) so as to create any liability under ERISA to any person or
entity, (n) amended, terminated or experienced a termination of any material
contract, material agreement, material lease, material franchise, or material
license to which it is a party, (o) made any distributions, in cash or in kind,
to its members, or to any person or entity related to or affiliated therewith,
in any capacity, except such distributions as are made in the ordinary course of
the Company's business consistent with past practices, (p) entered into any
contract, commitment, agreement, or understanding to do any acts described in
the foregoing clauses (a)-(o) of this Section, (q) suffered any material damage,
destruction, or loss (whether or not covered by insurance) to any assets, (r)
experienced any strike, slowdown, or demand for recognition by a labor
organization by or with respect to any of its employees, or (s) experienced or
effected any shutdown, slow-down, or cessation of any operations conducted by,
or constituting part of, it.
3.7 No Knowledge of Breach. Prime does not have any actual knowledge,
without due inquiry, of any facts or circumstances which, if known by the
Sellers, would constitute a breach by the Sellers of their representations and
warranties given under Section 2.2, Section 2.3 and Section 2.4.
Section 4. Covenants.
4.1 Deliveries at Closing.
(a) Xxxxxxx shall deliver to Purchaser an executed employment
agreement in substantially the form attached hereto as Exhibit B.
(b) Sodomire shall deliver to Purchaser an executed employment
agreement in substantially the form attached hereto as Exhibit C.
(c) The Sellers shall execute and deliver to Purchaser an
amendment to the Regulations of the Company in substantially the form attached
hereto as Exhibit D.
(d) Purchaser shall deliver to the Sellers One Million Eight
Hundred Fifty Thousand Dollars ($1,850,000).
4.2 Put Option. Each of Xxxxxxx and Sodomire shall have a one-time
option to require that Prime repurchase all or any portion of the Prime Stock
distributed to him pursuant to Section 1.2 for a one time payment equal to the
number of shares being repurchased multiplied by $7.05 per share (the "Put
Option"), payable in cash or other immediately available funds within ten
business days of the date that notice of exercise is received by Prime . In
order to exercise the Put Option, the Sellers must (i) deliver to Prime an
irrevocable written notice prior to July 31, 2002 and (ii) upon tender by Prime
of the purchase price, deliver to Prime any and all certificates representing
the repurchased Prime Stock and all such other documents or transfer instruments
that Prime may reasonably require. Each of Xxxxxxx and Sodomire acknowledges and
agrees that his option under this Section may only be exercised one time, may
not be divided or assigned, and may not be exercised with respect to shares of
Prime Stock he receives from the other of Xxxxxxx or Sodomire.
4.3 Transfer Restrictions; Legend Certificates.
(a) No Seller shall transfer any Prime Stock (or interest therein)
for a period of one (1) year following the Effective Date, and shall not
thereafter transfer any Prime Stock if such transfer would constitute a
violation of any federal or state securities or "blue sky" laws. Any attempt to
transfer any Prime Stock (or interest therein) not in accordance with this
Section shall be null and void and neither Prime nor any transfer agent of such
Prime Stock shall transfer upon the books of Prime any Prime Stock to any person
unless such transfer or attempted transfer is permitted by this Section. Each
Seller acknowledges that it has been advised of the promulgation of Rule 144 by
the Securities and Exchange Commission (the "Commission") under the Securities
Act which permits only limited resales of securities purchased in private
placements subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
issuer, the resale occurring not less than one (1) year after a party has
purchased and paid for the security to be sold, the sale being through a broker
in a "broker's transaction," and the number of shares being sold during any
period not exceeding specified limitations. Each Seller acknowledges and
understands that (1) Prime may not at a given time in the future be satisfying
the current public information requirement of Rule 144 even if the one year
minimum holding period has been satisfied; and (2) although Rule 144 is not the
exclusive means provided for the sale of the Prime Stock, the staff of the
Securities and Exchange Commission has expressed its opinion that persons
proposing to sell securities received in a private placement other than in a
registered offering or pursuant to Rule 144 will have a substantial burden of
proof in establishing that an exemption from registration is available. Each
Seller further agrees that Prime may condition any transfer of the Prime Stock
out of such Seller's name only when any request for transfer is accompanied by
an opinion of counsel acceptable in form and substance to Prime's counsel to the
effect that the proposed transfer results in no violation of the Securities Act,
or any other applicable securities laws. Each Seller agrees that a legend to
this effect shall be placed upon each certificate representing the Prime Stock.
Prime agrees to reasonably cooperate promptly without delay in providing any
information or documentation that it needs to provide to a Seller (including,
without limitation, the necessary form of legal opinion) to enable that Seller
to sell its Prime Stock pursuant to a transaction otherwise permissible under
Rule 144. Prime agrees that its cooperation pursuant to the immediately
preceding sentence shall be at its sole cost and expense as long as the
requested activities undertaken are consistent with those customarily undertaken
by other issuers in similar circumstances.
(b) Each stock certificate representing Prime Stock shall be
imprinted with legends substantially in the following form:
The shares this certificate represents have not been registered
under the Securities Act. Such shares have been acquired for investment
purposes and may not be offered for sale, sold, delivered after sale,
transferred, pledged, or hypothecated in the absence of an effective
Registration Statement filed by the issuer with the Securities and
Exchange Commission covering such shares under the Securities Act or
an opinion of counsel satisfactory to the issuer that such registration
is not required.
4.4 Piggyback Registration Rights.
(a) Definitions. As used in this Section:
(i) "Prime Insiders" shall mean any director, officer,
employee, affiliate, agent or shareholder of Prime, individually and
collectively.
(ii) "Registrable Shares" shall mean and includes (a) the
shares of Prime's common stock held by a Seller that are received
by such Seller pursuant to Section 1.2 and (b) any shares of Prime's
common stock that are issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a
dividend or other distribution with respect to, or in exchange for, or
in replacement of, the shares referenced in (a) above; provided,
however, that shares of Prime's common stock which are Registrable
Shares shall cease to be Registrable Shares upon (x) such time as the
shares may be sold pursuant to a registration statement under the
Securities Act, the exemption from registration provided by Section
4(1) of the Securities Act or the safe harbor set forth in Rule 144
under the Securities Act, (y) otherwise Registrable Shares which
respect to which a Seller has failed to request inclusion in a
registration upon receiving the written notice required of Prime
pursuant to subsection (b) below, or (z) the exercise of any Put Option
by a Seller with respect to all otherwise Registrable Shares held by
such Seller.
(b) Grant of Rights. If at any time (but without any obligation
under this Section to do so) Prime shall determine to register any shares of its
common stock under the Securities Act for the account of a person other than
Prime (including, without limitation, a registration for the account of any
shareholder or affiliate of Prime, even if the registration also includes shares
to be registered for Prime's own account in the respective registration), other
than on Form S-8 or its then equivalent relating to shares of Prime's common
stock issuable in connection with a stock option or other employee benefit
plans, Form S-4 or its then equivalent relating to shares of Prime's common
stock to be issued solely in connection with any acquisition of any entity or
business, any form that does not include substantially the same information as
would be required to be included in a registration statement covering the sale
of the Registrable Shares (as hereinafter defined), or a registration in which
the only Prime common stock being registered is Prime common stock issuable upon
conversion of debt securities that are also being registered, then Prime shall
send to each Seller written notice of such determination and, if within 20 days
after mailing such notice in accordance with this Agreement, such Seller shall
so request in writing, Prime shall use all reasonable efforts to include in such
registration statement all or any part of a Seller's Registrable Shares which
the Seller requests to be registered, except that if, in the reasonable opinion
of an underwriter a limit should be imposed on the number of shares of Prime's
common stock which may be included in the registration statement, then Prime
shall be obligated to include in such registration statement only such portion
of such Registrable Shares as is possible in light of such limitation and
without reduction in the number of shares of Prime's common stock being
registered for (a) the account of any person who is not a Prime Insider and
(b) for Prime's own account. Subject to the preceding sentence, any exclusion of
Registrable Shares shall be made pro rata as to the Registrable Shares the
Sellers wish to include and the shares to be included for Prime Insiders, based
upon the number of shares that were otherwise to have been included by the
Sellers and Prime Insiders. Prime shall have the right to terminate or withdraw
any registration initiated by it under this Section prior to the effectiveness
of such registration whether or not any Seller has elected to include
Registrable Shares in such registration. The expenses of such withdrawn
registration shall be borne by Prime.
(c) Expenses. In the case of each registration effected under this
Section, Prime shall bear all reasonable costs and expenses of such registration
on behalf of the Sellers that elect to include Registrable Shares in the
registration, including Prime's printing, legal and accounting fees and
expenses, SEC and NASD filing fees and "blue sky" fees and expenses; provided,
however, that Prime shall have no obligation to pay or otherwise bear any
portion of the underwriters' commissions or discounts attributable to the
Registrable Shares being offered and sold by the Sellers, or the fees and
expenses of any counsel independently retained by the Sellers.
4.5 Additional Distributions. Prime agrees to cause the Company to pay
to each Seller an amount of cash necessary for such Seller satisfy any
individual federal tax obligations of such Seller that arose as a result of such
Seller's direct ownership of an interest in the Company from January 1, 2001
until May 31, 2002, but only to the extent that those tax obligations of such
Seller (independent of the other Seller) exceed $738,750. Purchaser shall pay
any amounts required under this Section within three business days following
receipt from the Seller of a reasonable calculation of the amounts owed which
must be based on the Form K-1 covering the period in question. The Purchaser and
the Sellers hereby agree that any payment pursuant to this Section 4.5 is
additional Purchase Price and each of them agrees to report such amount
consistently therewith. Furthermore, for the period commencing January 1, 2002
and ending on the Closing Date, the items of income, gain, deduction or loss the
Company allocated to the Sellers shall be determined based on the closing of the
books method pursuant to Code ss. 706(c)(2)(A) and Treasury Regulation ss.
1.706-1(c)(2)(ii).
Section 5.Indemnification.
5.1 Survival. The representations, warranties, covenants and other
agreements of the parties contained herein, or in any signed writing delivered
pursuant hereto or in connection herewith shall survive the Closing
indefinitely, except for the representations and warranties set forth in Section
2.3, Section 2.4, Section 3.5, Section 3.6 and (except insofar as it relates to
Section 2.2) Section 3.7 which shall only survive for a period of eighteen (18)
months following the Closing.
5.2 Indemnification by the Sellers. The Sellers, jointly and severally,
shall indemnify the Company, Prime, Purchaser and their respective affiliates,
and their respective partners, principals, officers, directors, managers,
members, employees, independent contractors, agents, representatives, and other
similarly situated parties in their capacities as such, and the successors,
heirs and personal representatives of any of them (collectively, "Prime
Indemnified Parties"), against and hold them harmless from any and all damage,
claim, loss, liability and expense (including, without limitation, reasonable
expenses of investigation and attorneys' fees and expenses) (collectively,
"Damages") incurred or suffered by any Prime Indemnified Party arising out of or
relating to any breach of any representation, warranty, covenant or other
agreement of any Seller contained herein; but, the maximum aggregate amount of
liability of either Xxxxxxx or Sodomire pursuant to this Section shall be
$2,000,000. In addition, no claim can be asserted against any Seller under this
Section unless and until the aggregate of all claims exceeds $160,000, at which
time the full amount of all present and subsequent claims can be brought
(including the first $160,000). Prime and Purchaser agree that this Section
shall provide their sole recourse with respect to any breach of any
representation, warranty, covenant or other agreement of Seller contained in
this Agreement.
5.3 Indemnification by Purchaser. Purchaser shall indemnify the Sellers
and their affiliates, and their respective partners, principals, officers,
directors, employees, independent contractors, agents, representatives and other
similarly situated parties, in their capacities as such, and the successors,
heirs and personal representatives of any of them (collectively, the "Seller
Indemnified Parties") against and hold them harmless from any and all Damages
incurred or suffered by any Seller Indemnified Party arising out of or relating
to any breach of any representation, warranty, covenant or other agreement of
Purchaser contained herein; but, the maximum aggregate amount of liability of
Purchaser and Prime pursuant to this Section shall be $4,000,000 minus 80% of
the aggregate of all amounts paid by or on behalf of Purchaser to the Sellers
pursuant to Section 4.2. The Sellers agree that this Section shall provide their
sole recourse with respect to any breach of any representation, warranty,
covenant or other agreement of Prime or Purchaser contained in this Agreement.
5.4 Indemnification; Notice and Settlements. A party seeking
indemnification pursuant to Sections 5.2 or 5.3 (an "Indemnified Party") with
respect to a claim, action or proceeding by a person who is not a Prime
Indemnified Party or a Seller Indemnified Party shall give prompt written notice
to the party from whom such indemnification is sought (the "Indemnifying Party")
of the assertion of any claim, or the commencement of any action or proceeding,
in respect of which indemnity may be sought hereunder; provided that the failure
to give such notice shall not affect the Indemnified Party's rights to
indemnification hereunder, unless such failure shall prejudice in any material
respect the Indemnifying Party's ability to defend such claim, action or
proceeding. The Indemnifying Party shall have the right to assume the defense of
any such action or proceeding at its expense, with counsel approved by the
Indemnified Party (which approval will not be unreasonably withheld or delayed).
If the Indemnifying Party shall elect not to assume the defense of any such
action or proceeding, or fails to make such an election within 20 days after it
receives such notice pursuant to the first sentence of this Section, the
Indemnified Party may assume such defense at the expense of the Indemnifying
Party. The Indemnified Party shall have the right to participate in (but not
control) the defense of an action or proceeding defended by the Indemnifying
Party hereunder and to retain its own counsel in connection with such action or
proceeding, but the fees and expenses of such counsel shall be at the
Indemnified Party's expense unless (i) the Indemnifying Party and the
Indemnified Party have mutually agreed in writing to the retention of such
counsel or (ii) the named parties in any such action or proceeding (including
impleaded parties) include the Indemnifying Party and the Indemnified Party, and
representation of the Indemnifying Party and the Indemnified Party by the same
counsel would create a conflict (in which case the Indemnifying Party shall not
be permitted to assume the defense of such claim, action or proceeding);
provided that, unless otherwise agreed by the Indemnifying Party, if the
Indemnifying Party is obligated to pay the fees and expenses of such counsel,
the Indemnifying Party shall be obligated to pay only the fees and expenses
associated with one attorney or law firm (plus local counsel as required), as
applicable, for the Indemnified Party. An Indemnifying Party shall not be liable
under Section 5.2 or 5.3 for any settlement effected without its written
consent, which consent will not be unreasonably withheld, of any claim, action
or proceeding in respect of which indemnity may be sought hereunder.
Section 6.Miscellaneous.
6.1 Guaranty of Prime. Prime hereby unconditionally and irrevocably
guarantees all of the obligations of Purchaser hereunder and under each of the
Documents. Without limiting the foregoing, Prime agrees that if Purchaser shall
default in any obligation to pay to the Sellers any amount then due and payable
by Purchaser to the Sellers under this Agreement, Prime shall immediately pay
such amount to the Sellers. Prime hereby agrees not to require any Seller to
proceed against Purchaser or any other person or to pursue any other remedy
before proceeding against Prime under this guaranty.
6.2 Successors and Assigns. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the permitted respective successors,
assigns, heirs, executors and administrators of the parties hereto.
6.3 WAIVER OF JURY TRIAL. ANY MATTER IN DISPUTE BETWEEN THE PARTIES
SHALL BE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY A JUDGE ALONE. EACH
OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
CONNECTION WITH ANY DISPUTE BETWEEN THE PARTIES HERETO.
6.4 Entire Agreement. This Agreement, including all schedules and
exhibits hereto, embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings relating to such subject
matters.
6.5 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures delivered by
telecopy shall be considered for all purposes to be the same as original
signatures.
6.6 Severability. If any provision of this Agreement is held by final
judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable, such invalid, illegal or unenforceable provision shall be severed
from the remainder of this Agreement, and the remainder of this Agreement shall
be enforced. In addition, the invalid, illegal or unenforceable provision shall
be deemed to be automatically modified, and, as so modified, to be included in
this Agreement, such modification being made to the minimum extent necessary to
render the provision valid, legal and enforceable.
6.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware excluding that body of laws
pertaining to conflicts of laws.
6.8 Further Assurances. Each party of this Agreement hereby covenants
and agrees, without the necessity of any further consideration, to execute and
deliver any and all such further documents and take any and all such other
actions as may be necessary to appropriately carry out the intent and purposes
of this Agreement and the other Documents and to consummate the transactions
contemplated. Each party will use its good faith efforts to carry out and comply
with the provisions of this Agreement.
6.9 Construction. The parties agree that references to "Prime's
knowledge" or words of similar import shall mean only those facts or
circumstances which are within the actual knowledge of the managers or executive
officers of Prime or Purchaser.
[Signature page follows.]
SIGNATURE PAGE
TO
PURCHASE AGREEMENT
IN WITNESS WHEREOF, Bachman, Sodomire, Prime, and Purchaser have
executed this Purchase Agreement as of the day and year first above written.
XXXXXXX:
----------------------------------------------------------
Xxxxxx X. Xxxxxxx
SODOMIRE:
----------------------------------------------------------
Xxxxxxxx X. Xxxxxxxx
PURCHASER
PRIME MEDICAL MANUFACTURING, LLC
By:
-------------------------------------------------------
Xxxx Xxxxxxxx, Senior Vice President, Chief
Financial Officer and Secretary
PRIME:
PRIME MEDICAL SERVICES, INC.
By:
-------------------------------------------------------
Xxxx Xxxxxxxx, Senior Vice President, Chief
Financial Officer and Secretary
EXHIBIT A
FINANCIAL STATEMENTS
EXHIBIT B
XXXXXXX EMPLOYMENT AGREEMENT
EXHIBIT C
SODOMIRE EMPLOYMENT AGREEMENT
EXHIBIT D
AMENDMENT TO REGULATIONS
