CONTRIBUTION AGREEMENT
AMONG
PRIME MBC, L.L.C.,
MBC HOLDING COMPANY, L.L.C.,
XXXX BERKELEY EYE CENTER, P.A.,
XXXX XXXXXXX XXXX, M.D.,
XXXXX X. BERKELEY, M.D.,
XXXXXXX X. XXXXXX, M.D.,
XXXX X. XXXXXXXXXX
AND
PRIME RVC, INC.
DATED March 1, 2000
3
043838.0000 AUSTIN 161222 v11
043838.0000 AUSTIN 161222 v11
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is entered into to be
effective as of March 1, 2000 (the "Effective Time"), among Prime RVC, Inc., a
Delaware corporation ("Prime"), Prime MBC, L.L.C., a Delaware limited liability
company ("Newco"), MBC Holding Company, L.L.C., a Texas limited liability
company ("Target Center"), Xxxx Berkeley Eye Center, P.A., a Texas professional
association ("MBEC"), Xxxx Xxxxxxx Xxxx, M.D. ("Xxxx"), Xxxxx X. Berkeley, M.D.
("Berkeley"), Xxxxxxx X. Xxxxxx, M.D. ("Xxxxxx") and Xxxx X. Xxxxxxxxxx
("Xxxxxxxxxx"). Target Center, Xxxx, Berkeley, Xxxxxx and Xxxxxxxxxx are also
sometimes referred to collectively herein as the "Sellers" and individually as a
"Seller". Xxxx, Berkeley and Xxxxxx are also sometimes referred to collectively
herein as the "Physicians" and individually as the "Physician".
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, as of the Effective Time, from Target
Center, an undivided sixty percent (60%) interest in (i) the Assets (as
hereinafter defined) and (ii) the business conducted using the Assets, excluding
the practice of medicine in all cases (the "Business"), for $3,765,000 in cash
(the "Purchase Price"), together with warrants, in substantially the form
attached hereto as Exhibit A (the "Warrants"), entitling Target Center to
purchase 27,000 shares of $0.01 par value common stock of Prime Medical
Services, Inc., a Delaware corporation ("PMSI"); (b) Prime agrees to contribute
to Newco, as of the Effective Time, the undivided sixty percent (60%) interest
in the Assets and Business purchased by Prime, and will receive a sixty percent
(60%) ownership interest in Newco; (c) Target Center agrees to contribute, as of
the Effective Time, the remaining undivided forty percent (40%) interest in the
Assets and Business to Newco. The Purchase Price will be allocated to the Assets
in accordance with Schedule 1.1 attached hereto. The parties agree that:
(y) immediately prior to the Closing, all of the outstanding membership
interests of Newco shall be owned by Target Center, and, immediately after the
Closing, Prime shall own sixty percent (60%) of all of the outstanding
membership interests of Newco, and Target Center shall own forty percent (40%)
of all of the outstanding membership interests of Newco; and
(z) prior to the Effective Time, Prime and Target Center shall have
executed the limited liability company agreement, in the form attached hereto as
Exhibit B, and any other organizational documents of Newco;
The organizational documents of Newco are hereinafter collectively
referred to as the "Organizational Documents".
1.2 Closing. The closing of the transactions 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. The term "Assets" shall mean the items listed on Schedule 1.3
attached hereto, all Permits (as hereinafter defined), all business records of
Refractive Surgery (as hereinafter defined) and the Business, Working Capital
(as defined in Section 3.17) of at least $25,000, all contract rights of Target
Center under leases (including rights to receive returns of deposits under such
leases) or contracts listed on Schedule 1.3 and all of the business and goodwill
of Refractive Surgery and the Business. Each of the Sellers hereby represents
and warrants that the Assets include all of the equipment, instruments, computer
software used in connection with the equipment, Permits, personal property,
furniture, business records and other assets of Target Center that are used
primarily in or are materially relied on for the conduct of Refractive Surgery
and the Business by the Target Center. Notwithstanding any provision contained
herein to the contrary, the term "Assets" and "Business" shall only refer to
those assets or business utilized in or related to the operations of Target
Center in Austin, Texas. As used in this Agreement, "Refractive Surgery" shall
mean, collectively, any current and/or future surgical procedures intended to
correct refractive error, including, without limitation, myopia, hyperopia,
presbyopia or astigmatism of the eye. Notwithstanding anything in this Agreement
to the contrary, "Refractive Surgery" shall not include any specific procedure
that, at the time the procedure is to be performed, 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 is, in either case, licensed by the
State of Texas (provided, however, that this sentence shall not in the future
exclude from "Refractive Surgery" any surgical procedure that was included in
the definition of "Refractive Surgery" at the Effective Time, and if any
applicable future 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). Notwithstanding the foregoing, the
following shall not be "Assets" and shall be retained by Target Center:
(a) all activities that constitute the practice of medicine;
(b) the books of account and record books of Target Center (complete and
accurate copies of which, insofar as they relate to the Business during
the calendar years 1998 and 1999, shall be provided to Prime on or
before the Closing Date);
(c) Target Center's rights under this Agreement; and
(d) assets that are neither used in, nor relied on for, the conduct of
Refractive Surgery.
1.4 Assumed Liabilities. At the Closing, Newco shall only assume those trade
payables on open account incurred in the ordinary course of Target Center's
business since February 1, 2000 from unrelated parties. Such limited assumption
shall be pursuant to that certain general conveyance, assignment and transfer of
assets and assumption of liabilities, attached hereto as Exhibit C (the
"Assignment and Assumption Agreement") to be executed by Newco, Prime and Target
Center at the Closing, effective as of the Effective Time. With respect to any
lease or other contract obligations reflected on Schedule 1.4, it is agreed that
Newco will only be assuming obligations thereunder which accrue after the
Effective Time, and will have no responsibility whatsoever for any breaches or
defaults which occurred prior to the Closing Date, or for obligations accruing
prior to the Effective Time. Except for those liabilities and obligations
specifically assumed by Newco as provided above, any and all debts, liabilities,
and obligations of Target Center, 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
Target Center or its business) shall remain the sole responsibility of Target
Center and Target Center covenants to pay promptly all such debts and
liabilities and to fulfill all such obligations as and when the same become due.
Notwithstanding any provision of this Agreement, Newco and Prime do not assume
any debts, obligations or liabilities of Target Center whatsoever, except for
those trade payables described in the first sentence of this Section.
1.5 Payment of Purchase Price. The Purchase Price shall be paid in immediately
available funds at the Closing.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to the Sellers that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that the Sellers are relying materially on such representations
and warranties in entering into and performing this Agreement):
2.1 Due Organization and Principal Executive Office. Prime is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full corporate power and authority to carry on its business as
now conducted and as proposed to be conducted. Prime is a wholly-owned
subsidiary of PMSI. Prime's principal executive offices are located at 0000
Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000.
2.2 Due Authorization. Prime has full corporate power and authority to enter
into and perform this Agreement and each other agreement, instrument and
document required to be executed by Prime in connection herewith. This Agreement
and each other agreement, instrument, and document required herein to be
executed by Prime have been duly and validly authorized, executed and delivered
by Prime and constitute the valid and binding obligations of Prime enforceable
against it in accordance with its terms. The execution, delivery, and
performance of this Agreement and each other agreement, instrument, and document
required herein to be executed by Prime will not (a) violate any federal, state,
county, or local law, rule, or regulation applicable to Prime or its properties,
(b) violate or conflict with, or permit the cancellation of, any agreement to
which Prime 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, Prime or (d) violate or conflict with any provision
of the organizational documents of Prime. No action, consent, or approval of, or
filing with, any federal, state, county, or local governmental authority is
required by Prime in connection with the execution, delivery or performance of
this Agreement (or any agreement, instrument or other document executed in
connection herewith by Prime).
2.3 Brokers and Finders. Prime has not engaged, or caused to be incurred any
liability to, any finder, broker, or sales agent (and has not paid, and will not
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. Prime is not a party to any claims, actions, suits,
proceedings, or investigations, at law or in equity, before or by any court,
municipal or other governmental department, commission, board, agency, or
instrumentality which seeks to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the validity of such
transactions or any part thereof or seeking damages on account thereof; and, to
the knowledge of Prime, no such claim, action, suit, proceeding or investigation
is threatened.
2.5 Investment Representations. Prime:
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(a) Is an "accredited investor," and has not retained or consulted with any
"purchaser representative" (as such terms are defined in Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act")) in connection with its execution of this
Agreement and the consummation of the transactions contemplated hereby;
(b) Has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of an investment in Newco;
(c) Will acquire any Newco interests for its own account for investment and not
with the view toward resale or redistribution in a manner which would
require registration under the Securities Act, the Texas Securities Act, as
amended, or the securities laws of any other state, and it does not
presently have any reason to anticipate any change in its circumstances or
other particular occasion or event which would cause it to sell its Newco
interests, or any part thereof or interest therein, and it has no present
intention of dividing the Newco interests with others or reselling or
otherwise disposing of the Newco interests or any part thereof or interest
therein either currently or after the passage of a fixed or determinable
amount of time or upon the occurrence or nonoccurrence of any predetermined
event or circumstance;
(d) In connection with entering into this Agreement and the 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, the Sellers, the
affiliates of the foregoing or the officers, directors, shareholders,
employees, partners, members, agents, consultants, personnel or
similarly related parties of any of the foregoing, other than those
representations and warranties contained in this Agreement;
(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.
2.6 Securities Laws Compliance. Prime shall remain responsible for
assuring that Newco complies with all securities laws, both state and federal,
and that Newco makes all necessary disclosures as required by such securities
laws.
ARTICLE III
Representations and Warranties of Sellers
The Sellers each, jointly and severally, hereby represent and warrant
to Prime that each of the following matters is true and correct in all respects
as of the Closing Date (with the understanding that Prime is relying materially
on each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
3.1 Due Organization. Target Center is a limited liability company duly
organized, validly existing, and in good standing under the laws of the State of
Texas and has full power and authority to carry on its business as now conducted
and as proposed to be conducted. Xxxx, Berkeley, Xxxxxx and Xxxxxxxxxx are the
only owners of Target Center, and their respective ownership interests are set
forth on Schedule 3.1. No other person or entity has any right to acquire any
ownership interest in Target Center. Complete and correct copies of the Articles
of Organization, the Regulations, all managers' resolutions and all members'
resolutions of Target Center, and all amendments thereto, have been delivered to
Prime. Target Center is qualified to do business and is in good standing in the
states set forth on Schedule 3.1 attached hereto, which states represent every
jurisdiction where such qualification is required for the conduct of Target
Center's business as conducted on the Closing Date.
3.2 Subsidiaries. Target Center 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 Seller has full power and authority to enter into
and perform this Agreement and each other agreement, instrument, and document
required to be executed by such Seller in connection herewith. The execution,
delivery, and performance of this Agreement and such other agreements,
instruments, and documents have been duly authorized by all necessary action of
Target Center, its managers and its members. This Agreement has been duly and
validly executed and delivered by the Sellers and constitutes a valid and
binding obligation of the Sellers enforceable against them in accordance with
its terms. The execution, delivery, and performance of this Agreement, and each
other agreement, instrument and document required herein to be executed by the
Sellers does not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to the Sellers, the Sellers' business or the Assets, (b)
violate or conflict with, or permit the cancellation of, any agreement to which
any of the Sellers is a party, or by which any 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, or any indebtedness secured by the property of,
Target Center, or (d) violate or conflict with any provision of the Articles of
Organization or Regulations of Target Center. No action, consent, waiver or
approval of, or filing with, any federal, state, county or local governmental
authority is required by any of the Sellers in connection with the execution,
delivery, or performance of this Agreement (or any agreement or other document
executed in connection herewith).
3.4 Financial Statements. The unaudited balance sheet and income statement of
Target Center as of and for each of the years ended December 31, 1998 and 1999,
and the unaudited balance sheet and income statement of Target Center as of and
for the month ended January 31, 2000 (collectively, the "Financial Statements")
are attached hereto as Exhibit D. The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP") (except as specifically noted therein or in Schedule 3.4) and fairly
present the financial position and results of operations of Target Center as of
the indicated dates and for the indicated periods. Except as disclosed in
Schedule 3.4 and except to the extent specifically and fully reflected in the
Financial Statements (including the notes thereto), Target Center has no
liabilities of a type that would be required to be reflected as such in the
Financial Statements (including the notes thereto) other than current
liabilities on open account incurred in the ordinary course of business
consistent with past practices. Except as set forth in Schedule 3.4 hereto,
since January 1, 1999, there has been no material adverse change in the
financial position, assets, results of operations, or business of Target Center.
3.5 Conduct of Business; Certain Actions. Except as set forth on Schedule 3.5
attached hereto, since January 1, 1999, Target Center has conducted its Business
and operations of the Business in the ordinary course and consistent with its
past practices and has not, with respect to or in a manner affecting the
Business (a) purchased or retired any indebtedness from any Seller, purchased,
retired, or redeemed any membership interest from any Seller, or engaged in any
other transaction that involves or requires distributions of money or other
assets from Target Center to any Seller if such other transaction is not done in
the ordinary course of business and is not consistent with past practices of
Target Center, (b) increased the compensation of any of the Sellers or of any
officers, employees, agents, contractors, vendors or other parties, except for
wage and salary increases made in the ordinary course of business and consistent
with the past practices of Target Center, (c) made capital expenditures
exceeding $2,000 individually or $5,000 in the aggregate, (d) 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 $2,000, (e) 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,
(f) made or guaranteed any loans or advances to any party whatsoever, (g)
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, (h) canceled, waived, or released any
of Target Center's debts, rights, or claims against third parties, (i) amended
its Articles of Organization or Regulations, (j) made or paid any severance or
termination payment to any employee 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 (as hereinafter
defined) to any person or entity, (n) amended, terminated or experienced a
termination of any material contract, agreement, lease, franchise, or license to
which it is a party, (o) made any distributions, in cash or in kind, to the
Sellers, its owners, 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 Target Center's business consistent with past practices, (p)
entered into any other material transactions except in the ordinary course of
business, (q) entered into any contract, commitment, agreement, or understanding
to do any acts described in the foregoing clauses (a)-(p) of this Section, (r)
suffered any material damage, destruction, or loss (whether or not covered by
insurance) to any assets, (s) experienced any strike, slowdown, or demand for
recognition by a labor organization by or with respect to any of its employees,
or (t) experienced or effected any shutdown, slow-down, or cessation of any
operations conducted by, or constituting part of, Target Center.
3.6 Ownership of Assets; Licenses, Permits, etc. Target Center has good and
marketable title to all of the Assets listed on Schedule 1.3 free and clear of
all liens, security interests, claims and encumbrances of any kind whatsoever,
except for those encumbrances specifically set forth on Schedule 3.6. The Assets
include all property and assets, real, personal and mixed, tangible and
intangible, including leases and other contracts, which are required for, or
used in connection with, the operation of Target Center as currently conducted.
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 adequate for the conduct of Target Center's business. Attached hereto as
Schedule 3.6 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 Target Center and used or relied on
(or to be used or relied on) in connection with the Assets or the Business
("Permits"). Target Center has complied in all material respects, and Target
Center is in compliance in all material respects, with the terms and conditions
of any such Permits. To the best knowledge of Sellers, 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 of Target Center. No
claim has been made by any governmental authority (and, to the knowledge of the
Sellers, no such claim has been threatened) to the effect that a Permit not
possessed by Target Center is necessary in respect of the business conducted by
Target Center. All of the Permits noted on the attached Schedule 3.6 are freely
assignable to Prime and Newco.
3.7 Environmental Issues.
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(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, affecting the Assets or the
Business.
(b) Target Center has complied in all material respects with and obtained
all authorizations and made all filings required by all applicable
environmental laws. During Target Center's operation and ownership of
the properties occupied or used by Target Center, such properties, to
the best knowledge of Sellers, 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 financial position of Target Center.
(c) Target Center 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. There are no patents, trademarks, trade names,
or copyrights, and no applications therefor, owned by or registered in the name
of Target Center or in which Target Center has the sole right, license, or
interest. Target Center is not a party to any license agreement, either as
licensor or licensee, with respect to any patents, trademarks, trade names, or
copyrights. Target Center has not received any notice that it is infringing any
patent, trademark, trade name, or copyright of others. Target Center and its
affiliates may continue to use any such intellectual property, as permitted by
this Agreement, and any such intellectual property is irrevocably licensed for
use royalty free by Target Center and its affiliates to Newco.
3.9 Compliance with Laws. With respect to the Assets and the Business, Target
Center has complied in all material respects, and Target Center is in compliance
in all material respects, with all federal, state, county, and local laws,
rules, regulations and ordinances currently in effect. No claim has been made or
threatened by any governmental authority against Target Center to the effect
that the business conducted by Target Center 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 Target Center 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 Sellers, no event directly relating to Target Center 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 Target Center during the past three (3) years, including
without limitation any change which has resulted in any period during which
Target Center had no insurance coverage. Excluding insurance policies which have
expired and been replaced, no insurance policy of Target Center has been
canceled within the last three (3) years and no threat has been made to cancel
any insurance policy of Target Center within such period.
3.11 Employee Benefit Matters. Except as set forth on Schedule 3.11, Target
Center 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). Target Center 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. 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) that relate to or affect the Assets or the Business,
to which Target Center is a party or by which Target Center or its properties
are bound, pursuant to which the obligations thereunder of any party thereto
are, or are contemplated as being, in respect of any such individual contracts,
commitments, leases, or other agreements during any year during the term
thereof, $25,000 or greater, or which are otherwise material to the business of
Target Center (collectively the "Contracts" and individually, a "Contract").
Target Center is not and, to the best knowledge of Sellers, 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 Target Center
or, to the best knowledge of Sellers, by any other party thereto) under any
Contract. Target Center 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 sale of the Assets or the consummation of the transactions contemplated
hereby. Target Center 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 the Sellers, threatened against Target Center
that affect or relate to the Assets or the Business, 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 Target Center which (individually or in the
aggregate) is material, and Target Center has not been, and Target Center is not
now, subject to any order, judgment, decree, stipulation, or consent of any
court, governmental body, or agency. No inquiry, action, or proceeding has been
asserted, instituted, or threatened against Target Center 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
Target Center 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 Target Center. All Taxes, assessments, penalties,
and interest which have become due pursuant to such Returns have been paid or
adequately accrued in the Financial Statements. The provisions for Taxes
reflected on the balance sheet contained in the Financial Statements are
adequate to cover all of Target Center's estimated Tax liabilities for the
respective periods then ended and all prior periods. As of the Closing Date,
Target Center will not owe any Taxes for any period prior to the Closing which
are not reflected on the Financial Statements, except for Taxes attributable to
the operations of Target Center between the Effective Time and the Closing Date.
Target Center 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 Target Center with
respect to any Taxes owed or allegedly owed by Target Center. There are no tax
liens on any of the assets of Target Center. Proper and accurate amounts have
been withheld and remitted by Target Center 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. Target Center 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 Target
Center who have been employed in the operation of the Business or who utilize
(or are necessary for the utilization of) the Assets (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 Target Center to any Employees from January 1, 1999
through the Closing Date. Schedule 3.15 attached hereto also contains a brief
description of all material terms of employment agreements and confidentiality
agreements to which Target Center is a party and all severance benefits which
any director, Employee or sales representative of Target Center is or may be
entitled to receive. Target Center 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 Target Center is a party
and under which its employees are entitled to receive benefits of any nature.
Sellers have no knowledge of any pending or threatened (i) labor dispute or
union organization campaign relating to Target Center, (ii) claims against
Target Center or the Sellers by any employees of Target Center (other than those
certain Workers' Compensation claims specifically described on Schedule 3.13),
or (iii) terminations, resignations or retirements of any employees of Target
Center. None of the employees of Target Center are represented by any labor
union or organization. There is no unfair labor practice claim against Target
Center before the National Labor Relations Board or any strike, labor dispute,
work slowdown, or work stoppage pending or threatened against or involving
Target Center.
3.16 Business Relations. The total number of Refractive Surgery procedures
performed at the Target Center, the number of Refractive Surgery procedures
performed by each Physician at the Target Center, and the number of Refractive
Surgery procedures performed by others at the Target Center, in each case for
calendar years 1998 and 1999, are as set forth on Schedule 3.16. Sellers have no
reason to believe and have not been notified that any supplier or customer of
Target Center will cease or refuse to do business with Target Center or Newco in
the same manner as previously conducted with Target Center as a result of or
within one (1) year after the consummation of the transactions contemplated
hereby, to the extent such cessation or refusal might affect the Assets or the
Business. Target Center 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 Target Center.
3.17 Working Capital. Except as set forth on Schedule 3.17 attached hereto, all
of the accounts, notes, and loans receivable (the "Accounts Receivable")
reflected in the Financial Statements, or arising since January 31, 2000, arose
from transactions occurring in the ordinary course of Target Center's business
as previously conducted, are bona fide and represent amounts validly due,
subject to offsets or defenses. Except for accounts payable and other accrued
expenses incurred in the ordinary course of Target Center's business since
January 31, 2000 and consistent with past practices of Target Center, there are
no material liabilities of Target Center other than those reflected in the
Financial Statements. Adequate provision has been made for uncollectible
Accounts Receivable. Through the Closing Date, Target Center has collected its
Accounts Receivable and has paid or performed all liabilities and obligations of
Target Center in the ordinary course, consistent with past practices. As of the
Closing Date, the amount of Working Capital (as hereinafter defined) of Target
Center included in the Assets shall not be less than $25,000. For purposes of
this Agreement, "Working Capital" means the difference between (i) cash, cash
equivalents, prepaid expenses and Accounts Receivable less than sixty (60) days
old and (ii) accounts payable and other liabilities and payment obligations due
in the following twelve (12) months, all as determined in accordance with GAAP.
3.18 Agents. Except as set forth on Schedule 3.18 attached hereto, Target Center
has not designated or appointed any person (other than Target Center'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.
3.19 Indebtedness To and From Members, Managers and Employees. Target Center
does not owe any indebtedness to any of the Sellers or any of its officers,
managers or employees or have indebtedness owed to it from any of the Sellers or
any of its officers, managers or employees, excluding indebtedness for travel
advances or similar advances for expenses incurred on behalf of and in the
ordinary course of business of Target Center and consistent with Target Center's
past practices. As of the Effective Time and the Closing Date all amounts due
Target Center from any of the Sellers or any officer, manager or employee of
Target Center (or any of their family members) shall have been repaid in full.
3.20 Commission Sales Contracts. Except as disclosed in Schedule 3.20 attached
hereto, Target Center does not employ or have any relationship, related to or
arising out of the Assets or the Business, with any individual, corporation,
partnership, or other entity whose compensation from Target Center is in whole
or in part determined on a commission basis.
3.21 Certain Consents. Except as set forth on Schedule 3.21 attached hereto,
there are no consents, waivers, or approvals required to be executed and/or
obtained by any Sellers from third parties (including, without limitation, the
spouses of any Seller) in connection with the execution, delivery, and
performance of this Agreement or any of the other contracts, documents,
instruments or agreements to be entered into in connection with or as
contemplated by this Agreement (all of which are collectively referred to as the
"Transaction Documents").
3.22 Brokers. No Seller has engaged, or caused any liability to be incurred to,
any finder, broker, or sales agent (or has paid, or will pay, any finders fee or
similar fee or commission to any person) in connection with the execution,
delivery, or performance of this Agreement or the transactions contemplated
hereby.
3.23 Interest in Competitors, Suppliers, and Customers. Except as set forth on
Schedule 3.23 attached hereto, no Seller or any affiliate of any Seller, and to
the knowledge of Sellers no officer, manager or employee of Target Center or any
affiliate of any officer, manager or employee of Target Center, has any
ownership interest in any competitor, customer or supplier of Target Center or
any property used in the operation of the business of Target Center.
3.24 Warranties. Except as set forth on Schedule 3.24, Target Center has not
made any warranties or guarantees to third parties with respect to any products
sold or services rendered by it, other than implied warranties. Except as set
forth on Schedule 3.24 attached hereto, no claims for breach of product or
service warranties have been made against Target Center.
3.25 No Defaults. No Seller is aware of any breach or default by any other
Seller of any of the representations, warranties, covenants or agreements
contained herein.
3.26 Investment Representations. Each Seller:
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(a) Is an "accredited investor," and has not retained or consulted with any
"purchaser representative" (as such terms are defined in Rule 501 of
Regulation D promulgated under the Securities Act 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 by Target
Center in Newco;
(c) Will acquire its direct or indirect Newco interests for its own account for
investment and not with the view toward resale or redistribution in a
manner which would require registration under the Securities Act, the Texas
Securities Act, as amended, or the securities laws of any other state, and
Sellers do not presently have any reason to anticipate any change in their
respective circumstances or other particular occasion or event which would
cause such Seller to sell its Newco interests, or any part thereof or
interest therein, and Sellers have 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 the Transaction
Documents to which each Seller is a party, and in making the investment
decisions associated therewith, Sellers have neither received nor
relied on any representations or warranties from Newco, Prime, PMSI,
the affiliates of the foregoing or the officers, directors,
shareholders, employees, partners, members, agents, consultants,
personnel or similarly related parties of any of the foregoing, other
than those representations and warranties contained in this Agreement;
(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 Name Change. For so long as (i) any of the Sellers remain obligated under
this Agreement, including, without limitation, obligations arising under Section
8.6, or, (ii) the Management Agreement has not been terminated (other than a
termination by Newco for cause as described therein), Newco may operate within
the Restricted Areas (as hereinafter defined) under the name "Xxxx Berkeley
Xxxxxx Laser Center of Austin," or names similar thereto. At all times, Sellers
shall own such name and it shall remain their exclusive property. The Sellers
hereby grant to Newco, Prime, and PMSI the irrevocable, royalty free license to
use such name in connection with the business of Newco, in connection with the
business of Prime and PMSI as such business relates to the business of Newco,
and in connection with any Retained Business (as hereinafter defined) as to
which the PMSI Option (as hereinafter defined) is exercised. At, or within
thirty (30) days after, the Closing Date, the Sellers shall no longer use such
name or any name deceptively similar to such name in the Restricted Areas (as
defined in Section 8.4)(provided, however, the use of such name or deceptively
similar name by Newco shall not be deemed a violation by Sellers of this
covenant). Sellers and their affiliates may continue to use the name, or parts
thereof, outside the Restricted Areas.
4.2 Cooperation Relating to Financial Statements. Sellers agree to
cooperate with Prime in its preparation of any financial statements of Target
Center and Newco which Prime or its affiliates may be required by any applicable
law to prepare.
4.3 Member and Manager Action. The Sellers each agree to vote their interests in
Target Center, and to take such actions as may be necessary in their capacity as
managers of Target Center, to authorize and direct Target Center to perform all
of its obligations under this Agreement and under the Organizational Documents
and Transaction Documents to which it is a party. Furthermore, Sellers each
agree that, until such time as none of the Sellers owns any ownership interest
in Newco, none of them will, without obtaining the prior written consent of
Prime (and then only as allowed pursuant to the Transfer Restriction Agreement
described in Section 4.5 below), (i) authorize the issuance of any additional
membership interest in Target Center to any third party, or (ii) transfer,
assign, or otherwise dispose of any membership interest of Target Center owned
or controlled by any of the Sellers.
4.4 Capital Contributions. The parties agree that no party shall be required to
make any capital contribution to Newco following the Closing, including, without
limitation, for purposes of providing working capital; provided, however, that
this sentence shall not affect any party's obligations under Article VI with
respect to any breach of the representations or warranties made by that party
under this Agreement.
4.5 Ownership Interest Transfer Restriction Agreement. Each of the Sellers
agrees that it, and its spouse(if any), will execute, on or prior to the
Closing, the Membership Interest Transfer Restriction Agreement, in
substantially the form attached hereto as Exhibit E (the "Transfer Restriction
Agreement"), that imposes certain limitations and conditions on the sale,
transfer, assignment or other disposition of any interest that is directly or
indirectly owned or controlled by such party in Target Center or the
subsidiaries or affiliates of Target Center.
4.6 Insurance. Newco agrees to maintain, for five (5) years after the Closing
Date, a prior acts insurance policy providing insurance coverage for Newco and
for Refractive Surgery procedures performed prior to the Closing Date at the
Austin, Texas facility of Target Center, of the same scope, in the same or
greater amounts and subject to the same or smaller deductibles as the Target
Center's insurance in effect immediately prior to the Closing Date.
4.7 Management Agreement. Newco and MBEC shall execute, on or prior to the
Closing, the Management Agreement, in substantially the same form as attached
hereto as Exhibit F (the "Management Agreement").
4.8 Other Parties. Without the express written consent of Sellers,
Prime (through its control of Newco) will not allow LASIK Investors, L.L.C., a
Delaware limited liability company ("LASIK") or Barnet Xxxxxxx Eye Center,
P.L.L.C., an Arizona professional limited liability company ("BDEC"), or any of
the current (as of the Effective Date) or any former owners of either LASIK or
BDEC to become involved in or exercise any control or influence over Newco, nor
will Prime sell, convey or otherwise transfer, all, or any portion, of its
ownership interest in Newco to LASIK, BDEC, or any current or former owners of
either LASIK or BDEC. If LASIK or BDEC, or any of their affiliates, merge with
Prime in a merger wherein Prime is not the surviving entity, or otherwise
acquire greater than fifty percent (50%) of the voting equity securities of
Prime, Sellers and Target Center shall have the right (but not the obligation)
to terminate this Agreement, and MBEC shall have the right (but not the
obligation) to terminate the Management Agreement, within six (6) months of the
effective date of such merger or acquisition of control by giving thirty (30)
days prior written notice to Prime (or Prime's successor) of such termination.
Nothing herein shall be construed as to prohibit or restrict any current (as of
the Effective Date) or former physician owner of LASIK or BDEC from serving on
the Board of Directors of PMSI, and fully participating as a board member.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of each Seller to Close):
(a) pay the Purchase Price to Target Center;
(b) ensure that the Warrants are delivered to Target Center;
(c) ensure that the Incidental Registration Rights Agreement, in
substantially the same form as attached hereto as Exhibit G (the
"Rights Agreement"), is executed and delivered to Target Center;
(d) execute and deliver the Assignment and Assumption Agreement and the
Organizational Documents to which it is a party; and
(e) deliver such good standing certificates, officer certificates, and
similar documents and certificates as counsel for Target Center may
reasonably require.
5.2 Sellers Closing Obligations. At the Closing, each Seller shall (each of
which is a condition to the obligations of Prime to Close):
(a) execute and deliver each Transaction Document required to be executed by it
pursuant to this Agreement;
(b) cause MBEC to execute and deliver the Management Agreement; and
(c) deliver such good standing certificates, officer certificates, and
similar documents and certificates as counsel for Prime may reasonably
require.
5.3 Newco's Closing Obligations. At the Closing, Newco shall execute and deliver
the Assignment and Assumption Agreement, the Management Agreement and such good
standing certificates, officer certificates, and similar documents and
certificates as counsel for Prime or any of the Sellers may reasonably require.
ARTICLE VI
Indemnification of Prime and Newco
6.1 Indemnification of Prime and Newco. The Sellers and MBEC, each jointly and
severally, agree to indemnify and hold harmless Prime, each subsidiary and/or
affiliate of Prime (including, without limitation, PMSI), and, following the
Closing, Newco, and each officer, director, and employee of Prime and each
subsidiary and affiliate of Prime, and affiliate of Prime and, following the
Closing, Newco (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 (a) any breach or default by any Seller of
any of the representations, warranties, covenants or agreements contained in
this Agreement or any Transaction Document (including, without limitation, the
Organizational Documents and the Management Agreement), (b) any obligation or
liability of Target Center not assumed by Newco pursuant to the Assignment and
Assumption Agreement, or (c) any obligations or liabilities with respect to any
claims arising out of actions or omissions by any Seller prior to Closing, or
actions or omissions by any Seller after Closing that are not related to the
business or management of Newco, or actions or omissions by any Seller that are
a breach of a fiduciary duty. With respect to indemnification for Indemnified
Costs arising solely out of the breach, default, action or omission of a
Physician or Xxxxxxxxxx, the Prime Indemnified Parties shall not seek
indemnification under this Section from any Physician or Xxxxxxxxxx who did not
cause, allow or contribute to such breach, default, action or omission that gave
rise to the Indemnified Costs; provided, however, in all such cases the Prime
Indemnified Parties will be able to seek indemnity jointly and severally from
MBEC and Target Center, in addition to the Physician or Xxxxxxxxxx whose breach,
default, action or omission gave rise to the Indemnified Costs. For all
indemnity obligations arising pursuant to this Section, the Prime Indemnified
Parties will demand payment first from MBEC and Target Center, but if MBEC and
Target Center fail or refuse to pay such indemnity obligation, then the Prime
Indemnified Parties may seek indemnity from the Physicians or Xxxxxxxxxx, as any
of them may be liable under the provisions of this Section.
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give prompt
written notice to Sellers of the commencement or assertion of any third party
action in respect of which such Prime Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Sellers shall not relieve
Sellers from any liability that they may have to such Prime Indemnified Party
under this ARTICLE unless the failure to give such notice materially and
adversely prejudices Sellers. Sellers 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) Sellers 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) Sellers 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; and
(d) Sellers shall not be entitled to control (but shall be entitled to
participate at their 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 Sellers fail 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 (other than liability
to Prime Indemnified Parties under this Agreement) on the part of
Sellers or Target Center, without the prior written consent of Sellers.
(e) Sellers shall make payments of all amounts required to be made pursuant
to the foregoing provisions of this ARTICLE to or for the account of
the Prime Indemnified Party from time to time promptly upon receipt of
bills or invoices relating thereto or when otherwise due and payable,
provided that the Prime Indemnified Party has agreed in writing to
reimburse Sellers for the full amount of such payments if the Prime
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.
6.3 Security. Without limiting or adversely affecting the rights of Prime under
Section 8.11, and in order to secure full and prompt payment of the obligations
of each of the Sellers under this ARTICLE, Target Center hereby grants to Prime
a continuing security interest in and to distributions it may be entitled to
receive at any time after the Closing in respect of any ownership interest held
by it in Newco. In connection with the grant of a security interest contained in
this Section, each Seller agrees (i) to execute all documents, agreements,
instruments and certificates, and to take such other actions, as are necessary
in order to cause Target Center 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.
ARTICLE VII
Indemnification of Sellers
7.1 Indemnification of Sellers. Prime agrees to indemnify and hold harmless
Sellers and Newco (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 Seller Indemnified Parties may
sustain, arising out of any breach or default by Prime of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document (including, without limitation, the Organizational
Documents).
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;
(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 (other than liability to Seller
Indemnified Parties under this Agreement) on the part of Prime without
the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be made pursuant
to the foregoing provisions of this ARTICLE to or for the account of
the 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.
ARTICLE VIII
Post Closing Agreements
8.1 Transition of Business. Each Seller agrees to cooperate fully with Prime and
Newco in transitioning the business conducted, and business relationships
maintained by, Target Center prior to the Closing, to Newco after the Closing;
and each Seller agrees not to take any action or make any disclosure which a
reasonable person would expect to adversely alter or impair any relationship
with any customer, or other service recipient, person or entity which did
business with Target Center prior to the Closing. Each Seller agrees to promptly
remit to Newco any payments received by Target Center or any Seller for services
provided by Target Center after the Effective Time or by Newco after the
Closing. Furthermore, Sellers agree to deposit any such payments received
directly to a deposit account designated and controlled by Newco or to take such
other action as may be requested by Prime to implement and maintain a system for
remitting payments due Newco which come into the possession or control of Target
Center or any Seller.
8.2 Ratification by Newco. Prime and Target Center agree that by executing this
Agreement they are deemed to be voting their ownership interests in Newco to
authorize Newco to enter into and perform this Agreement and each of the
Transaction Documents to which it is a party. Prime and Target Center agree to
execute such resolutions and written consents, and take such other actions, in
their capacities as members of Newco, as any party shall reasonably require
after the Closing to have Newco ratify and adopt this Agreement, notwithstanding
the official date of Newco's creation.
8.3 Confidentiality Agreement. Each Seller acknowledges that through its
relationship with Newco, it will be exposed to Proprietary Information (as
defined below) of Newco and/or each of Newco's present or future affiliates
(which includes, without limitation, Prime, PMSI and each of their present or
future affiliates, but excludes, for purposes of this Section, each Seller) (the
party owning such Proprietary Information is referred to as the "Discloser"),
that such Proprietary Information is unique and valuable and that such Discloser
would suffer irreparable injury if its Proprietary Information were divulged to
those in competition with Discloser. "Proprietary Information" shall be all
information concerning Discloser which a party acquires, or to which it has
access through its relationship with Discloser or Newco that has not been
publicly disclosed by Discloser or that is not a matter of common knowledge
among Discloser's competitors, including, but not limited to, information
relating to any inventions, processes, software, formulae, plans, devices,
compilations of information, technical data, mailing lists, management
strategies, business distribution methods, names of suppliers (of both goods and
services) and customers, names of employees and terms of employment,
arrangements entered into with suppliers and customers, including, but not
limited to, proposed expansion plans of Discloser, marketing and other business
and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, each Seller agrees
that it will not, at any time after the Closing: (i) directly or indirectly,
disclose any Proprietary Information to any person except its owners, directors,
managers, officers, employees, agents and consultants who need to know such
Proprietary Information in connection with such party's relationship with Newco
nor (ii) use Proprietary Information in any way, except for the purposes of
Newco.
Within forty-eight (48) hours of termination of its ownership
(directly, or indirectly through Target Center) interest in Newco, as
applicable, whether voluntary or involuntary, each Seller will deliver to the
appropriate Discloser (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, all other tangible
Proprietary Information in its possession or control and all of Discloser's
credit cards, keys, equipment, vehicles, supplies and other materials that are
in its possession or under its control.
Notwithstanding any other provision of this Section, to the extent any
Proprietary Information is owned exclusively by Newco, Newco hereby grants an
irrevocable, royalty free license to Prime, PMSI, each of Prime's or PMSI's
present or future affiliates, and each Seller and their present or future
affiliates, to use and disseminate such Proprietary Information.
8.4 Seller Non-Competition Agreement. As a material inducement to Prime to enter
into this Agreement, each Seller hereby agrees that, until the earlier of the
termination of the Management Agreement (other than a termination by Newco for
cause as described therein) or five (5) years after the Closing Date, each
Seller will not directly or indirectly, either through any kind of ownership
(other than ownership of securities of a publicly held corporation of which it
owns less than one percent (1%) of any class of outstanding securities), or as a
principal, shareholder, agent, employer, advisor, consultant, co-partner or in
any individual or representative capacity whatever, either for its own benefit
or for the benefit of any other person, corporation or other entity, without the
prior written consent of Newco and Prime, commit any of the following acts,
which acts shall be considered violations of this covenant not to compete:
(a) Directly or indirectly, within the "Restricted Areas" (as hereinafter
defined) engage in, or provide any services related to, (i) the
operating of Refractive Surgery centers, (ii) the manufacture,
maintenance, refurbishing, repair, sale, or leasing of any equipment
related to or necessary for the operating of Refractive Surgery
centers, or (iii) providing any management services, training or
consulting services related to any of the activities described in (i)
or (ii);
(b) Directly or indirectly provide Refractive Surgery services, including
without limitation, Refractive Surgery patient services, Refractive
Surgery management services, Refractive Surgery marketing services, or
similar services, anywhere within the Restricted Areas.
(c) Directly or indirectly request or advise any person, firm, physician,
corporation or other entity having a business relationship with Newco,
Prime or any affiliate or related entity of either of them, to
withdraw, curtail, or cancel its business with Newco, Prime or such
affiliate or related entity, including, without limitation, marketing
efforts and activities outside the Restricted Areas whose targeted
audience includes (in whole or in part) any potential any potential
Refractive Surgery customers inside the Restricted Areas; or
(d) Directly or indirectly hire any employee of Newco, Prime or any
affiliate or related entity of either of them, or induce or attempt to
influence any employee of Newco, Prime or any such affiliate or related
entity to terminate his or her employment with Newco, Prime or any such
affiliate or related entity. No employees, contract physicians or staff
of MBEC shall be considered to be working for an "affiliate" of Newco.
For purposes hereof, the "Restricted Areas" are anywhere within forty
(40) miles of (i) Target Center's location at 0000 Xxx Xxxxxxx, Xxxxx 000,
Xxxxxx, Xxxxx 00000. The covenants in this Section 8.4 shall terminate if Newco
terminates the Management Agreement (other than a termination by Newco for cause
as described therein).
8.5 Prime Non-Competition Agreement. As a material inducement to Seller to enter
into this Agreement, Prime hereby agrees that, until five (5) years after the
Closing Date, neither Prime nor any of its affiliates will directly or
indirectly, either through any kind of ownership (other than ownership of
securities of a publicly held corporation of which it owns less than one percent
(1%) of any class of outstanding securities), or as a principal, shareholder,
agent, employer, advisor, consultant, co-partner or in any individual or
representative capacity whatever, either for its own benefit or for the benefit
of any other person, corporation or other entity, without the prior written
consent of Newco and Seller, directly or indirectly hire any employee of Newco,
Seller or any affiliate or related entity of either of them, or induce or
attempt to influence any employee of Newco, Seller or any such affiliate or
related entity to terminate his or her employment with Newco, Seller or any such
affiliate or related entity.
8.6 Exclusive Use. Except as expressly otherwise provided below, during the term
of this Agreement, each Physician hereby agrees that, without the prior written
consent of both Newco and Prime, each Physician will perform, and will direct
all other medically trained or licensed medical professionals under the
direction or control of Physician to perform, all services related to Refractive
Surgery for patients residing or domiciled within the Austin, Texas metropolitan
area only at the facilities of, and using the equipment of, Newco.
Xxxx and Xxxxxx each agree, until the expiration of the fifth (5th)
anniversary of the Closing Date, to manage and operate Newco, and perform
Refractive Surgery, in a manner consistent with the management and operation of,
and their respective performance of Refractive Surgery at, Target Center in
1999. Berkeley agrees, until the expiration of the second (2nd) anniversary of
the Closing Date, to manage and operate Newco, and perform Refractive Surgery,
in a manner consistent with the management and operation of, and his performance
of Refractive Surgery at, Target Center in 1999. Each Physician agrees, for so
long as he remains obligated under the immediately preceding two (2) sentences
of this paragraph, to perform Refractive Surgery, or cause Refractive Surgery to
be performed by a physician employed by or affiliated with MBEC, at the
facilities of Newco on at least forty-two (42) separate days in the aggregate
during each calendar year, including a minimum of three (3) days each month,
subject to patient volume. Each Physician agrees, for so long as he remains
obligated under this paragraph of Section 8.6, to devote sufficient business
time and attention, and to use his best efforts, to create and maintain
sufficient patient volume to satisfy his obligations under this Section 8.6.
For so long as the Management Agreement is in effect, MBEC shall
compensate the Physicians for all procedures performed at the facilities of
Newco pursuant to this Agreement.
The obligations under this Section shall not apply to any Refractive
Surgery 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.
8.7 Right of First Refusal. Each Seller and MBEC represent and warrant to Prime
and PMSI that as of the Effective Time it does not operate, manage, or have any
direct or indirect ownership interest in, any entity that owns, operates, or
manages any Refractive Surgery center (currently existing or proposed), other
than as set forth on Schedule 8.7 which, together with any Refractive Surgery
center, business or operation developed or acquired after the Effective Time as
permitted under the terms of this Agreement, shall be referred to herein as the
"Retained Businesses." Sellers and MBEC shall give Prime prompt written notice
of establishing or acquiring any Refractive Surgery center after the Effective
Time for so long as the Management Agreement, or any extension thereof, is in
force (this obligation will not terminate, however, upon a termination of the
Management Agreement, or any extension thereof, by Newco for cause as described
therein, but shall continue to the benefit of Prime). Sellers and MBEC agree
that PMSI is hereby granted a right of first refusal (the "PMSI Option")
pursuant to which PMSI or one of its direct or indirect subsidiaries may, in its
sole discretion and for so long as the Management Agreement, or any extension
thereof, is in force (the PMSI Option will not terminate, however, upon a
termination of the Management Agreement, or any extension thereof, by Newco for
cause as described therein, but shall continue to the benefit of PMSI), and
without any obligation to do so, acquire from Sellers, MBEC, or the Retained
Businesses, as the case may be, at the price offered by (and upon the same terms
applicable to) any third party offer, all or a portion of the ownership
interest, business or assets of a Retained Business then held by Sellers, the
Retained Business or MBEC, prior to any sale, conveyance, encumbrance or other
transfer of the Retained Business, or any assets thereof or interest therein, in
whole or in part, to any third party (including without limitation any interest
dilution that occurs due to the issuance of any new ownership or other interests
in a Retained Business). The foregoing right of first refusal shall not apply to
any sale or transfer of a minority ownership interest to a physician or a
current full time employee of MBEC, provided that no such permitted transfer
shall be allowed if it results in the Sellers, or any of them, owning in the
aggregate less than 51% of the outstanding ownership interests (both as to
voting rights and rights to income and distributions) of the Retained Business
in question. If the Sellers, or any of them, own in the aggregate less than 51%
of the outstanding ownership interests (both as to voting rights and rights to
income and distributions) of a particular Retained Business, then no transfers
shall be permitted that are subject to PMSI's right of first refusal.
All parties hereto acknowledge and agree that it would be impractical
to exercise an option to purchase arising pursuant to this Section 8.7 whenever
the proposed consideration to be received by the Sellers or MBEC is other than
cash, cash equivalents or stock of publicly traded companies. Therefore, the
parties agree that no transfer shall be permitted whenever the consideration to
be received from the proposed transferee is other than cash, cash equivalents or
stock of publicly traded companies. Upon receiving any such third party offer,
Sellers or MBEC shall give prompt written notice thereof to PMSI. Following its
receipt of such notice, PMSI shall have thirty (30) days to exercise the PMSI
Option, and Sellers and MBEC agree that Sellers and MBEC may not take any action
with respect to the third party offer until PMSI has either provided written
notice of its intent not to exercise the PMSI Option, or the thirty (30) day
period has expired without any election by PMSI to exercise the PMSI Option. The
closing of any purchase and sale pursuant to an exercise of the PMSI Option
shall occur within 30 business days following such exercise, and the purchase
price shall be paid in identical form as shall have been set forth in the notice
of third party offer. In connection with any exercise of the PMSI Option by
PMSI, Sellers and MBEC shall deliver all agreements, documents, instruments and
certificates, and take such other action, as may be reasonably necessary in
order to consummate the purchase and sale contemplated in this Section, and PMSI
or its designated purchasing subsidiary shall receive the acquired interest free
and clear of any liens, claims or encumbrances. The parties agree that any
acquisition pursuant to exercise of the PMSI Option shall be accomplished
through an asset purchase, unless the parties otherwise agree.
8.8 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) each Physician shall not hereby be denied access to any list of his
patients whom he has seen or treated;
(b) each Physician shall not hereby be denied access to medical records of
his patients upon authorization of the patient, and any copies of such
medical records obtained or possessed by Prime or Newco shall be
provided to the Physician 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 (a) or (b) 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 the
applicable Physician;
(d) each Physician shall be entitled to buy out his performance of
obligations arising under Section 8.6 of this Agreement (but only such
obligations as is necessary in order for this Agreement to comply with
the Applicable Statutory Provision) for One Half of the Purchase Price,
less any amounts paid pursuant to Section 8.10 hereof; provided,
however, that in order for such buy out to be effective, the Physician
must also convey his entire equity interest in Newco to Prime,
unencumbered; and
(e) the Physician shall not hereby be prohibited from providing continuing
care and treatment to a specific patient or patients during the course
of an acute illness.
Each Physician agrees that the buy out amount set forth in this Section
8.8 is a reasonable price and represents a fair value for his performance of his
obligations hereunder. Physicians and Prime have each elected to utilize such
reasonable price in lieu of arbitration pursuant to the Applicable Statutory
Provision.
8.9 Agreement. Each Seller has reviewed and carefully considered the provisions
of Sections 8.3, 8.4, 8.6, 8.7 and 8.8 and, having done so, agrees that the
restrictions applicable to it as set forth therein (a) are fair and reasonable
with respect to time, geographic area and scope, (b) are not unduly burdensome
to them, and (c) are reasonably required for the protection of the interests of
the other parties hereto for whose benefit such restrictions were agreed upon.
8.10 Remedies. Each Seller agrees that a violation on its part of any applicable
covenant contained in Sections 8.3, 8.4, 8.6 or 8.7 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, Seller
agrees that the other parties shall be entitled as a matter of right to
equitable remedies, including specific performance and injunctive relief,
therefor. The right to specific performance and injunctive relief shall be
cumulative and in addition to whatever other remedies, at law or in equity, that
the other parties may have, including, specifically, recovery of liquidated
damages pursuant to this Section and any other additional damages.
Without limiting the indemnity provisions of Articles VI or VII of this
Agreement, the parties hereto agree that in the event a claim for damages
resulting from a breach of warranty or failure of a representation under Article
II or Article III of this Agreement is made against a party to this Agreement,
the party alleged to have breached this Agreement shall be provided, if
possible, with a reasonable opportunity to cure any breach of a warranty under
this Agreement. No remedy shall be afforded to any party to this Agreement for
any failure of a representation or warranty under this Article that is not
material (as defined in Section 9.9).
8.11 Right of Offset. Each Seller agrees that Newco shall have rights of offset
against distributions to each Seller in respect of any ownership interest such
Seller may have in Newco at any time following the Closing, for any and all
debts, obligations or liabilities that such Seller may have to Prime or PMSI,
including, without limitation, any liability arising out of or relating to such
Seller's indemnity obligations under this Agreement or any Transaction Document.
Each Seller hereby authorizes and directs Newco, and appoints Newco as its
attorney in fact, 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.
8.12 Termination. This Agreement, including, but not limited to, the
obligations contained in this Article VIII (but excluding Article VI and Article
VII), shall terminate upon the termination of the Management Agreement (other
than a termination by Newco for cause as described therein); provided that in no
event shall the provisions of Article VI and Article VII terminate.
ARTICLE IX
Miscellaneous
9.1 Collateral Agreements, Amendments, and Waivers. This Agreement (together
with the documents delivered pursuant hereto) supersedes all prior documents,
understandings, and agreements, oral or written, relating to this transaction
and constitutes the entire understanding among the parties with respect to the
subject matter hereof. Any modification or amendment to, or waiver of, any
provision of this Agreement (or any document delivered pursuant to this
Agreement unless otherwise expressly provided therein) may be made only by an
instrument in writing executed by each party thereto.
9.2 Successors and Assigns. No party's rights or obligations under this
Agreement may be assigned without the prior written consent of all parties
hereto, except that Prime may assign its rights and obligations hereunder to any
entity, more than fifty percent (50%) of the voting equity ownership interests
of which is at the time owned, directly or indirectly, by PMSI. Any assignment
in violation of the foregoing shall be null and void. Subject to the preceding
sentences of this Section, the provisions of this Agreement (and, unless
otherwise expressly provided therein, of any document delivered pursuant to this
Agreement) shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors, and assigns.
9.3 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. The costs and expenses incurred by Prime 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, but not to exceed $2,000 in any event.
9.4 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.
9.5 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.
9.6 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 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: Prime RVC, Inc.
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
Sellers: Xxxx Berkeley Eye Center
with a copy to: Xxxxxx X. Xxxxxx
Looper, Reed, Xxxx & McGraw
0000 Xxxx Xxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Each party may change its address for purposes of this Section by proper notice
to the other parties.
9.7 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.
9.8 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.
9.9 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 $5,000 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, Xxx
Xxxxxxx, Xxxxxx Xxxxxxxx and Xxxx Xxxxxxx and (ii) Target Center, it shall mean
such items as are within the actual knowledge of any Seller or any managerial
employee of Target Center who becomes an employee of Newco after the Closing.
9.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
9.11 Arbitration. Any controversy between the parties regarding this Agreement
and any claims arising out of this Agreement or its breach shall be submitted to
arbitration by either party. The arbitration proceedings shall be conducted by a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration shall be conducted in Dallas, Texas and
the arbitrator shall have the right to award actual damages and attorney fees
and costs, but shall not have the right to award punitive, exemplary or
consequential damages against either party.
9.12 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.
9.13 Post Effective Time Adjustments. The parties acknowledge and agree that
Target Center has, prior to the Closing Date, been receiving revenues, making
disbursements and incurring payables and receivables pursuant to the operations
of Target Center in the ordinary course, including without limitation paying
payroll, payroll taxes, trade vendors and other expenses. Target Center will
promptly account for all such activity and the parties agree that Newco or
Target Center, as applicable, will reimburse the other for any net amounts due
with respect to such post Effective Time activity.
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.
PRIME: PRIME RVC, INC.
By: __________________________________
Printed Name: _________________________
Title: ________________________________
NEWCO: PRIME MBC, L.L.C.
By: __________________________________
Printed Name: _________________________
Title: ________________________________
TARGET CENTER: MBC HOLDING COMPANY, L.L.C.
By: __________________________________
Printed Name: _________________________
Title: ________________________________
======================================
======================================
MBEC: XXXX BERKELEY EYE CENTER, P.A.
By: __________________________________
Printed Name: _________________________
Title: ________________________________
TABLE OF EXHIBITS
Exhibit A Form of Warrant
Exhibit B Limited Liability Company Organizational Documents of Newco
Exhibit C Form of Assignment and Assumption Agreement
Exhibit D Financial Statements of Target Center
Exhibit E Form of Transfer Restriction Agreement
Exhibit F Form of Management Agreement
Exhibit G Form of Incidental Registration Rights Agreement
