UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from
to
Commission File Number: 0-22392
PRIME MEDICAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2652727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 Capital of Texas Highway, Austin, Texas 78746
(Address of principal executive offices) (Zip Code)
(512) 328-2892
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. YES X NO
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-K or
any amendment to this Form 10-K.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
60 days prior to the date of filing.
Aggregate Market Value at March 20, 1998: $228,150,000
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Number of Shares Outstanding at
Title of Each Class March 20, 1998
------------------- --------------
Common Stock, $.01 par value 19,314,267
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the Registrant's definitive proxy material for the
1998 annual meeting of shareholders are incorporated by reference into Part III
of the Form 10-K.
<PAGE>
PRIME MEDICAL SERVICES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
PART I
ITEM 1. BUSINESS.
Prime Medical Services, Inc., a Delaware corporation ("Prime" or the
"Company"), is the largest provider of lithotripsy services in the United
States. Lithotripsy is a non-invasive procedure for the treatment of kidney
stones, typically performed on an outpatient basis, that eliminates the need for
lengthy hospital stays and extensive recovery periods associated with surgery.
The Company has 61 lithotripters of which 54 are mobile and seven are fixed
site. The Company's lithotripters performed approximately 36,000 procedures in
the United States in 1997 through its network of approximately 450 hospitals and
surgery centers in 34 states. In addition, the Company has over 270 contracts
with managed care organizations.
Lithotripters fragment kidney stones by use of extracorporeal shock
wave lithotripsy. The Company provides services related to the operation of the
lithotripters, including scheduling, staffing, training, quality assurance,
maintenance, regulatory compliance and contracting with payors, hospitals and
surgery centers. Medical care is rendered by the urologists utilizing the
lithotripters. Management believes that the Company has collected the industry's
largest and most comprehensive lithotripsy database, containing detailed
treatment and outcomes data on over 120,000 lithotripsy procedures. The Company
and its associated urologists utilize this database in seeking to provide the
highest quality of lithotripsy services as efficiently as possible.
From 1992 through 1997, the Company completed 12 acquisitions involving
57 lithotripter operations and internally developed four new operations. Since
1992, the Company has substantially divested its original non-lithotripsy
businesses.
Lithotripsy Industry Overview
Kidney stones develop from crystals made up primarily of calcium which
separate from urine and build up on the inner surfaces of the kidney. The exact
cause of kidney stone formation is unclear, and there is no known preventative
cure in the vast majority of cases. Approximately 25% of all kidney stones do
not pass spontaneously and therefore require medical or surgical treatment.
Kidney stone treatments used by urologists include lithotripsy, drug therapy,
endoscopic extraction or open surgery. While the nature and location of a kidney
stone impacts the choice of treatment, the Company believes the majority of all
kidney stones that require treatment are treated with lithotripsy because it is
non-invasive, typically requires no general anesthesia, and rarely requires
hospital stays. After fragmentation by lithotripsy, the resulting kidney stone
fragments pass out of the body naturally. Recovery from the procedure is usually
a matter of hours.
Kidney stone disease is most prevalent in the southern United States.
Men are afflicted with kidney stones more than twice as frequently as women,
with the highest incidence occurring in men
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45 to 64 years of age.
Kidney Stone Treatment Methods
A number of kidney stone treatments are used by urologists ranging from
non-invasive procedures, such as drug therapy or lithotripsy, to invasive
procedures, such as endoscopic extraction or open surgery. The type of treatment
a urologist chooses depends on a number of factors, such as the size and
chemical make-up of the stone, the stone's location in the urinary system and
whether the stone is contributing to other urinary complications such as
blockage or infection.
Certain types of less common kidney stones may be dissolved by drugs which
allow normal passage from the urinary system. Stones located in certain areas of
the urinary tract may be extracted endoscopically. These procedures commonly
require general or local anesthesia and can injure the involved areas of the
urinary tract. Frequently, kidney stones are located where they are not
accessible by an endoscopic procedure. Prior to the development of lithotripsy,
stones lodged in the upper urinary tract were often treated by open surgery or
percutaneous stone removal, both major operations requiring an incision to gain
access to the stone. After such procedures, the patient typically spends several
days in the hospital followed by a convalescence period of three to six weeks.
As the technology for treating kidney stones has improved, there has been a
shift from more expensive and complicated invasive procedures to safer, more
cost efficient and less painful non-invasive procedures, such as lithotripsy.
Extracorporeal Shock Wave Lithotripsy
General. The lithotripter has dramatically changed the course of kidney
stone disease treatment since lithotripsy is normally performed on an outpatient
basis, often without general anesthesia. Recovery times are generally only a few
hours, and most patients can return to work the next day. There are three basic
types of lithotripsy treatment currently available: electromagnetic, spark-gap
and piezoelectric. A decision regarding which type is used in any instance may
depend on several factors, among which are the treating physician's preferences,
treatment times, stone location, and anesthesia considerations. The Company has
40 electromagnetic machines, 20 spark-gap machines and one piezoelectric
machine.
Electromagnetic Technology. Most new lithotripters utilize an
electromagnetic shock wave component that eliminates the need for disposable
electrodes. The use of lithotripters employing electromagnetic technology allows
for more precise focusing of shock wave energy and more predictable energy
delivery than other lithotripsy technologies, which eliminates the need for
anesthesia in most cases. Utilization of systems employing electromagnetic
technology usually results in fragmentation of the kidney stone in between 60
and 90 minutes.
Spark Gap Technology. With these lithotripsy systems, shock waves generated
by a disposable high-voltage spark electrode are focused on a kidney stone.
Utilization of systems employing spark gap technology usually results in
fragmentation of the kidney stone in less than 60 minutes. The use of spark-gap
technology often requires the administration of sedatives or intravenous
anesthesia care and in some cases requires general anesthesia.
Piezoelectric Technology. Lithotripters applying piezoelectric technology
focus shock waves on the kidney stone using a linear array of ceramic elements.
This technology has not been widely adopted, and there are only a few
lithotripters utilizing piezoelectric technology operating in the United States.
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Other Lines of Business
In September 1997, the Company, through its acquisition of a 75% interest
in AK Associates, L.L.C. ("AK"), began providing manufacturing services and
installation, upgrade, refurbishment and repair of major medical equipment for
mobile medical services providers. The Company paid $4.8 million for this
interest, plus an earn-out of up to $1.1 million. The remaining 25% of AK is
owned by certain members of AK management. The Company did not receive
significant revenues from AK during 1997.
In October 1997, the Company began providing thermotherapy services for the
treatment of benign prostatic hyperplasia ("BPH"). BPH is the non-cancerous
enlargement of the prostate, a condition common in men over age 60.
Thermotherapy uses microwaves to apply heat to the prostate, resulting in relief
of the symptoms of BPH without damaging surrounding tissues. Thermotherapy
relieves the symptoms of BPH without incurring the risks of complications often
associated with surgery and more invasive procedures. The Company operates one
mobile thermotherapy device servicing hospitals and surgery centers in eastern
North Carolina, and has been granted an unrestricted license to provide
thermotherapy services with a second mobile system in southern California. The
Company intends to evaluate the success of its thermotherapy operations and may
expand such operations in the future. The Company did not receive significant
revenues from this activity during 1997.
Prime Cardiac Rehabilitation Services, Inc. ("Prime Cardiac"), a
wholly-owned subsidiary of the Company, provides non-medical management services
for six cardiac rehabilitation centers, pursuant to agreements with physicians,
clinics and hospitals ("Medical Providers"). The Medical Providers have absolute
authority over the medical services provided at the centers, fees charged to
patients and the collection practices of the facility. Prime Cardiac's fees are
generally based on collected revenues of the centers. The Company has
substantially reduced its cardiac rehabilitation business over the last three
years, which accounted for less than 1% of the Company's total revenues for the
year ended December 31, 1997.
Potential Liabilities-Insurance
All medical procedures performed in connection with the Company's
business activities are conducted directly by, or under the supervision of
physicians, who are not employees of the Company. The Company does not provide
medical services to any patients. However, patients being treated at health care
facilities at which the Company provides its non-medical services could suffer a
medical emergency resulting in serious injury or death, which could subject the
Company to the risk of lawsuits seeking substantial damages.
The Company currently maintains general and professional liability
insurance with a total limit of $1,000,000 per loss event and $3,000,000 policy
aggregate and an umbrella excess limit of $10,000,000, with a deductible of
$25,000 per occurrence. In addition, the Company requires medical professionals
who utilize its services to maintain professional liability insurance. All of
these insurance policies are subject to annual renewal by the insurer. If these
policies were to be canceled or not renewed, or failed to provide sufficient
coverage for the Company's liabilities, the Company might be forced to
self-insure against the potential liabilities referred to above. In that event,
a single incident might result in an award of damages which might have a
material adverse effect on the operations of the Company.
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Government Regulation and Supervision
The Company is subject to extensive regulation by both the federal
government and the states in which the Company conducts its business. The
Company is subject to Section 1128B of the Social Security Act (known as "the
Illegal Remuneration Statute"), which imposes civil and criminal sanctions on
persons who solicit, offer, receive or pay any remuneration, directly or
indirectly, for referring, or arranging for the referral of, a patient for
treatment that is paid for in whole or in part by Medicare, Medicaid or similar
government programs. The federal government has published regulations that
provide exceptions or a "safe harbor" for certain business transactions.
Transactions that are structured within the safe harbors are deemed not to
violate the Illegal Remuneration Statute. Transactions that do not satisfy all
elements of a relevant safe harbor do not necessarily violate the Illegal
Remuneration Statute, but may be subject to greater scrutiny by enforcement
agencies. The arrangements between the Company and the partnerships and other
entities in which it owns an indirect interest and through which the Company
provides most of its lithotripsy services (and the corresponding arrangements
between such partnerships and other entities and the treating physicians who own
interests therein and who use the lithotripsy facilities owned by such
partnerships and other entities) could potentially be questioned under the
illegal remuneration prohibition and may not fall within the protection afforded
by these safe harbors. Many states also have laws similar to the Federal Illegal
Remuneration Statute. While failure to fall within the safe harbors may subject
the Company to scrutiny under the Illegal Remuneration Statute, such failure
does not constitute a violation of the Illegal Remuneration Statute.
Nevertheless, these illegal remuneration laws, as applied to activities and
relationships similar to those of the Company, have been subjected to limited
judicial and regulatory interpretation, and the Company has not obtained or
applied for any opinion of any regulatory or judicial authority that its
business operations and affiliations are in compliance with these laws.
Therefore, no assurances can be given that the Company's activities will be
found to be in compliance with these laws if scrutinized by such authorities.
In addition to the Illegal Remuneration Statute, Section 1877 of the
Social Security Act ("Stark II") imposes certain restrictions upon referring
physicians and providers of certain designated health services under the
Medicare, Medicaid and Champus Programs ("Government Programs"). Subject to
certain exceptions, Stark II provides that if a physician (or a family member of
a physician) has a financial relationship with an entity: (i) the physician may
not make a referral to the entity for the furnishing of designated health
services reimbursable under the Government Programs; and (ii) the entity may not
bill Government Programs, any individual or any third-party payor for designated
health services furnished pursuant to a prohibited referral under the Government
Programs. The prohibitions of Stark II only apply to the treatment of Government
Program patients, and have no application to services performed for
non-government program patients. Entities and physicians committing an act in
violation of Stark II will be required to refund amounts collected in violation
of the statute and also are subject to civil money penalties and exclusion from
the Government Programs. Urologists are investors in 43 of the Company's 61
lithotripsy operations, and the two Company affiliates engaged in thermotherapy
services have referring physicians- investors (the Company lithotripsy and
thermotherapy affiliates with referring physicians-investors are referred to
herein as the "Company Physician Entities").
Many key terms in Stark II are not adequately defined and the statute
is silent regarding its application to vendors, such as the Company Physician
Entities, contracting "under arrangements" with hospitals for the provision of
outpatient services. Since the passage of Stark II, the Company, interpreted
Stark II consistently with the informal view of the General Counsel for Health
and
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Human Services, and concluded that the statute did not apply to its method of
conducting business. Based upon a reasonable interpretation of Stark II, by
referring a patient to a hospital furnishing the outpatient lithotripsy or
thermotherapy services "under arrangements" with the Company Physician Entities,
a physician investor in a Company Physician Entity is not making a referral to
an entity (the hospital) in which they have an ownership interest.
On January 9, 1998, the federal government published proposed
regulations under Stark II (the "Proposed Stark Regulations"). By clarifying
certain ambiguities and defining certain statutory terms, the Proposed Stark
Regulations and accompanying commentary apply the physician referral
prohibitions of Stark II to the Company Physician Entities' practice of
contracting "under arrangements" with hospitals for treatment and billing of
Government Program patients. Only hospitals can bill the Government Programs for
lithotripsy and thermotherapy services; thus contracting under arrangements with
hospitals was the way the Company Physician Entities economically participated
in the treatment of Government Program patients. Absent a restructuring of
traditional operations, to comply with the government's interpretation of Stark
II, the physician- investors will be prohibited from referring Government
Program patients to the hospitals contracting with the Company Physician
Entities. The Company cannot predict when final Stark II regulations will be
issued or the substance of the final regulations, but the interpretive
provisions of the Proposed Stark Regulations may be viewed as the federal
government's interim enforcement position until final regulations are issued.
Restructuring traditional operations may reduce Company revenues and limit
future growth by (i) reducing or eliminating revenues attributable to the
treatment of Government Program patients by the Company Physician Entities, (ii)
reducing revenues from the treatment of non-government patients by Company
Physician Entities due to physician, hospital and third-party payor anxiety and
concern created by Stark II, (iii) requiring the Company Physician Entities to
restructure their operations to comply with Stark II, (iv) restricting the
acquisition or development of additional lithotripsy or thermotherapy operations
that will both treat Government Program patients and have referring
physician-investors, (v) impairing the Company's relationship with urologists
and (vi) otherwise materially adversely impacting the Company.
Many states currently have laws similar to Stark II that restrict a
physician with a financial relationship with an entity from referring patients
to that entity. Often these laws contain statutory exceptions for circumstances
where the referring physician, or a member of his practice group, treats their
own patients. States also commonly require physicians to disclose to patients
their financial relationship with an entity. The Company believes that it is in
material compliance with these state laws. Nevertheless, these state
self-referral laws, as applied to activities and relationships similar to those
of the Company, have been subjected to limited judicial and regulatory
interpretation, and the Company has not obtained or applied for any opinion of
any regulatory or judicial authority that its business operations and
affiliations are in compliance with these laws. Therefore, no assurances can be
given that the Company's activities will be found to be in compliance with these
laws if scrutinized by such authorities.
In addition, upon the occurrence of changes in the law that may
adversely affect operations, the Company is required to purchase the interests
of physician-investors for certain of the Company Physician Entities. These
mandatory purchase obligations require the payment by the Company of a multiple
of earnings similar to multiples used by the Company in pricing the original
acquisition of such interests. To the extent the Company is required to purchase
such interests, such purchases might cause a default under the terms of the
Company's senior credit facility, impair the Company's relationship with
urologists and otherwise have a material adverse impact on the Company.
Regulatory developments, such as Stark II, might also dictate that the Company
purchase all the
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interests of its physician-investors, regardless of any contractual requirements
to do so, or substantially alter its business and operations to remain in
compliance with applicable laws. Accordingly, there can be no assurance that the
Company will not be required to change its business practices or its investment
relationships with urologists or that the Company will not experience a material
adverse effect as a result of any challenge made by a federal or state
regulatory agency. In addition, there can be no assurance that
physician-investors who, voluntarily or otherwise, divest of their interests in
Company Physician Entities will continue to refer patients at the same rate or
at all.
Some states require approval, usually in the form of a certificate of
need ("CON"), prior to the purchase of major medical equipment exceeding a
predesignated capital expenditure threshold or for the commencement of certain
clinical health services. Such approval is generally based upon the anticipated
utilization of the service and the projected need for the service in the
relevant geographical area of the state where the service is to be provided. CON
laws differ in many respects, and not every state's CON law applies to the
Company. Most of the Company's operations originated in states which did not
require a CON for lithotripsy services, and the Company has obtained a CON in
states where one is required. Some states also require registration of
lithotripters with the state agency which administers its CON program. Such
registration is not subject to any required approval, but rather is an
administrative matter imposed so that the state will be aware of all existing
clinical health services. The Company registers in those states which require
these filings.
All states in which the Company operates require registration of the
fluoroscopic x-ray tubes which are utilized to locate the kidney stones treated
with the Company's lithotripters. The registration requirements are imposed in
order to facilitate periodic inspection of the fluoroscopic tubes.
Some states have regulations that require facilities such as mobile
lithotripters to be licensed and to have appropriate emergency care resources
and qualified staff meeting the stated educational and experience criteria. The
Company's lithotripsy equipment is subject to regulation by the U.S. Food & Drug
Administration, and the motor vehicles utilized to transport the Company's
mobile lithotripsy equipment are subject to safety regulation by the U.S.
Department of Transportation and the states in which the Company conducts its
mobile lithotripsy business. The Company believes that it is in material
compliance with these regulations.
Except as provided herein, the Company believes it complies in all
material respects with the foregoing laws and regulations, and all other
applicable regulatory requirements; however, these laws are complex and have
been broadly construed by courts and enforcement agencies. Thus, there can be no
assurance that the Company will not be required to change its practices or its
relationships with treating physicians who are investors in the Company
Physician Entities, or that the Company will not experience material adverse
effects as a result of any investigations or enforcement actions by a federal or
state regulatory agency. Further, the Company acknowledges that the Proposed
Stark Regulations apply the physician referral prohibitions of Stark II to the
Company Physician Entities' practice of contracting under arrangements with
hospitals for the treatment and billing of Government Program patients. As a
consequence, the Company Physician Entities will have to restructure or modify
their business practices in order to comply with the Stark II statute as
interpreted by the Proposed Stark Regulations.
A number of proposals for healthcare reform have been made in recent
years, some of which have included radical changes in the healthcare system.
Healthcare reform could result in material changes in the financing and
regulation of the healthcare business, and the Company is unable to
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predict the effect of such changes on its future operations. It is uncertain
what legislation on healthcare reform, if any, will ultimately be implemented or
whether other changes in the administration or interpretation of governmental
healthcare programs will occur. There can be no assurance that future healthcare
legislation or other changes in the administration or interpretation of
governmental healthcare programs will not have a material adverse effect on the
results of operations of the Company.
Equipment
The Company purchases its lithotripter equipment and maintenance is
generally provided pursuant to service contracts with the manufacturer or local
service companies. The cost of a new lithotripter ranges from $600,000 to
$1,200,000. For mobile lithotripsy, the Company either purchases or leases the
tractor, usually for a term up to five years, and purchases the trailer or a
self contained coach.
Employees
As of March 15, 1998, the Company employed approximately 330 full-time
employees and approximately 20 part-time employees.
Competition
The market to provide lithotripsy services is highly fragmented and
competitive. The Company competes with other private facilities and medical
centers that offer lithotripsy services and with hospitals, clinics and
individual medical practitioners that offer conventional medical treatment for
kidney stones. Certain of the Company's current and potential competitors have
substantially greater financial resources than the Company and may compete with
the Company for acquisitions and development of operations in markets targeted
by the Company. A decrease in the purchase price of lithotripters as a result of
the development of less expensive lithotripsy equipment could decrease the
Company's competitive advantage. Most of the Company's lithotripsy services
agreements have matured past their initial terms and are now in annual renewal
terms or are on a month-to-month basis. Another significant provider of
lithotripsy services is also a manufacturer of lithotripsy equipment, which may
create different incentives for such provider in pricing lithotripsy services.
Moreover, while the Company believes that lithotripsy has emerged as the
superior treatment for kidney stone disease, the Company competes with
alternative kidney stone disease treatments.
ITEM 2. PROPERTIES.
The Company's principal executive office is located in Austin, Texas in
an office building owned by American Physicians Services Group, Inc. ("APS").
The Company pays APS approximately $8,000 per month, which includes rental
payment for approximately 5,600 square feet of office space, reception and
telephone services, and certain other services and facilities. The office space
lease expires in December, 1998.
The Company leases approximately 11,000 square feet of office space in
Fayetteville, NC under two leases expiring in 2001. The current monthly lease
amount is approximately $10,000.
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The Company leases approximately 24,000 square feet of manufacturing
and office space in Mokena, Illinois under a lease which expires in 2000. The
current monthly lease amount is approximately $12,000.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company may be named as a party to litigation
proceedings incidental to its business. The Company does not believe the outcome
of any such litigation is likely to have a material adverse effect on its
business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCK HOLDER MATTERS.
The following table sets forth the high and low closing prices for the
Company's common stock in the over-the-counter market as reported by the
National Association of Securities Dealers, Inc., Automated Quotations System,
for the years ended December 31, 1997 and 1996 (NASDAQ Symbol "PMSI").
Year Ended December 31, 1997 High Low
First Quarter $12.38 $ 9.75
Second Quarter 11.81 8.94
Third Quarter 14.75 10.25
Fourth Quarter 14.69 11.75
Year Ended December 31, 1996 High Low
First Quarter $13.31 $ 6.75
Second Quarter 20.38 13.06
Third Quarter 17.25 11.00
Fourth Quarter 13.75 10.00
On March 20, 1998, the Company had approximately 800 holders of record of
its common stock.
The Company has not declared any cash dividends on its common stock
during the last two years and has no present intention of declaring any cash
dividends in the foreseeable future. In addition, the Company is not permitted
by its current credit facility to declare or make any payments for dividends. It
is the present policy of the Board of Directors to retain all earnings to
provide funds for the growth of the Company. The declaration and payment of
dividends in the future will be determined by the Board of Directors based upon
the Company's earnings, financial condition, capital requirements, loan
covenants and such other factors as the Board of Directors may deem
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relevant.
ITEM 6. SELECTED FINANCIAL DATA.
($ in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C> <C>
Years Ended December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Revenues:
Lithotripsy $ 93,113 $ 71,602 $ 22,153 $ 14,843 $ 7,309
Other 2,866 802 1,042 9,925 13,259
-------- -------- -------- --------- --------
Total $ 95,979 $ 72,404 $ 23,195 $ 24,768 $ 20,568
======== ======== ======== ======== ========
Income:
Net income $ 14,856 $ 8,961 $ 7,204 $ 4,504 $ 2,539
======== ========= ======== ======== ========
Diluted earnings per share:
Net income $ 0.76 $ 0.49 $ 0.48 $ 0.31 $ 0.21
====== ====== ====== ====== ======
Dividends per share None None None None None
Total assets $225,826 $202,534 $ 77,627 $ 53,861 $ 38,678
======== ======== ======== ======== ========
Long-term obligations $ 71,198 $ 70,910 $ 22,323 $ 12,734 $ 2,675
======== ======== ======== ======== ========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Forward Looking Statements
The statements contained in this Report on Form 10-K that are not
purely historical are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, including statements regarding the Company's expectation, hopes,
intentions or strategies regarding the future. Readers should not place undue
reliance on forward-looking statements. All forward-looking statements included
in this document are based on information available to the Company on the date
hereof, and the Company assumes no obligation to update any such forward-looking
statements. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements. In addition to
any risks and uncertainties specifically identified in the text surrounding such
forward- looking statements, the reader should consult the Company's reports on
Form 10-Q and other filings under the Securities Act of 1933 and the Securities
Exchange Act of 1934, for factors that could cause actual results to differ
materially from those presented.
The forward-looking statements included herein are necessarily based on
various assumptions and estimates and are inherently subject to various risks
and uncertainties, including risks and uncertainties relating to the possible
invalidity of the underlying assumptions and estimates and possible changes or
developments in social, economic, business, industry, market, legal and
regulatory circumstances and conditions and actions taken or omitted to be taken
by third parties,
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including customers, suppliers, business partners and competitors and
legislative, judicial and other governmental authorities and officials.
Assumptions related to the foregoing involve judgements with respect to, among
other things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Any of such
assumptions could be inaccurate and therefore, there can be no assurance that
the forward-looking statements included in this Report on Form 10-K will be
prove to be accurate.
Year ended December 31, 1997 compared to the year ended December 31, 1996
For the year ended December 31, 1997, total revenues increased $23,575,000
(33%) as compared to the same period in 1996. Revenues from lithotripter
operations increased by $21,511,000 primarily due to the acquisitions of (i) one
lithotripter entity that owned or managed 31 lithotripters throughout the U.S.
effective May 1996, (ii) additional interests in 10 partnerships in January
1997, (iii) one company that owned two lithotripters effective June 1997 and
(iv) a 38.25% interest in a lithotripter unit effective May 1997. Revenues from
manufacturing were $2,358,000, related to the acquisition of the trailer
manufacturer in September 1, 1997. Revenues from cardiac centers decreased
$323,000 primarily due to the one sold cardiac center.
For the year ended December 31, 1997, costs and expenses (excluding
depreciation and amortization) increased from 34% to 35% of revenues, and
increased $8,486,000 (34%) in absolute terms, compared to the same period in
1996. Costs of services associated with lithotripter operations increased
$5,459,000 (27%) in absolute terms primarily due to the acquisitions discussed
above, and decreased from 28% to 27% of lithotripter revenues. Expenses from
manufacturing were $1,743,000. Cost of services associated with cardiac centers
decreased $322,000 (51%) primarily due to the sale of one cardiac center.
Corporate expenses were 6% of revenues for both years as the Company was able to
successfully grow without proportionately adding overhead. Corporate expenses
increased $1,438,000 (34%) primarily due to the additional corporate expenses
associated with the acquisitions discussed above.
For the year ended December 31, 1997, other deductions decreased $1,592,000
primarily due to $3,535,000 in debt issuance and canceled stock offering costs
in 1996, compared to only $360,000 which were recorded in 1997, partially offset
by an increase in interest expense of $1,500,000 due to borrowings in 1997
related to the acquisitions discussed above.
Minority interest in consolidated income increased $5,498,000 primarily due
to the other ownership interest associated with 21 partnerships in which
Lithotripters, Inc. holds a controlling interest. The Company concluded the
Lithotripters, Inc. acquisition effective May 1, 1996.
Provision for income taxes increased $3,799,000 due to the increase in
income before income taxes, partially offset by the Company fully utilizing its
net operating loss and other carryforwards in 1997, which resulted in a
reduction in the beginning of year valuation allowance of $2,399,000.
Year ended December 31, 1996 compared to the year ended December 31, 1995
Total revenues increased $49,209,000 (212%) as compared to the same period
in 1995. Revenues from lithotripter operations increased by $49,449,000
primarily due to the acquisitions of (i) an entity that owned or managed 31
lithotripters effective May 1, 1996 (ii) an entity that owned or managed eight
lithotripters effective October 1, 1995, and (iii) a 70% interest in an entity
that operated one lithotripter, as of July 1, 1995. In addition, the Company
acquired a 32.5% interest in an entity that operated one lithotripter in June
1995. Revenues from cardiac centers decreased
10
<PAGE>
$240,000 primarily due to four discontinued/sold cardiac centers.
Costs and expenses (excluding depreciation and amortization) decreased from
43% to 34% of revenues, but increased $14,742,000 (147%) in absolute terms,
compared to the same period in 1995. Costs of services associated with
lithotripter operations increased $13,943,000 (233%) in absolute terms and from
27% to 28% of lithotripter revenues primarily due to the acquisitions discussed
above. Cost of services associated with cardiac centers decreased $873,000 (58%)
primarily due to four discontinued/sold cardiac centers. Corporate expenses
decreased from 11% to 6% of revenues as the Company was able to successfully
grow without proportionately adding overhead. Corporate expenses increased
$1,672,000 (65%) primarily due to the additional corporate expenses associated
with the acquisition discussed above and the management incentive plans tied to
the performance of the Company.
Other deductions increased $8,251,000 primarily due to (i) the write-off of
$2,735,000 in fees paid to lenders to obtain financing, and $800,000 in fees
associated with a proposed stock offering that was canceled in August 1996 and
(ii) an increase in interest expense of $4,746,000 due to $74.0 million in new
borrowings in 1996 primarily for the acquisition of Lithotripters, Inc.,
effective May 1, 1996.
Minority interest in consolidated income increased $18,122,000 primarily
due to the other ownership interest associated with 21 partnerships in which
Lithotripters, Inc. holds a controlling interest. The Company concluded the
acquisition of Lithotripters, Inc. effective May 1, 1996.
Liquidity and Capital Resources
Cash was $23,770,000 and $20,096,000 at December 31, 1997 and December 31,
1996, respectively. Cash provided by operations was $51,693,000 for the year
ended December 31, 1997 and $41,602,000 for the year ended December 31, 1996.
The Company's subsidiaries generally distribute all of their available cash
quarterly, after establishing reserves for estimated capital expenditures and
working capital. For the years ended December 31, 1997 and 1996, the Company's
subsidiaries distributed cash of approximately $28,667,000 and $13,440,000,
respectively, to minority interest holders.
Cash used by investing activities for the year ended December 31, 1997 was
$22,949,000 primarily due to $20,217,000 associated with acquisitions and
$4,546,000 for the purchase of equipment and leasehold improvements, partially
offset by $1,690,000 in distributions from investments. Cash used by investing
activities for the year ended December 31, 1996 was $71,770,000 primarily due to
expenditures of $70,129,000 associated with acquisitions including $3,387,000
for deferred payments, and $2,526,000 for the purchase of equipment and
leasehold improvements. This was partially offset by $1,257,000 in distributions
from investments.
Cash used in financing activities for the year ended December 31, 1997 was
$25,070,000, primarily due to distributions to minority interests of $28,667,000
offset by net borrowings of $873,000, and contributions received from minority
interests of $2,381,000. Cash provided by financing activities for the year
ended December 31, 1996 was $45,572,000, which was primarily due to $58,649,000
in net borrowings under credit facilities, partially offset by distributions to
minority interests of $13,440,000.
The Company's existing credit facility is comprised of two term loans and a
revolving line of credit. The term loans bear interest at the rate of LIBOR plus
two percent to three percent, payable monthly, and require quarterly or annual
principal payments. At December 31, 1997, approximately $39 million was owed
under the term loan which matures in April 2001, and approximately $40 million
was owed under the term loan which matures in April 2003. The revolving line of
credit has a borrowing limit of $50.0 million none of which was drawn at
December 31, 1997.
On March 27, 1998, the Company completed an offering of $100 million of
senior subordinated notes due 2008 (the "Notes") to qualified institutional
buyers. The net proceeds from the offering
11
<PAGE>
of approximately $96 million will be used to repay all outstanding
indebtedness under the Company's bank facility, with the remainder to be used
for general corporate purposes, including acquisitions. In connection herewith,
the Company will take a charge to earnings of approximately $3.8 million for
debt issuance costs associated with the Notes.
The Company is currently evaluating its alternatives in light of the
Proposed Stark Regulations. While the Company believes the changing regulatory
environment may benefit the Company by creating new lithotripsy acquisition
opportunities, the Company is reevaluating its historical model for providing
lithotripsy and thermotherapy services through operations which include
physician- investors and has delayed the organization of physician partnerships
that were in various stages of development.
The Company intends to increase the number of its lithotripsy operations
primarily through acquisitions. The Company believes that the fragmented nature
of the lithotripsy industry, combined with operational challenges created by
increasing regulatory and business complexities, including Stark II, the Illegal
Remuneration Statute and similar state laws, will provide significant
lithotripsy acquisition opportunities. Where appropriate, the Company will seek
to increase its ownership interest in current lithotripsy operations by
purchasing interests of urologists and other investors who desire to divest due
to concerns over regulatory issues, a desire to realize a return on their
investment or retirement. The Company intends to fund the purchase price for
future acquisitions using borrowings under its senior credit facility, proceeds
from the offering of the Notes and cash flow from operations. In addition, the
Company may use shares of its common stock in such acquisitions where
appropriate.
The Company has announced a stock repurchase program of up to $15.0 million
of common stock. From time to time, the Company may purchase additional shares
of its common stock where, in the judgment of management, market valuations of
its stock do not accurately reflect the Company's past and projected results of
operations. The Company intends to fund any such purchases using available cash,
cash flow from operations and borrowings under its senior credit facility.
The Company's ability to make scheduled payments of principal of, or to pay
the interest on, or to refinance, its indebtedness, or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control. Based upon the current level of
operations and anticipated cost savings and revenue growth, management believes
that cash flow from operations and available cash, together with available
borrowings under its senior credit facility, will be adequate to meet the
Company's future liquidity needs for at least the next several years. However,
there can be no assurance that the Company's business will generate sufficient
cash flow from operations, that anticipated revenue growth and operating
improvements will be realized or that future borrowings will be available under
the senior credit facility in an amount sufficient to enable the Company to
service its indebtedness or to fund its other liquidity needs.
Impact of Inflation
The assets of the Company are not affected by inflation because the Company
is not required
12
<PAGE>
to make large investments in fixed assets. However, the rate of inflation will
affect certain of the Company's expenses, such as employee compensation and
benefits.
New Accounting Pronouncements
In June 1997, the FASB issued FASB No. 131, Disclosures about Segments of
an Enterprise and Related Information, which the Company is required to adopt
for annual periods beginning after December 15, 1997 and interim periods
beginning in fiscal year 1999. SFAS No. 131 establishes standards for the way
that public companies report information about operating segments in annual
financial statements and requires that those companies report information about
segments in interim financial reports issued to shareholders. The Company has
not yet completed its analysis of this statement and the impact on its financial
statements.
Year 2000 Compliance
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The "year 2000 problem"
is pervasive and complex as virtually every computer operation will be affected
in some way by the rollover of the two digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail. The Company
does not anticipate that it will incur significant operating expenses or be
required to invest heavily in computer systems improvements to be year 2000
compliant. However, significant uncertainty exists concerning the potential
costs and effects associated with any year 2000 compliance. Any year 2000
compliance problem of either the Company or its vendors, third party payors or
customers could have a material adverse effect on the Company's business,
results of operations, financial condition and prospects.
ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Not required for 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is contained in Appendix A
attached hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
NONE.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is contained in the definitive proxy
material of the Company to be filed in connection with its 1998 annual meeting
of shareholders, except for the information regarding executive officers of the
Company which is provided below. The information required by this item contained
in such definitive proxy material is incorporated herein by reference.
13
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT.
As of March 20, 1998, the executive officers of the Company are as follows:
Name Age Position
Kenneth S. Shifrin 48 Chairman of the Board
Joseph Jenkins, M.D., J.D. 50 President, Chief Executive Officer
and Director
Michael Madler 39 Senior Vice President - Operations
Dan Myers, M.D. 49 Senior Vice President - Development
Stan Johnson 44 Vice President
Cheryl L. Williams 46 Chief Financial Officer, Vice
President-Finance, and Secretary
The foregoing does not include positions held in the Company's subsidiaries.
Officers are elected for annual periods. There are no family relationships
between any of the executive officers and/or directors of the Company.
Mr. Shifrin has been Chairman of the Board and a director of the Company
since October 1989. In addition, Mr. Shifrin has served in various capacities
with APS since February 1985, and is currently Chairman of the Board and Chief
Executive Officer of APS.
Dr. Jenkins has been President and Chief Executive Officer and a director
of the Company since April 1996. From May 1990 until December 1991, Dr. Jenkins
was a Vice President of Lithotripters, Inc. Since January 1992, Dr. Jenkins has
been President of Lithotripters, Inc. Dr. Jenkins is a board certified urologist
and is a founding member, a past president and currently a director of the
American Lithotripsy Society.
Mr. Madler has been Sr. Vice President--Operations of the Company since
August 1996. From July 1993 to August 1996, Mr. Madler was Vice
President--Operations of the Company. Previously, Mr. Madler was Vice President
of Operations of American Health Services Corp., a diagnostic imaging company,
from July 1991 to June 1993. He was employed by the Company from 1985 to 1991,
most recently as its Vice President of Operations.
Dr. Myers has been Sr. Vice President--Development of the Company since
August 1996. Dr. Myers is a board certified urologist and was a Vice President
of Lithotripters, Inc. from January 1990 until it was acquired by the Company in
April 1996.
Mr. Johnson has been a Vice President of the Company and President of Sun
Medical Technologies, Inc. ("Sun"), a wholly-owned subsidiary of the Company,
since November 1995. Mr. Johnson was the Chief Financial Officer of Sun from
1990 to 1995.
14
<PAGE>
Ms. Williams has been Chief Financial Officer, Vice President--Finance and
Secretary of the Company since October 1989. Ms. Williams was Controller of
Fairchild Aircraft Corporation from August 1988 to October 1989. From 1985 to
1988, Ms. Williams served as the Chief Financial Officer of APS Systems, Inc., a
wholly-owned subsidiary of APS.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is contained in the definitive proxy
statement of the Company to be filed in connection with its 1998 annual meeting
of shareholders, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this item is contained in the definitive proxy
statement of the Company to be filed in connection with its 1998 annual meeting
of shareholders, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is contained in the definitive proxy
statement of the Company to be filed in connection with its 1998 annual meeting
of shareholders, which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements.
The information required by this item is contained in Appendix A attached
hereto.
2. Financial Statement Schedules.
NONE
All other schedules are omitted as the required information is presented in the
Consolidated Financial Statements and related notes.
(b) Reports on Form 8-K.
None.
15
<PAGE>
(c) Exhibits. (1)
3.1 Certificate of Incorporation of the Company. (2)
3.2 Bylaws of the Company. (2)
4.1 Specimen of Common Stock Certificate. (2)
10.1* Prime Medical Services, Inc. 1993 Stock Option Plan. (3)
10.2* First Amendment to the Prime Medical Services, Inc. 1993 Stock
Option Plan. (12)
10.3* Second Amendment to the Prime Medical Services, Inc. 1993 Stock
Option Plan. (12)
10.4 Rights Agreement dated October 18, 1993 between the Company and
American Stock Transfer and Trust Company. (3)
10.5 Form of Indemnification Agreement dated October 11, 1993 between
the Company and certain of its officers and directors. (3)
10.6 Partnership Agreement of Metro Atlanta Stonebusters, G.P. (5)
10.7 Management Agreement dated July 28, 1994 between the Alabama Renal
Stone Institute, Inc. and Alabama Kidney Stone Foundation, Inc. (6)
10.8 Asset Purchase Agreement, dated August 30, 1994, between Prime
Lithotripter Operations, Inc. and Alabama Lithotripsy Joint
Venture. (7)
10.9 Asset Purchase Agreement, dated August 30, 1994, between Prime
Lithotripter Operations, Inc. and Baptist Medical Center -
Montclair. (7)
10.10 Promissory Note, dated August 30, 1994, issued by Prime
Lithotripter Operations, Inc. to Baptist Medical Center -
Montclair. (7)
10.11 Management Agreement, dated August 30, 1994, between Prime
Lithotripter Operations, Inc. and Alabama Lithotripsy Associates,
Inc. (7)
10.12 Security Agreement dated August 30, 1994, between Prime
Lithotripter Operations, Inc. and Baptist Medical Center -
Montclair. (7)
10.13 Amended and Restated Joint Venture Agreement dated April, 1989,
between Prime Diagnostic Imaging Services, Inc. and The Shasta
Diagnostic Imaging Medical Group. (4)
16
<PAGE>
10.14 Loan Agreement dated November 28, 1994 between Prime Medical
Services, Inc., The First National Bank of Boston, NationsBank of
Texas, N.A. and The First National Bank of Boston, as agent. (8)
10.15 First Amendment to Loan Agreement dated August 17, 1995 between
Prime Medical Services, Inc. and The First National Bank of Boston,
as agent. (9)
10.16 Amended and Restated Loan Agreement dated April 26, 1996 between
Prime Medical Services, Inc., The First National Bank of Boston,
NationsBank of Texas, N.A. and The First National Bank of Boston,
as agent. (11)
10.17 Second Amended and Restated Loan Agreement between Prime Medical
Services, Inc., The First National Bank of Boston, N.A. and
NationsBank of Texas, N.A., as agent. (12)
10.18 Revolving Credit Note, dated March 31, 1997 in the amount of
$14,111,111.11 issued by the Company to NationsBank of Texas, N.A.
as agent. (12)
10.19 Revolving Credit Note, dated March 31, 1997 in the amount of
$13,888,888.89 issued by the Company to The First National Bank of
Boston as agent. (12)
10.20 Revolving Credit Note, dated March 31, 1997 in the amount of
$8,333,333.33 issued by the Company to Bank One, Texas, N.A.
as agent. (12)
10.21 Revolving Credit Note, dated March 31, 1997 in the amount of
$6,666,666.67 issued by the Company to Imperial Bank as agent. (12)
10.22 Revolving Credit Note, dated March 31, 1997 in the amount of
$7,000,000.00 issued by the Company to The Sumitomo Bank, Limited as
agent. (12)
10.23 Term Note A, dated March 31, 1997 in the amount of $12,500,000.00
issued by the Company to NationsBank of Texas, N.A. as agent. (12)
10.24 Term Note A, dated March 31, 1997 in the amount of $12,500,000.00
issued by the Company to The First National Bank of Boston as
agent. (12)
10.25 Term Note A, dated March 31, 1997 in the amount of $7,500,000.00
issued by the Company to Bank One, Texas, N.A. as agent. (12)
10.26 Term Note A, dated March 31, 1997 in the amount of $7,500,000.00
issued by the Company to Imperial Bank as agent. (12)
17
<PAGE>
10.27 Term Note A, dated March 31, 1997 in the amount of $5,000,000.00
issued by the Company to The Sumitomo Bank, Limited as agent. (12)
10.28 Term Note B, dated March 31, 1997 in the amount of $10,000,000.00
issued by the Company to NationsBank of Texas, N.A. as agent. (12)
10.29 Term Note B, dated March 31, 1997 in the amount of $5,000,000.00
issued by the Company to Crescent/MACH Partners, L.P. as agent.(12)
10.30 Term Note B, dated March 31, 1997 in the amount of $5,000,000.00
issued by the Company to Merrill Lynch Senior Floating Rate Fund,
Inc. as agent. (12)
10.31 Term Note B, dated March 31, 1997 in the amount of $5,000,000.00
issued by the Company to Pilgrim America Prime Rate Trust as
agent. (12)
10.32 Term Note B, dated March 31, 1997 in the amount of $5,000,000.00
issued by the Company to ING Capital Senior Secured High Income
Fund, L.P. as agent. (12)
10.33 Term Note B, dated March 31, 1997 in the amount of $5,000,000.00
issued by the Company to Van Kampen American Capital Prime Rate
Income as agent. (12)
10.34 Term Note B, dated March 31, 1997 in the amount of $5,000,000.00
issued by the Company to Paribas Capital Funding LLC as agent. (12)
10.35 Operating Agreement for Southern California Stone Center, L.L.C.(9)
10.36 Lease Agreement dated July 1, 1995 between Kidney Stone Center of
South Florida, L.C. and Madorsky and Pinon Kidney Stone Center of
South Florida, P.A. (9)
10.37* Employment Agreement dated October 27, 1995 between Prime Medical
Services, Inc. and Stan D. Johnson. (9)
10.38* Employment Agreement dated May 1, 1996 between Prime Medical
Services, Inc. and Joseph Jenkins, M.D., J.D. (11)
10.39* Employment Agreement dated April 1, 1997 between Prime Medical
Services, Inc. and William Walsh. (12)
10.40* Employment Agreement dated October 8, 1997 between Prime Medical
Services, Inc. and Robert Bachman. (12)
18
<PAGE>
10.41* Employment Agreement dated October 8, 1997 between Prime Medical
Services, Inc. and Larry Sodomire. (12)
10.42 Stock Purchase Agreement dated April 26, 1996 between Prime Medical
Services, Inc.; Lithotripters, Inc.; William R. Jordan, M.D.;
Franklin S. Clark, M.D.; Dan A. Myers, M.D.; Thomas B. Mobley, M.D.;
Thomas R. Jordan; Anthony E. Rand; Estate of H. Edward Rietze, III;
Phillip J. Gallina; Joseph Jenkins, M.D.; William B. Grine, M.D.;
and W. Alan Terry. (10)
10.43 Registration Rights Agreement dated April 26, 1996 between Prime
Medical Services, Inc.; Lithotripters, Inc.; William R. Jordan,
M.D.; Franklin S. Clark, M.D.; Dan A. Myers, M.D.; Thomas B. Mobley,
M.D.; Thomas R. Jordan; Anthony E. Rand; Estate of H. Edward Rietze,
III; Phillip J. Gallina; Joseph Jenkins, M.D.; William B. Grine,
M.D.; and W. Alan Terry. (10)
10.44 Partnership Interest Purchase Agreement dated May 1, 1997 among
Prime Lithotripter Operations, Inc., Tenn-Ga Stone Group Two, L.P.,
NGST, Inc. and all the shareholders of NGST, Inc. (12)
10.45 Stock Purchase Agreement dated June 1, 1997 between Sun Medical
Technologies, Inc. and Executive Medical Enterprises, Inc. (12)
10.46 Contribution Agreement dated October 8, 1997 between Prime Medical
Services, Inc. and AK Associates. (12)
10.47 Limited Partnership Agreement of Pacific Medical Limited
Partnership. (12)
10.48 Limited Partnership Agreement of California I Prostatherapy Limited
Partnership. (12)
10.49 Limited Partnership Agreement of Great Lakes Lithotripsy Limited
Partnership. (12)
10.50 Limited Partnership Agreement of Texas Lithotripsy Limited
Partnership VI, L.P. (12)
10.51 Limited Partnership Agreement of North Carolina Prostatherapy
Limited Partnership I. (12)
21.1 List of subsidiaries of the Company. (12)
23.1 Independent Auditors' Consent of KPMG Peat Marwick LLP. (12)
27 Financial Data Schedule (12)
--------------
* Executive compensation plans and arrangements.
19
<PAGE>
(1) The exhibits listed above will be furnished to any security holder upon
written request for such exhibit to Cheryl L. Williams, Prime Medical Services,
Inc., 1301 Capital of Texas Highway, Suite C-300, Austin, Texas 78746. The
Securities and Exchange Commission (the "SEC") maintains a website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC at "http://www.sec.gov".
(2) Filed as an Exhibit to the Registration Statement on Form S-4
(Registration No. 33-56900) of the Company and incorporated herein by reference.
(3) Filed as an Exhibit to the Current Report on Form 8-K of the Company
dated October 18, 1993 and incorporated herein by reference.
(4) Filed as an Exhibit to the Annual Report on Form 10-K of Old Prime,
Commission File Number 0-9963, for the year ended December 31, 1992 and
incorporated herein by reference.
(5) Filed as an Exhibit to the Current Report on Form 8-K dated May 5, 1994
of the Company and incorporated herein by reference.
(6) Filed as an Exhibit to the Current Report on Form 8-K dated July 28,
1994 of the Company and incorporated herein by reference.
(7) Filed as an Exhibit to the Current Report on Form 8-K dated September
13, 1994 of the Company and incorporated herein by reference.
(8) Filed as an Exhibit to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1994.
(9) Filed as an Exhibit to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1995.
(10) Filed as an Exhibit to the Current Report on Form 8-K dated April 26,
1996 of the Company and incorporated herein by reference.
(11) Filed as an Exhibit to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1996.
(12) Filed herewith.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PRIME MEDICAL SERVICES, INC.
By /s/ Joseph Jenkins, M.D., J.D.
------------------------------
Joseph Jenkins, M.D., J.D., President,
Chief Executive Officer and Director
Date: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By: /s/ Kenneth S. Shifrin
-----------------------
Kenneth S. Shifrin
Chairman of the Board
Date: March 30, 1998
By: /s/ Cheryl L. Williams
-----------------------
Cheryl L. Williams
Vice President of Finance, Secretary
and Chief Financial Officer (Principal
Financial and Accounting Officer)
Date: March 30, 1998
By: /s/ Joseph Jenkins
-------------------
Joseph Jenkins, M.D., President,
Chief Executive Officer and Director
Date: March 30, 1998
21
<PAGE>
By: /s/ Paul R. Butrus
------------------
Paul R. Butrus, Director
Date: March 30, 1998
By: /s/ William E. Foree
--------------------
William E. Foree, M.D., Director
Date: March 30, 1998
By: /s/ Irwin Katz
---------------
Irwin Katz, Director
Date: March 30, 1998
By: /s/ John McEntire
-----------------
John McEntire, Director
Date: March 30, 1998
By: /s/ William A. Searles
----------------------
William A. Searles, Director
Date: March 30, 1998
By: /s/ Michael Spalding
---------------------
Michael Spalding, M.D., Director
Date: March 30, 1998
22
<PAGE>
APPENDIX A
INDEX
Page
Independent Auditors' Report A-2
Consolidated Financial Statements:
Consolidated Statements of Income
for the years ended December 31, 1997, 1996 and 1995. A-3
Consolidated Balance Sheets at December 31, 1997 and 1996. A-4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995. A-6
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995. A-7
Notes to Consolidated Financial Statements. A-11
A-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Prime Medical Services, Inc.:
We have audited the accompanying consolidated financial statements of Prime
Medical Services, Inc. and subsidiaries ("Company") as listed in the
accompanying index. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Prime Medical
Services, Inc. and subsidiaries at December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick, LLP
- --------------------------
Austin, Texas
February 27, 1998, except Note N,
to which the date is March 27, 1998
A-2
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data) Years Ended December 31,
1997 1996 1995
---- ---- ----
Fee Revenue:
Lithotripsy:
Fee revenues $84,537 $65,138 $19,306
Management fees 6,237 4,698 1,617
Equity income 2,339 1,766 1,230
-------- --------- ----------
93,113 71,602 22,153
Manufacturing 2,358 -- --
Cardiac 479 802 1,042
Other 29 -- --
-------- ----------- ------------
Total fee revenue 95,979 72,404 23,195
-------- ----------- ------------
Cost of services and general and
administrative expenses
Lithotripsy 25,381 19,922 5,979
Manufacturing 1,743 -- --
Cardiac 310 632 1,505
Other 168 -- --
Corporate 5,683 4,245 2,573
-------- --------- ----------
33,285 24,799 10,057
Depreciation and amortization 9,911 8,422 3,195
-------- --------- ----------
Total operating expenses 43,196 33,221 13,252
------- --------- ---------
Operating income 52,783 39,183 9,943
Other income (deductions):
Interest and dividends 740 459 152
Interest expense (7,477) (5,977) ( 1,231)
Loan fees and stock offering costs (360) (3,535) --
Other, net 6 370 647
---------- ----------- ------------
(7,091) (8,683) ( 432)
--------- ----------- -----------
Income before provision for income taxes
and minority interest 45,692 30,500 9,511
Minority interest in
consolidated income 25,041 19,543 1,421
Provision for income taxes 5,795 1,996 886
-------- ---------- -----------
Net income $14,856 $ 8,961 $ 7,204
========= ========= ==========
Basic earnings per share:
Net income $0.77 $0.51 $0.51
===== ===== =====
Weighted average shares
outstanding 19,275 17,633 14,226
====== ====== ======
Diluted earnings per share:
Net income $0.76 $0.49 $0.48
===== ===== =====
Weighted average shares
outstanding 19,461 18,638 15,350
====== ====== ======
See accompanying notes to consolidated financial statements.
A-3
A-3
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
December 31,
1997 1996
-------- --------
ASSETS
Current assets:
Cash $ 23,770 $ 20,096
Accounts receivable, less allowance
for doubtful accounts of $811 in 1997
and $335 in 1996 19,387 16,346
Other receivables 1,103 1,842
Deferred income taxes 1,506 948
Prepaid expenses and other current assets 1,776 841
--------- ----------
Total current assets 47,542 40,073
-------- --------
Property and equipment:
Equipment, furniture and fixtures 32,673 28,318
Leasehold improvements 531 113
--------- ---------
33,204 28,431
Less accumulated depreciation and
amortization (13,497) (8,089)
-------- --------
Property and equipment, net 19,707 20,342
-------- -------
Other investments 12,305 8,100
Goodwill, at cost, net of amortization 143,823 131,415
Other noncurrent assets 2,449 2,604
--------- ---------
$225,826 $202,534
======== ========
(continued)
See accompanying notes to consolidated financial statements.
A-4
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands)
December 31,
1997 1996
---------- -----------
LIABILITIES:
Current Liabilities:
Current portion of long-term debt $ 11,138 $ 10,522
Accounts payable 5,386 4,451
Accrued expenses 20,859 16,582
---------- ---------
Total current liabilities 37,383 31,555
Long-term debt, net of current portion 71,198 70,910
Deferred income taxes 5,809 4,907
----------- ----------
Total liabilities 114,390 107,372
Minority interest 19,372 18,735
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
1,000,000 shares authorized;
none outstanding -- --
Common stock, $.01 par value,
40,000,000 shares authorized;
19,306,267 issued in 1997 and
19,078,933 issued in 1996 193 191
Capital in excess of par value 84,050 83,271
Accumulated earnings (deficit) 7,821 ( 7,035)
----------- -----------
Total stockholders' equity 92,064 76,427
---------- ----------
$ 225,826 $202,534
========= ========
See accompanying notes to consolidated financial statements.
A-5
<PAGE>
PRIME MEDICAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1997, 1996 and 1995
($ in thousands, except share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issued Capital in Accumulated
Common Stock Excess of Earnings Treasury Stock Reciprocal
Shares Amount Par Value (Deficit) Shares Amount Stockholdings Total
-------------- ---------- ------------ --------- -------- ---------- ------------- ---------
Balance, January 1, 1995 14,594,663 $146 $58,631 ($23,200) 30,000 ($101) ( $1,055) $ 34,421
Net income for the year -- -- -- 7,204 -- -- -- 7,204
Exercise of stock options 135,000 1 69 -- -- -- -- 70
Reclassification of
reciprocal stockholdings -- -- -- -- -- -- 1,055 1,055
-------------- ---------- ------------- --------- -------- --------- ------------- ---------
Balance, December 31, 1995 14,729,663 147 58,700 ( 15,996) 30,000 (101) -- 42,750
Net income for the year -- -- -- 8,961 -- -- -- 8,961
Issuance of stock 1,636,364 17 14,903 -- -- -- -- 14,920
Exercise of stock options
including tax benefit of
$130 on non-qualifying
exercises 477,666 5 488 -- -- -- -- 493
Debt converted to stock 921,415 9 5,241 -- -- -- -- 5,250
Exercise of warrants 1,343,825 13 4,040 -- -- -- -- 4,053
Retirement of treasury
stock ( 30,000) -- ( 101) -- (30,000) 101 -- --
-------------- ---------- ---------- --------- --------- -------- ------------- --------
Balance, December 31, 1996 19,078,933 191 83,271 ( 7,035) -- -- -- 76,427
Net income for the year -- -- -- 14,856 -- -- -- 14,856
Exercise of stock options
including tax benefit of
$438 on non-qualifying
exercises 227,334 2 779 -- -- -- -- 781
-------------- ---------- ---------- --------- --------- -------- ------------- ---------
Balance, December 31, 1997 19,306,267 $ 193 $ 84,050 $ 7,821 -- $ -- $ -- $ 92,064
============== ========== ========== ========= ========= ======== ============= =========
</TABLE>
See accompanying notes to consolidated financial statements.
A-6
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C>
($ in thousands)
Years Ended December 31,
1997 1996 1995
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $90,924 $ 72,452 $ 21,640
Cash paid to employees, suppliers
of goods and others (31,685) (25,190) ( 9,094)
Interest received 739 459 157
Interest paid ( 7,521) ( 5,104) ( 1,275)
Taxes paid ( 764) ( 1,015) ( 530)
-------- --------- ---------
Net cash provided by operating activities 51,693 41,602 10,898
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of lithotripter entities (20,217) (66,742) (15,033)
Proceeds from sale of investment in American
Physicians Service Group, Inc. stock -- -- 2,753
Purchases of equipment and leasehold
improvements ( 4,546) ( 2,526) ( 473)
Deferred payments on lithotripter entities -- ( 3,387) --
Proceeds from sales of equipment 30 6 21
Investments 1,690 1,257 864
Other 94 ( 378) ( 6)
-------- --------- ---------
Net cash used by investing activities (22,949) (71,770) ( 11,874)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable & capital leases,
exclusive of interest (50,328) (15,351) ( 9,588)
Borrowings on notes payable 51,201 74,000 14,284
Distributions to minority interest (28,667) (13,440) ( 1,644)
Contributions by minority interest 2,381 -- --
Exercise of stock options 343 363 70
Other -- -- ( 366)
-------- --------- ---------
Net cash provided by (used in)
financing activities (25,070) 45,572 2,756
-------- --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 3,674 15,404 1,780
Cash and cash equivalents, beginning of period 20,096 4,692 2,912
-------- --------- ---------
Cash and cash equivalents, end of period $23,770 $ 20,096 $ 4,692
======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
A-7
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ in thousands)
<TABLE>
<S> <C> <C> <C>
Years Ended December 31,
1997 1996 1995
---- ---- ----
Reconciliation of net income to net
cash provided by operating activities
Net income $ 14,856 $ 8,961 $ 7,204
Adjustments to reconcile net
income to cash provided by
operating activities:
Minority interest in consolidated income 25,041 19,543 1,421
Depreciation and amortization 9,911 8,422 3,195
Provision for uncollectible accounts 427 319 771
Equity in earnings of affiliates (2,342) ( 1,773) (1,234)
Gain on sale of investment in American
Physicians Service Group, Inc. stock -- -- ( 559)
Provision for deferred income taxes 68 974 193
Writeoff of loan fees -- 696 --
Other 1,162 -- (226)
Changes in operating assets and liabilities,
net of effect of purchase transactions:
Accounts receivable (3,156) 1,284 ( 541)
Other receivables 754 472 2,197
Other current assets (602) 529 (447)
Accounts payable 934 452 (1,224)
Accrued expenses 4,640 1,723 148
-------- --------- -----------
Total adjustments 36,837 32,641 3,694
-------- -------- ----------
Net cash provided by operating activities $ 51,693 $ 41,602 $ 10,898
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
A-8
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ in thousands)
<TABLE>
<S> <C> <C> <C>
Years Ended December 31,
1997 1996 1995
---- ---- ----
SUPPLEMENTAL INFORMATION OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
In 1997, the Company acquired (1)
additional ownership interests in 10
partnerships (2) a 38.25% general
partnership interest in a lithotripter
operation (3) 100% of the stock of a
lithotripter operator and (4) 75% equity
interest in a trailer manufacturer.
These transactions are discussed
further in Notes C and D. The acquired assets
and liabilities were as follows:
Current assets decreased by $ 9,532
Noncurrent assets increased by 4,041
Goodwill increased by 15,836
Current liabilities increased by 1,343
Noncurrent liabilities increased 10,000
Minority interest decreased by 998
At December 31, 1997, the Company had accrued
distributions payable to minority interests. The
effect of this transaction was as follows:
Current liabilities increased by 8,655
Minority interest decreased by 8,655
In 1996, the Company acquired (1)
100% of the outstanding stock of a
corporation which operated 31
lithotripters and (2) increased ownership
in two partnerships, in which the Company
is the managing general partner. These
transactions are discussed further in
Note D. The acquired assets
and liabilities were as follows:
Current assets increased by $19,032
Noncurrent assets increased by 12,630
Goodwill increased by 82,297
Current liabilities increased by 13,110
Noncurrent liabilities increased by 69,712
Minority interest increased by 16,218
Stockholders' equity 14,919
</TABLE>
See accompanying notes to consolidated financial statements.
A-9
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ in thousands)
<TABLE>
<S> <C> <C> <C>
Years Ended December 31,
1997 1996 1995
---- ---- ----
In 1996, several holders of notes
issued by the Company elected to convert
the outstanding balances of the notes
into 921,000 shares of the Company stock.
In addition, certain holders of warrants
exercised their warrants and the Company
issued 1,344,000 shares of the Company's
stock to the warrant holders. The effect
of these transactions were as follows:
Current assets increased by 1,749
Current liabilities decreased by 4,062
Noncurrent liabilities decreased by 3,493
Stockholders' equity increased by 9,304
At December 31, 1996, the Company had accrued
distributions payable to minority interests. The
effect of this transaction was as follows:
Current liabilities increased by 10,705
Minority interest decreased by 10,705
In 1995, the Company acquired (1) 100% of
the outstanding stock of a corporation
which owned or managed eight lithotripter
operations and (2) 70% interest in a
lithotripter operation. These transactions
are discussed further in Note D. The
acquired assets and liabilities were as follows:
Current assets decreased by $ 9,905
Noncurrent assets increased by 2,491
Goodwill increased by 19,553
Current liabilities increased by 7,249
Noncurrent liabilities increased by 4,890
In 1995, the Company retired a note payable
to American Physicians Service Group, Inc.
("APS"). This note was retired by the Company
transferring to APS shares of stock of APS
that the Company owned. The effect of this
transaction is as follows:
Current assets decreased by 3
Investment in APS decreased by 301
Notes payable decreased by 297
Stockholders' equity 7
</TABLE>
See accompanying notes to consolidated financial statements.
A-10
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ORGANIZATION AND OPERATION OF THE COMPANY
Prime Medical Services, Inc. ("Prime"), through its direct and indirect
wholly-owned subsidiaries, provides non-medical management services to
lithotripsy, prostatherapy, and cardiac rehabilitation centers.
References to the Company are to Prime and its controlled and
affiliated entities. The Company also manufactures trailers for major
medical equipment manufacturers and mobile medical service providers.
The Company operates lithotripters in 34 states.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of
Prime, its wholly-owned subsidiaries, entities more than 50% owned
and partnerships where Prime has control, even though its
ownership is less than 50%. Investments in entities in which the
Company's investment is less than 50% ownership, and the Company does
not control, are accounted for by the equity method if ownership is
between 20% - 50%, or by the cost method if ownership is less than 20%.
Through December 31, 1997, the Company had recognized $466,000 in
undistributed earnings using the equity method. This amount represents
undistributed earnings from entities, in which the Company owns 50
percent or less, and does not exhibit control. All significant
intercompany accounts and transactions have been eliminated.
Cash Equivalents
The Company considers as cash equivalents demand deposits and all
short-term investments with an original maturity of three months or
less.
Property and Equipment
Property and equipment are stated at cost. Major betterments are
capitalized while normal maintenance and repairs are charged to
operations. Depreciation is computed by the straight-line method using
estimated useful lives of five to ten years. Leasehold improvements are
generally amortized over ten years or the term of the lease, whichever
is shorter. When assets are sold or retired, the corresponding cost and
accumulated depreciation or amortization are removed from the related
accounts and any gain or loss is credited or charged to operations.
A-11
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Intangible Assets
The Company records as goodwill the excess of the purchase price over
the fair value of the net assets associated with acquired businesses.
Goodwill is amortized over a period not to exceed forty years using the
straight-line basis. Accumulated amortization at December 31, 1997 and
1996 is $9,745,000 and $5,798,000, respectively. Goodwill is reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If the sum of
the expected future undiscounted cash flows is less than the carrying
amount of the goodwill, a loss is recognized for the difference
between the fair value and carrying value of the goodwill.
Revenue Recognition
Revenues generated from management services are recognized as they are
earned.
The Company's lithotripsy fee revenues are based upon fees charged for
services to hospitals, commercial insurance carriers, state and
federal health care agencies, and individuals, net of contractual fee
reductions.
Revenues for the manufacture of trailers are recognized using the
percentage of completion method.
At December 31, 1997, approximately 15% of accounts receivable relate
to units operating in Texas, 11% relate to units located in California,
11% relate to operations located in North Carolina and 9% relate to
units located in Louisiana.
Reciprocal Stockholdings
The Company had accounted for its investment in its largest
shareholder's common stock on the equity basis prior to 1995 (see Note
C). The Company's investment was reduced for the Company's pro rata
interest in the common stock of the Company owned by such shareholder.
This reduction was reflected in an offsetting charge to reciprocal
stockholdings. When the Company's investment dropped below 5%
in 1995, reciprocal stockholdings were eliminated.
A-12
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Income Tax
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows
is less than the carrying amount of the asset, a loss is recognized,
for the difference between the fair value and carrying value of the
asset.
Accounts Receivable
Accounts receivable are recorded based on revenues, less allowance for
doubtful accounts and contractual adjustments.
Stock-Based Compensation
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation
("Statement 123"), in October 1995 for implementation in fiscal years
beginning after December 15, 1995. Statement 123 became effective
beginning with the Company's first quarter of fiscal year 1996 and did
not have a material effect on the Company's financial position or
results of operations. Upon adoption of Statement 123, the Company
continued to measure compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by APB
Opinion No. 25, Accounting for Stock Issued to Employees. The Company
provides proforma disclosures of net income and earnings per share as
if the fair value-based method prescribed by Statement 123 had been
applied in measuring compensation expense. (See Note J).
A-13
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Debt Issuance Costs
The Company expenses debt issuance costs as incurred.
Estimates Used to Prepare Financial Statements
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual results could vary from
the estimates that were assumed in preparing the financial statements.
Reclassification
Certain reclassifications have been made to amounts presented in
previous years to be consistent with the 1997 presentation.
Earnings Per Share
Statement of Financial Accounting Standards No. 128, "Earnings per
Share", specifies new measurement, presentation and disclosure
requirements for earnings per share and is required to be applied
retroactively upon initial adoption. The Company has adopted SFAS No.
128 effective with the release of December 31, 1997 earnings data, and
accordingly, has restated herein all previously reported earnings per
share data. Basic earnings per share is based on the weighted average
shares outstanding without any dilutive effects considered. Diluted
earnings per share reflects dilution from all contingently issuable
shares, including options and convertible debt. A reconciliation of
such earnings per share data is as follows:
A-14
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
($ in thousands, except per share data)
1997
Per Share
Income Shares Amounts
Basic EPS
Net Income..................... $14,856 19,275 $ 0.77
========
Effect of dilutive securities:
Options . 186
-------- ---
Diluted EPS.................... $14,856 19,461 $ 0.76
======= ====== ========
1996
Per Share
Income Shares Amounts
Basic EPS
Net Income..................... $ 8,961 17,633 $ 0.51
========
Effect of dilutive securities:
Warrants....................... 400
Convertible Debt............... 101 224
Options . 381
-------- ---
Diluted EPS.................... $9,062 18,638 $ 0.49
====== ====== ========
1995
Per Share
Income Shares Amounts
Basic EPS
Net Income..................... $ 7,204 14,226 $ 0.51
========
Effect of dilutive securities:
Warrants....................... 402
Convertible Debt............... 97 209
Options . 513
-------- ---
Diluted EPS.................... $7,301 15,350 $ 0.48
====== ====== ========
Unexercised employee stock options to purchase 841,000 and 706,000
shares of Prime common stock as of December 31, 1997 and 1996,
respectively, were not included in the computations of diluted EPS
because the options exercise prices were greater than the average market
price of Prime's common stock during the respective periods.
A-15
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C. INVESTMENTS
Tenn-Ga
In May 1997, the Company acquired a 38.25% general partner interest in a
partnership that provides mobile lithotripsy service in Tennessee and
Georgia. The purchase price was cash of $3,470,000. This investment is
accounted for using the equity method.
Southern California
Effective June 1, 1995, the Company acquired a 32.5% interest in a
limited liability company that operates a fixed site lithotripter near
Los Angeles, California. This investment is accounted for using the
equity method.
Texas, Ohio & Louisiana Partnerships
In December 1994, the Company acquired all of the common stock of
three corporations. Each corporation is the general partner and
holds an approximate 20% interest in a limited partnership which
operates a mobile lithotripter. Texas ESWL/Laser Lithotripter, Ltd.
operates a mobile lithotripter in Texas, Oklahoma and Arkansas. Ohio
Mobile Lithotripter, Ltd. operates a mobile lithotripter in Ohio.
Arklatx Mobile Lithotripter, L.P. operates a mobile lithotripter in
Louisiana. This investment is accounted for using the equity method.
American Physicians Service Group, Inc.
At December 31, 1997 and 1996, the Company owned 50,000 shares of common
stock, representing approximately 1%, of the outstanding common stock of
American Physicians Service Group, Inc. (APS). APS owned approximately
16% of the outstanding common stock of the Company at December 31, 1997
and 1996. The Company's pro rata interest in its own shares of common
stock had been included in stockholders' equity as reciprocal
stockholdings prior to 1995. (See Note B). Two of the Company's eight
board members are also on the board of APS.
The Company occupies approximately 5,600 square feet of office space
owned by APS. The Company also shares certain personnel with APS. The
monthly rent and personnel cost is approximately $8,000.
D. ACQUISITIONS
Effective September 1, 1997, the Company acquired a 75% equity interest
in AK Associates, LLC ("AK"), which provides installation, upgrade,
manufacturing, refurbishment and repair services for major medical
equipment manufacturers and mobile medical service providers. The
purchase price was $4,761,000 in cash with contingent consideration up
to another $1,050,000 being payable based upon certain performance
criteria being met by AK during 1998. This transaction was accounted
for using the purchase method of accounting.
A-16
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. ACQUISITIONS, continued
Effective June 1, 1997, the Company acquired 100% of the stock of
Executive Medical Enterprises, Inc. ("EME"), which operated three
lithotripters in California, Oregon and Washington. The purchase price
was $1,339,000 in cash and potential contingent consideration based
upon the performance of these operations during 1998, 1999 and 2000.
The transaction was accounted for using the purchase method of
accounting.
In January 1997, the Company purchased additional ownership
interests in 10 partnerships, which the Company controls. The
purchase price for the additional ownership interests was $10,510,000
in cash. These transactions were accounted for using the purchase
method of accounting.
Unaudited proforma combined income data for the years ended December
31, 1997 and 1996 of the Company and the acquisitions
discussed above assuming all were effective January 1, 1996 is as
follows:
($ in thousands except per share data)
1997 1996
-------- -------
Total revenues $100,228 $81,143
Total expenses 84,941 71,080
-------- --------
Net income $ 15,287 $10,063
======== =======
Diluted earnings per share $0.79 $0.54
===== =====
Effective May 1, 1996, the Company acquired 100% of the common stock of
Lithotripters, Inc. ("Litho"). Litho operated 31 lithotripters serving
approximately 200 locations in 19 states. The purchase price was
$86,500,000 consisting of $71,600,000 cash and 1,636,000 shares of the
Company's common stock valued at $14,900,000. This transaction was
accounted for using the purchase method of accounting.
Effective November 1, 1996, the Company increased its ownership
interest in two partnerships that operate lithotripters in Arkansas and
South Carolina. The Company acquired an additional 12.0% interest in
Fayetteville Lithotripters Limited Partnership - Arkansas I and 2.7%
interest in Fayetteville Lithotripters Limited Partnership - South
Carolina II, which the Company manages as General Partner. The purchase
price was $1,291,000 in cash. This transaction was accounted for using
the purchase method of accounting.
Unaudited proforma combined income data for the years ended December
31, 1996 and 1995 of the Company and the acquisitions
discussed immediately above assuming both were effective January 1,
1995 is as follows:
A-17
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. ACQUISITIONS, continued
($ in thousands except per share data)
1996 1995
------ -------
Total revenues $92,499 $82,934
Total expenses 82,684 74,409
------- -------
Net income $ 9,815 $ 8,525
======= ========
Diluted earnings per share $ 0.51 $ 0.50
======= ========
Effective October 1, 1995, the Company acquired 100% of the outstanding
stock of Sun Medical Technologies, Inc. ("Sun"). Sun operates eight
lithotripters serving clients in California, Arizona, Montana, New
Mexico, Washington and Wyoming. The purchase price was $16,150,000
consisting of cash of $9,438,000, deferred payments payable in January
1996 of $2,687,000, notes payable of $4,025,000, and warrants to
purchase 200,000 shares of the Company's common stock. The exercise
price of the warrants represented the market price of the Company's
common stock at the date the warrants were issued. The notes payable of
$4,025,000 were convertible into 672,000 shares of the Company's common
stock. These noteholders elected to convert the outstanding balances of
their notes into the Company's stock in 1996. This acquisition was
accounted for using the purchase method of accounting.
Effective July 1, 1995 the Company acquired an undivided 70% interest
in a fixed site lithotripter located in Fort Lauderdale, Florida. The
purchase price was $5,550,000 consisting of cash of $3,885,000 and
notes payable of $1,665,000, which could be converted into 326,000
shares of the Company's common stock. The noteholder elected to convert
the outstanding balance of such note into the Company's stock in 1996.
The acquisition was accounted for using the purchase method of
accounting.
A-18
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About
Fair Value of Financial Instruments (Statement 107), requires that the
Company disclose estimated fair values for its financial instruments as
of December 31, 1997 and 1996. The carrying amounts and fair values of
the Company's financial instruments are as follows:
<TABLE>
<S> <C> <C> <C> <C>
1997 1996
---------------------- -------------------------
Carrying Fair Carrying Fair
($ in Thousands) Amount Value Amount Value
------ ----- ------ -----
Financial assets:
Cash $23,770 $23,770 $20,096 $20,096
Accounts receivable 19,387 19,387 16,346 16,346
Other receivables 1,103 1,103 1,842 1,842
Investment in American
Physicians Service Group, Inc. 173 356 173 325
Financial liabilities:
Debt 82,336 82,336 81,432 81,432
Accounts payable 5,386 5,386 4,451 4,451
</TABLE>
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial instruments.
Cash
The carrying amounts for cash approximate fair value because they
mature in less than 90 days and do not present unanticipated credit
concerns.
Accounts Receivable and Other Receivables
The carrying value of these receivables approximates the fair value
due to their short-term nature and historical collectibility.
Investment in American Physicians Service Group, Inc.
The fair value of the stock is based on the last trade value at the
end of the year.
Debt
The carrying value of debt approximates fair value since the majority
is primarily floating rate debt based on current market rates.
A-19
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. FAIR VALUE OF FINANCIAL INSTRUMENTS, continued
Accounts Payable
The carrying value of the payables approximates fair value due to the
short-term nature of the obligation.
Limitations
Fair value estimates are made at a specific point in time, based
on relevant market information and information about the financial
instrument. Fair value estimates are based on existing on-balance
sheet financial instruments without attempting to estimate the value
of anticipated future business and the value of assets and liabilities
that are not considered financial instruments. Other significant
assets and liabilities that are not considered financial assets or
liabilities include the deferred tax assets and liabilities, property
and equipment, equity investment in partnerships, goodwill, other
noncurrent assets and accrued expenses. In addition, the tax
ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have
not been considered in the aforementioned estimates.
F. ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31, December 31,
1997 1996
($ in Thousands)
Legal fees $ 634 $ 452
Accrued group insurance costs 228 164
Compensation and payroll
related expense 1,787 1,502
Taxes, other than income taxes 439 334
Accrued interest 984 1,028
Provision for closed centers 159 163
Income taxes payable 4,229 761
Dividends payable to minority interest 8,655 10,705
Deferred payments for acquisitions 1,339 --
Other 2,405 1,473
------- -------
$20,859 $16,582
======= =======
A-20
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. INDEBTEDNESS
Long-term debt, other than bank debt, are as follows:
($ in thousands)
Interest December 31,
Rates Maturities 1997 1996
-------- ---------- ------- ------
None 2000 - 2006 $ 161 $ 241
6% -- -- 984
11.5% 1998 6 12
------- -------
167 1,237
Less current portion of
long-term debt 6 1,100
------- ------
$ 161 $ 137
======= ======
The non-interest bearing notes totaling $161,000 are unsecured. The 11.5%
note is secured by computer equipment.
Long-term bank notes payable are as follows:
($ in thousands)
Interest December 31,
Rates Maturities 1997 1996
-------- ---------- ------- ------
60-day LIBOR
plus 2 1/2% 1998-2003 $79,000 $76,750
Prime 1998-2001 2,969 3,245
Prime + 1% 1998 200 200
------- -------
82,169 80,195
Less current portion of
long-term bank debt 11,132 9,422
------- -------
$71,037 $70,773
======= =======
During 1997, the Company increased its bank facility with Bank Boston
from $90 million to $135 million. The facility consists of three separate
loans: (1) a $45 million term loan bearing an interest rate of LIBOR +2
to 3%, payable quarterly, with quarterly principal payments, maturing in
April 2001, (2) a $40 million term loan bearing an interest rate of LIBOR
+2 to 3%, payable quarterly, with annual principal payments, maturing in
April 2003, and (3) a $50 million revolving credit facility bearing
interest of LIBOR +2 to 3%, maturing in April 2001. At December 31, 1997,
the entire $50 million revolving credit facility was undrawn. At December
31, 1997,
A-21
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. INDEBTEDNESS, continued
interest on the Company's bank facility was 8.6%. The bank facility is
collateralized by the assets of the Company, including the stock of its
subsidiaries. (See Note N)
The stated principal repayments for all indebtedness as of December 31,
1997 are payable as follows:
($ in thousands)
1998 $11,138
1999 13,134
2000 13,706
2001 7,426
2002 800
Thereafter 36,132
H. COSTS OF SERVICES AND GENERAL AND ADMINISTRATIVE EXPENSES
Costs of services and general and administrative expenses consist of
the following:
Years Ended December 31,
1997 1996 1995
---------- --------- ---------
($ in thousands)
Salaries, wages and benefits $15,779 $11,953 $ 4,027
Other costs of services 7,569 6,878 3,412
General and administrative 3,595 1,941 718
Legal and professional 2,064 1,315 659
Manufacturing costs 1,394 -- --
Other 2,884 2,712 1,241
--------- ------- -------
$33,285 $24,799 $10,057
========= ======= =======
I. COMMITMENTS AND CONTINGENCIES
At December 31, 1997, minimum annual rental commitments under
non-cancelable operating leases for equipment and office space, which
may contain renewal and escalation clauses through 2001, are:
($ in thousands)
1998 $ 439
1999 365
2000 309
2001 2
A-22
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
I. COMMITMENTS AND CONTINGENCIES
Rent expense for equipment and office space for the years ended
December 31, 1997, 1996 and 1995 are $568,000, $360,000, and
$239,000, respectively.
The Company sponsors a partially, self-insured group medical
insurance plan. The plan is designed to provide a specified level of
coverage, with stop-loss coverage provided by a commercial insurer.
The Company's maximum claim exposure is limited to $35,000 per person
per policy year. At December 31, 1997, the Company had 172 employees
enrolled in the plan. The plan provides non-contributory coverage for
employees and contributory coverage for dependents. The Company's
contributions totaled $351,000 in 1997, $224,000 in 1996, and
$150,000 in 1995.
J. COMMON STOCK OPTIONS
1993 Stock Option Plan:
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25")
and related Interpretations in accounting for its employee stock
options. The Company provides proforma disclosures of net income and
earnings per share as if the fair-value based method prescribed by
Statement 123 had been applied in measuring compensation expense.
Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
On October 12, 1993, the Company adopted the 1993 Stock Option Plan
which authorizes the grant of up to 2,000,000 shares to certain key
employees, directors, and consultants and advisors to the Company.
Options granted under the 1993 Stock Option Plan shall terminate
no later than ten years from the date the option is granted, unless
the option terminates sooner by reason of termination of employment,
disability or death.
In June 1997, the Company adopted an amendment to the 1993 Stock
Option Plan that raised the number of shares to be issued by 500,000.
A summary of the Company's stock option activity, and related
information for the years ended December 31, follows:
A-23
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. COMMON STOCK OPTIONS, continued
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995
--------------------------- -------------------------- --------------------
Options Weighted-Average Options Weighted-Average Options Weighted-Average
(000) Exercise Price (000) Exercise Price (000) Exercise Price
Outstanding - beginning
of year 1,228 $8.99 975 $1.31 1,055 $0.98
Granted 428 11.94 730 13.87 55 5.58
Exercised (227) 1.51 (477) 0.52 (135) 0.52
Forfeited (35) 12.19 (--) -- (--) --
------ -------
Outstanding-end of year 1,394 $11.04 1,228 $8.99 975 $1.31
====== ======= =======
Exercisable at end of year 466 $ 8.21 422 $2.03 816 $0.75
Weighted-average fair
value of options granted
during the year $5.21 -- $6.13 -- $2.07 --
</TABLE>
The following table summarizes the Company's outstanding options at
December 31, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C>
Outstanding options Exercisable options
------------------------- ----------------------
Average Weighted Weighted
Remaining Average Average
Options Contractual Exercise Options Exercise
Range of Exercise Prices (000) Life Price (000) Price
------------------------ ------ ----------- --------- ------- --------
$ 0.25 - $ 4.12 223 2.0 years $ 1.39 195 $ 1.10
$ 4.13 - $ 8.25 37 3.9 years $ 5.75 10 $ 5.99
$ 8.26 - $12.37 292 2.3 years $ 10.55 5 $ 8.94
$12.38 - $16.50 842 3.9 years $ 14.04 256 $13.72
------ -------
Total 1,394 466
======= =======
</TABLE>
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company
had accounted for its employee stock options under the fair value
method of that Statement. The fair value for these options was
estimated at the date of grant using a Black- Scholes option pricing
model with the following weighted-average assumptions for 1995, 1996,
and 1997
A-24
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. COMMON STOCK OPTIONS, continued
respectively: risk-free interest rates of 5.7%, 6.2% and 6.2%;
dividend yields of 0%, 0% and 0%; volatility factors of the expected
market price of the Company's common stock of .38, .53 and .46; and a
weighted-average expected life of the option of 4 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide
a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting period.
The Company's pro forma information follows (in thousands except for
earnings per share information):
1997 1996 1995
------- ------- ------
Pro forma net income $12,448 $ 8,109 $7,197
Pro forma earnings
per share
Basic $0.65 $0.46 $0.51
Diluted $0.64 $0.44 $0.47
Statement 123 calls for a prospective application of compensation
relating to the grant of stock options and, consequently pro-forma
financial information may not be indicative of future amounts until
the new rules are applied to all outstanding nonvested awards.
K. OTHER INCOME (EXPENSE)
Included in other, net in the consolidated statements of operations are
the following components:
($ in thousands)
Years Ended December 31,
1997 1996 1995
Collections on amounts ----- ----- -----
previously written off $ -- $ 192 --
Gain on sale of investment
in American Physicians Service
Group, Inc. Stock -- -- 559
Equipment rental -- 58 --
Other income 6 120 88
----- ----- -----
Other, net $ 6 $ 370 $ 647
===== ===== =====
A-25
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
L. INCOME TAXES
The Company files a consolidated tax return with its wholly owned
subsidiaries. A substantial portion of consolidated income is not
taxed at the corporate level as it represents income from partnerships.
Accordingly, only the portion of income from these partnerships
attributable to the Company's ownership interests is included in
taxable income in the consolidated tax return and financial statements.
The minority interest portion of this income is the responsibility of
the individual partners.
Income tax expense consists of the following:
($ in thousands)
Years ended December 31,
----------------------------
1997 1996 1995
------ ------ ------
Federal
Current $4,369 $ 97 $ 110
Deferred 68 974 193
State 1,358 925 583
------ ------ -----
$5,795 $1,996 $ 886
====== ====== =====
A reconciliation of expected income tax (computed by applying the
United States statutory income tax rate of 35% for 1997 and 34% for
1996 and 1995, to earnings before income taxes) to total income
tax expense in the accompanying consolidated statements of income
follows:
($ in thousands) Years ended December 31,
------------------------
1997 1996 1995
------ ------ ------
Expected federal income tax $7,228 $3,725 $2,751
Change in beginning of year
valuation allowance (2,399) (3,093) (2,091)
State taxes 1,358 925 583
Other ( 392) 439 ( 357)
------ ------ ------
$5,795 $1,996 $ 886
====== ====== ======
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1997 and 1996 are presented below.
($ in thousands)
1997 1996
----- ------
Deferred tax assets:
Accounts receivable,
principally due to allowance
for doubtful accounts $ 266 $ 114
AMT credit carryforwards -- 249
Net operating loss carryforwards -- 944
Investment tax credit carryforwards -- 1,200
Accrued expenses deductible
for tax purposes when paid 1,240 834
Property and equipment,
principally due to
differences in depreciation -- 656
Other 932 829
----- ------
Total gross deferred tax assets 2,438 4,826
Less valuation allowance -- (2,399)
----- ------
Net deferred tax assets 2,438 2,427
----- ------
Deferred tax liabilities:
Property and equipment,
principally due to
differences in depreciation ( 583) --
Investments in affiliated
entities, principally due to
undistributed income (2,807) (2,860)
Intangible assets, principally
due to differences in
amortization periods for tax
purposes (2,419) (1,872)
IRS Section 481(A) adjustment
for partnerships acquired ( -- ) ( 175)
------- ------
A-26
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
L. INCOME TAXES, continued
1997 1996
Total gross deferred tax ------- -------
liabilities ( 5,809) ( 4,907)
------- -------
Net deferred tax liability ($3,371) ($2,480)
======= =======
The valuation allowance for deferred tax assets as of December 31, 1997
was $-0- representing a decrease of $2,399,000, primarily due to
utilization of net operating loss carryforwards. The valuation
allowance for deferred tax assets as of January 1, 1996 was $5,492,000
with the change in the total valuation allowance for the year ended
December 31, 1996 being a decrease of $3,093,000. The Company believed
that the valuation allowance at December 31, 1996 was necessary due to
uncertainties regarding the Company's use of the net operating loss
carryforwards and tax credit carryforwards which could have become
limited in the event that the Company experienced a greater than 50%
stock ownership change in a three-year period (as defined in the
Internal Revenue Service regulations).
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deductible temporary
differences reverse, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net
of the existing valuation allowances.
M. RELATED PARTY TRANSACTIONS
See Notes B and C for additional related party transactions involving
investments in affiliates.
N. SUBSEQUENT EVENT
On March 27, 1998, the Company completed an offering of $100 million of
senior subordinated notes due 2008 (the "Notes") to qualified
institutional buyers. The net proceeds from the offering of
approximately $96.0 million will be used to repay all outstanding
indebtedness under the Company's bank facility, with the remainder to
be used for general corporate purposes, including acquisitions.
In connection herewith, the Company will take a charge to earnings of
approximately $3.8 million for debt issuance costs associated with the
Notes. (See Note B)
A-27
<PAGE>
<PAGE>
FIRST AMENDMENT
TO
1993 STOCK OPTION PLAN
OF
PRIME MEDICAL SERVICES, INC.
Prime Medical Services, Inc., a Delaware corporation, formerly known as New
PMSI, Inc. (the "Corporation"), hereby adopts this first amendment (this
"Amendment") to its 1993 stock option plan (the "Plan") effective for all
purposes as of June 18, 1997 (the "Effective Date").
R E C I T A L S
WHEREAS, on October 12, 1993 the Corporation adopted the Plan, a copy of
which is attached hereto as Exhibit-A; and
WHEREAS, pursuant to Section 2.1 of the Plan, subject to certain
adjustments provided for in the Plan, the aggregate number of shares of the
Corporation's stock to be issued pursuant to the exercise of all options granted
under the plan may not exceed two million (2,000,000) shares; and
WHEREAS, at the annual meeting of the Corporation's shareholders held on
the Effective Date, and in accordance with Section 9 of the Plan (relating to
amendments of the Plan), the shareholders of the Corporation approved an
amendment to the Plan, as contained herein, pursuant to which the aggregate
number of shares of stock that could be issued pursuant
<PAGE>
to the exercise of all options granted under the Plan would be increased by five
hundred thousand (500,000) shares.
NOW, THEREFORE, in consideration of, and pursuant to, the foregoing, the
Corporation hereby adopts this Amendment to the Plan as follows:
1. Paragraph 2.1 of the Plan is hereby amended to read in its entirety as
follows:
2.1. Description of Stock and Maximum Shares Allocated. The Stock which
Options granted hereunder give a Holder the right to purchase may be
unissued or reacquired shares of Stock, as the Corporation may, in its sole
and absolute discretion, from time to time determine.
Subject to the adjustments provided for in Paragraph 6.7 hereof, the
aggregate number of shares of Stock to be issued pursuant to the exercise
of all Options granted hereunder may equal but shall not exceed 2,500,000
shares of Stock.
2. Except as specifically amended hereby, the Plan shall remain in full
force and effect in accordance with its terms.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation, acting by and through its officer
hereunto duly authorized, has executed this Amendment as of the Effective Date.
PRIME MEDICAL SERVICES, INC.
By:/s/ Cheryl L. Williams
---------------------------
Cheryl L. Williams
Vice President - Finance
3
<PAGE>
SECOND AMENDMENT
TO
1993 STOCK OPTION PLAN
OF
PRIME MEDICAL SERVICES, INC.
Prime Medical Services, Inc., a Delaware corporation, formerly known as New
PMSI, Inc. (the "Corporation"), hereby adopts this second amendment (this
"Amendment") to its 1993 Stock Option Plan (the "Plan") effective for all
purposes as of ___________, 1997 (the "Effective Date").
R E C I T A L S
WHEREAS, on October 12, 1993 the Corporation adopted the Plan, which was
subsequently amended by that certain First Amendment (the "First Amendment")
dated effective June 18, 1997, a copy of which is attached hereto as Exhibit-A;
and
WHEREAS, the Corporation's Board of Directors have approved an amendment to
the Plan, as contained herein, pursuant to which (i) the Plan may be
administered by either the Board of Directors or a committee of the Board duly
appointed under the terms of the Plan and comprised solely of non-employee
directors, and (ii) the holders of Non-Incentive Options (as defined in the
Plan) may assign or transfer such Options with the approval of the Board of
Directors or its appointed committee; and
<PAGE>
WHEREAS, the Corporation desires to amend and restate the Plan to reflect
the incorporation of the First Amendment and this Amendment, and to delete all
references therein to "New PMSI, Inc." and substitute the Corporation's current
name in place thereof.
NOW, THEREFORE, in consideration of, and pursuant to, the foregoing, the
Corporation hereby adopts this Amendment to the Plan as follows:
1. Section 1.7 of the Plan is hereby amended to read in its entirety as
follows:
1.7. "Non-Employee Directors" shall mean directors who meet the
definition of "Non-Employee Directors" under Rule 16b-3 under the Act.
2. Section 3.1 of the Plan is hereby amended to read in its entirety as
follows:
3.1. Administrator. An administrative body designated by the
-------------
Board of Directors shall administer the Plan (the "Administrator").
The Board of Directors may designate itself as the Administrator or
appoint two or more Non-Employee Directors to a committee which shall
serve as the Administrator.
2
<PAGE>
3. All sections of the Plan (inclusive of section headings) are amended to
replace the term "Committee" or "Committee's" with "Administrator" or
"Administrator's", respectively.
4. Section 6.5 of the Plan is hereby amended to delete the second sentence
thereof and to add, in its place, the following sentences:
Incentive Options shall not be transferable other than by will or the
laws of descent and distribution. Non-Incentive Options shall not be
transferable other than by will or the laws or descent and
distribution, or upon the express prior written consent of the
Administrator in each instance.
5. The Plan is hereby amended to remove all references to "New PMSI, Inc."
and to replace each such reference with "Prime Medical Services, Inc."
6. Except as specifically amended hereby, the Plan shall remain in full
force and effect in accordance with its terms.
7. The Plan, as amended and restated to reflect the First Amendment and
this Amendment, is attached hereto as Exhibit-B, and is hereby adopted for all
purposes.
3
<PAGE>
IN WITNESS WHEREOF, the Corporation, acting by and through its officer
hereunto duly authorized, has executed this Amendment as of the Effective Date.
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl L. Williams
---------------------------
Cheryl L. Williams
Vice President - Finance
4
<PAGE>
PRIME MEDICAL SERVICE, INC.
AMENDED AND RESTATED
1993 STOCK OPTION PLAN
Scope and Purpose of Plan
-------------------------
Prime Medical Services, Inc., a Delaware corporation (the "Corporation"),
has adopted this Stock Option Plan (the "Plan") to provide for the granting of:
(a) Incentive Options (hereinafter defined) to certain key employees of
the Corporation, or of its Affiliates (hereinafter defined), and
(b) Non-Incentive Options (hereinafter defined) to certain key employees
and non-employee directors of the Corporation or of its Affiliates.
The purpose of the Plan is to provide an incentive for Eligible Individuals
(hereinafter defined) to remain in the service of the Corporation or its
Affiliates, to extend to them the opportunity to acquire a proprietary interest
in the Corporation so that they will apply their best efforts for the benefit of
the Corporation, and to aid the Corporation in attracting able persons to enter
the service of the Corporation and its Affiliates.
SECTION 1. Definitions.
1.1. "Act" shall mean the Securities Exchange Act of 1934, as amended.
1.2. "Affiliates" shall mean (a) any corporation, other than the
Corporation, in an unbroken chain of corporations ending with the Corporation if
each of the corporations, other than the Corporation, owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain and (b) any corporation,
other than the Corporation, in an unbroken chain of corporations beginning with
the Corporation if each of the corporations, other than the last corporation in
the unbroken chain, owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
1.3. "Agreement" shall mean the written agreement between the Corporation
and a Holder evidencing the Option granted by the Corporation and the
understanding of the parties with respect thereto.
1.4. "Board of Directors" shall mean the board of directors of the
Corporation.
1.5. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.6. "Administrator" shall mean the Administrator appointed pursuant to
Section 3.1 to administer the Plan.
1.7. "Non-Employee Directors" shall mean directors who meet the definition
of "Non-Employee Directors" under Rule 16b-3 under the Act.
1.8. "Effective Date" shall mean the date that PMSI Acquisition
Corporation is merged with and into Prime Medical Services, Inc.
<PAGE>
1.9. "Eligible Individuals" shall mean (a) key employees, including
officers and directors who are also employees of the Corporation or of any of
its Affiliates, (b) non-employee directors and officers of the Corporation or of
any of its Affiliates and (c) consultants and advisors of the Corporation or of
any of its Affiliates who render bona fide services to the Corporation or to any
of its Affiliates; provided such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
1.10. "Fair Market Value" shall mean:
(a) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange at
the date of determining the Fair Market Value, the last reported sale price on
such exchange on the last business day prior to the date in question; or
(b) If shares of Stock of the same class shall not be listed or admitted
to unlisted trading privileges as provided in Subparagraph 1.10(a) and sales
prices therefor in the over-the-counter market shall be reported by the National
Association of Securities Dealers, Inc. Automated Quotations, Inc. ("NASDAQ")
National Market System at the date of determining the Fair Market Value, the
last reported sale price so reported on the last business day prior to the date
in question; or
(c) If shares of Stock of the same class shall not be listed or admitted
to unlisted trading privileges as provided in Subparagraph 1.10(a) and sales
prices therefor shall not be reported by the NASDAQ National Market System as
provided in Subparagraph 1.10(b), and bid and asked prices therefor in the over-
the-counter market shall be reported by NASDAQ (or, if not so reported, by the
National Quotation Bureau Incorporated) at the date of determining the Fair
Market Value, the average of the closing bid and asked prices on the last
business day prior to the date in question; and
(d) If shares of Stock of the same class shall not be listed or admitted
to unlisted trading privileges as provided in Subparagraph 1.10(a) and sales
prices or bid and asked prices therefor shall not be reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subparagraph 1.10(b) or
Subparagraph 1.10(c) at the date of determining the Fair Market Value, the value
determined in good faith by the Administrator.
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one which, by its
terms, will never lapse.
1.11. "Holder" shall mean an Eligible Individual to whom an Option has
been granted.
1.12. "Incentive Options" shall mean stock options that are intended to
satisfy the requirements of Section 422A of the Code.
1.13. "Non-Incentive Options" shall mean stock options that do not satisfy
the requirements of Section 422A of the Code.
1.14. "Options" shall mean either Incentive Options or Non-Incentive
Options, or both.
1.15. "Stock" shall mean the Corporation's authorized common stock, $.01
par value, together with any other securities with respect to which Options
granted hereunder may become exercisable.
SECTION 2. Stock and Maximum Number of Shares Subject to the Plan.
------------------------------------------------------
2.1. Description of Stock and Maximum Shares Allocated. The Stock which
-------------------------------------------------
Options granted hereunder give a Holder the right to purchase may be unissued or
reacquired shares of Stock, as the Corporation may, in its sole and absolute
discretion, from time to time determine.
<PAGE>
Subject to the adjustments provided for in Paragraph 6.7 hereof, the
aggregate number of shares of Stock to be issued pursuant to the exercise of all
Options granted hereunder may equal but shall not exceed 2,500,000 shares of
Stock.
2.2. Restoration of Unpurchased Shares. If an Option granted hereunder
---------------------------------
expires or terminates for any reason during the term of this Plan and prior to
the exercise of the Option in full, the shares of Stock subject to but not
issued under such Option shall again be available for Option granted hereunder
subsequent thereto.
SECTION 3. Administration of the Plan.
--------------------------
3.1. Administrator. An administrative body designated by the Board of
-------------
Directors shall administer the Plan (the "Administrator"). The Board of
Directors may designate itself as the Administrator or appoint two or more Non-
Employee Directors to a committee which shall serve as the Administrator.
3.2. Meetings and Actions of Administrator. The Administrator shall hold
-------------------------------------
its meetings at such times and places as it may determine. All decisions and
determinations of the Administrator shall be made by the majority vote or
decision of all of its members present at a meeting; provided, however, that any
decision or determination reduced to writing and signed by all of the members of
the Administrator shall be as fully effective as if it had been made at a
meeting duly called and held. The Administrator may make any rules and
regulations for the conduct of its business that are not inconsistent with the
provisions hereof and with the bylaws of the Corporation as it may deem
advisable.
3.3. Administrator's Powers. Subject to the express provisions hereof,
----------------------
the Administrator shall have the authority, in its sole and absolute discretion,
(a) to adopt, amend, and rescind administrative and interpretive rules and
regulations relating to the Plan; (b) to determine the terms and provisions of
the respective Agreements (which need not be identical), including provisions
defining or otherwise relating to (i) subject to Section 6 of the Plan, the term
and the period or periods and extent of exercisability of the Options, (ii) the
extent to which the transferability of shares of Stock issued upon exercise of
Options is restricted, and (iii) the effect of approved leaves of absence
(consistent with any applicable regulations of the Internal Revenue Service);
(c) to accelerate the time of exercisability of any Option that has been
granted; (d) to construe the respective Agreements and the Plan; and (e) to make
all other determinations and perform all other acts necessary or advisable for
administering the Plan, including the delegation of such ministerial acts and
responsibilities as the Administrator deems appropriate. The Administrator may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any Agreement in the manner and to the extent it shall deem expedient
to carry it into effect, and it shall be the sole and final judge of such
expediency. The Administrator shall have full discretion to make all
determinations on the matters referred to in this Paragraph 3.3; such
determinations shall be final, binding and conclusive.
SECTION 4. Eligibility and Participation.
-----------------------------
4.1. Eligible Individuals. Options may be granted hereunder only to
--------------------
persons who are Eligible Individuals at the time of the grant thereof.
Notwithstanding any provision contained herein to the contrary, a person shall
not be eligible to receive an Incentive Option hereunder unless he is an
employee of the Corporation or an Affiliate, nor shall a person be eligible to
receive an Incentive Option hereunder if he, at the time such Option is
granted, would own (within the meaning of Sections 422A and 425 of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
or value of all classes of stock of the Corporation or of an Affiliate unless at
the time such Incentive Option is granted the exercise price per share of Stock
is at least one hundred and ten percent (110%) of the Fair Market Value of each
share of Stock to which the Incentive Option relates and the Incentive Option is
not exercisable after the expiration of five years from the date it is granted.
4.2. No Right to Option. The adoption of the Plan shall not be deemed to
------------------
give any person a right to be granted an Option.
<PAGE>
SECTION 5. Grant of Options and Certain terms of the Agreements.
----------------------------------------------------
Subject to the express provisions hereof, the Administrator shall determine
which Eligible Individuals shall be granted Options hereunder from time to time.
In making grants, the Administrator shall take into consideration the
contribution the potential Holder has made or may make to the success of the
Corporation or its Affiliates and such other considerations as the Administrator
may from time to time specify. The Administrator shall also determine the
number of shares subject to each of such Options, and shall authorize and cause
the Corporation to grant Options in accordance with such determinations.
The date on which the Administrator completes all action constituting an
offer of an Option to an individual, including the specification of the number
of shares of Stock to be subject to the Option, shall be the date on which the
Option covered by an Agreement is granted, even though certain terms of the
Agreement may not be at such time determined and even though the Agreement may
not be executed until a later time. In no event, however, shall an Optionee
gain any rights in addition to those specified by the Administrator in its
grant, regardless of the time that may pass between the grant of the Option and
the actual execution of the Agreement by the Corporation and the Optionee.
Each Option granted hereunder shall be evidenced by an Agreement, executed
by the Corporation and the Eligible Individual to whom the Option is granted,
incorporating such terms as the Administrator shall deem necessary or desirable.
More than one Option may be granted hereunder to the same Eligible Individual
and be outstanding concurrently hereunder. In the event an Eligible Individual
is granted both one or more Incentive Options and one or more Non-Incentive
Options, such grants shall be evidenced by separate Agreements, one for each of
the Incentive Option grants and one for each of the Non-Incentive Option grants.
Each Agreement may contain or otherwise provide for conditions giving rise
to the forfeiture of the Stock acquired pursuant to an Option granted hereunder
or otherwise and such restrictions on the transferability of shares of the Stock
acquired pursuant to an Option granted hereunder or otherwise as the
Administrator in its sole and absolute discretion shall deem proper or
advisable. Such conditions giving rise to forfeiture may include, but need not
be limited to, the requirement that the Holder render substantial services to
the Corporation or its Affiliates for a specified period of time. Such
restrictions on transferability may include, but need not be limited to, options
and rights of first refusal in favor of the Corporation and shareholders of the
Corporation other than the Holder of such shares of Stock who is a party to the
particular Agreement or a subsequent holder of the shares of Stock who is bound
by such Agreement. In addition, no Option may be exercisable for a period of
more than ten years from the date the Option is granted.
SECTION 6. Terms and Conditions of Options.
-------------------------------
All Options granted hereunder shall comply with, be deemed to include, and
shall be subject to the following terms and conditions:
6.1. Number of Shares. Each Agreement shall state the number of shares of
----------------
Stock to which it relates.
6.2. Exercise Price. Each Agreement shall state the exercise price per
--------------
share of Stock. The exercise price per share of Stock subject to an Incentive
Option shall not be less than the greater of (a) the par value per share of the
Stock or (b) 100% of the Fair Market Value per share of the Stock on the date of
the grant of the Option. The exercise price per share of Stock subject to a
Non-Incentive Option shall be determined by the Administrator upon the granting
of the Non-Incentive Option.
6.3. Automatic Options. Notwithstanding Paragraph 6.2, on the Effective
-----------------
Date the persons then holding unexercised options granted pursuant to the 1990
Stock Option Plan and Second Amended and Restated Stock Option Plan of Prime
Medical Services, Inc. ("Prime Plans"), shall automatically be granted Non-
Incentive Options under the Plan covering the same number of shares of Stock, at
the same exercise price and for the same term as set forth in the options
granted to such persons under the Prime Plans. The grant of such Non-Incentive
Options shall be in cancellation of such options granted to such persons under
the Prime Plans.
<PAGE>
6.4. Medium and Time of Payment, Method of Exercise, and Withholding
---------------------------------------------------------------
Taxes. The exercise price of an Option shall be payable upon the exercise of
the Option in cash or by certified or cashier's check payable to the order of
the Corporation, or, with the consent of the Administrator, with shares of Stock
of the Corporation owned by the Holder, including a multiple series of exchanges
of such Stock, or with the consent of the Administrator, by a combination of
cash and such shares. Exercise of an Option shall not be effective until the
Corporation has received written notice of exercise. Such notice must specify
the number of whole shares to be purchased and be accompanied by payment in full
of the aggregate exercise price of the number of shares purchased. The
Corporation shall not in any case be required to sell, issue, or deliver a
fractional share of Stock with respect to any Option.
The Administrator may, in its discretion, require a Holder to pay to the
Corporation at the time of exercise of an Option or portion thereof the amount
that the Corporation deems necessary to satisfy its obligation to withhold
Federal, state or local income or other taxes incurred by reason of the
exercise. Where the exercise of an Option does not give rise to an obligation
to withhold Federal income or other taxes on the date of exercise, the
Corporation may, in its discretion, require a Holder to place shares of Stock
purchased under the Option in escrow for the benefit of the Corporation until
such time as Federal income or other tax withholding is no longer required with
respect to such shares or until such withholding is required on amounts included
in the gross income of the Holder as a result of the exercise of an Option or
the disposition of shares of Stock acquired pursuant thereto. At such later
time, the Corporation, in its discretion, may require a Holder to pay to the
Corporation the amount that the Corporation deems necessary to satisfy its
obligation to withhold Federal, state or local income or other taxes incurred by
reason on the exercise of the Option or the disposition of shares of Stock.
Upon receipt of such payment by the Corporation, such shares of Stock shall be
released from escrow to the Holder.
6.5. Term, Time of Exercise, and Transferability of Options. In addition
------------------------------------------------------
to such other terms and conditions as may be included in a particular Agreement
granting an Option, an Option shall be exercisable during a Holder's lifetime
only by the Holder or by the Holder's guardian or legal representative.
Incentive Options shall not be transferable other than by will or the laws of
descent and distribution. Non-Incentive Options shall not be transferable other
than by will or the laws of descent and distribution, or upon the express prior
written consent of the Administrator in each instance. The provisions of the
remainder of this paragraph shall apply to the extent a Holder's Agreement does
not expressly provide otherwise. If a Holder ceases to be an Eligible
Individual, the Option shall terminate ninety days after such Holder ceases to
be an Eligible Individual. Notwithstanding the foregoing, if a Holder ceases to
be an Eligible Individual by reason of (a) disability (as defined in Section
105(d)(4)), or (b) death, then the Holder shall have the right for twelve months
after the date of disability or death to exercise an Option to the extent such
Option is exercisable on the date of his disability.
That portion of the Option which is not exercisable on the date the Holder
ceases to be an Eligible Individual shall terminate and be forfeited to the
Corporation on the date of such cessation.
Notwithstanding any other provision of this Plan, no Incentive Option shall
be exercisable after the expiration of ten years from the date it is granted, or
the period specified in Paragraph 4.1, if applicable. The Administrator shall
have authority to prescribe in any Agreement that the Option evidenced thereby
may be exercised in full or in part as to any number of shares subject thereto
at any time or from time to time during the term of the Option, or in such
installments at such times during said term as the Administrator may prescribe.
Except as provided above and unless otherwise provided in any Agreement, an
Option may be exercised at any time or from time to time during the term of the
Option. Such exercise may be as to any or all whole (but no fractional) shares
which have become purchasable under the Option.
Within a reasonable time or such time as may be permitted by law after the
Corporation receives written notice that the Holder has elected to exercise all
or a portion of an Option, such notice to be accompanied by payment in full of
the aggregate Option exercise price of the number of shares of Stock purchased,
the Corporation shall issue and deliver a certificate representing the shares
acquired in consequence of the exercise and any other amounts payable in
consequence of such exercise. In the event that a Holder exercises both an
Incentive Option, or portion thereof, and a Non-Incentive Stock Option, or a
portion thereof, separate Stock certificates shall be issued, one for the Stock
subject to the Incentive Option and one for the Stock subject to the Non-
Incentive Stock Option. The number of the shares of Stock transferable due to
an exercise of an Option under this Plan shall not be increased due to the
passage of time, except as may be provided in an Agreement. However, this
number of such shares of
<PAGE>
Stock which are transferable may increase due to the occurrence of certain
events which are fully described in Paragraph 6.7.
Nothing herein or in any Option granted hereunder shall require the
Corporation to issue any shares upon exercise of any Option if such issuance
would, in the opinion of counsel for the Corporation, constitute a violation of
the Securities Act of 1933, as amended, or any similar or superseding statute or
statutes, or any other applicable statute or regulation, as then in effect. At
the time of any exercise of an Option, the Corporation may, as a condition
precedent to the exercise of such Option, require from the Holder of the Option
(or in the event of his death, his legal representatives, heirs, legatees, or
distributees) such written representations, if any, concerning his intentions
with regard to the retention or disposition of the shares being acquired by
exercise of such Option and such written covenants and agreements, if any, as to
the manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by such Holder (or
in the event of his death, his legal representatives, heirs, legatees, or
distributees), will not involve a violation of the Securities Act of 1933, as
amended, or any similar or superseding statute or statutes, or any other
applicable state or federal statute or regulation, as then in effect.
Certificates for shares of Stock, when issued, may have the following or similar
legend, or statements of other applicable restrictions, endorsed thereon, and
may not be immediately transferable:
The shares of Stock evidenced by this certificate have been issued to the
registered owner in reliance upon written representations that these shares
have been purchased for investment. These shares have not been registered
under the Securities Act of 1933, as amended, or any applicable state
securities laws, in reliance upon an exception from registration. Without
such registration, these shares may not be sold, transferred, assigned or
otherwise disposed of unless, in the opinion of the Corporation and its
legal counsel, such sale, transfer, assignment or disposition will not be
in violation of the Securities Act of 1933, as amended, applicable rules
and regulations of the Securities and Exchange Commission, and any
applicable state securities laws.
6.6. Limitation on Aggregate Value of Shares That May Become First
-------------------------------------------------------------
Exercisable During Any Calendar Year Under an Incentive Option. Except as is
- --------------------------------------------------------------
otherwise provided in the second paragraph of Paragraph 6.7 hereof, with respect
to any Incentive Option granted under this Plan, the sum of:
(a) the aggregate Fair Market Value of shares of Stock subject to such
Incentive Option that first become purchasable in a calendar year
under such Incentive Option, and
(b) the aggregate Fair Market Value of shares of Stock or stock of any
Affiliate (or a predecessor of the Corporation or an Affiliate)
subject to any other incentive stock option (within the meaning of
Section 422A of the Code) of the Corporation or its Affiliates (or a
predecessor corporation of any such corporation), that first become
purchasable in a calendar year under such incentive stock option may
not (with respect to any Holder) exceed $100,000, with such Fair
Market Value to be determined as of the date the Incentive Option or
such other incentive stock option is granted.
For purposes of this Paragraph 6.6, "predecessor corporation" means (i) a
corporation that was a party to a transaction described in Section 425(a) of the
Code (or which would be so described if a substitution or assumption under such
section had been effected) with the Corporation, (ii) a corporation which, at
the time the new incentive stock option (within the meaning of Section 422A of
the Code) is granted, is an Affiliate of the Corporation or a predecessor
corporation of any such corporations, or (iii) a predecessor corporation of any
such corporations.
6.7. Adjustments Upon Changes in Capitalization. Notwithstanding any
------------------------------------------
other provision hereof, in the event of any change in the number of outstanding
shares of Stock effected without receipt of consideration therefor by the
Corporation, by reason of a stock dividend, or split, combination, exchange of
shares or other recapitalization, merger, or otherwise, in which the Corporation
is the surviving corporation (1) the aggregate number and class of the reserved
shares, (2) the number and class of shares subject to each outstanding Option
and (3) the exercise price of each outstanding Option shall be automatically
adjusted to equitably reflect the effect thereon of such change (provided,
however, that any fractional share resulting from such adjustment may be
eliminated). In the event of a dispute concerning such adjustment, the
Administrator has full discretion to determine the resolution of the dispute.
Such determination shall be final, binding and conclusive. The number of
reserved shares or the number of shares
<PAGE>
subject to any outstanding Option shall be automatically reduced by any fraction
included therein which results from any adjustment made pursuant to this
Paragraph 6.7.
The following provisions of this Paragraph 6.7 shall apply unless a
Holder's Agreement provides otherwise. In the event of:
(a) a dissolution or liquidation of the Corporation,
(b) a merger or consolidation (other than a merger effecting a re-
incorporation of the Corporation in another state or any other merger
or a consolidation in which the shareholders of the surviving
corporation and their proportionate interests therein immediately
after the merger or consolidation are substantially identical to the
shareholders of the Corporation and their proportionate interests
therein immediately prior to the merger or consolidation) in which the
Corporation is not the surviving corporation (or survives only as a
subsidiary of another corporation in a transaction in which the
shareholders of the parent of the Corporation and their proportionate
interests therein immediately after the transaction are not
substantially identical to the shareholders of the Corporation and
their proportionate interests therein immediately prior to the
transaction; provided, however, that the Administrator may at any time
prior to such a merger or consolidation provide by resolution that the
foregoing provisions of this parenthetical shall not apply if a
majority of the board of directors of such parent immediately after
the transaction consists of individuals who constituted a majority of
the Board of Directors immediately prior to the transaction), or
(c) a transaction in which any person (other than a shareholder of the
Corporation that already is the owner of 50% or more of the total
combined voting power of all classes of the Corporation on the date of
the Holder's Agreement) becomes the owner of 50% or more of the total
combined voting power of all classes of stock of the Corporation
(provided, however, that the Administrator may at any time prior to
such transaction provide by resolution that this subparagraph (c)
shall not apply if such acquiring person is a corporation and a
majority of the board of directors of the acquiring corporation
immediately after the transaction consists of individuals who
constituted a majority of the Board of Directors immediately prior to
the acquisition of such 50% or more total combined voting power)
the Administrator may, at its election, as of the effective time of such
transaction, either (1) change the number and kind of shares of stock (including
substitution of shares of another corporation) and exercise price in the manner
it deems appropriate, provided, however, that in no event may any change be made
under this Paragraph 6.7 which would constitute a "modification" within the
meaning of Section 425(h)(3) of the Code; or (2) purchase the Options from each
Holder by tendering cash equal to the Fair Market Value of the Stock represented
by the Options less the exercise price of the Options specified in each
agreement, without regard to the determination as to the periods and
installments of exercisability made pursuant to a Holder's Agreement if (and
only if) such Options have not at that time expired or been terminated.
6.8. Rights as a Shareholder. A Holder shall have no right as a
-----------------------
shareholder with respect to any shares covered by his Option until a certificate
representing such shares is issued to him. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Paragraph 6.7 hereof.
6.9. Modification, Extension and Renewal of Options. Subject to the terms
----------------------------------------------
and conditions of and within the limitations of the Plan, the Administrator may
modify, extend or renew outstanding Options granted under the Plan, or accept
the surrender of Options outstanding hereunder (to the extent not theretofore
exercised) and authorize the granting of new Options hereunder in substitution
therefor (to the extent not theretofore exercised). The Administrator may not,
however, without the consent of the Holder, modify any outstanding Options so as
to specify a higher or lower exercise price or base amount or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher or lower exercise price.
In addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, alter or impair any
<PAGE>
rights or obligations under any Option theretofore granted hereunder to such
Holder under the Plan, except as may be necessary, with respect to Incentive
Options, to satisfy the requirements of Section 422A of the Code.
6.10. Furnish Information. Each Holder shall furnish to the Corporation
-------------------
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
6.11. Obligation to Exercise: Termination of Employment. The granting of
--------------------------------------------------
an Option hereunder shall impose no obligation upon the Holder to exercise the
same or any part thereof. In the event of a Holder's termination of employment
with the Corporation or an Affiliate, the unexercised portion of an Option
granted hereunder shall terminate in accordance with Paragraph 6.5 hereof.
6.12. Agreement Provisions. The Agreements authorized under the Plan
--------------------
shall contain such provisions in addition to those required by the Plan
(including, without limitation, restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Administrator shall deem advisable. Each Agreement shall
identify the Option evidenced thereby as an Incentive Option or a Non-Incentive
Option, as the case may be, and no Agreement shall cover both an Incentive
Option and a Non-Incentive Option. Each Agreement relating to an Incentive
Option granted hereunder shall contain such limitations and restrictions upon
the exercise of the Incentive Option to which it relates as shall be necessary
for the Incentive Option to which such Agreement relates to constitute an
incentive stock option, as defined in Section 422A of the Code.
SECTION 7. Remedies.
--------
7.1. Attorneys Fees. The Corporation shall be entitled to recover from a
--------------
Holder reasonable attorneys' fees incurred in connection with the enforcement of
the terms and provisions of the Plan and any Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.
7.2. Specific Performance. The Corporation shall be entitled to enforce
--------------------
the terms and provisions of this Paragraph 7, including the remedy of specific
performance, in Travis County, Texas.
SECTION 8. Duration of Plan.
----------------
No Options will be granted herein after the date that is ten years from the
earlier of (a) the date the Plan is accepted by the Board of Directors or (b)
the date the Plan is approved by the stockholders of the Corporation.
SECTION 9. Amendment of Plan.
-----------------
The Board of Directors may at any time terminate or from time to time amend
or suspend the Plan; provided, however, that no such amendment shall, without
-------- -------
approval of the shareholders of the Corporation, except as provided in Section 7
hereof, (a) increase the aggregate number of shares of Stock as to which Options
may be granted under the Plan; (b) change the minimum Option exercise price; (c)
increase the maximum period during which Options may be exercised; or (d) extend
the effective period of the Plan. No Option may be granted during any
suspension of the Plan or after the Plan has been terminated and no amendment,
suspension or termination shall, without a Holder's consent, adversely alter or
impair any of the rights or obligations under any Option theretofore granted to
such Holder under the Plan.
SECTION 10. General.
-------
10.1. Application of Funds. The proceeds received by the Corporation from
--------------------
the sale of shares pursuant to Options shall be used for general corporate
purposes.
10.2. Right of the Corporation and Affiliates to Terminate Employment.
---------------------------------------------------------------
Nothing contained in the Plan, or in any Agreement, shall confer upon any Holder
the right to continue in the employ of the Corporation or any Affiliate, or
interfere in any way with the rights of the Corporation or any Affiliate to
terminate his employment any time.
<PAGE>
10.3. No Liability for Good Faith Determinations. Neither the members of
------------------------------------------
the Board of Directors nor any member of the Administrator shall be liable for
any act, omission, or determination taken or made in good faith with respect to
the Plan or any Option granted under it, and members of the Board of Directors
and the Administrator shall be entitled to indemnification and reimbursement by
the Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors and officers liability or similar insurance coverage that may from
time to time be in effect.
10.4. Information Confidential. As partial consideration for the granting
------------------------
of each Option hereunder, the Agreement may, in the Administrator's sole and
absolute discretion, provide that the Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax and financial advisors, or to a
financial institution to the extent that such information is necessary to secure
a loan. In the event any breach of this promise comes to the attention of the
Administrator, it shall take into consideration such breach, in determining
whether to recommend the grant of any future Option to such Holder, as a factor
militating against the advisability of granting any such future Option to such
individual.
10.5. Other Benefits. Participation in the Plan shall not preclude the
--------------
Holder from eligibility in any other stock option plan of the Corporation or any
Affiliate or any old age benefit, insurance, pension, profit sharing,
retirement, bonus, or other extra compensation plans which the Corporation or
any Affiliate has adopted, or may, at any time, adopt for the benefit of its
employees.
10.6. Execution of Receipts and Releases. Any payment of cash or any
----------------------------------
issuance or transfer of shares of Stock to the Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such persons hereunder. The Administrator may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
10.7. No Guarantee of Interests. Neither the Administrator nor the
-------------------------
Corporation guarantees the Stock of the Corporation from loss or depreciation.
10.8. Payment of Expenses. All expenses incident to the administration,
-------------------
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Affiliates; provided,
however, the Corporation or an Affiliate may recover any and all damages, fees,
expenses, and/or costs arising out of any actions taken by the Corporation to
enforce its rights hereunder.
10.9. Corporation Records. Records of the Corporation or its Affiliates
-------------------
regarding the Holder's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment, and other matters shall be
conclusive for all purposes hereunder, unless determined by the Administrator to
be incorrect.
10.10. Information. The Corporation and its Affiliates shall, upon
-----------
request or as may be specifically required hereunder, furnish or cause to be
furnished, all of the information or documentation which is necessary or
required by the Administrator to perform its duties and functions under the
Plan.
10.11. No Liability of Corporation. The Corporation assumes no obligation
---------------------------
or responsibility to the Holder or his legal representatives, heirs, legatees,
or distributees for any act of, or failure to act on the part of, the
Administrator.
10.12. Corporation Action. Any action required of the Corporation shall
------------------
be by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
<PAGE>
10.13. Severability. If any provision of this Plan is held to be illegal
------------
or invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but such provision shall be fully severable and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein.
10.14. Notices. Whenever any notice is required or permitted hereunder,
-------
such notice must be in writing and personally delivered or sent by mail or by a
nationally recognized courier service. Any notice required or permitted to be
delivered hereunder shall be deemed to be delivered on the date on which it is
personally delivered, or, if mailed, whether actually received or not, on the
third business day after it is deposited in the United States mail, certified or
registered, postage prepaid, addressed to the person who is to receive it at the
address which such person has previously specified by written notice delivered
in accordance herewith, or, if by courier, twenty-four hours after it is sent,
addressed as described in this Section. The Corporation or a Holder may change,
at any time and from time to time, by written notice to the other, the address
which it or he had previously specified for receiving notices. Until changed in
accordance herewith, the Corporation and each Holder shall specify as its and
his address for receiving notices the address set forth in the Agreement
pertaining to the shares to which such notice relates.
10.15. Waiver of Notice. Any person entitled to notice hereunder may
----------------
waive such notice.
10.16. Successors. The Plan shall be binding upon the Holder, his legal
----------
representatives, heirs, legatees and distributees upon the Corporation, its
successors, and assigns, and upon the Administrator, and its successors.
10.17. Headings. The titles and headings of Sections and Paragraphs are
--------
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
10.18. Governing Law. All questions arising with respect to the
-------------
provisions of the Plan shall be determined by application of the laws of the
State of Texas except to the extent Texas law is preempted by federal law.
Questions arising with respect to the provisions of an Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Agreement, except to the extent preempted by federal law and except to the
extent that Texas corporate law conflicts with the contract law of such state,
in which event Texas corporate law shall govern. The obligation of the
Corporation to sell and deliver Stock hereunder is subject to applicable laws
and to the approval of any governmental authority required in connection with
the authorization, issuance, sale, or delivery of such Stock.
10.19. Word Usage. Words used in the masculine shall apply to the
----------
feminine where applicable, and wherever the context of the Plan dictates, the
plural shall be read as the singular and the singular as the plural.
IN WITNESS WHEREOF, Prime Medical Services, Inc. acting by and through its
officer hereunto duly authorized, has executed this Amended and Restated Plan on
the ____ day of _________, 1997.
PRIME MEDICAL SERVICES, INC.
By:/s/ Cheryl L. Williams
-----------------------------------
Cheryl L. Williams
Vice President - Finance
<PAGE>
PRIME MEDICAL SERVICES, INC.
SECOND AMENDED AND RESTATED
LOAN AGREEMENT
$45,000,000.00 TERM LOAN A
$40,000,000.00 TERM LOAN B
AND
$50,000,000.00 REVOLVING CREDIT LOAN
THE FIRST NATIONAL BANK OF BOSTON,
as Administrative Agent
NATIONSBANK OF TEXAS, N.A.,
as Documentation Agent
NATIONSBANC CAPITAL MARKETS, INC.
as Syndication Agent
AND
THE LENDERS NAMED HEREIN,
as Lenders
Dated as of March 31, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS........................................... 1
Section 1.1 Amendment and Restatement............................. 1
Section 1.2 Definitions........................................... 1
Section 1.3 Other Definitional Provisions......................... 16
ARTICLE II ADVANCES.............................................. 16
Section 2.1 Commitments........................................... 16
Section 2.2 Notes................................................. 17
Section 2.3 Repayment of Advances................................. 17
Section 2.4 Interest.............................................. 18
Section 2.5 Borrowing Procedure................................... 18
Section 2.6 Continuations; Conversions............................ 19
Section 2.7 Use of Proceeds....................................... 19
Section 2.8 Fees.................................................. 20
ARTICLE III PAYMENTS.............................................. 20
Section 3.1 Method of Payment..................................... 20
Section 3.2 Optional Prepayment................................... 20
Section 3.3 Mandatory Prepayments................................. 21
Section 3.4 Pro Rata Treatment.................................... 22
Section 3.5 Non-Receipt of Funds by the Administrative Agent...... 22
Section 3.6 Withholding Taxes..................................... 22
Section 3.7 Withholding Tax Exemption............................. 23
Section 3.8 Computation of Interest............................... 23
Section 3.9 Order of Application.................................. 23
ARTICLE IV YIELD PROTECTION AND ILLEGALITY....................... 25
Section 4.1 Additional Costs...................................... 25
Section 4.2 Limitation on Eurodollar Advances..................... 26
Section 4.3 Illegality............................................ 26
Section 4.4 Treatment of Eurodollar Advances...................... 26
Section 4.5 Compensation.......................................... 27
Section 4.6 Capital Adequacy...................................... 27
ARTICLE V SECURITY.............................................. 28
Section 5.1 Collateral............................................ 28
Section 5.2 Setoff................................................ 28
Section 5.3 Guaranties............................................ 29
ARTICLE VI CONDITIONS PRECEDENT.................................. 29
Section 6.1 Initial Advance....................................... 29
Section 6.2 All Advances.......................................... 30
- i -
<PAGE>
ARTICLE VII REPRESENTATIONS AND WARRANTIES........................ 31
Section 7.1 Existence............................................. 31
Section 7.2 Financial Statements.................................. 31
Section 7.3 Corporate Action: No Breach.......................... 32
Section 7.4 Operation of Business................................. 32
Section 7.5 Litigation and Judgments.............................. 32
Section 7.6 Rights in Properties; Liens........................... 32
Section 7.7 Enforceability........................................ 32
Section 7.8 Approvals............................................. 32
Section 7.9 Debt.................................................. 33
Section 7.10 Taxes................................................. 33
Section 7.11 Use of Proceeds; Margin Securities.................... 33
Section 7.12 ERISA................................................. 33
Section 7.13 Disclosure............................................ 33
Section 7.14 Subsidiaries; Partnerships............................ 33
Section 7.15 Agreements............................................ 34
Section 7.16 Compliance with Legal Requirements; Governmental
Authorizations........................................ 34
Section 7.17 Investment Company Act................................ 34
Section 7.18 Public Utility Holding Company Act.................... 35
Section 7.19 Environmental Matters................................. 35
ARTICLE VIII POSITIVE COVENANTS.................................... 35
Section 8.1 Reporting Requirements................................ 35
Section 8.2 Maintenance of Existence; Conduct of Business......... 37
Section 8.3 Maintenance of Properties............................. 37
Section 8.4 Taxes and Claims...................................... 37
Section 8.5 Insurance............................................. 38
Section 8.6 Inspection Rights..................................... 38
Section 8.7 Keeping Books and Records............................. 38
Section 8.8 Compliance with Laws.................................. 38
Section 8.9 Compliance with Agreements............................ 38
Section 8.10 Further Assurances.................................... 38
Section 8.11 ERISA................................................. 39
Section 8.12 Information Relating to Proposed Acquisitions......... 39
Section 8.13 After-Acquired Subsidiaries........................... 39
Section 8.14 Syndication Cooperation............................... 39
ARTICLE IX NEGATIVE COVENANTS.................................... 39
Section 9.1 Debt.................................................. 39
Section 9.2 Limitation on Liens................................... 40
Section 9.3 Mergers, Etc.......................................... 40
Section 9.4 Restricted Payments................................... 41
Section 9.5 Investments........................................... 41
Section 9.6 Limitation on Issuance of Capital Stock............... 41
Section 9.7 Transactions With Affiliates.......................... 42
Section 9.8 Disposition of Assets................................. 42
Section 9.9 Sale and Leaseback.................................... 42
Section 9.10 Prepayment of Debt.................................... 42
Section 9.11 Nature of Business.................................... 42
- ii -
<PAGE>
Section 9.12 Environmental Protection.............................. 42
Section 9.13 Accounting............................................ 42
Section 9.14 Amendment of Partnership and Management Agreements.... 43
ARTICLE X FINANCIAL COVENANTS................................... 43
Section 10.1 Total Debt to EBITDA.................................. 43
Section 10.2 Interest Coverage Ratio............................... 43
Section 10.3 Total Debt Service Coverage Ratio..................... 43
Section 10.4 Consolidated Net Worth................................ 43
Section 10.5 Minimum EBITDA........................................ 44
ARTICLE XI DEFAULT............................................... 44
Section 11.1 Events of Default..................................... 44
Section 11.2 Remedies.............................................. 46
Section 11.3 Performance by the Administrative Agent............... 46
ARTICLE XII THE ADMINISTRATIVE AGENT.............................. 47
Section 12.1 Appointment, Powers and Immunities.................... 47
Section 12.2 Rights of Administrative Agent as a Lender............ 48
Section 12.3 Sharing of Payments, Etc.............................. 48
Section 12.4 Indemnification....................................... 49
Section 12.5 Independent Credit Decisions.......................... 49
Section 12.6 Several Commitments................................... 50
Section 12.7 Successor Administrative Agent........................ 50
Section 12.8 Independent Contractor................................ 50
ARTICLE XIII MISCELLANEOUS......................................... 51
Section 13.1 Expenses.............................................. 51
Section 13.2 Indemnification....................................... 51
Section 13.3 No Duty............................................... 52
Section 13.4 No Fiduciary Relationship............................. 52
Section 13.5 No Waiver; Cumulative Remedies........................ 52
Section 13.6 Successors and Assigns................................ 52
Section 13.7 Survival.............................................. 54
Section 13.8 ENTIRE AGREEMENT...................................... 55
Section 13.9 Amendments, Etc....................................... 55
Section 13.10 Maximum Interest Rate................................. 55
Section 13.11 Notices............................................... 56
Section 13.12 Governing Law......................................... 56
Section 13.13 Counterparts.......................................... 56
Section 13.14 Severability.......................................... 56
Section 13.15 Headings.............................................. 56
Section 13.16 Construction.......................................... 56
Section 13.17 Independence of Covenants............................. 56
Section 13.18 Confidentiality....................................... 56
Section 13.19 Renewal and Increase.................................. 57
Section 13.20 Waiver of Jury Trial.................................. 57
Section 13.21 Choice of Forum; Consent to Service of Process and
Jurisdiction.......................................... 57
- iii -
<PAGE>
INDEX TO EXHIBITS
-----------------
EXHIBIT DESCRIPTION OF EXHIBIT
- ------- ----------------------
A Advance Request Form
B Form of Assignment and Acceptance
C Form of Revolving Credit Note
D Form of Term Note A
E Form of Term Note B
F Perfection Certificate
G Form of Opinion of Counsel for Borrower and the Guarantors
H Compliance Certificate
INDEX TO SCHEDULES
------------------
SCHEDULE DESCRIPTION OF SCHEDULE
- -------- -----------------------
1 Commitments
2 Guarantors
3 Partnerships
7.5 Existing Litigation
7.9 Existing Debt
7.14.1 Capitalization of Subsidiaries
7.14.2 Partners
7.15 Agreements
7.16 Governmental Disclosures
7.19 Environmental Matters
9.2 Existing Liens
- iv -
<PAGE>
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT (the "AGREEMENT"), dated as
of March 31, 1997, is among PRIME MEDICAL SERVICES, INC., a Delaware corporation
("BORROWER"), each of the lenders or other lending institutions which is or
which may from time to time become a signatory hereto or any successor or
assignee thereof (collectively, the "LENDERS" and individually, a "LENDER"), THE
FIRST NATIONAL BANK OF BOSTON ("FNBB"), a national banking association, as
Administrative Agent for itself and the other Lenders (in such capacity,
together with its successors in such capacity, the "ADMINISTRATIVE AGENT") and
NATIONSBANK OF TEXAS, N.A. ("NATIONSBANK"), a national banking association, as
Documentation Agent for itself and the other Lenders (in such capacity, together
with its successors in such capacity, the "DOCUMENTATION AGENT"), and
NATIONSBANC CAPITAL MARKETS, INC., as Syndication Agent (in such capacity,
together with its successors in such capacity, the "SYNDICATION AGENT").
R E C I T A L S
- - - - - - - -
1. Reference is hereby made to that certain Loan Agreement dated as of
November 28, 1994, by and between Borrower, the Banks defined therein, and FNBB,
as Agent for the Banks defined therein as amended by that certain First
Amendment to Loan Agreement dated as of August 17, 1995, as amended by the
Amended and Restated Loan Agreement dated as of April 26, 1996 among FNBB,
NationsBank and FNBB, as Syndication Agent, as amended by the First Amendment to
Amended and Restated Loan Agreement dated as of June 14, 1996 among FNBB,
NationsBank and the other Banks named therein (collectively, the "ORIGINAL
CREDIT AGREEMENT").
2. The parties hereto desire to amend the Original Credit Agreement, to
provide for, among other things, (a) an additional $40,000,000.00 term loan, (b)
a $10,000,000.00 increase in the maximum amount available under the Revolving
Credit Commitment, (c) the addition of certain lenders as parties thereto, and
(d) modification and amendment to certain other provisions therein, subject to
the terms and conditions set forth in this Agreement.
3. The Administrative Agent, the Documentation Agent, the Syndication
Agent, the Lenders and Borrower desire and have agreed to amend and restate the
Original Credit Agreement in its entirety as and pursuant to this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 AMENDMENT AND RESTATEMENT. This Agreement is in renewal,
extension, modification, increase and restatement of the Original Credit
Agreement.
SECTION 1.2 DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"ACQUISITION" means any transaction, or any series of related transactions,
consummated on or after the date hereof, by which Borrower or any Subsidiary
directly or indirectly (a) acquires all or substantially all
<PAGE>
of the assets of any Person, whether through purchase of assets, merger, or
otherwise, (b) acquires (in one transaction or as the most recent transaction in
a series of transactions) at least a majority (in number of votes) of the
securities (or similar ownership interests) of any Person, or (c) acquires (in
one transaction or as the most recent transaction in a series of transactions)
at least a majority of the general partnership interests of any Person.
"ADDITIONAL COSTS" has the meaning specified in SECTION 4.1.
"ADJUSTED EURODOLLAR RATE" means, for any Eurodollar Advance for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 0.01%) determined by the Administrative Agent to be equal to (a) the
Eurodollar Rate for such Eurodollar Advance for such Interest Period divided by
(b) 1.00 minus the Reserve Requirement for such Eurodollar Advance for such
Interest Period.
"ADMINISTRATIVE AGENT" has the meaning specified in the preamble.
"ADVANCE" means (a) with respect to the Revolving Credit Commitment, each
advance of funds by the Lenders having a Revolving Credit Commitment, or any of
them, to Borrower pursuant to SECTION 2.5(a), (b) with respect to the Term Loan
A Commitment, each advance by the Lenders having a Term Loan A Commitment, or
any of them, to Borrower pursuant to SECTION 2.5(b), and (c) with respect to the
Term Loan B Commitment, each advance by the Lenders having a Term Loan B
Commitment, or any of them, to Borrower pursuant to SECTION 2.5(b).
"ADVANCE REQUEST FORM" means a certificate, in substantially the form of
EXHIBIT A, properly completed and signed by Borrower requesting an Advance.
"AFFILIATE" means, as to any Person, any other Person (a) that directly or
indirectly, through one or more intermediaries, Controls or is Controlled by, or
is under common Control with, such Person, (b) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of voting
stock of such Person, or (c) five percent (5%) or more of the voting stock of
which is directly or indirectly beneficially owned or held by the Person in
question; provided, however, in no event shall the Agents or any Lender be
deemed an Affiliate of Borrower or any of its Subsidiaries.
"AFTER-ACQUIRED SUBSIDIARY" has the meaning specified in SECTION 8.13.
"AGENTS" means the Administrative Agent, the Documentation Agent and the
Syndication Agent. "AGENT" means any one of the Agents.
"ALTERNATE BASE RATE" means, at any time, the greater of (a) the variable
rate of interest established from time to time by the Administrative Agent as
its "BASE RATE" and set by the Administrative Agent as a general reference rate
of interest charged by the Administrative Agent, and (b) the Federal Funds Rate
plus one-half of one percent (.5%). Borrower acknowledges that the
Administrative Agent may, from time to time, extend credit to other borrowers at
rates of interest varying from, and having no relationship to, such general
reference rate. Each change in the Alternate Base Rate shall become effective
without prior notice to Borrower automatically as of the opening of business on
the date of such change in the Alternate Base Rate.
"ALTERNATE BASE RATE ADVANCES" means Advances that bear interest at rates
based upon the Alternate Base Rate.
2
<PAGE>
"APPLICABLE LENDING OFFICE" means for each Lender and each Type of Advance,
the lending office of such Lender (or of an Affiliate of such Lender) designated
for such Type of Advance below its name on the signature pages hereof or an
Assignment and Acceptance, or such other office of such Lender (or of an
Affiliate of such Lender) as such Lender may from time to time specify to
Borrower and the Administrative Agent as the office by which its Advances of
such Type are to be made and maintained.
"APPLICABLE MARGIN" means the interest margin over the Alternate Base Rate
or the Adjusted Eurodollar Rate, as the case may be, that is as follows: (a) for
Advances under the Term Loan B, three percent (3.00%), and (b) for Advances
under the Revolving Credit Commitment and the Term Loan A, (i) from the date
hereof until the delivery of financial statements and a compliance certificate
for the period ending March 31, 1997, as required hereunder, (A) one percent
(1.00%) for Alternate Base Rate Advances, and (B) two and one-half percent
(2.50%) for Eurodollar Advances; and (iii) thereafter, based on the Total Debt
to EBITDA Ratio as of and for the most recent four (4) quarter period ending on
or before the date of determination, the margin set forth opposite such ratio
below:
<TABLE>
<CAPTION>
================================================================================
APPLICABLE MARGIN APPLICABLE MARGIN
TOTAL DEBT TO EBITDA RATIO ALTERNATE BASE RATE EURODOLLAR
ADVANCES ADVANCES
- -------------------------------------------------------------------------------
<S> <C> <C>
Less than 2.0 to 1.0 0.5% 2.00%
- -------------------------------------------------------------------------------
Less than 2.50 to 1.0 but greater 0.75% 2.25%
than or equal to 2.0 to 1.0
- -------------------------------------------------------------------------------
Less than 3.0 to 1.0 but greater 1.00% 2.50%
than or equal to 2.50 to 1.0
- -------------------------------------------------------------------------------
Greater than or equal to 3.00 to 1.0 1.25% 2.75%
================================================================================
</TABLE>
The Total Debt to EBITDA Ratio shall be determined from the then most current of
either (a) the quarterly or annual financial statements and related compliance
certificate delivered pursuant to SECTION 8.1, or (b) the most recent Advance
Request Form for a Permitted Acquisition, calculating any adjustments to such
ratio necessitated as a result of the Permitted Acquisition for which such
Advance was made. The adjustment, if any, to the Applicable Margin shall be
effective commencing on the fifth (5th) Business Day after delivery of such
financial statements (and related compliance certificate) or the respective date
of Advance for a Permitted Acquisition, as the case may be. If Borrower fails
at any time to furnish to the Administrative Agent and the Lenders the financial
statements and related compliance certificate as required to be delivered
pursuant to SECTION 8.1, then the maximum Applicable Margin shall apply until
such time as such financial statements and compliance certificates are so
delivered.
"APPLICABLE PAYMENT AMOUNT" means, as of any date, an amount equal to (a)
the aggregate amount of Debt of the Companies, as of such date, minus (b) the
product of (i) EBITDA of the Companies, for the four (4) fiscal quarter period
immediately preceding the date of determination, including EBITDA of any Company
acquired by Borrower during that period, and (ii) 2.75; provided that if such
Applicable Payment Amount is less than $0.00, then the Applicable Payment Amount
shall be $0.00.
"APPLICABLE RATE" means: (a) during any period that an Advance is an
Alternate Base Rate Advance, the Alternate Base Rate plus the Applicable Margin;
and (b) during any period that an Advance is a Eurodollar Advance, the Adjusted
Eurodollar Rate plus the Applicable Margin.
3
<PAGE>
"APPLICABLE UNUSED FEE PERCENTAGE" means the per annum rate with respect
to the unused portion of the Revolving Credit Commitments as follows: (a) from
the date hereof until delivery of financial statements and a compliance
certificate for the period ending March 31, 1997, as required hereunder, one-
half of one percent (0.50%); and (b) thereafter, based on the Total Debt to
EBITDA Ratio as of and for the most recent four (4) quarter period ending on or
before the date of determination, the percentage set forth opposite such ratio
below:
================================================================================
APPLICABLE UNUSED
TOTAL DEBT TO EBITDA RATIO FEE PERCENTAGE
- --------------------------------------------------------------------------------
Less than 2.5 to 1.0 0.375%
- --------------------------------------------------------------------------------
Greater than or equal to 2.50 to 1.0 0.50%
================================================================================
The Applicable Unused Fee Percentage shall be adjusted, if necessary, at the
same time as adjustments to the Applicable Margin.
"APPROVED FUND" means, with respect to any Lender that is a fund that
invests in loans, any other fund that invests in loans and is managed by the
same investment advisor as such Lender or by an Affiliate of such investment
advisor.
"ASSIGNEE" has the meaning specified in SECTION 13.6.
"ASSIGNING LENDER" has the meaning specified in SECTION 13.6.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into
by an Assigning Lender and its Assignee and accepted by the Administrative Agent
pursuant to SECTION 13.6, in substantially the form of EXHIBIT B.
"BASLE ACCORD" means the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "INTERNATIONAL CONVERGENCE OF CAPITAL
MEASUREMENT AND CAPITAL STANDARDS" dated July 1988, as amended, supplemented and
otherwise modified and in effect from time to time, or any replacement thereof.
"BORROWER SECURITY AGREEMENT" means the Borrower Security Agreement dated
as of April 26, 1996, executed by Borrower in favor of the Administrative Agent
for the benefit of the Lenders, as the same may be amended, supplemented, or
modified from time to time, including the Consent, Confirmation and Ratification
of Borrower Security Agreement dated the date hereof, which Borrower Security
Agreement is in renewal, amendment, restatement and substitution of that certain
Borrower Security Agreement dated November 28, 1994, executed by Borrower in
favor of the Administrative Agent, for the benefit of the Lenders under the
Original Credit Agreement, as amended pursuant to that First Amendment to
Borrower Security Agreement dated as of August 17, 1995.
"BUSINESS DAY" means (a) any day on which the Administrative Agent is open
for regular business, and (b) with respect to all borrowings, payments,
Conversions, Continuations, Interest Periods, and notices in connection with
Eurodollar Advances, any day which is a Business Day described in clause (a)
above and which is also a day on which dealings in Dollar deposits are carried
out in the London interbank market.
4
<PAGE>
"CAPITAL LEASE OBLIGATIONS" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof, as
determined in accordance with GAAP.
"CHANGE IN CONTROL" means the individuals who, as of the date of this
Agreement, constitute the members of Borrower's Board of Directors (the
"INCUMBENT BOARD") do not constitute or cease for any reason to constitute at
least fifty percent (50%) of:
(a) Borrower's Board of Directors; or
(b) The surviving corporation's Board of Directors in the event of
any merger or consolidation involving Borrower (if permitted by SECTION
9.3); or
(c) The controlling entity's board of directors, the comparable
body if there is no Board of Directors, or voting control if there is no
comparable body, in the event that the surviving corporation under clause
(b) above is directly or indirectly controlled by that entity.
Any individual who becomes a member of the Board of Directors or comparable body
or who obtains a voting interest, as applicable under clauses (a), (b), or (c)
above, after the date of this agreement and whose appointment to the Board, or
nomination for election, was approved or ratified by a vote of the individuals
comprising at least fifty (50%) of the Incumbent Board shall be deemed to be a
member of the Incumbent Board.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"COLLATERAL" has the meaning specified in SECTION 5.1.
"COMMITMENT" means, as to each Lender as of any date, the aggregate amount
of the Revolving Credit Commitment, the Term Loan A Commitment and the Term Loan
B Commitment of such Lender. "COMMITMENTS" means the aggregate amount of the
Revolving Credit Commitments, the Term Loan A Commitments and the Term Loan B
Commitments of all the Lenders.
"COMPANIES" means Borrower and its Subsidiaries.
"CONFIDENTIAL INFORMATION" means any and all information relating to the
Companies, including, without limitation, information relating to each of the
Company's financial condition, business plans, management, earnings, assets,
liabilities, contracts, processes, products, research and development
activities, intellectual property, services, customers, suppliers, marketing and
sales. In addition, Confidential Information shall include any and all other
information marked or identified in writing by any of the Companies as
"CONFIDENTIAL" or "CONFIDENTIAL INFORMATION" and provided by each of the
Companies or its representatives to any of the Lenders or the Agents or obtained
by the Lenders or the Agents after an inspection pursuant to SECTION 8.6.
Notwithstanding the foregoing, "CONFIDENTIAL INFORMATION" shall not include:
5
<PAGE>
(i) any information known to an Agent or a Lender prior to
disclosure by any of the Companies or its representatives, as documented
prior to such disclosure in such Agent's or Lender's written records;
(ii) any information which an Agent or a Lender demonstrates became
available to it on a non-confidential basis from a source (other than any
of the Companies) who is not bound by a confidentiality agreement with, or
any other contractual, legal or fiduciary obligation of confidentiality to,
any of the Companies or any other party with respect to such information;
(iii) any information which an Agent or a Lender demonstrates is or
becomes generally available to the public other than as a result of a
disclosure by it in breach of SECTION 13.18; and
(iv) any information which an Agent or a Lender demonstrates was
conceived of or developed by it or any of its employees without access or
reference, directly or indirectly, to the Confidential Information.
"CONSOLIDATED NET INCOME" means, for any Person for any period, the amount
which, in conformity with GAAP, would be shown on a consolidated income
statement of such Person as net income for such period, after deduction of any
minority interests.
"CONSOLIDATED NET WORTH" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as stockholders' equity on a
consolidated balance sheet of the Companies.
"CONTINUE," "CONTINUATION," and "CONTINUED" refers to the continuation
pursuant to SECTION 2.6 of a Eurodollar Advance from one Interest Period to the
next Interest Period.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities or other ownership interests, by
contract or otherwise. "CONTROLLING" and "CONTROLLED" have meanings correlative
thereto.
"CONVERSION" and "CONVERTED" refers to a conversion pursuant to SECTION 2.6
of one Type of Advance into another Type of Advance.
"DEBT" means as to any Person at any time (without duplication and without
duplication among the Companies): (a) all obligations of such Person for
borrowed money; (b) all obligations of such Person evidenced by bonds, notes,
debentures, or other similar instruments; (c) all obligations of such Person to
pay the deferred purchase price of property or services, except trade accounts
payable of such Person arising in the ordinary course of business that are not
past due by more than ninety (90) days; (d) all Capital Lease Obligations of
such Person; (e) all indebtedness or other obligations of others of the types
described in this definition, if Guaranteed by such Person; (f) all obligations
secured by a Lien existing on property owned by such Person, whether or not the
obligations secured thereby have been assumed by such Person or are non-recourse
to the credit of such Person; (g) all reimbursement obligations of such Person
(whether contingent or otherwise) in respect of letters of credit, Lenders'
acceptances, surety or other bonds and similar instruments; (h) Hedging
Agreements, and (i) all liabilities of such Person in respect of unfunded vested
benefits under any Plan; provided, however, that the term Debt shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business.
6
<PAGE>
"DEFAULT" means an Event of Default or the occurrence of an event or
condition which with the giving of notice or the lapse of time or both would
become an Event of Default.
"DEFAULTING LENDER" means any Lender that has defaulted on any of its
obligations under this Agreement.
"DEFAULT RATE" means the lesser of (a) the Maximum Rate, and (b) the sum of
the Alternate Base Rate in effect from day to day plus the Applicable Margin
plus two percent (2%).
"DOCUMENTATION AGENT" has the meaning specified in the preamble.
"DOLLARS" and "$" mean lawful money of the United States of America.
"EBITDA" means, for any Person for any period, Consolidated Net Income of
such Person for such period, determined after deduction of any minority
interests, plus all amounts deducted therefrom during such period, in
conformity with GAAP, for interest, taxes, depreciation and amortization.
"ELIGIBLE ASSIGNEE" means any commercial bank, savings and loan
association, savings bank, finance company, insurance company, pension fund,
mutual fund, fund which is regularly engaged in making, purchasing or investing
in loans, or other financial institution (whether a corporation, partnership, or
other entity) approved by the Administrative Agent and, so long as no Default
has occurred and is continuing, Borrower, such approvals not to be unreasonably
withheld.
"ENVIRONMENTAL LAWS" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. (S) 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C. (S) 651 et seq., the Clean Air
Act, 42 U.S.C. (S) 7401 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et
seq., and the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., as such
laws, regulations, and requirements may be amended or supplemented from time to
time.
"ENVIRONMENTAL LIABILITIES" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs, and expenses (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions, and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including any
Environmental Law, permit, order or agreement with any Governmental Authority or
other Person, arising from environmental, health or safety conditions or the
Release or threatened Release of a Hazardous Material into the environment,
resulting from the past, present, or future operations of such Person or its
Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA AFFILIATE" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with Borrower.
7
<PAGE>
"EURODOLLAR ADVANCES" means Advances the interest rates on which are
determined on the basis of the rates referred to in the definition of "ADJUSTED
EURODOLLAR RATE" in this SECTION 1.1.
"EURODOLLAR RATE" means, for any Eurodollar Advance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "EURODOLLAR RATE" shall mean, for any Eurodollar
Advance for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page
as the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period, provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"EVENT OF DEFAULT" has the meaning specified in SECTION 11.1.
"EXCESS CASH FLOW" means, for any semi-annual period described in SECTION
3.3(B)(iii), (a) EBITDA, minus (b) total cash income tax expense actually paid
during such period, minus (c) the aggregate amount of any optional prepayments
of the Obligations during such period, minus (d) scheduled principal payments in
respect of all Debt during such period, minus (e) total consolidated interest
expense in respect of all Debt actually paid or that is payable during such
period, minus (f) capital expenditures during such period (provided that such
capital expenditures shall not exceed (x) $4,000,000.00 minus (y) the aggregate
amount of capital expenditures during the two (2) fiscal quarters ending prior
to such semi-annual fiscal period).
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 0.01%) equal to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published on such next
succeeding Business Day, the Federal Funds Rate for any day shall be the average
rate charged to the Administrative Agent on such day on such transactions as
determined by the Administrative Agent.
"FNBB" has the meaning specified in the preamble.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question.
Accounting principles are applied on a "CONSISTENT BASIS" when the accounting
principles applied in a current period are comparable in all material respects
to those accounting principles applied in a preceding period, except for changes
required by GAAP. In the event of a change in GAAP, Administrative Agent and
Borrower will thereafter negotiate in good faith to revise any covenants of this
Agreement affected thereby in order to make such covenants consistent with GAAP
then in effect.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
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"GOVERNMENTAL AUTHORIZATION" shall mean any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Authority or pursuant to
any Legal Requirement.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise), or (b)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect the obligee
against loss in respect thereof (in whole or in part), provided that the term
"GUARANTEE" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "GUARANTEE" used as a verb has a
corresponding meaning.
"GUARANTIES" means, collectively, the Guaranty Agreements, each dated as of
April 26, 1996, executed by the Guarantors in favor of the Agents and the
Lenders, as the same may be amended, supplemented or modified from time to time,
including the Consent, Confirmation and Ratification of Guaranty Agreements,
dated the date hereof, which Guaranty Agreements are in renewal, amendment,
substitution and replacement of the Guaranty Agreements executed by the
Guarantors under the Original Credit Agreement in favor of the Agent and the
Lenders under the Original Credit Agreement. "GUARANTY" means any one of the
Guaranties.
"GUARANTORS" means, collectively, all Wholly-Owned Subsidiaries of
Borrower, now owned or hereafter acquired or formed, including, without
limitation, the Subsidiaries listed on SCHEDULE 2. "GUARANTOR" means any one of
the Guarantors.
"GUARANTOR SECURITY AGREEMENTS" means the Security Agreements, each dated
as of April 26, 1996, executed by the Guarantors in favor of the Administrative
Agent, for the benefit of the Lenders, as the same may be amended, supplemented
or modified from time to time, including the Consent, Confirmation and
Ratification of Guarantor Security Agreements dated the date hereof, which
Security Agreements are in renewal, amendment, restatement and substitution of
the Security Agreements executed by the Guarantors under the Original Credit
Agreement in favor of the Administrative Agent, for the benefit of the Lenders
under the Original Credit Agreement. "GUARANTOR SECURITY AGREEMENT" means any
one of the Guarantor Security Agreements.
"HAZARDOUS MATERIAL" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law, including,
without limitation, asbestos, petroleum, and polychlorinated biphenyls.
"HEDGING AGREEMENT" has the meaning specified in SECTION 11.1.
"INTEREST COVERAGE RATIO" means, as to the Companies for any period, (a)
EBITDA for such period divided by (b) the aggregate amount of consolidated
interest expense for such period, all as determined in accordance with GAAP.
"INTEREST PERIOD" means, with respect to any Eurodollar Advance, each
period commencing on the date such Advance is made or Converted from an Advance
of another Type or, in the case of each subsequent, successive Interest Period
applicable to a Eurodollar Advance, the last day of the next preceding Interest
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Period with respect to such Advance, and ending on the numerically corresponding
day in the first (1st), second (2nd), third (3rd) or sixth (6th) calendar month
thereafter, as Borrower may select as provided in SECTION 2.5 or 2.6, except
that each such Interest Period which commences on the last Business Day of a
calendar month (or on any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end on the last Business
Day of the appropriate subsequent calendar month. Notwithstanding the
foregoing: (a) each Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day (or, if such
succeeding Business Day falls in the next succeeding calendar month, on the next
preceding Business Day); (b) any Interest Period which would otherwise extend
beyond the Termination Date shall end on the Termination Date; (c) no more than
six (6) Interest Periods shall be in effect at the same time; and (d) no
Interest Period shall have a duration of less than one (1) month and, if any
Interest Period would otherwise be a shorter period, such Advances shall not be
available hereunder.
"ISSUANCE PROCEEDS" means the net proceeds of (i) any sale or issuance of
Borrower's capital stock, or (ii) the incurrence of any Debt of the type
described in SUBSECTIONS (a) and (b) of the definition of Debt, in each case to
the extent permitted hereunder; provided that "ISSUANCE PROCEEDS" shall include
proceeds from the exercise of any warrants issued to Alabama Lithotripsy Joint
Venture to the extent such warrant proceeds are contemporaneously used to pay
outstanding Debt to Alabama Lithotripsy Joint Venture.
"LEGAL REQUIREMENT" shall mean any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty as in effect on the date hereof.
"LENDER" and "LENDERS" have the meanings specified in the preamble.
"LIEN" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"LITHO" means Lithotripters, Inc., a North Carolina corporation.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, the
Borrower Security Agreement, the Guarantor Security Agreements, the Pledge
Agreements, any Hedging Agreement between Borrower and the Administrative Agent,
and all other instruments, documents, and agreements executed and delivered
pursuant to or in connection with this Agreement, as such instruments,
documents, and agreements may be amended, modified, renewed, extended, or
supplemented from time to time.
"MATERIAL SUBSIDIARY" means, as of any date, (a) any Subsidiary which,
together with its Subsidiaries, accounts for three percent (3%) or more of the
Company's consolidated gross revenues or assets, or (b) any combination of
Subsidiaries which, together with their Subsidiaries, account for seven percent
(7%) or more of the Company's consolidated gross revenues or assets, in each
case on a consolidated basis (but without elimination of any minority interests)
as of and for the most recent fiscal quarter for which such information is
available. "MATERIAL SUBSIDIARIES" means all of the Material Subsidiaries.
"MAXIMUM RATE" means, at any time and with respect to any Lender, the
maximum rate of interest under applicable law that such Lender may charge
Borrower. The Maximum Rate shall be calculated in a manner that takes into
account any and all fees, payments, and other charges in respect of the Loan
Documents that constitute interest under applicable law. Each change in any
interest rate provided for herein based upon
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the Maximum Rate resulting from a change in the Maximum Rate shall take effect
without notice to Borrower at the time of such change in the Maximum Rate.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section 3(37)
of ERISA to which contributions have been made by Borrower or any ERISA
Affiliate of Borrower and which is covered by Title IV of ERISA.
"NATIONSBANK" has the meaning specified in the preamble.
"NOTES" means the Revolving Credit Notes and the Term Notes. "NOTE" means
any one of the Notes.
"OBLIGATED PARTY" means any Person who is or becomes party to any agreement
that guarantees or secures payment and performance of the Obligations or any
part thereof.
"OBLIGATIONS" means all obligations, indebtedness, and liabilities of
Borrower to the Agents and the Lenders, or any of them, arising pursuant to any
of the Loan Documents, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, and all interest accruing thereon and all
attorneys' fees and other expenses incurred in the enforcement or collection
thereof.
"ORIGINAL CREDIT AGREEMENT" has the meaning specified in the recitals.
"PARTNERSHIPS" means the partnerships in which Borrower or any Subsidiary
now owns or hereafter acquires general and/or limited partnership interests and
the other Persons in which Borrower or any Subsidiary now owns or hereafter
acquires ownership interests, including, without limitation, the partnerships
and other Persons listed on SCHEDULE 3. "PARTNERSHIP" means any one of the
Partnerships.
"PAYMENT DATE" means (a) with respect to Alternate Base Rate Advances and
the commitment fees payable pursuant to SECTION 2.8(a), the last Business Day
of each April, July, October and January, commencing April 30, 1997, and (b)
with respect to Eurodollar Advances, the last day of the respect Interest Period
therefor, provided that if any Interest Period is greater than three (3) months,
then accrued interest shall also be due and payable shall also be due and
payable on the date that is three (3) months after the commencement of such
Interest Period.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"PERMITTED ACQUISITION" means an Acquisition by Borrower or any of its
Subsidiaries with respect to which each of the following conditions shall have
been satisfied:
(a) the Acquisition by Borrower or such Subsidiary is of a business,
assets or Person (as applicable, the "TARGET") which is engaged in
substantially the same business as the business conducted by Borrower or
such Subsidiary on the date hereof, or any other business reasonably
related thereto;
(b) as of the closing of such Acquisition, the Acquisition has been
approved and recommended by the board of directors or other applicable
governing body of the Target and the Person from which the Target is to be
acquired;
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(c) prior to the closing of such acquisition, the Target and the
Person from which the Target is to be acquired must be Solvent;
(d) as of the closing of such Acquisition, after giving effect to
such Acquisition, Borrower or the Subsidiary that is the acquiring party
must be Solvent and the Companies, on a consolidated basis, must be
Solvent;
(e) as of the closing of such Acquisition, after giving effect to
such Acquisition, no Default shall exist or occur as a result of, and after
giving effect to, such Acquisition;
(f) the aggregate purchase price with respect to such Acquisition
does not exceed five (5) times EBITDA of the Target, subject to adjustments
acceptable to the Administrative Agent where less than all of the business,
assets or stock of the Target is acquired, acquired pursuant to the
Acquisition for the four (4) fiscal quarters ending on the most recently
ended fiscal period prior to the date of such Acquisition;
(g) the aggregate cash consideration for such Acquisition does not
exceed $10,000,000.00 and the aggregate cash consideration for all
Acquisitions (other than the Acquisition of additional limited partnership
interests of the Partnerships in which Litho is, as of the date hereof,
the general partner) during the immediately preceding twelve (12) month
period (including such Acquisition) does not exceed $20,000,000.00;
(h) after giving effect to such Acquisition, the aggregate Debt of
the Companies (without deduction for any minority interests and including
any Advances under the Revolving Credit Commitments) does not exceed the
product of (1) EBITDA of the Companies (including EBITDA for the Target
acquired pursuant to the Acquisition) for the four (4) fiscal quarters
ending on the closing of the Acquisition, and (2)(A) on or before December
31, 1998, 2.75 and (B) thereafter, the ratio set forth in SECTION 10.1
which is applicable to the period for which such calculation is made;
(i) the Administrative Agent shall have received pro forma financial
statements of the Companies (as if the business, assets or Person acquired
had been acquired since the first (1st) day of the period for which such
pro forma financial statements are delivered and had been managed and
conducted in accordance with the Borrower's standard business practices)
for the prior four (4) fiscal quarters of Borrower and the Companies;
(j) if the Target is to be an After-Acquired Subsidiary, then
Borrower shall have complied with the terms and conditions set forth in
SECTION 8.13; and
(k) the Administrative Agent has received a certificate, executed by
the President or a Vice President of Borrower confirming that all
representations and warranties set forth in the Loan Documents continue to
be true and correct in all material respects immediately prior to and after
giving effect to the Permitted Acquisition and the transactions
contemplated thereby, and setting forth the calculations supporting
compliance with the limitations prescribed herein.
"PERSON" means any individual, corporation, business trust, association,
company, partnership, joint venture, Governmental Authority, or other entity.
"PLAN" means any employee benefit or other plan established or maintained
by Borrower or any ERISA Affiliate of Borrower and which is covered by Title IV
of ERISA.
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"PLEDGE AGREEMENTS" means the Pledge Agreements, each dated as of April 26,
1996, executed by Borrower and each Subsidiary of Borrower that owns general
and/or limited partnership interests in the Partnerships in favor of the
Administrative Agent, for the benefit of the Lenders, as the same may be
amended, supplemented or modified from time to time, including the Consent,
Confirmation and Ratification of Pledge and Security Agreements, dated the date
hereof. "PLEDGE AGREEMENT" means any one of the Pledge Agreements.
"PLEDGORS" means each of the pledgors of partnership interests or Assigned
Rights (as defined in the applicable Pledge Agreement) pursuant to a Pledge
Agreement. "PLEDGOR" means any one of the Pledgors.
"PRINCIPAL OFFICE" means the principal office of the Administrative Agent,
presently located at 100 Federal Street, Boston, Massachusetts 02110.
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.
"REGULATORY CHANGE" means, with respect to any Lender, any change after the
date of this Agreement in United States federal, state, or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives, or requests applying to a class of banks
including such Lender of or under any United States federal, state, or foreign
laws or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"RELEASE" means, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, disbursement, leaching, or migration of
Hazardous Materials into the indoor or outdoor environment or into or out of
property owned by such Person, including, without limitation, the movement of
Hazardous Materials through or in the air, soil, surface water, ground water, or
property.
"REMEDIAL ACTION" means all actions required to (a) clean up, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and post-
remedial monitoring and care.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
"REQUIRED LENDERS" means, as of any date, any combination of Lenders (other
than any Defaulting Lenders) who collectively hold sixty percent (60%) of the
sum of (a) the Revolving Credit Commitments (other than of any Defaulting
Lenders), or if the Revolving Credit Commitments shall have been terminated,
then of the aggregate unpaid principal amount of the Revolving Credit Notes
(other than of any Defaulting Lenders), (b) the aggregate unpaid principal
amount of the Term Notes A (other than of any Defaulting Lenders) and (c) the
aggregate unpaid principal amount of the Term Notes B (other than of any
Defaulting Lenders).
"RESERVE REQUIREMENT" means, for any Eurodollar Advance for any Interest
Period therefor, the average rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to
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be maintained during such Interest Period under Regulation D by each Lender on
its portion of such Advance against "EUROCURRENCY LIABILITIES" as such term is
used in Regulation D. Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by a
Lender by reason of any Regulatory Change against (i) any category of
liabilities which includes deposits by reference to which the Adjusted
Eurodollar Rate is to be determined, or (ii) any category of extensions of
credit or other assets which include Eurodollar Advances.
"REVOLVING CREDIT COMMITMENT" means, as to each Lender as of any date, the
obligation of such Lender on such date to make Advances hereunder in an
aggregate principal amount at any time outstanding up to but not exceeding the
amount shown on SCHEDULE 1 as its Revolving Credit Commitment, as the same may
be reduced pursuant to SECTION 2.1(c) or terminated pursuant to SECTION 2.1(c)
or SECTION 11.2 and as the same may be increased or decreased from time to time
by further assignment pursuant to SECTION 13.6. "REVOLVING CREDIT COMMITMENTS"
means the Revolving Credit Commitments of all of the Lenders in the original
aggregate amount of $50,000,000.00.
"REVOLVING CREDIT LOAN" means all Advances with respect to the Revolving
Credit Commitment, evidenced by the Revolving Credit Notes.
"REVOLVING CREDIT NOTE" means a revolving credit note executed by Borrower,
substantially in the form of EXHIBIT C, payable to each Lender having a
Revolving Credit Commitment in an amount equal to such Lender's Revolving Credit
Commitment, as the same may be amended, supplemented, modified or restated from
time to time, evidencing the obligation of Borrower to repay the Revolving
Credit Loan, and all renewals, modifications and extensions thereof. "REVOLVING
CREDIT NOTES" means all of the Revolving Credit Notes of the applicable Lenders.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of 1970,
as amended from time to time.
"SOLVENT" means, with respect to any Person, that on the date of
determination (a) the fair market value of its assets is greater than the total
amount of liabilities, including, without limitation, contingent liabilities of
such Person which would be required to be included on the balance sheet of such
Person or disclosed in the financial statements of such Person in accordance
with GAAP, (b) the present fair salable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature, and
(d) such Person is not engaged in business or transactions, and is not about to
engage in business or transactions, for which its assets would constitute an
unreasonably small capital.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, or other business entity (a) of which securities or
other ownership interests representing more than fifty percent (50%) of the
equity or more than fifty percent (50%) of the ordinary voting power or more
than fifty percent (50%) of the general partnership interests are, at the time
any determination is made, owned, Controlled or held by such Person, or (b) that
is, at the time any determination is made, otherwise Controlled by one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"SYNDICATION AGENT" has the meaning specified in the preamble.
"TERMINATION DATE" means 1:00 p.m. Boston, Massachusetts time on (a) with
respect to the Revolving Credit Commitments and the Term Loan A Commitments,
April 30, 2001, and (b) with respect to the
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Term Loan B Commitments, April 30, 2003, as the case may be, or such earlier
date and time on which the Commitments terminate as provided in this Agreement.
"TERM LOAN A" means the $45,000,000.00 term loan facility provided to
Borrower by the Lenders hereunder.
"TERM LOAN A COMMITMENT" means, as to the applicable Lenders as of the date
hereof, the obligation of such Lender on such date to make Advances hereunder in
an aggregate principal amount up to but not exceeding the amount shown on
SCHEDULE 1 hereto as its Term Loan A Commitment, as the same may be increased or
decreased from time to time by further assignment pursuant to SECTION 13.6.
"TERM LOAN A COMMITMENTS" means the Term Loan A Commitments of all of the
applicable Lenders in the original aggregate amount of $45,000,000.00.
"TERM NOTE A" means a term promissory note executed by Borrower,
substantially in the form of EXHIBIT D, payable to each Lender having a Term
Loan A Commitment in an amount equal to such Lender's Term Loan A Commitment, as
the same may be amended, supplemented, modified or restated from time to time,
evidencing the obligation of Borrower to repay the Term Loan A, and all
renewals, modifications and extensions thereof. "TERM NOTES A" means all of the
Term Notes A of the applicable Lenders.
"TERM LOAN B" means the $40,000,000.00 term loan facility provided to
Borrower by the Lenders having a Term Loan B Commitment hereunder.
"TERM LOAN B COMMITMENT" means, as to each Lender as of any date, the
obligation of such Lender on such date to make Advances hereunder in an
aggregate principal amount up to but not exceeding the amount shown on SCHEDULE
1 hereto as its Term Loan B Commitment, as the same may be increased or
decreased from time to time by further assignment pursuant to SECTION 13.6.
"TERM LOAN B COMMITMENTS" means the Term Loan B Commitments of all of the
Lenders in the original aggregate amount of $40,000,000.00.
"TERM NOTE B" means a term promissory note executed by Borrower,
substantially in the form of EXHIBIT E, payable to each Lender having a Term
Loan B Commitment in an amount equal to such Lender's Term Loan B Commitment, as
the same may be amended, supplemented, modified or restated from time to time,
evidencing the obligation of Borrower to repay the Term Loan B, and all
renewals, modifications and extensions thereof. "TERM NOTES B" means all of the
Term Notes B of the Lenders having a Term Loan B Commitment.
"TERM NOTES" means, collectively, the Term Notes A and the Term Notes B.
"TOTAL DEBT SERVICE COVERAGE RATIO" means, as to the Companies for any
period, (a) the sum of EBITDA for such period, minus the aggregate amount of
capital expenditures made during such period, divided by (b) the sum of all
principal and interest payments payable during such period in respect of all
Debt of the Companies (without deduction for any minority interests), all as
determined on a rolling four (4) quarter and consolidated basis in accordance
with GAAP.
"TOTAL DEBT TO EBITDA" means, as of any date, the ratio of (a) the
aggregate amount of Debt of the Companies (without deduction for any minority
interests), as of such date, to (b) EBITDA of the Companies, for the four (4)
fiscal quarter period ending on the date of determination.
"TYPE" means any type of Advance (i.e., Alternate Base Rate Advance or
Eurodollar Advance).
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"UCC" means the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts or other applicable jurisdiction, as amended.
"WHOLLY-OWNED SUBSIDIARIES" means, as of any date, all Subsidiaries that
are wholly-owned by Borrower or a wholly-owned Subsidiary of Borrower. "WHOLLY-
OWNED SUBSIDIARY" means any one of the Wholly-Owned Subsidiaries.
SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof," "herein," and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all ARTICLE, SECTION, EXHIBIT and SCHEDULE references pertain to this
Agreement. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. All financial covenants and related
definitions relating to the Companies shall, unless otherwise indicated, be
determined after deduction of any minority interests, provided that all
references to "DEBT" shall include all Debt without deduction for any minority
interests. Terms used herein that are defined in the UCC, unless otherwise
defined herein, shall have the meanings specified in the UCC.
ARTICLE II
ADVANCES
SECTION 2.1 COMMITMENTS.
(a) REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions of
this Agreement, each Lender hereby severally agrees to make one or more Advances
to Borrower from time to time from the date hereof to the Termination Date in an
aggregate principal amount at any time outstanding up to but not exceeding the
amount of such Lender's Revolving Credit Commitment as then in effect. Subject
to the foregoing limitations, and the other terms and provisions of this
Agreement, Borrower may borrow, repay, and reborrow hereunder the amount of the
Revolving Credit Commitments by means of Eurodollar Advances (or, in the event
Eurodollar Advances are unavailable hereunder, Alternate Base Rate Advances when
required or permitted by ARTICLE IV).
(b) TERM LOAN A AND TERM LOAN B COMMITMENTS. Subject to the terms and
conditions of this Agreement, (i) each Lender having a Term Loan A Commitment
hereby severally agrees to make a single Advance to Borrower, on or about the
date of this Agreement, in the amount of such Lender's Term Loan A Commitment,
and (ii) each Lender having a Term Loan B Commitment hereby severally agrees to
make a single Advance to Borrower, on or about March 31, 1997, in the amount of
such Lender's Term Loan B Commitment. Borrower may not borrow, repay, and
reborrow hereunder any portion of the amount of the Term Loan A or the Term Loan
B.
(c) OPTIONAL REDUCTION AND TERMINATION OF REVOLVING CREDIT COMMITMENTS.
Borrower shall have the right to terminate in whole or reduce in part the unused
portion of the Revolving Credit Commitments upon at least three (3) Business
Days' prior written notice (which notice shall be irrevocable) to the
Administrative Agent specifying the effective date thereof, whether a
termination or reduction is being made, and the amount of any partial reduction,
provided that each partial reduction shall be in the amount of $1,000,000.00 or
a greater integral multiple thereof and Borrower shall simultaneously prepay the
amount by which the unpaid principal amount of the Revolving Credit Notes
exceeds the Revolving Credit Commitments
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(after giving effect to such notice) plus accrued and unpaid interest on the
principal amount so prepaid. No portion of the Revolving Credit Commitments may
be reinstated after it has been terminated or reduced.
SECTION 2.2 NOTES.
(a) REVOLVING CREDIT NOTES. The obligation of Borrower to repay each
Lender for Advances made by such Lender pursuant to such Lender's Revolving
Credit Commitment, and all interest thereon, shall be evidenced by a Revolving
Credit Note dated the date hereof, executed by Borrower and payable to the order
of such Lender in the original principal amount of such Lender's Revolving
Credit Commitment.
(b) TERM NOTES A AND TERM NOTES B.
(i) The obligation of Borrower to repay each Lender having a Term
Loan A Commitment for Advances made by such Lender pursuant to its Term
Loan A Commitment, and all interest thereon, shall be evidenced by a Term
Note A dated the date hereof, executed by Borrower and payable to the order
of such Lender in the original principal amount of such Lender's Term Loan
A Commitment.
(ii) The obligation of Borrower to repay each Lender having a Term
Loan B Commitment for Advances made by such Lender pursuant to its Term
Loan B Commitment, and all interest thereon, shall be evidenced by a Term
Note B dated the date hereof, executed by Borrower and payable to the order
of such Lender in the original principal amount of such Lender's Term Loan
B Commitment.
SECTION 2.3 REPAYMENT OF ADVANCES.
(a) REVOLVING CREDIT NOTES. Borrower shall repay the outstanding
principal amount of the Revolving Credit Notes on the Termination Date.
(b) TERM NOTES A. Borrower shall repay the outstanding principal amount
of the Term Notes A as follows: (i) in five (5) equal quarterly installments,
on April 30, 1997, July 31, 1997, October 31, 1997, January 31, 1998, and April
30, 1998, each in the amount of $2,000,000.00; (ii) in four (4) equal quarterly
installments, on July 31, 1998, October 31, 1998, January 31, 1999 and April 30,
1999, each in the amount of $2,500,000.00; and (iii) in eight (8) equal
quarterly installments, on July 31, 1999, October 31, 1999, January 31, 2000,
April 30, 2000, July 31, 2000, October 31, 2000, January 31, 2001 and on the
Termination Date, each in the amount of $3,125,000.00.
(c) TERM NOTES B. Borrower shall repay the outstanding principal amount
of the Term Notes B as follows: (i) in five (5) installments, on April 30th of
each year, commencing April 30, 1998, and continuing through April 30, 2002,
each in the amount of $800,000.00; and (ii) one final installment on the
Termination Date, in the outstanding unpaid principal amount of the Term Notes
B.
SECTION 2.4 INTEREST. The unpaid principal amount of all Advances shall
bear interest at a varying rate per annum equal from day to day to the lesser of
(a) the Maximum Rate, or (b) the Applicable Rate. If at any time the Applicable
Rate for any Advance shall exceed the Maximum Rate, thereby causing the interest
accruing on such Advance to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate for such Advance shall not reduce the rate of
interest on such Advance below the Maximum Rate until the aggregate amount of
interest accrued on such Advance equals the aggregate amount of interest which
would have accrued on such Advance if the Applicable Rate had at all times been
in effect. Accrued
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and unpaid interest on the Advances shall be due and payable on each Payment
Date and on the Termination Date. Notwithstanding the foregoing, any outstanding
principal of any Advance and (to the fullest extent permitted by law) any other
amount payable by Borrower under this Agreement or any other Loan Document that
is not paid in full when due (whether at stated maturity, by acceleration, or
otherwise) shall bear interest at the Default Rate for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Interest payable at the Default Rate shall be payable from time to time on
demand.
SECTION 2.5 BORROWING PROCEDURE.
(a) REVOLVING CREDIT LOAN. Borrower shall give the Administrative Agent
notice by means of an Advance Request Form of each requested Advance under the
Revolving Credit Commitments hereunder at least two (2) Business Days before the
requested date of each Eurodollar Advance (and at least one (1) Business Day
before the requested date of each Alternate Base Rate Advance), specifying: (a)
the requested date of such Advance (which shall be a Business Day); (b) the
amount of such Advance; and (c) the duration of the Interest Period for such
Advance (if a Eurodollar Advance). The Administrative Agent at its option may
accept telephonic requests for Advances under the Revolving Credit Commitments,
provided that such acceptance shall not constitute a waiver of the
Administrative Agent's right to delivery of an Advance Request Form in
connection with subsequent Advances under the Revolving Credit Commitments. Any
telephonic request for an Advance under the Revolving Credit Commitments by
Borrower shall be promptly confirmed by submission of a properly completed
Advance Request Form to the Administrative Agent. Each Advance under the
Revolving Credit Commitments shall be in a minimum principal amount of
$1,000,000.00 or a greater integral multiple thereof, provided that if such
Advance equals the entire remaining unfunded portion of the Revolving Credit
Commitments, it may be for any amount. The aggregate principal amount of
Eurodollar Advances having the same Interest Period shall be at least equal to
$2,500,000.00 or a greater integral multiple of $500,000.00.
(b) TERM LOANS A AND TERM LOANS B. Borrower shall give the Administrative
Agent notice by means of an Advance Request Form of the initial Advance under
the Term Loan A and the Term Loan B hereunder at least two (2) Business Days
before the requested date thereof, specifying: (a) the requested date of such
Advance (which shall be a Business Day); (b) the amount of such Advance; and (c)
the duration of the Interest Period for such Advance (if a Eurodollar Advance),
provided that any Advance under the Term Loan B shall be a Eurodollar Advance.
(c) GENERALLY. The Administrative Agent shall notify each Lender of the
contents of each Advance Request Form. Not later than 11:00 a.m. Boston,
Massachusetts time on the date specified for each Advance hereunder, each Lender
will make available to the Administrative Agent at the Principal Office in
immediately available funds, for the account of Borrower, its pro rata share of
each Advance. After the Administrative Agent's receipt of such funds and subject
to the other terms and conditions of this Agreement, the Administrative Agent
will make each Advance available to Borrower by depositing the same, in
immediately available funds, in a deposit account of Borrower maintained at the
Documentation Agent. All notices under this SECTION 2.5(C) shall be irrevocable
and shall be given not later than 11:00 a.m. Boston, Massachusetts time on the
day which is not less than the number of Business Days specified above for such
notice.
SECTION 2.6 CONTINUATIONS; CONVERSIONS.
(a) CONTINUATIONS. Borrower shall have the right to Continue Eurodollar
Advances by giving the Administrative Agent written notice specifying: (i) the
Continuation date; (ii) the amount of the Advance to be Continued; and (iii) the
duration of the Interest Period applicable thereto, which notice shall be
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irrevocable and must be given by Borrower not later than 11:00 a.m. Boston,
Massachusetts time at least two (2) Business Days before each such Continuation.
The Administrative Agent shall promptly notify each Lender of the contents of
each such notice. If Borrower shall fail to give the Administrative Agent the
notice as specified above for Continuation of a Eurodollar Advance prior to the
end of the Interest Period applicable thereto, such Eurodollar Advance shall be
automatically Continued for a one (1) month Interest Period. The existing
Eurodollar Advances under the Original Credit Agreement relating to the Term
Loans thereunder shall be Continued hereunder relating to the Term Loans A.
(b) CONVERSIONS. Borrower shall have the right to Convert an Alternate
Base Rate Advance at any time to a Eurodollar Advance by giving the
Administrative Agent written notice specifying: (i) the Conversion Date; (ii)
the amount of the Advance to be Converted; and (iii) the duration of the
Interest Period applicable thereto, which notice shall be irrevocable and must
be given by Borrower not later than 11:00 a.m. Boston, Massachusetts time at
least two (2) Business Days before each such Conversion. The Administrative
Agent shall promptly notify each Lender of the contents of each such notice.
(c) DEFAULT. After the occurrence and during the continuance of a
Default, no outstanding Advances may be Converted into, or Continued as, a
Eurodollar Advance.
SECTION 2.7 USE OF PROCEEDS.
(a) REVOLVING CREDIT LOAN. The proceeds of Advances under the Revolving
Credit Commitments shall be used by Borrower (i) for working capital in the
ordinary course of business, (ii) to purchase, refurbish or replace equipment to
be utilized in lithotripsy operations, (iii) to finance Permitted Acquisitions,
(iv) to the extent permitted by this Agreement, to repurchase outstanding
capital stock of Borrower, and (v) to make loans or capital contributions to its
Subsidiaries the proceeds of which are used by each such Subsidiary for one or
more of the purposes permitted by SUBSECTIONS (i), (ii), (iii), and (iv) of this
SECTION 2.7(a).
(b) TERM LOANS A AND TERM LOANS B. The proceeds of Advances under the
Term Loan A Commitments were used by Borrower to finance the Acquisition of
Litho, and the proceeds of Advances under the Term Loan B Commitments shall be
used by Borrower to fund other Permitted Acquisitions and for capital
expenditures and other working capital purposes.
SECTION 2.8 FEES.
(a) Borrower hereby agrees to pay to the Administrative Agent, for the
ratable account of each Lender having a Revolving Credit Commitment, a
commitment fee on the daily average unused amount of such Lender's Revolving
Credit Commitment for the period from and including the date of this Agreement
to but excluding the Termination Date, at the per annum rate equal to the
Applicable Unused Fee Percentage based on a 365-day or 366-day year, as the case
may be, and the actual number of days elapsed. Accrued commitment fees shall be
payable in arrears on each Payment Date and on the Termination Date.
(b) Borrower hereby agrees to pay to the Agents for their own respective
accounts, the fees agreed to by Borrower and the Agents pursuant to a side
letter agreement with each Agent.
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ARTICLE III
PAYMENTS
SECTION 3.1 METHOD OF PAYMENT. All payments of principal, interest, and
other amounts to be paid by Borrower under this Agreement and the other Loan
Documents shall be paid to the Administrative Agent at the Principal Office for
the account of each Lender's Applicable Lending Office in Dollars and in
immediately available funds, without setoff, deduction, or counterclaim, not
later than 1:00 p.m. Boston, Massachusetts time on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day).
Borrower shall, at the time of making each such payment, specify to the
Administrative Agent the sums payable by Borrower under this Agreement and the
other Loan Documents to which such payment is to be applied (and in the event
that Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, the Administrative Agent may apply such payment to the Obligations
in such order and manner as it may elect in its sole discretion, subject to
SECTION 3.4). Each payment received by the Administrative Agent under this
Agreement or any other Loan Document for the account of a Lender shall be paid
promptly to such Lender, in immediately available funds, for the account of such
Lender's Applicable Lending Office. Whenever any payment under this Agreement
or any other Loan Document shall be stated to be due on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of the
payment of interest and commitment fee, as the case may be.
SECTION 3.2 OPTIONAL PREPAYMENT. Borrower may, upon at least three (3)
Business Days' prior notice to the Administrative Agent, prepay the Revolving
Notes and the Term Notes A in whole or in part at any time or from time to time
without premium or penalty but with accrued interest to the date of prepayment
on the amount so prepaid, provided that (a) Eurodollar Advances prepaid on a day
other than the last day of the Interest Period for such Advances shall include
the additional compensation, if any, required by SECTION 4.5, and (b) each
partial prepayment shall be in the amount of the aggregate remaining outstanding
principal amount of the Eurodollar Advances or in the principal amount of
$1,000,000.00 or a greater integral multiple thereof. All notices under this
SECTION 3.2 shall be irrevocable and must be given by Borrower not later than
11:00 a.m. Boston, Massachusetts time on the day which is not less than the
number of Business Days specified above for such notice. Optional prepayments
of the Term Notes B must be proposed to be made by Borrower pro rata with the
Term Notes A. So long as the outstanding principal amount of the Term Notes A
on the date of any proposed prepayment exceeds the pro rata portion of the
proposed prepayment to be applied to the Term Notes A, any Lender holding Term
Notes B may elect to be excluded from the pro rata sharing of any optional
prepayment made by Borrower under this SECTION 3.2, and any such prepayment
shall not reduce the outstanding principal balances of the Term Notes B, but
shall be applied pro rata to the Term Notes A. Such election shall be made in a
writing signed by each such electing Lender who holds Term Notes B and delivered
to the Administrative Agent before the date fixed for such prepayment. Optional
prepayments shall be applied to the applicable Notes as set forth in SECTION
3.9.
SECTION 3.3 MANDATORY PREPAYMENTS.
(a) REVOLVING CREDIT NOTES.
(i) ASSET SALES. Immediately upon the receipt of the proceeds
thereof, Borrower shall prepay the Revolving Credit Notes in an amount
equal to the net proceeds of any sale, liquidation or disposition of any
assets of any Company (other than the Partnerships or the assets of the
Partnerships), where such net proceeds exceed $100,000.00.
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(ii) SALE OR ISSUANCE OF CAPITAL STOCK OR DEBT. Immediately upon the
receipt of the proceeds thereof, Borrower shall prepay the Revolving Credit
Notes in an amount equal to fifty percent (50%) of any Issuance Proceeds.
(iii) AMERICAN PHYSICIANS SERVICE GROUP. Immediately upon the
receipt of the proceeds of any disposition of the stock of American
Physicians Service Group, Inc. held by any Company, Borrower shall prepay
the Revolving Credit Notes in an amount equal to excess of (A) the net
proceeds of any disposition, over (B) an amount equal to two dollars
($2.00) per share sold or disposed.
(iv) APPLICATION OF MANDATORY PREPAYMENTS. Any such mandatory
prepayments of the Revolving Credit Notes shall be applied to the Revolving
Credit Notes on a pro rata basis based upon the outstanding principal
balances of such Notes as of the date of payment. Any such prepayments
shall not reduce the Revolving Credit Commitments.
(b) TERM NOTES.
(i) ASSET SALES BY PARTNERSHIPS. Immediately upon the receipt of
the proceeds thereof, Borrower shall prepay the Term Notes in an amount
equal to the net proceeds of any sale, liquidation or disposition of any
Partnership or of any assets of any Partnership; provided that such net
proceeds shall be limited to Borrower's or its Wholly-Owned Subsidiary's
pro rata portion of such net proceeds; and provided further that Borrower
shall not be required to prepay the Term Notes to the extent that the net
proceeds of any sale, liquidation or disposition of any assets of any
Partnership are used by such Partnership to replace such assets with assets
of similar character within ninety (90) days of such sale, liquidation or
disposition.
(ii) SALE OR ISSUANCE OF CAPITAL STOCK OR DEBT. Immediately upon the
receipt of the proceeds thereof, Borrower shall prepay the Term Notes in an
amount equal to the lesser of (A) fifty percent (50%) of any Issuance
Proceeds, and (B) the Applicable Payment Amount.
(iii) EXCESS CASH FLOW. Borrower shall prepay the Term Notes on each
April 15 and August 15, commencing April 15, 1997 in amount equal to the
lesser of (A) seventy-five percent (75%) of Excess Cash Flow for, in the
case of the payment due each April 15, the period from the preceding July 1
though December 31, and in the case of the payment due each August 15, the
period from the preceding January 1 through June 30, fiscal quarter, and
(B) the Applicable Payment Amount.
(iv) APPLICATION OF MANDATORY PREPAYMENTS. Subject to SECTION
3.9(a)(iv) below, any mandatory prepayments of the Term Notes shall be
applied to the Term Notes on a pro rata basis based upon the aggregate
outstanding principal balances of such Notes owing to each Lender as of the
date of payment.
SECTION 3.4 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) the making and Continuation of Advances under the Revolving Credit
Commitment and the Term Loan A shall be made pro rata among the Lenders
according to the amounts of their respective Revolving Credit Commitments or
Term Loan A Commitments, as the case may be; (b) the making and Continuation of
Advances under the Term Loan B shall be made pro rata among the Lenders
according to the amounts of their respective Term Loan B Commitments; (c) each
termination or reduction of the Revolving Credit Commitments under SECTION
2.1(c) or otherwise shall be applied to the Revolving Credit Commitments of the
Lenders pro rata,
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according to their respective unused Revolving Credit Commitments; and (d) each
payment and prepayment of principal of or interest on Advances by Borrower shall
be made to the Administrative Agent for the account of the applicable Lenders in
accordance with SECTION 3.9.
SECTION 3.5 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless
the Administrative Agent shall have been notified by a Lender or Borrower (the
"PAYOR") prior to the date on which such Lender is to make payment to the
Administrative Agent of the proceeds of an Advance to be made by it hereunder or
Borrower is to make a payment to the Administrative Agent for the account of one
or more of the Lenders, as the case may be (such payment being herein called the
"REQUIRED PAYMENT"), which notice shall be effective upon receipt, that the
Payor does not intend to make the Required Payment to the Administrative Agent,
the Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to the Administrative Agent, the
recipient of such payment shall, on demand, return to the Administrative Agent
the amount made available to it together with interest thereon in respect of the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such period.
SECTION 3.6 WITHHOLDING TAXES. All payments by Borrower of principal of
and interest on the Advances and of all fees and other amounts payable under any
Loan Document are payable without deduction for or on account of any present or
future taxes, duties or other charges levied or imposed by the United States of
America or by the government of any jurisdiction outside the United States of
America or by any political subdivision or taxing authority of or in any of the
foregoing through withholding or deduction with respect to any such payments.
If any such taxes, duties or other charges are so levied or imposed, Borrower
will pay additional interest or will make additional payments in such amounts so
that every net payment of principal of and interest on the Advances and of all
other amounts payable by any of them under any Loan Document, after withholding
or deduction for or on account of any such present or future taxes, duties or
other charges, will not be less than the amount provided for herein or therein,
provided that Borrower shall have no obligation to pay such additional amounts
to any Lender to the extent that such taxes, duties, or other charges are levied
or imposed by reason of the failure of such Lender to comply with the provisions
of SECTION 3.7. Borrower shall furnish promptly to the Administrative Agent for
distribution to each affected Lender, as the case may be, official receipts
evidencing any such withholding or reduction.
SECTION 3.7 WITHHOLDING TAX EXEMPTION. Each Lender that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to Borrower and the Administrative Agent two (2)
duly completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Lender is entitled to receive payments
from Borrower under any Loan Document, without deduction or withholding of any
United States federal income taxes or (b) if such Lender is claiming exemption
from United States withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest," a Form W-8, or any successor
form prescribed by the Internal Revenue Service, and a certificate representing
that such Lender is not a bank for purposes of Section 881(c) of the Code, is
not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of the Borrower and is not a controlled foreign corporation related to the
Borrower (within the meaning of section 864(d)(4) of the Code). Each Lender
which so delivers a W-8, Form 1001 or 4224 further undertakes to deliver to
Borrower and the Administrative Agent two (2) additional copies of such form (or
a successor form) on or before the date such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form so
delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by Borrower or the Administrative Agent, in each
case certifying that such Lender is entitled to receive payments from Borrower
under any Loan Document without
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deduction or withholding of any United States federal income taxes, unless an
event (including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises Borrower and the Administrative Agent that it is not capable
of receiving such payments without any deduction or withholding of United States
federal income tax.
SECTION 3.8 COMPUTATION OF INTEREST. Interest on the Eurodollar
Advances shall be computed on the basis of a year of 360 days. Interest on
Alternate Base Rate Advances and all other amounts payable by Borrower hereunder
shall be computed on the basis of a year of 365 or 366 days, as the case may be.
SECTION 3.9 ORDER OF APPLICATION.
(a) NO DEFAULT. Prior to the occurrence of an Event of Default:
(i) any voluntary payment may (except as otherwise provided herein)
be applied, at the option of Borrower, to either the Revolving Notes or the
Term Notes;
(ii) any payment (whether voluntary or mandatory) of the Revolving
Notes shall be applied to the Revolving Notes on a pro rata basis based
upon the outstanding principal balances of the Revolving Notes as of the
date of payment;
(iii) any voluntary or mandatory payment of the Term Notes A,
together with any portion of any voluntary or mandatory prepayment of the
Term Notes B to the extent the Lenders having Term Loan B Commitments elect
not to share in the prepayment shall be applied to the Term Notes A on a
pro rata basis based upon the outstanding principal balances of the Term
Notes A as of the date of payment, and (x) voluntary prepayments shall be
applied to reduce the payments required by SECTION 2.3(b) on a pro rata
basis, and (y) mandatory prepayments shall be applied to reduce the
payments required by SECTION 2.3(b) in the inverse order of maturity;
(iv) so long as the outstanding principal amount of the Term Notes A
on the date of any proposed voluntary or mandatory prepayment exceeds the
pro rata portion of the proposed voluntary or mandatory prepayment to be
applied to the Term Notes A, then any Lender having Term Notes B may elect
to be excluded from the pro rata sharing of any voluntary or mandatory
prepayment made by Borrower hereunder, any such prepayment shall not reduce
the outstanding principal balances of the Term Notes B, but shall be
applied pro rata to the Term Notes A. Such election shall be made in
writing signed by each such electing Lender who holds Term Notes B and
delivered to the Administrative Agent before the date fixed for such
prepayment.
(v) any voluntary or mandatory payment of the Term Notes B shall be
applied to the Term Notes B on a pro rata basis (provided that to the
extent that any Lenders having Term Loan B Commitments elect not to share
in any voluntary or mandatory prepayment, the prepayments which would have
otherwise been payable to them shall be applied to the Term Notes A as set
forth in SECTION 3.9(iii) and (iv) above), based upon the outstanding
principal balances of the Term Notes B as of the date of payment, and such
voluntary prepayments shall be applied to reduce the payments required by
SECTION 2.3(c) on a pro rata basis, and any mandatory payment of the Term
Notes B shall be applied to reduce the payments required by SECTION 2.3(c),
in the inverse order of maturity.
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(b) AFTER DEFAULT. After the occurrence and during the continuance of an
Event of Default, any payment or proceeds of Collateral shall be applied shall
be applied in the following order: (i) to all fees and expenses for which
Agents or Lenders have not been paid or reimbursed in accordance with the Loan
Documents (and if such payment is less than all unpaid or unreimbursed fees and
expenses, then the payment shall be paid against unpaid and unreimbursed fees
and expenses in the order of incurrence or due date); (ii) to accrued interest
on the Revolving Notes and the Term Notes on a pro rata basis, based upon the
outstanding principal balances of such Notes as of the date of payment; and
(iii) to the principal of the Revolving Notes and the Term Notes on a pro rata
basis, based upon the outstanding principal balances of such Notes as of the
date of payment, and any such prepayments of the Term Notes shall be applied to
reduce the payments required by SECTION 2.3(b) and SECTION 2.3(c), respectively,
in such order as shall be determined by the Administrative Agent in its sole
discretion.
(c) APPLICATION TO ADVANCES. Subject to the foregoing, and so long as no
Event of Default has occurred and is continuing, payments of principal of any
Note shall be applied to such outstanding Alternate Base Rate Advances and
Eurodollar Advances under such Note as Borrower shall select; provided, however,
that Borrower shall select Alternate Base Rate Advances and Eurodollar Advances
to be repaid in a manner designated to minimize the funding loss required to be
paid pursuant to SECTION 4.5, if any, resulting from such payment; and provided
further that if Borrower shall fail to select the Alternate Base Rate Advances
and Eurodollar Advances to which such payments are to be applied, or if an Event
of Default has occurred and is continuing at the time of such payment, then the
Administrative Agent shall be entitled to apply the payment to such Advances in
the manner in which it shall deem appropriate in its sole discretion.
ARTICLE IV
YIELD PROTECTION AND ILLEGALITY
SECTION 4.1 ADDITIONAL COSTS.
(a) Borrower hereby agrees to pay directly to each Lender from time to
time such amounts as such Lender may determine to be necessary to compensate it
for any costs incurred by such Lender which such Lender determines are
attributable to its making or maintaining any Eurodollar Advances hereunder or
its obligation to make any of such Advances hereunder, or any reduction in any
amount receivable by such Lender hereunder in respect of any such Advances or
such obligation (such increases in costs and reductions in amounts receivable
being herein called "ADDITIONAL COSTS"), resulting from any Regulatory Change
which:
(i) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such Advances
(other than (1) taxes imposed on the overall net income of such Lender or
its Applicable Lending Office for any of such Advances, (2) franchise or
similar taxes of such Lender, and (3) amounts withheld pursuant to the last
sentence of SECTION 3.7);
(ii) imposes or modifies any reserve, special deposit, minimum
capital, capital ratio, or similar requirement relating to any extensions
of credit or other assets of, or any deposits with or other liabilities or
commitments of, such Lender; or
(iii) imposes any other Additional Cost affecting this Agreement or
the Notes or any of such extensions, of credit or liabilities or
commitments.
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Each Lender will notify Borrower of any event occurring after the date of this
Agreement which will entitle such Lender to compensation pursuant to this
SECTION 4.1(a) as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation, and will designate a different
Applicable Lending Office for the Advances affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, violate any law, rule, or
regulation or be in any way disadvantageous to such Lender, provided that such
Lender shall have no obligation to so designate an Applicable Lending Office
located outside the United States of America. Each Lender will furnish Borrower
with a certificate setting forth the basis and the amount of each request of
such Lender for compensation under this SECTION 4.1(a). If any Lender requests
compensation from Borrower under this SECTION 4.1(a), Borrower may, by notice to
such Lender (with a copy to the Administrative Agent) suspend the obligation of
such Lender to make or Continue making Eurodollar Advances until the Regulatory
Change giving rise to such request ceases to be in effect (in which case such
Lender's Eurodollar Advances shall be Converted to Alternate Base Rate Advances
in accordance with the provisions of SECTION 4.4).
(b) Without limiting the effect of the foregoing provisions of this
SECTION 4.1, in the event that, by reason of any Regulatory Change, any Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Lender which includes deposits by reference to which the interest rate on
Eurodollar Advances is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender which includes Eurodollar
Advances or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if such Lender so
elects by notice to Borrower (with a copy to the Administrative Agent), the
obligation of such Lender to make or Continue making Eurodollar Advances
hereunder shall be suspended until such Regulatory Change ceases to be in effect
(in which case such Lender's Eurodollar Advances shall be Converted to Alternate
Base Rate Advances in accordance with the provisions of SECTION 4.4).
(c) Determinations and allocations by any Lender for purposes of this
SECTION 4.1 of the effect of any Regulatory Change on its costs of maintaining
its obligations to make Advances or of making or maintaining Advances or on
amounts receivable by it in respect of Advances, and of the additional amounts
required to compensate such Lender in respect of any Additional Costs, shall be
conclusive, absent manifest error and provided that such determinations and
allocations are made on a reasonable basis.
SECTION 4.2 LIMITATION ON EURODOLLAR ADVANCES. Anything herein to the
contrary notwithstanding, if with respect to any Eurodollar Advance for any
Interest Period therefor:
(a) The Administrative Agent determines (which determination shall be
conclusive absent manifest error) that quotations of interest rates for the
relevant deposits referred to in the definition of "EURODOLLAR RATE" in SECTION
1.1 are not being provided in the relative amounts or for the relative
maturities for purposes of determining the rate of interest for such Advances as
provided in this Agreement; or
(b) The Required Lenders determine (which determination shall be
conclusive absent manifest error) and notify the Administrative Agent that the
rate of interest referred to in the definition of "EURODOLLAR RATE" in SECTION
1.1 on the basis of which the rate of interest for such Advances for such
Interest Period is to be determined do not accurately reflect the cost to the
Lenders of making or maintaining such Advances for such Interest Period;
then the Administrative Agent shall give Borrower prompt notice thereof
specifying the relevant amounts or periods, and so long as such condition
remains in effect, the Lenders shall be under no obligation to make or Continue
additional Eurodollar Advances and Borrower shall, on the last day(s) of the
then-current Interest
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Period(s) for the outstanding Eurodollar Advances, prepay such Eurodollar
Advances or Convert them to Alternate Base Rate Advances in accordance with
SECTION 4.4.
SECTION 4.3 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to (a) honor its obligation to make Eurodollar
Advances hereunder, or (b) maintain Eurodollar Advances hereunder, then such
Lender shall promptly notify Borrower (with a copy to the Administrative Agent)
thereof and such Lender's obligation to make or maintain Eurodollar Advances
shall be suspended until such time as such Lender may again make and maintain
Eurodollar Advances (in which case such Lender's Eurodollar Advances shall be
Converted to Alternate Base Rate Advances in accordance with the provisions of
SECTION 4.4).
SECTION 4.4 TREATMENT OF EURODOLLAR ADVANCES. If the Eurodollar
Advances of any Lender are to be Converted pursuant to SECTION 4.1, 4.2 or 4.3,
such Lender's Eurodollar Advances shall be automatically Converted into
Alternate Base Rate Advances on the last day(s) of the then current Interest
Period(s) for the Eurodollar Advances (or, in the case of a Conversion required
by SECTION 4.1(b) or 4.3(b), on such earlier date as such Lender may specify to
Borrower with a copy to the Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
SECTION 4.1, 4.2 or 4.3 which gave rise to such Conversion no longer exist:
(a) To the extent that such Lender's Eurodollar Advances have been so
Converted, all payments and prepayments of principal which would otherwise be
applied to such Lender's Eurodollar Advances shall be applied instead to its
Alternate Base Rate Advances; and
(b) All Advances which would otherwise be made or Continued by such Lender
as Eurodollar Advances shall be made as or Converted into Alternate Base Rate
Advances.
If such Lender gives notice to Borrower (with a copy to the Administrative
Agent) that the circumstances specified in SECTION 4.1, 4.2 or SECTION 4.3 which
gave rise to the Conversion of such Lender's Eurodollar Advances pursuant to
this SECTION 4.4 no longer exist (which such Lender agrees to do promptly upon
such circumstances ceasing to exist) at a time when Advances are outstanding,
such Lender's Alternate Base Rate Advances shall be automatically Converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Eurodollar Advances to the extent necessary so that, after giving effect
thereto, all Eurodollar Advances held by the Lenders holding the same are held
pro rata (as to principal amounts and Interest Periods) in accordance with their
respective Commitments.
SECTION 4.5 COMPENSATION. Borrower shall pay to the Administrative
Agent, for the account of each Lender, upon the request of such Lender through
the Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense incurred by it as a result of:
(a) Any payment, prepayment or Conversion of a Eurodollar Advance for any
reason (including, without limitation, the acceleration of the outstanding
Advances pursuant to SECTION 11.2) on a date other than the last day of an
Interest Period for such Advance; or
(b) Any failure by Borrower for any reason (including, without limitation,
the failure of any conditions precedent specified in ARTICLE VI to be satisfied)
to borrow or prepay a Eurodollar Advance on the date for such borrowing or
prepayment, specified in the relevant notice of borrowing or prepayment under
this Agreement.
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Such compensation shall not exceed the excess, if any, of (i) the amount of
interest which otherwise would have accrued on the principal amount so paid or
not borrowed for the period from the date of such payment or failure to borrow
to the last day of the Interest Period for such Advance (or, in the case of a
failure to borrow, the Interest Period for such Advance which would have
commenced on the date specified for such borrowing) at the applicable rate of
interest for such Advance provided for herein over (ii) the interest component
of the amount such Lender would have bid in the London interbank market for
Dollar deposits of leading banks and amounts comparable to such principal amount
and with maturities comparable to such period.
SECTION 4.6 CAPITAL ADEQUACY. If after the date hereof, any Lender
shall have determined that the adoption or implementation of any applicable law,
rule, or regulation regarding capital adequacy (including, without limitation,
any law, rule, or regulation implementing the Basle Accord), or any change
therein, or any change in the interpretation or administration thereof by any
central bank or other Governmental Authority charged with the interpretation or
administration thereof, or compliance by such Lender (or its parent) with any
guideline, request, or directive regarding capital adequacy (whether or not
having the force of law) of any central bank or other Governmental Authority
(including, without limitation, any guideline or other requirement implementing
the Basle Accord), has or would have the effect of reducing the rate of return
on such Lender's (or its parent's) capital as a consequence of its obligations
hereunder or the transactions contemplated hereby to a level below that which
such Lender (or its parent) could have achieved but for such adoption,
implementation, change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, within ten (10) Business Days after demand
by such Lender (with a copy to the Administrative Agent), which demand shall be
delivered by such Lender to Borrower as promptly as practicable after such
Lender obtains knowledge of such reduction in its rate of return, Borrower shall
pay to such Lender such additional amount or amounts as will compensate such
Lender (or its parent) for such reduction. A certificate of such Lender
claiming compensation under this SECTION and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive, absent manifest error
and provided that the determination thereof is made on a reasonable basis. In
determining such amount or amounts, such Lender may use any reasonable averaging
and attribution methods.
ARTICLE V
SECURITY
SECTION 5.1 COLLATERAL. To secure the full and complete payment and
performance of the Obligations, Borrower shall execute and deliver or cause to
be executed and delivered the documents described below covering the property
and collateral described therein (which, together with any other property and
collateral which may now or hereafter secure the Obligations or any part
thereof, is sometimes herein called the "COLLATERAL"):
(a) Borrower shall execute and deliver to the Administrative Agent, for
the benefit of the Lenders, the First Amendment to the Borrower Security
Agreement.
(b) The Guarantors shall execute and deliver to the Administrative Agent,
for the benefit of the Lenders, the First Amendment to the Guarantor Security
Agreements.
(c) Pledgors shall execute and deliver to the Administrative Agent, for
the benefit of the Lenders, the First Amendment to the Pledge Agreements.
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(d) Borrower shall execute and cause to be executed such further documents
and instruments, including without limitation, Uniform Commercial Code financing
statements, as the Administrative Agent and the Documentation Agent, in their
sole discretion, deem necessary or desirable to evidence and perfect the
Administrative Agent's liens and security interests in the Collateral.
SECTION 5.2 SETOFF. If an Event of Default shall have occurred and is
continuing, each Lender is hereby authorized at any time and from time to time,
without notice to Borrower (any such notice being hereby expressly waived by
Borrower), to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender to or for the credit or the account of Borrower
against any and all of the obligations of Borrower now or hereafter existing
under this Agreement, such Lender's Notes, or any other Loan Document,
irrespective of whether or not the Administrative Agent or such Lender shall
have made any demand under this Agreement or such Lender's Notes or such other
Loan Document and although such obligations may be unmatured. Each Lender
agrees promptly to notify Borrower (with a copy to the Administrative Agent)
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
and remedies of each Lender hereunder are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which such
Lender may have.
SECTION 5.3 GUARANTIES. Each Guarantor shall unconditionally and
irrevocably confirm its guaranty of the payment and performance of the
Obligations by execution and delivery of the First Amendment to the Guaranties.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 INITIAL ADVANCE. The obligation of each Lender to make its
initial Advance is subject to the condition precedent that the Documentation
Agent shall have received on or before the day of such Advance all of the
following, each dated (unless otherwise indicated) the date hereof, in form and
substance satisfactory to the Documentation Agent:
(a) RESOLUTIONS. Resolutions of the Boards of Directors of Borrower and
each Guarantor certified by the Secretary or an Assistant Secretary of each of
them which authorize the execution, delivery, and performance by such Company of
this Agreement and/or the other Loan Documents to which such Company is or is to
be a party;
(b) INCUMBENCY CERTIFICATE. A certificate of incumbency certified by the
Secretary or an Assistant Secretary of Borrower and each Guarantor certifying
the names of the officers of each such Company, authorized to sign this
Agreement and each of the other Loan Documents to which each such Company is or
is to be a party (including the certificates contemplated herein) together with
specimen signatures of such officers;
(c) ARTICLES OF INCORPORATION. The articles of incorporation of Borrower
and Litho certified, in the case of Borrower, by the Secretary of State of
Delaware, and, in the case of Litho, by the Secretary or an Assistant Secretary
of such Company;
(d) BYLAWS. The bylaws of Borrower and Litho certified by the Secretary
or an Assistant Secretary of each such Company;
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(e) GOVERNMENTAL CERTIFICATES. Certificates of the appropriate government
officials of the state of incorporation of Borrower and Litho as to the
existence and good standing of each of them;
(f) NOTES. The Notes executed by Borrower;
(g) BORROWER SECURITY AGREEMENT. The Consent, Confirmation and
Ratification of Borrower Security Agreement executed by Borrower;
(h) GUARANTIES. The Consent, Confirmation and Ratification of Guaranty
Agreement executed by the Guarantors;
(i) GUARANTOR SECURITY AGREEMENT. The Consent, Confirmation and
Ratification of Guarantor Security Agreements executed by the Guarantors;
(j) PLEDGE AGREEMENTS. The Consent, Confirmation and Ratification of
Pledge and Security Agreements executed by the Pledgors;
(k) FINANCING STATEMENTS. Uniform Commercial Code financing statements
executed by Borrower and each Guarantor and covering the Collateral;
(l) STOCK CERTIFICATES. Stock certificates evidencing all stock pledged
pursuant to the Borrower Security Agreement and each Guarantor Security
Agreement, as applicable, together with stock powers duly executed in blank;
(m) CERTIFICATES OF TITLE. Original certificates of title, together with
executed applications for title, for all vehicles used in connection with the
transportation of lithotripters pledged pursuant to the Borrower Security
Agreement and the Guarantor Security Agreements;
(n) INSURANCE POLICIES. Copies of all insurance policies required by
SECTION 8.5, together with loss payee endorsements in favor of the
Administrative Agent, for the benefit of the Lenders, with respect to all
insurance policies covering Collateral;
(o) UCC AND TAX AND JUDGMENT LIEN SEARCHES. The results of Uniform
Commercial Code searches showing all financing statements and other documents or
instruments, and tax and judgment lien searches showing all tax and judgment
liens, on file against Borrower and Litho in such jurisdictions as the
Administrative Agent shall require, such searches to be as of a date no more
than twenty (20) days prior to the date of the initial Advance;
(p) PERFECTION CERTIFICATE. A Perfection Certificate, in substantially
the form of EXHIBIT F hereto, properly completed and signed by the Chief
Executive or Chief Financial Officer or Vice President-Finance of Borrower and
the Guarantors;
(q) OPINION OF COUNSEL. Favorable opinions as to the matters set forth in
EXHIBIT G hereto of (i) Small, Craig & Werkenthin, special Texas legal counsel
to Borrower and the Guarantors, and (ii) Bingham Dana & Gould, special
Massachusetts legal counsel to the Agents and the Lenders;
(r) ATTORNEYS' FEES AND EXPENSES. Evidence that the costs and expenses
(including attorneys' fees) referred to in SECTION 13.1, to the extent incurred,
shall have been paid in full by Borrower;
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(s) FEES. Borrower shall have paid to the Agents for their own account,
the fees owed by Borrower to the Agents pursuant to the letter agreements of
even date herewith between Borrower and the Agents; and
(t) FEDERAL RESERVE BOARD FORM U-1. For the Administrative Agent a
properly completed Federal Reserve Board Form U-1 duly executed by each Company
pledging stock of another Company.
SECTION 6.2 ALL ADVANCES. The obligation of each Lender to make any
Advance (including the initial Advance) is subject to the following additional
conditions precedent:
(a) ADVANCE REQUEST FORM. The Administrative Agent shall have received,
in accordance with SECTION 2.5, an Advance Request Form executed by an
authorized officer of Borrower;
(b) NO DEFAULT. No Default shall have occurred and be continuing, or
would result from such Advance;
(c) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in ARTICLE VII hereof and in each of the other Loan
Documents shall be true and correct on and as of the date of such Advance with
the same force and effect as if such representations and warranties had been
made on and as of such date, except to the extent that such representations and
warranties speak to a specific date or the facts on which such representations
and warranties are based have been changed by transactions contemplated by the
Loan Documents; and
(d) ADDITIONAL DOCUMENTATION. The Administrative Agent shall have
received such additional approvals, opinions, or documents as are required by
the terms and provisions of this Agreement or any other Loan Document.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement, Borrower
hereby represents and warrants to the Agents and the Lenders that:
SECTION 7.1 EXISTENCE.
(a) CORPORATE EXISTENCE. Each of the Companies (other than the
Partnerships): (a) is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation; (b) has
all requisite corporate power and authority to own its assets and carry on its
business as now being or as proposed to be conducted; and (c) is qualified to do
business in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a material
adverse effect on the business, condition (financial or otherwise), operations,
or properties of the Companies taken as a whole, Borrower, or any Material
Subsidiary. Each Company has the corporate power and authority to execute,
deliver, and perform its obligations under this Agreement and the other Loan
Documents to which it is or may become a party.
(b) PARTNERSHIP EXISTENCE. Each of the Partnerships: (a) is a general
partnership, limited partnership or limited liability company, as appropriate,
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its formation; (b) has all requisite partnership power and
authority or
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company power and authority, as appropriate, to own its assets and carry on its
business as now being or as proposed to be conducted; and (c) is qualified to do
business in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a material
adverse effect on the business, condition (financial or otherwise), operations,
or properties of the Companies taken as a whole, Borrower, or any Material
Subsidiary.
SECTION 7.2 FINANCIAL STATEMENTS. Borrower has delivered to the
Administrative Agent audited consolidated financial statements of the Companies
as of and for the fiscal year ended December 31, 1996, and unaudited
consolidated financial statements of Borrower for the one (1) month period ended
January 31, 1997. Such financial statements have been prepared in accordance
with GAAP, and fairly present, on a consolidated basis, the financial condition
of the Companies and Litho and the Partnerships, as appropriate, as of the
respective dates indicated therein and the results of operations for the
respective periods indicated therein. There has been no material adverse change
in the business, condition (financial or otherwise), operations, or properties
of the Companies taken as a whole, Borrower, or any Material Subsidiary since
the effective date of the most recent financial statements referred to in this
SECTION.
SECTION 7.3 CORPORATE ACTION: NO BREACH. The execution, delivery, and
performance by each Company of this Agreement and the other Loan Documents to
which such Company is or may become a party and compliance with the terms and
provisions hereof and thereof have been duly authorized by all requisite
corporate action (or, if such Company is a partnership, then partnership action)
on the part of such Company and do not and will not (a) violate or conflict
with, or result in a breach of, or require any consent under (i) the articles of
incorporation or bylaws of such Company (or, if such Company is a partnership,
then the partnership agreement of such Company), (ii) any material applicable
law, rule, or regulation or any material order, writ, injunction, or decree of
any Governmental Authority or arbitrator, or (iii) any material agreement or
instrument to which such Company is a party or by which such Company or any of
its property is bound or subject (other than agreements and instruments relating
to Debt which will be paid off with the proceeds of the initial Advance), or (b)
constitute a material default under any such agreement or instrument (other than
agreements and instruments relating to Debt which will be paid off with the
proceeds of the initial Advance), or result in the creation or imposition of any
Lien (except as provided in ARTICLE V) upon any of the revenues or assets of any
of the Companies.
SECTION 7.4 OPERATION OF BUSINESS. Each of the Companies possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and tradenames,
or rights thereto, necessary to conduct their respective businesses
substantially as now conducted and as presently proposed to be conducted. None
of the Companies is in violation of any valid rights of others with respect to
any of the foregoing (except where the failure to do so would not have a
material adverse effect on the business, condition (financial or otherwise),
operations or properties of the Companies taken as a whole, Borrower, or any
Material Subsidiary).
SECTION 7.5 LITIGATION AND JUDGMENTS. As of the date hereof, except as
disclosed on SCHEDULE 7.5 hereto, there is no action, suit, investigation, or
proceeding before or by any Governmental Authority or arbitrator pending, or to
the knowledge of Borrower, threatened against or affecting any of the Companies,
that would, if adversely determined, have a material adverse effect on the
business, condition (financial or otherwise), operations or properties of the
Companies taken as a whole, Borrower, or any Material Subsidiary or the ability
of Borrower to pay and perform the Obligations. There are no outstanding
judgments against any Company.
SECTION 7.6 RIGHTS IN PROPERTIES; LIENS. Each of the Companies has good
and indefeasible title to or valid leasehold interests in their respective
material properties and assets, real and personal, including the properties,
assets, and leasehold interests reflected in the financial statements described
in SECTION 7.2, and
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none of the properties, assets, or leasehold interests of any Company is subject
to any Lien, except as permitted by SECTION 9.2.
SECTION 7.7 ENFORCEABILITY. This Agreement constitutes, and the other
Loan Documents to which Borrower is a party, when delivered, shall constitute
the legal, valid, and binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors' rights. The Loan Documents to which each Guarantor is
a party, when delivered, shall constitute the legal, valid, and binding
obligations of such Guarantor, enforceable against such Guarantor in accordance
with their respective terms, except as limited by bankruptcy, insolvency, or
other laws of general application relating to the enforcement of creditors'
rights.
SECTION 7.8 APPROVALS. No authorization, approval, or consent of, and
no filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by Borrower or any
Guarantor of this Agreement and the other Loan Documents to which Borrower or
any Guarantor is or may become a party or for the validity or enforceability
thereof.
SECTION 7.9 DEBT. As of the date hereof, the Companies have no Debt,
except as disclosed on SCHEDULE 7.9.
SECTION 7.10 TAXES. The Companies have filed or extended all tax returns
(federal, state, and local) required to be filed, including all income,
franchise, employment, property, and sales tax returns, and have paid all of
their respective liabilities for taxes, assessments, governmental charges, and
other levies that are due and payable. Except as previously disclosed to the
Administrative Agent in writing, no Company knows of any pending investigation
of any of them by any taxing authority or of any pending but unassessed tax
liability of any of them.
SECTION 7.11 USE OF PROCEEDS; MARGIN SECURITIES. No Company is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T, U, or X of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying margin stock, except for purchases of Borrower's
capital stock permitted by SECTION 9.4 hereof.
SECTION 7.12 ERISA. The Companies are in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event
nor a Prohibited Transaction has occurred and is continuing with respect to any
Plan. No notice of intent to terminate a Plan has been filed, nor has any Plan
been terminated. No circumstances exist which constitute grounds entitling the
PBGC to institute proceedings to terminate, or appoint a trustee to administer,
a Plan, nor has the PBGC instituted any such proceedings. None of the Companies
nor any ERISA Affiliate has completely or partially withdrawn from a Multi-
employer Plan. The Companies and each ERISA Affiliate have met their minimum
funding requirements under ERISA with respect to all of their Plans, and the
present value of all vested benefits under each Plan does not exceed the fair
market value of all Plan assets allocable to such benefits, as determined on the
most recent valuation, date of the Plan and in accordance with ERISA. None of
the Companies nor any ERISA Affiliate has incurred any liability to the PBGC
under ERISA.
SECTION 7.13 DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of Borrower in writing to any Agent or any Lender
(including, without limitation, all factual information contained in the Loan
Documents) for purposes of or in connection with this Agreement, the other Loan
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Documents or any transaction contemplated herein or therein is, and all other
such factual information (taken as a whole) hereafter furnished by or on behalf
of Borrower in writing will be, true and accurate in all material respects on
the date as of which such factual information is dated or certified and is not
(and such factual information (taken as a whole) hereafter furnished will not
be) incomplete by omitting to state any facts necessary to make such factual
information (taken as a whole) not misleading in any material respect at such
time in light of the circumstances under which such factual information was
provided.
SECTION 7.14 SUBSIDIARIES; PARTNERSHIPS. Each of the Guarantors is a
direct or indirect wholly-owned Subsidiary of Borrower, and as of the date
hereof, together with the Partnerships listed on SCHEDULE 3, constitute all of
the Subsidiaries of Borrower. SCHEDULE 7.14.1, as the same may be amended from
time to time to reflect transactions permitted by this Agreement, sets forth the
outstanding shares of capital stock (or other ownership interests) and the name
of each shareholder of each of the Subsidiaries of Borrower. All of the
outstanding capital stock of Borrower and each of its Subsidiaries has been
validly issued, is fully paid, and is nonassessable. SCHEDULE 7.14.2, as the
same may be amended from time to time to reflect transactions permitted by this
Agreement, sets forth the outstanding partnership interests of the Partnerships
owned by each of the Companies.
SECTION 7.15 AGREEMENTS. Except as set forth on SCHEDULE 7.15, none of
the Companies is a party to any indenture, loan, or credit agreement, or to any
lease or other agreement or instrument, or subject to any charter or corporate
restriction which could reasonably be expected to have a material adverse effect
on the business, condition (financial or otherwise), operations or properties of
the Companies taken as a whole, Borrower, or any Material Subsidiary or the
ability of Borrower or any Guarantor to pay and perform its obligations under
the Loan Documents to which it is a party. None of the Companies is in default
in any material respect in the performance, observance, or fulfillment of any of
the obligations, covenants, or conditions contained in any agreement or
instrument to which it is a party, which default, in the aggregate with all such
other defaults, would have a material adverse affect on the business, condition
(financial or otherwise), operations or properties of the Companies taken as a
whole, Borrower, or any Material Subsidiary.
SECTION 7.16 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in SCHEDULE 7.16.1: (i) each Company is in
compliance in all material respects with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets; and (ii) no Company has received any notice or
other communication from any Governmental Authority or other Person of any event
or circumstance which could constitute a violation of, or failure to comply
with, any Legal Requirement.
(b) Except as set forth in SCHEDULE 7.16: (i) each Company is in material
compliance with all of the terms and requirements of each Governmental
authorization held by such Company; (ii) no Company has received any notice or
other communication from any Governmental Authority or other Person of, any
event or circumstance which could constitute a violation of, or failure to
comply with, any term or requirement of any Governmental Authorization, or of
any actual or potential revocation, withdrawal, cancellation or termination of,
or material modification to, any Governmental Authorization; (iii) all
applications required to have been filed for the renewal of any required
Governmental Authorizations have been duly filed on a timely basis with the
appropriate Governmental Authorities, and all other filings required to have
been made with respect to such Governmental Authouly made on a timely basis with
the appropriate Governmental Authorities; (iv) all Governmental Authorizations
of the Companies are transferable to the Companies; (v) upon consummation of the
transactions contemplated hereby, the Companies will lawfully hold all such
Governmental Authorizations; and (vi) none of such Governmental Authorizations
will terminate upon consummation of the transactions contemplated hereby. Except
as set forth on SCHEDULE 7.16, each of
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the Companies possesses the necessary Governmental Authorizations (i) necessary
to permit each Company to lawfully conduct and operate its respective business
in the manner it currently conducts and operates such business and to permit
such Company to own and use its assets in the manner in which it currently owns
and uses such assets, and (ii) necessary to permit each Company, upon the
consummation of the transactions contemplated hereby, to lawfully conduct and
operate its business and to permit each Company to own and use its assets, where
the failure to have such Governmental Authorization would have a material
adverse effect on the business, condition (financial or otherwise), operations
or properties of the Companies taken as a whole, Borrower, or any Material
Subsidiary.
SECTION 7.17 INVESTMENT COMPANY ACT. No Company is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
SECTION 7.18 PUBLIC UTILITY HOLDING COMPANY ACT. No Company is a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or a "public utility" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
SECTION 7.19 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE
7.19, as the same may be amended from time to time, hereto:
(a) Each of the Companies and all of their respective properties, assets,
and operations are in compliance in all material respects with all Environmental
Laws. No Company is aware of, nor have any of them received notice of, any
past, present, or future conditions, events, activities, practices, or incidents
which may interfere with or prevent the material compliance or continued
material compliance of any Company with all material Environmental Laws; and
(b) The Companies have obtained all material permits, licenses and
authorizations that are required under applicable Environmental Laws, and all
such permits are in good standing and each Company is in compliance is all
material respects with all of the terms and conditions of such permits.
ARTICLE VIII
POSITIVE COVENANTS
Borrower hereby covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any Commitment hereunder,
Borrower will perform and observe each of the following positive covenants:
SECTION 8.1 REPORTING REQUIREMENTS. Borrower will furnish to the
Administrative Agent and each Lender:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event
within ninety-five (95) days after the end of each fiscal year of Borrower,
beginning with the fiscal year ending December 31, 1996, a copy of the annual
audit report of the Companies for such fiscal year containing, on a consolidated
and consolidating basis, balance sheets and statements of income, retained
earnings, and cash flow as at the end of such fiscal year and for the twelve
(12)-month period then ended, in each case setting forth in comparative form the
figures for the preceding fiscal year, audited by independent certified public
accountants of recognized standing, and accompanied by an opinion of such
independent certified public accountants stating that such report has been
prepared in accordance with GAAP;
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(b) MONTHLY FINANCIAL STATEMENTS. As soon as available, and in any event
within forty (40) days after the end of each month of each fiscal year of
Borrower, a copy of an unaudited financial report of the Companies as of the end
of such month and for the portion of the fiscal year then ended, containing, on
a consolidated and consolidating basis, balance sheets and statements of income,
retained earnings, and cash flow, in each case setting forth in comparative form
the figures for the corresponding period of the preceding fiscal year, certified
by the chief financial officer of Borrower to have been prepared in accordance
with GAAP and to fairly and accurately present (subject to year-end audit
adjustments) the financial condition and results of operations of the Companies,
on a consolidated and consolidating basis, at the date and for the periods
indicated therein;
(c) COMPLIANCE CERTIFICATE. Concurrently with the delivery of each of the
financial statements referred to in SECTION 8.1(A) and within forty (40) days
after the end of each of the first three (3) fiscal quarters of each fiscal year
of Borrower, a certificate of the chief executive or chief financial officer of
Borrower, in substantially the form of EXHIBIT H, (i) stating that to such
officer's knowledge, no Default has occurred and is continuing, or if a Default
has occurred and is continuing, a statement as to the nature thereof and the
action that is proposed to be taken with respect thereto, and (ii) showing in
reasonable detail the calculations demonstrating compliance with ARTICLE X;
(d) ACCOUNTS RECEIVABLE AGING REPORT. As soon as available and in any
event within forty (40) days after the end of each month, an aged listing of the
accounts receivable of each of Borrower and its Subsidiaries as of the end of
such month in a form reasonably satisfactory to the Administrative Agent;
(e) BUSINESS PLAN AND BUDGET. As soon as available and in any event by
December 15 of each year, a copy of the annual budget and business plan of
Borrower and its Subsidiaries for the upcoming fiscal year, together with
details of the assumptions, if any, underlying such budget and business plan;
(f) MANAGEMENT LETTERS. Promptly upon receipt thereof, a copy of any
management letter or written report submitted to any Company by independent
certified public accountants with respect to the business, condition (financial
or otherwise), operations, or properties of any Company;
(g) NOTICE OF LITIGATION. Promptly after the commencement thereof, notice
of all actions, suits, and proceedings before any Governmental Authority or
arbitrator affecting Borrower or any of its Subsidiaries which, if determined
adversely to Borrower or any such Subsidiary, could have a material adverse
effect on the business, condition (financial or otherwise), options, or
properties of Borrower, any Subsidiary or the Companies (taken as a whole);
(h) NOTICE OF DEFAULT. As soon as possible and in any event within five
(5) days after Borrower knows of the occurrence of each Default, a written
notice setting forth the details of such Default and the action that Borrower
has taken and proposes to take with respect thereto;
(i) ERISA REPORTS. Promptly after the filing or receipt thereof, copies
of all reports, including annual reports, and notices which any Company files
with or receives from the PBGC or the U.S. Department of Labor under ERISA; and
as soon as possible and in any event within five (5) days after any Company
knows or has reason to know that any Reportable Event or Prohibited Transaction
has occurred with respect to any Plan or that the PBGC, or any Company has
instituted or will institute proceedings under Title IV of ERISA to terminate
any Plan, a certificate of the chief financial officer of Borrower setting forth
the details as to such Reportable Event or Prohibited Transaction or Plan
termination and the action that Borrower proposes to take with respect thereto;
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(j) REPORTS TO OTHER CREDITORS. Promptly after the furnishing thereof,
copies of any statement or report furnished by Borrower or any of its
Subsidiaries to any other creditor to which any Company owes $250,000.00 or more
pursuant to the terms of any indenture, loan, or credit or similar agreement and
not otherwise required to be furnished to the Administrative Agent and the
Lenders pursuant to any other clause of this SECTION;
(k) PROXY STATEMENTS, ETC. As soon as available, one (1) copy of each
financial statement, report, notice or proxy statement sent by Borrower to its
stockholders generally and one (1) copy of each regular, periodic or special
report, registration statement, or prospectus filed by Borrower with any
securities exchange or the Securities and Exchange Commission or any successor
agency including, without limitation, all Forms 10-K, 10-Q and 8-K and all other
periodic reports required to be filed under the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder;
(l) PARTNERSHIP LISTS. As soon as available, and in any event (a) within
thirty (30) days after the Administrative Agent requests such information from
Borrower, a list of the names of each partner of each of the Partnerships and a
list of the names and addresses of each partner of each of the Partnerships;
(m) GOVERNMENTAL AUTHORIZATIONS. Upon the request of the Administrative
Agent, but not more often than one (1) time during each fiscal year of Borrower,
a complete and accurate list of each Governmental Authorization held by each of
Companies or that otherwise relate to the business of, or to any of the assets
owned or used by, each of the Companies;
(n) LITHO AND PARTNERSHIP STATEMENTS. As soon as available, and in any
event within forty (40) days after the end of each fiscal quarter of Borrower,
beginning with the fiscal quarter ended March 31, 1997, income and cash flow
statements for each of the Partnerships on a consolidated and consolidating
basis;
(o) PARTNERSHIP ACTIONS. Promptly after the incurrence thereof, notice of
any Partnership's (i) incurrence of Debt, (ii) change in accounting treatment or
reporting practices (which change shall not affect any reporting requirements
set forth herein or the Loan Documents), except as permitted by GAAP and
disclosed to the Administrative Agent, (iii) change in tax reporting treatment,
except as permitted by law, (iv) amendment of any partnership agreement or
management agreement between such Partnership and any Company and copies of any
such amendment certified by an officer of Borrower as being true and correct,
and (v) change in its insurance; and
(p) GENERAL INFORMATION. Promptly, such other information concerning
Borrower or any of its Subsidiaries as the Administrative Agent or any Lender
may from time to time reasonably request.
SECTION 8.2 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. Borrower
will preserve and maintain its corporate existence and all of its leases,
privileges, licenses, permits, franchises, qualifications, and rights that are
necessary or desirable in the ordinary conduct of its business. Borrower will
cause each of its Subsidiaries to preserve and maintain its corporate,
partnership or other similar existence and all of its leases, privileges,
licenses, permits, franchises, qualifications and rights that are necessary or
desirable in the ordinary conduct of its business, except, in each case, where
failure to do so would not have a material adverse effect on the business,
condition (financial or otherwise), operations or properties of the Companies
taken as a whole, Borrower, or any Material Subsidiary. Borrower will conduct,
and will cause each of its Subsidiaries to conduct, its business in an orderly
and efficient manner in accordance with good business practices.
SECTION 8.3 MAINTENANCE OF PROPERTIES. Borrower will maintain, keep,
and preserve, and cause each of its Subsidiaries to maintain, keep, and
preserve, all of its properties (tangible and intangible) necessary
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or useful in the proper conduct of its business in good working order and
condition, except, in each case, as permitted by SECTION 9.8 or 9.9 or where the
failure to do so would not have a material adverse effect on the business,
condition (financial or otherwise), operations or properties of the Companies
taken as a whole, Borrower, or any Material Subsidiary.
SECTION 8.4 TAXES AND CLAIMS. Borrower will pay or discharge, and will
cause each of its Subsidiaries to pay or discharge, at or before maturity or
before becoming delinquent (a) all material taxes, levies, assessments, and
governmental charges imposed on it or its income or profits or any of its
material property, and (b) all material lawful claims for labor, material, and
supplies, which, if unpaid, might become a Lien upon any of its property;
provided, however, that no Company shall be required to pay or discharge any
tax, levy, assessment, or governmental charge which is being contested in good
faith by appropriate proceedings diligently pursued, and for which adequate
reserves have been established.
SECTION 8.5 INSURANCE. Borrower will maintain, and will cause each of
its Subsidiaries to maintain (except in the case of the Partnerships, in which
case Borrower shall maintain for the Partnerships), insurance with financially
sound and reputable insurance companies in such amounts and covering such risks
as is usually carried by corporations engaged in similar businesses and owning
similar properties in the same general areas in which the Companies operate,
consistent with past practices of the Companies and to the extent available on
commercially reasonable terms, provided that in any event Borrower will maintain
and cause each of its Subsidiaries (except in the case of the Partnerships, in
which case Borrower shall maintain for the Partnerships) to maintain workmen's
compensation insurance, property insurance, comprehensive general liability
insurance, professional liability insurance, and business interruption insurance
reasonably satisfactory to the Lenders. Each insurance policy covering
Collateral shall name the Administrative Agent as loss payee, for the benefit of
the Lenders, as its interests may appear and shall provide that such policy will
not be canceled or reduced without thirty (30) days' prior written notice to the
Administrative Agent. Borrower will annually provide the Administrative Agent
with all certificates of insurance evidencing all policies of insurance of
Borrower and its Subsidiaries.
SECTION 8.6 INSPECTION RIGHTS. At any reasonable time and from time to
time after reasonable notice to Borrower, Borrower will permit, and will cause
each of its Subsidiaries to permit, representatives of the Administrative Agent
and each Lender to examine, copy, and make extracts from its books and records,
to visit and inspect its properties, and to discuss its business, operations,
and financial condition with its officers, and independent certified public
accountants. Prior to removing any such copies or extracts from a Company's
premises, such Company's representatives shall be provided a reasonable
opportunity to review such information and mark or identify it as "confidential"
or "confidential information" as reasonably deemed appropriate by such Company.
SECTION 8.7 KEEPING BOOKS AND RECORDS. Borrower will maintain, and will
cause each of its Subsidiaries to maintain, proper books of record and account
in which full, true, and correct entries in conformity with GAAP shall be made
of all dealings and transactions in relation to its business and activities.
SECTION 8.8 COMPLIANCE WITH LAWS. Borrower will comply, and will cause
each of its Subsidiaries to comply, in all material respects with all material
applicable laws, rules, regulations, orders, and decrees of any Governmental
Authority or arbitrator.
SECTION 8.9 COMPLIANCE WITH AGREEMENTS. Borrower will comply, and will
cause each of its Subsidiaries to comply, in all material respects with all
agreements, contracts, and instruments binding on it or affecting its properties
or business, except where the failure to do so would not have a material adverse
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effect on the business, condition (financial or otherwise), operations or
properties of the Companies taken as a whole, Borrower, or any Material
Subsidiary.
SECTION 8.10 FURTHER ASSURANCES. Borrower will (a), and will cause each
of its Subsidiaries (other than the Partnerships) to, execute and deliver such
further agreements and instruments and take such further action as may be
reasonably requested by the Administrative Agent to carry out the provisions and
purposes of this Agreement and the other Loan Documents and, (b) and will cause
each of its Subsidiaries (including the Partnerships) to, create, preserve, and
perfect the Liens of the Administrative Agent, for the benefit of the Lenders,
in the Collateral.
SECTION 8.11 ERISA. Borrower will comply, and will cause each of its
Subsidiaries to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability thereunder.
SECTION 8.12 INFORMATION RELATING TO PROPOSED ACQUISITIONS. Borrower
will use its best efforts to keep the Administrative Agent and the Lenders
informed of the relevant information and status of and will share with the
Administrative Agent and the Lenders and provide copies to the extent possible,
of all material due diligence information relating to any proposed Acquisition
with respect to which Borrower or any Subsidiary enters into a letter of intent
or acquisition agreement, during the term of this Agreement.
SECTION 8.13 AFTER-ACQUIRED SUBSIDIARIES. Concurrently upon the
formation or Acquisition by Borrower or any Subsidiary of any Wholly-Owned
Subsidiary after the date hereof (pursuant to a Permitted Acquisition or
otherwise) (an "AFTER-ACQUIRED SUBSIDIARY"), Borrower shall cause the After-
Acquired Subsidiary to deliver articles of incorporation, bylaws, and
resolutions (or other corresponding constituent documents) and such opinions as
the Administrative Agent shall require and to execute a Guaranty, Guarantor
Security Agreement, and Pledge Agreement (if applicable), as shall be required
by the Administrative Agent to create first priority Liens in favor of the
Administrative Agent, for the benefit of the Lenders, in such After-Acquired
Subsidiary's assets, to secure the Obligations.
SECTION 8.14 SYNDICATION COOPERATION. Borrower acknowledges that the
Agents intend promptly to commence to syndicate the Commitments of the Lenders
in accordance with the provisions of SECTION 13.6. Borrower agrees to actively
assist Agents and their Affiliates in achieving a syndication that is
satisfactory to Agents and Borrower and in preparing information requested by
Agents in connection with arranging and syndication of the Commitments of the
Lenders and to take such other action deemed necessary by Agents or their
Affiliates, including the holding of a formal presentation to prospective
Lenders to achieve a successful syndication of the Commitments by Agents. The
syndication efforts will be accomplished by a variety of means, including the
preparation of a confidential information memorandum and other marketing
materials, direct contact during the syndication between senior management
(including, but not limited to, the chief executive officer, the chief financial
officer and treasurer of Borrower) and advisors and Affiliates of Borrower and
the proposed syndicate Lenders.
ARTICLE IX
NEGATIVE COVENANTS
Borrower hereby covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any Commitment hereunder,
Borrower will perform and observe the following negative covenants:
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SECTION 9.1 DEBT. Borrower will not incur, create, assume, or permit to
exist, nor permit any of its Subsidiaries (other than the Partnerships) to
incur, create, assume, or permit to exist, any Debt, except:
(a) Debt owed to the Agents and the Lenders pursuant to the Loan
Documents;
(b) Existing Debt described on SCHEDULE 7.9 hereto;
(c) Debt owed to Borrower or to any Wholly-Owned Subsidiary;
(d) Debt in an aggregate principal amount not to exceed $250,000.00 at any
time outstanding the proceeds of which are used by the Companies to purchase
equipment, other than lithotripters;
(e) Any Company's obligations as general partner of a Partnership for the
Debt of such Partnership;
(f) Any Company's Guarantee of Debt of any Partnership, if such Company is
a general partner of such Partnership; and
(g) Hedging Agreements as described in SECTION 11.1(M).
SECTION 9.2 LIMITATION ON LIENS. Borrower will not incur, create,
assume, or permit to exist, nor permit any of its Subsidiaries (other than the
Partnerships) to incur, create, assume, or permit to exist, any Lien upon any of
their respective properties, assets, or revenues, whether now owned or hereafter
acquired, except:
(a) Liens disclosed on SCHEDULE 9.2;
(b) Purchase money Liens securing Debt permitted by SECTION 9.1(d) and
(e);
(c) Liens in favor of the Administrative Agent, for the benefit of the
Lenders;
(d) Encumbrances consisting of minor easements, zoning restrictions, or
other restrictions on the use of real property that do not (individually or in
the aggregate) materially affect the value of the assets encumbered thereby or
materially impair the ability of Borrower or any of its Subsidiaries to use such
assets in their respective businesses, and none of which is violated in any
material respect by existing or proposed structures or land use;
(e) Liens for taxes, assessments, or other governmental charges which are
not delinquent or which are being contested in good faith and for which adequate
reserves have been established;
(f) Liens of mechanics, materialmen, warehousemen, carriers, or other
similar statutory Liens securing obligations that are not yet due and are
incurred in the ordinary course of business; and
(g) Liens resulting from good faith deposits to secure payments of
workmen's compensation or other social security programs or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
contracts (other than for payment of Debt), or leases made in the ordinary
course of business.
SECTION 9.3 MERGERS, ETC. Except upon the prior written consent of the
Required Lenders, Borrower will not become a party to a merger or consolidation,
except with another Company where Borrower is the surviving entity. Borrower
will not, and will not permit any of its Subsidiaries (other than the
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Partnerships) to, wind-up, dissolve or liquidate itself, unless the assets and
stock or other ownership interests of the Company being wound up, dissolved or
liquidated are transferred to another Company. Except as permitted by SECTION
9.5, Borrower will not, and will not permit any of its Subsidiaries (other than
the Partnerships) to, make any Acquisition other than a Permitted Acquisition.
Borrower will not, and will not permit any of its Subsidiaries (other than the
Partnerships) to, form, incorporate, acquire or make any investment in any
Subsidiary, except (a) the Subsidiaries listed on SCHEDULE 7.14.1, (b)
Subsidiaries acquired or formed through a Permitted Acquisition, and (c)
Wholly-Owned Subsidiaries formed in accordance with SECTION 8.13.
SECTION 9.4 RESTRICTED PAYMENTS. Borrower will not declare or pay any
dividends or make any other payment or distribution (whether in cash, property,
or obligations) on account of its capital stock, or redeem, purchase, retire, or
otherwise acquire any of its capital stock, or permit any of its Subsidiaries to
purchase or otherwise acquire any capital stock of Borrower, or set apart any
money for a sinking or other analogous fund for any dividend or other
distribution on its capital stock or for any redemption, purchase, retirement,
or other acquisition of any of its capital stock; provided, however, that, from
the date hereof through and including the Termination Date, Borrower may redeem
or retire and/or the Companies may purchase shares of Borrower's capital stock
for an aggregate consideration of no more than $750,000.00.
SECTION 9.5 INVESTMENTS. Borrower will not make, nor permit any of its
Subsidiaries (other than the Partnerships) to make, any advance, loan, extension
of credit, or capital contribution to or investment in, or purchase or own, or
permit any of its Subsidiaries (other than the Partnerships) to purchase or own,
any stock, bonds, notes, debentures, or other securities of, any Person, except:
(a) The Companies, or any of them, may purchase (i) readily marketable
direct obligations of the United States of America or any agency thereof with
maturities of one year or less from the date of acquisition, (ii) fully insured
certificates of deposit with maturities of one year or less from the date of
acquisition issued by any commercial bank operating in the United States of
America having capital and surplus in excess of $1,000,000,000, and (iii)
commercial paper of a domestic issuer if at the time of purchase such paper is
rated in one (1) of the two (2) highest rating categories of Standard and Poor's
Rating Group, a division of McGraw Hill, Inc., a New York corporation, or
Moody's Investors Service, Inc.;
(b) The Companies, or any of them, may make loans to officers, directors
and employees of any of them provided such loans are made in the ordinary course
of business, and are in an aggregate principal amount of not more than
$200,000.00 at any time outstanding;
(c) Borrower may continue to hold capital stock of American Physicians
Service Group, Inc. held by Borrower on the date hereof; and
(d) The Companies may create new Subsidiaries, hold stock in Subsidiaries
and themselves, and engage in the transactions permitted by SECTION 9.3 hereof,
provided that Borrower complies with SECTION 8.13.
SECTION 9.6 LIMITATION ON ISSUANCE OF CAPITAL STOCK. Borrower will not
permit any of its Subsidiaries to at any time issue, sell, assign, or otherwise
dispose of (a) any of its capital stock or other ownership interests, (b) any
securities exchangeable for or convertible into or carrying any rights to
acquire any of its capital stock or other ownership interests, or (c) any
option, warrant, or other right to acquire any of its capital stock or other
ownership interests; provided, however, that any Subsidiary of Borrower may
issue, sell, assign or otherwise dispose of its capital stock or other ownership
interests, or securities
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exchangeable for its capital stock or other ownership interests, to Borrower or
any other Wholly-Owned Subsidiary.
SECTION 9.7 TRANSACTIONS WITH AFFILIATES. Borrower will not enter into,
and will not permit any of its Subsidiaries to enter into, any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate of Borrower or any Subsidiary
of Borrower, except in the ordinary course of Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to Borrower or
such Subsidiary than would be obtained in a comparable arm's-length transaction
with a Person not an Affiliate of Borrower or such Subsidiary.
SECTION 9.8 DISPOSITION OF ASSETS. Borrower will not sell, lease,
assign, transfer, or otherwise dispose of any of its assets, nor permit any of
its Subsidiaries (other than the Partnerships) to do so with any of their
respective assets, except (subject to the mandatory prepayments required by
SECTION 3.3) (a) inter-Company transfers between Borrower and a Wholly-Owned
Subsidiary or between Wholly-Owned Subsidiaries, (b) dispositions of assets,
other than lithotripters, in the ordinary course of business for consideration
of up to an aggregate amount of $250,000.00 during the term of this Agreement,
(and the Administrative Agent agrees to execute and deliver releases of Liens in
connection with such dispositions), (c) dispositions by any Company of assets
used in connection with cardiac rehabilitation or diagnostic imaging, and (d)
dispositions of any tangible assets that are worn or obsolete, provided that
such tangible assets are replaced by assets of similar character where the
replacement of such asset is necessary or appropriate for the continued conduct
of such Company's business as presently conducted.
SECTION 9.9 SALE AND LEASEBACK. Borrower will not enter into, nor
permit any of its Subsidiaries (other than the Partnerships) to enter into, any
arrangement with any Person (other than another Company) pursuant to which it
leases from such Person equipment used in lithotripsy operations that has been
or is to be sold or transferred, directly or indirectly, by it to such Person;
provided, however, that the Companies may enter into any arrangement with any
Person pursuant to which it leases from such Person real or personal property
not used in lithotripsy operations that has been or is to be sold or
transferred, directly or indirectly, by it to such Person, in an aggregate
amount of up to but not to exceed $250,000.00 during the term of this Agreement.
SECTION 9.10 PREPAYMENT OF DEBT. Borrower will not prepay, nor permit
any of its Subsidiaries to prepay, any Debt, except the Obligations, if such
prepayment would result in Borrower being in violation of ARTICLE X hereof.
SECTION 9.11 NATURE OF BUSINESS. Borrower will not, and will not permit
any of its Subsidiaries (other than the Partnerships) to, engage in any business
other than the businesses in which they are engaged on the date hereof;
provided, however, that Borrower will not and will not permit any of its
Subsidiaries (other than the Partnerships) not already in the business of
providing non-medical management services to cardiac rehabilitation or
diagnostic imaging operations, to engage in either such business.
SECTION 9.12 ENVIRONMENTAL PROTECTION. Borrower will not, and will not
permit any of its Subsidiaries to, conduct any activity or use any of their
respective properties or assets in any manner that could reasonably be expected
to violate any Environmental Law or create any Environmental Liabilities for
which Borrower or any of its Subsidiaries would be responsible.
SECTION 9.13 ACCOUNTING. Borrower will not, and will not permit any of
its Subsidiaries (other than the Partnerships) to, change its fiscal year or
make any change (a) in accounting treatment or reporting
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practices, except as permitted by GAAP and disclosed to the Administrative
Agent, or (b) in tax reporting treatment, except as permitted by law.
SECTION 9.14 AMENDMENT OF PARTNERSHIP AND MANAGEMENT AGREEMENTS.
Borrower will not, and will not permit any of its Subsidiaries to, amend any
partnership agreements of any of the Partnerships or any management agreements
between any Company and any of the Partnerships, if such amendment could
reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations, or properties of the Companies
taken as a whole, Borrower, or any Material Subsidiary.
ARTICLE X
FINANCIAL COVENANTS
Borrower hereby covenants and agrees that, as long as the Obligations or
any part thereof are outstanding or any Lender has any Commitment hereunder,
Borrower will perform and observe the following financial covenants:
SECTION 10.1 TOTAL DEBT TO EBITDA. Borrower will not permit the Total
Debt to EBITDA Ratio, determined as of the last day of each fiscal quarter of
the Companies and for the four (4) fiscal quarter period then ending, to exceed
the ratio set forth opposite such period below:
========================================================
PERIOD RATIO
--------------------------------------------------------
January 1, 1997 through December 31, 1997 3.00 to 1.0
--------------------------------------------------------
January 1, 1998 through December 31, 1998 2.75 to 1.0
--------------------------------------------------------
January 1, 1999 through December 31, 1999 2.25 to 1.0
--------------------------------------------------------
January 1, 2000 and thereafter 2.00 to 1.0
========================================================
For purposes of this SECTION 10.1, cash flows during the relevant period of any
entity acquired by the Companies during such period shall be included in the
calculation of EBITDA.
SECTION 10.2 INTEREST COVERAGE RATIO. Borrower will not permit the
Interest Coverage Ratio (a) as of the last day of March 31, 1997, June 30, 1997,
September 30, 1997 and December 31, 1997, in each case for the four (4) fiscal
quarters then ended, to be less than 3.75 to 1.0, (b) as of the last day of
March 31, 1998, June 30, 1998, September 30, 1998 and December 31, 1998, in each
case for the four (4) fiscal quarters then ended, to be less than 4.50 to 1.0,
and (c) as of the last day of each fiscal quarter of Borrower thereafter,
commencing March 31, 1999, to be less than 5.25 to 1.0.
SECTION 10.3 TOTAL DEBT SERVICE COVERAGE RATIO. Borrower will not permit
the Total Debt Service Coverage Ratio (a) as of the last day of each fiscal
quarter of Borrower thereafter, commencing March 31, 1997, to be less than 1.30
to 1.0.
SECTION 10.4 CONSOLIDATED NET WORTH. Borrower shall not permit, as of
any date during the following periods, its Consolidated Net Worth to be less
than the amount set forth opposite such period below, such amount to be (a)
increased on the last day of each successive fiscal quarter of Borrower,
beginning March 31, 1997 to and including March 31, 1998, by an amount equal to
one hundred percent (100%) of the increase in net worth arising from any
Acquisition or equity issuance, and (b) increased on the last day of each
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successive fiscal quarter of Borrower beginning June 30, 1998, by an amount
equal to seventy-five percent (75%) of Consolidated Net Income for such fiscal
quarter:
===========================================================
PERIOD AMOUNT
-----------------------------------------------------------
Date hereof through March 30, 1997 $65,000,000.00
-----------------------------------------------------------
March 31, 1997 through September 29, 1997 $70,000,000.00
-----------------------------------------------------------
September 30, 1997 through March 30, 1998 $75,000,000.00
-----------------------------------------------------------
March 31, 1998 and thereafter $75,000,000.00
===========================================================
SECTION 10.5 MINIMUM EBITDA. Borrower will not permit (a) EBITDA for
any one (1) fiscal quarter of the Companies to be less than $5,000,000.00, or
(b) EBITDA for any two (2) consecutive fiscal quarters of the Companies to be
less than $12,000,000.00.
ARTICLE XI
DEFAULT
SECTION 11.1 EVENTS OF DEFAULT. Each of the following shall be deemed an
"EVENT OF DEFAULT":
(a) Borrower shall fail to pay when due any amount of principal under any
Note.
(b) Borrower shall fail to pay by the Administrative Agent or any Lender
(through the Administrative Agent), any interest on the Advances, any fees due
hereunder or under any other Loan Document, or any other part of the Obligations
which does not constitute principal under the Notes, and such failure shall
continue for three (3) Business Days after such payment became due.
(c) Any representation or warranty made or deemed made by Borrower or any
Obligated Party (or any of their respective officers) in any Loan Document or in
any certificate, report, notice, or financial statement furnished at any time in
connection with this Agreement shall be false, misleading, or erroneous in any
material respect when made or deemed to have been made and the effect thereof
shall not have been cured within ten (10) Business Days after notice thereof to
Borrower by the Administrative Agent or any Lender (through the Administrative
Agent).
(d) Borrower shall fail to perform, observe, or comply with any covenant,
agreement, or term contained in ARTICLE X; or Borrower or any Obligated
agreement or term contained in SECTION 8.1 (a), (b), (c) or (d), or ARTICLE IX
and such failure shall continue for a period of three (3) Business Days after
notice thereof to Borrower by the Administrative Agent or any Lender (through
the Administrative Agent); or Borrower or any Obligated Party shall fail to
perform, observe br comply with any other covenant, agreement, or term contained
in this Agreement or any other Loan Document (other than covenants to pay the
Obligations) and such failure shall continue for a period of ten (10) Business
Days after notice thereof to Borrower by the Administrative Agent or any Lender
(through the Administrative Agent).
(e) Any Company shall commence a voluntary proceeding seeking
liquidation, reorganization, or other relief with respect to itself or its debts
under any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian,
or other similar
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official of it or a substantial part of its property or shall consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it or shall make a
general assignment for the benefit of creditors or shall generally fail to pay
its debts as they become due or shall take any corporate action to authorize any
of the foregoing.
(f) An involuntary proceeding shall be commenced against any Company
seeking liquidation, reorganization, or other relief with respect to it or its
debts under any bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official for it or a substantial part of its property, and such
involuntary proceeding shall remain undismissed and unstayed for a period of
forty-five (45) days.
(g) Any Company shall fail to discharge within a period of forty-five
(45) days after the commencement thereof any attachment, sequestration, or
similar proceeding or proceedings, including without limitation any order of
forfeiture, seizure or divestiture (whether under RICO or otherwise) involving
an aggregate amount in excess of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) against any of its assets or properties.
(h) A final judgment or judgments for the payment of money in excess of
Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) in the aggregate
shall be rendered by a court or courts against any Company and the same shall
not be discharged (or provision shall not be made for such discharge), or a stay
of execution thereof shall not be procured, within forty-five (45) days from the
date of entry thereof and such Company shall not, within said period of forty-
five (45) days, or such longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal.
(i) Any Company shall fail to pay when due any principal of or interest
on Debt in an aggregate principal amount of Two Hundred Fifty Thousand and
00/100 Dollars ($250,000.00) or more (other than the Obligations), or the
maturity of any such Debt shall have been accelerated, or any such Debt shall
have been required to be prepaid prior to the stated maturity thereof, or any
event shall have occurred that permits (or, with the giving of notice or the
lapse of time or both, would permit) any holder or holders of such Debt or any
Person acting on behalf of such holder or holders to accelerate the maturity
thereof or require any such prepayment.
(j) This Agreement or any other Loan Document shall cease to be in full
force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower, any
Subsidiary of Borrower, any Obligated Party or any of their respective
shareholders, or Borrower or any Obligated Party shall deny that it has any
further liability or obligation under any of the Loan Documents, or any Lien or
security interest created by the Loan Documents shall for any reason cease to be
a valid, first priority perfected security interest in and Lien upon any of the
Collateral purported to be covered thereby.
(k) Any of the following events shall occur or exist with respect to
Borrower or any ERISA Affiliate: (i) any Prohibited Transaction involving any
Plan; (ii) any Reportable Event with respect to any Plan; (iii) the filing under
Section 4041 of ERISA of a notice of intent to terminate any Plan or the
termination of any Plan; (iv) any event or circumstance that might constitute
grounds entitling the PBGC to institute proceedings under Section 4042 of ERISA
for the termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; or (v) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a Multi-employer
Plan or the reorganization, insolvency, or termination of any Multi-employer
Plan; and in each case above, such event or condition,
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together with all other events or conditions, if any, have subjected or could in
the reasonable opinion of the Required Lenders subject Borrower, or any of its
Subsidiaries, to any tax, penalty, or other liability to a Plan, a Multi-
employer Plan, the PBGC, or otherwise (or any combination thereof) which in the
aggregate exceed or could reasonably be expected to exceed Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00).
(l) Any Change in Control shall occur.
(m) Borrower shall fail to deliver to the Administrative Agent, for the
benefit of the Lenders, interest rate hedging or other protection agreements (a
"HEDGING AGREEMENT") with a Lender or other person reasonably acceptable to the
Agents in a notional amount of at least Twenty Million and 00/100 Dollars
($20,000,000.00) in addition to the existing Hedging Agreements in the notional
amount of Twenty Million and 00/100 Dollars ($20,000,000.00) for a duration of
at least three (3) years, assuring that the net interest cost on such amount is
fixed, capped or hedged, in form and substance acceptable to the Administrative
Agent within ninety (90) days of the date hereof.
SECTION 11.2 REMEDIES. If any Event of Default shall occur and be
continuing, the Administrative Agent may (and if directed by the Required
Lenders, shall) do any one or more of the following:
(a) ACCELERATION. Declare all outstanding principal of and
accrued and unpaid interest on the Notes and all other obligations of
Borrower under the Loan Documents immediately due and payable, and the
same shall thereupon become immediately due and payable, without notice,
demand, presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest, or other formalities of any kind, all of
which are hereby expressly waived by Borrower;
(b) TERMINATION OF COMMITMENTS. Terminate the Commitments
without notice to Borrower;
(c) JUDGMENT. Reduce any claim to judgment;
(d) FORECLOSURE. Foreclose or otherwise enforce any Lien
granted to the Administrative Agent for the benefit of itself and the
Lenders to secure payment and performance of the Obligations in accordance
with the terms of the Loan Documents; and
(e) RIGHTS. Exercise any and all rights and remedies afforded
by the laws of the Commonwealth of Massachusetts or any other
jurisdiction, by any of the Loan Documents, by equity, or otherwise;
provided, however, that upon the occurrence of an Event of Default under
SUBSECTION (e) or (f) of SECTION 11.1, the Commitments of all of the Lenders
shall automatically terminate, and the outstanding principal of and accrued and
unpaid interest on the Notes and all other obligations of Borrower under the
Loan Documents shall thereupon become immediately due and payable without
notice, demand, presentment, notice of dishonor, notice of acceleration, notice
of intent to accelerate, protest, or other formalities of any kind, all of which
are hereby expressly waived by Borrower.
SECTION 11.3 PERFORMANCE BY THE ADMINISTRATIVE AGENT. If Borrower shall
fail to perform any covenant or agreement in accordance with the terms of the
Loan Documents, the Administrative Agent may, at the direction of the Required
Lenders, perform or attempt to perform such covenant or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of the Administrative
Agent, promptly pay any amount expended by the Administrative Agent or the
Lenders in connection with such performance or
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attempted performance to the Administrative Agent at the Principal Office,
together with interest thereon at the Default Rate from and including the date
of such expenditure to but excluding the date such expenditure is paid in full.
Notwithstanding the foregoing, it is expressly agreed that neither the
Administrative Agent nor any Lender shall have any liability or responsibility
for the performance of any obligation of Borrower under this Agreement or any of
the other Loan Documents.
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 APPOINTMENT, POWERS AND IMMUNITIES. In order to expedite
the various transactions contemplated by this agreement, the Lenders hereby
irrevocably appoint and authorize FNBB to act as their Administrative Agent
hereunder and under each of the other Loan Documents. FNBB consents to such
appointment and agrees to perform the duties of the Administrative Agent as
specified herein. The Lenders authorize and direct the Administrative Agent to
take such action in their name and on their behalf under the terms and
provisions of the Loan Documents and to exercise such rights and powers
thereunder as are specifically delegated to or required of the Administrative
Agent for the Lenders, together with such rights and powers as are reasonably
incidental thereto. The Administrative Agent is hereby expressly authorized to
act as the Administrative Agent on behalf of itself and the other Lenders:
(a) To receive on behalf of each of the Lenders any payment of
principal, interest, fees or other amounts paid pursuant to this Agreement
and the Notes and to distribute to each Lender its pro rata share of all
payments so received as provided in this Agreement;
(b) To receive all documents and items to be furnished under the
Loan documents;
(c) To act as nominee for and on behalf of the Lenders in and under
the Loan Documents;
(d) To arrange for the means whereby the funds of the Lenders are to
be made available to Borrower;
(e) To distribute to the Lenders information, requests, notices,
payments, prepayments, documents and other items received from Borrower,
the other Obligated Parties, and other Persons;
(f) To execute and deliver to Borrower, the other Obligated Parties,
and other Persons, all requests, demands, approvals, notices, and consents
received from the Lenders;
(g) To the extent permitted by the Loan Documents, to exercise on
behalf of each Lender all rights and remedies of the Lenders upon the
occurrence of any Event of Default;
(h) To accept, execute, and deliver the Security Agreement and any
other security documents as the secured party; and
(i) To take such other actions as may be requested by the Required
Lenders.
Neither the Administrative Agent nor any of its Affiliates, officers,
directors, employees, attorneys, or agents shall be liable to any Lender for any
action taken or omitted to be taken by any of them hereunder or otherwise in
connection with this Agreement or any of the other Loan Documents (INCLUDING ANY
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ACTION TAKEN OR OMITTED TO BE TAKEN BY SUCH PARTIES NEGLIGENTLY), but excluding
such actions or omissions arising from such parties' own gross negligence or
willful misconduct. Without limiting the generality of the preceding sentence,
the Administrative Agent: (i) may treat the payee of any Note as the holder
thereof until the Administrative Agent receives written notice of the assignment
or transfer thereof signed by such payee and in form satisfactory to the
Administrative Agent; (ii) shall have no duties or responsibilities except those
expressly set forth in this Agreement and the other Loan Documents, and shall
not by reason of this Agreement or any other Loan Document be a trustee or
fiduciary for any Lender; (iii) shall not be required to initiate any litigation
or collection proceedings hereunder or under any other Loan Document except to
the extent requested by the Required Lenders; (iv) shall not be responsible to
the Lenders for any recitals, statements, representations or warranties
contained in this Agreement or any other Loan Document, or any certificate or
other document referred to or provided for in, or received by any of them under,
this Agreement or any other Loan Document, or for the value, validity,
effectiveness, enforceability, or sufficiency of this Agreement or any other
Loan Document or any other document referred to or provided for herein or
therein or for any failure by any Person to perform any of its obligations
hereunder or thereunder; (v) may consult with legal counsel (including counsel
for Borrower), independent public accountants, and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants, or
experts; and (vi) shall incur no liability under or in respect of any Loan
Document by acting upon any notice, consent, certificate, or other instrument or
writing believed by it to be genuine and signed or sent by the proper party or
parties. As to any matters not expressly provided for by this Agreement, the
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, here under in accordance with instructions signed by the
Required Lenders, and such instructions of the Required Lenders and any action
taken or failure to act pursuant thereto shall be binding on all of the Lenders;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to this Agreement or any other Loan Document or applicable law.
SECTION 12.2 RIGHTS OF ADMINISTRATIVE AGENT AS A LENDER. With respect to
its Commitment, the Advances made by it and the Note issued to it, FNBB in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
the Administrative Agent, and the term "LENDER" or "LENDERS" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent and its Affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to, act as
trustee under indentures of, provide merchant banking services to, and generally
engage in any kind of business with Borrower, any Subsidiary of Borrower, any
other Obligated Party, and any other Person who may do business with or own
securities of Borrower or any other Obligated Party, all as if it were not
acting as the Administrative Agent and without any duty to account therefor to
the Lenders.
SECTION 12.3 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment of any principal of or interest on any Advance made by it under this
Agreement or payment of any other obligation under the Loan Documents then owed
by Borrower or any other Obligated Party to such Lender, whether voluntary,
involuntary, through the exercise of any right of setoff, lender's lien,
counterclaim or similar right, or otherwise, in excess of its pro rata share,
such Lender shall promptly purchase from the other Lenders participations in the
Advances held by them hereunder in such amounts, and make such other adjustments
from time to time as shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each of the other Lenders in accordance with its
pro rata portion thereof. To such end, all of the Lenders shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if all or any portion of such excess payment is thereafter
rescinded or must otherwise be restored. Borrower agrees, to the fullest extent
it may effectively do so under applicable law, that any Lender so purchasing a
participation in the Advances made by the other Lenders may exercise all rights
of setoff, lender's lien, counterclaim, or
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similar rights with respect to such participation as fully as if such Lender
were a direct holder of Advances to Borrower in the amount of such
participation. Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of Borrower.
SECTION 12.4 INDEMNIFICATION. THE LENDERS HEREBY AGREE TO INDEMNIFY THE
ADMINISTRATIVE AGENT FROM AND HOLD THE ADMINISTRATIVE AGENT HARMLESS AGAINST (TO
THE EXTENT NOT REIMBURSED UNDER SECTIONS 13.1 AND 13.2, BUT WITHOUT LIMITING THE
OBLIGATIONS OF BORROWER UNDER SECTIONS 13.1 AND 13.2), RATABLY IN ACCORDANCE
WITH THEIR RESPECTIVE COMMITMENTS, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES
(INCLUDING ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER
WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE
AGENT IN ANY WAY RELATING TO OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY
ACTION TAKEN OR OMITTED TO BE TAKEN BY THE ADMINISTRATIVE AGENT UNDER OR IN
RESPECT OF ANY OF THE LOAN DOCUMENTS INCLUDING ANY PORTION OF THE FOREGOING TO
THE EXTENT CAUSED BY THE ADMINISTRATIVE AGENT'S SOLE OR CONTRIBUTORY NEGLIGENCE;
PROVIDED, FURTHER, THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF THE
FOREGOING TO THE EXTENT CAUSED BY THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS
INTENTION OF THE LENDERS THAT THE ADMINISTRATIVE AGENT SHALL BE INDEMNIFIED
HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS,
EXPENSES (INCLUDING ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF THE ADMINISTRATIVE AGENT. WITHOUT LIMITING ANY OTHER PROVISION OF
THIS SECTION, EACH LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE AGENT PROMPTLY
UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON THE BASIS OF THE COMMITMENTS)
OF ANY AND ALL OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEYS' FEES) INCURRED BY
THE ADMINISTRATIVE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION,
DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER
THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN
RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO THE EXTENT
THAT THE ADMINISTRATIVE AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY BORROWER.
SECTION 12.5 INDEPENDENT CREDIT DECISIONS. Each Lender agrees that it
has independently and without reliance on any Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of Borrower and decision to enter into this Agreement and
that it will, independently and without reliance upon any Agent or any other
Lender, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Administrative Agent shall not be required to keep itself
informed as to the performance or observance by Borrower or any Obligated Party
of this Agreement or any other Loan Document or to inspect the properties or
books of Borrower or any Obligated Party. Except for notices, reports and other
documents and
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information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or under the other Loan Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other financial information concerning the affairs,
financial condition or business of Borrower or any Obligated Party (or any of
their Affiliates) which may come into the possession of the Administrative Agent
or any of its Affiliates.
SECTION 12.6 SEVERAL COMMITMENTS. The Commitments and other obligations
of the Lenders under this Agreement are several. The default by any Lender in
making an Advance in accordance with its Commitment shall not relieve the other
Lenders of their obligations under this Agreement. In the event of any default
by any Lender in making any Advance, each nondefaulting Lender shall be
obligated to make its Advance but shall not be obligated to advance the amount
which the defaulting Lender was required to advance hereunder. In no event
shall any Lender be required to advance an amount or amounts which shall in the
aggregate exceed such Lender's Commitment. No Lender shall be responsible for
any act or omission of any other Lender.
SECTION 12.7 SUCCESSOR ADMINISTRATIVE AGENT. Subject to the appointment
and acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign at any time by giving notice thereof to the
Lenders and Borrower and the Administrative Agent may be removed at any time
with or without cause by the Required Lenders. Upon any such resignation or
removal, the Required Lenders will have the right to appoint a successor
Administrative Agent from among the remaining Lenders. If no successor
Administrative Agent shall have been so appointed by the Required Lenders and
shall have accepted such appointment within thirty (30) days after the retiring
Administrative Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent,
which shall be a commercial bank organized under the laws of the United States
of America or any State thereof and having combined capital and surplus of at
least One Billion Dollars ($1,000,000,000). Upon the acceptance of its
appointment as successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all rights, powers,
privileges, immunities, and duties of the resigning or removed Administrative
Agent, and the resigning or removed Administrative Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents. After any Administrative Agent's resignation or removal as
Administrative Agent, the provisions of this ARTICLE XII shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was the Administrative Agent.
SECTION 12.8 INDEPENDENT CONTRACTOR.
(a) The relationship between each Agent and each of the Lenders is that
of an independent contractor. The use of the term "AGENT" is for convenience
only and is used to describe, as a form of convention, the independent
contractual relationship between each Agent and each of the Lenders. Nothing
contained in this Agreement or the other Loan Documents shall be construed to
create an agency, trust or other fiduciary relationship between any Agent and
any of the Lenders.
(b) As an independent contractor empowered by the Lenders to exercise
certain rights and perform certain duties and responsibilities hereunder and
under the other Loan Documents, the Administrative Agent is nevertheless a
"representative" of the Lenders, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the Lenders
and the Administrative Agent with respect to all collateral security and
guaranties contemplated by the Loan Documents. Such actions include the
designation of the Administration Agent as "secured party," "mortgagee" or the
like on all financing statements and other documents and instruments, whether
recorded or otherwise, relating to the attachment,
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perfection, priority or enforcement of any security interests, mortgages or
deeds of trust in collateral security intended to secure the payment or
performance of any of the Obligations, all for the benefit of the Lenders and
the Administrative Agent.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 EXPENSES. Borrower hereby agrees to pay on demand: (a) all
reasonable costs and expenses of the Agents in connection with the preparation,
negotiation, syndication, execution, and delivery of this Agreement and the
other Loan Documents including, without limitation, the legal fees and
reasonable expenses of legal counsel for the Agents; (b) all reasonable costs
and expenses of the Agents in connection with any and all amendments,
modifications, renewals, extensions and supplements of any of the Loan
Documents; (c) all reasonable costs and expenses of the Agents and the Lenders
in connection with any Default and the enforcement of this Agreement or any
other Loan Document, including, without limitation, the fees and expenses of
legal counsel for the Agents and the Lenders; (d) all transfer, stamp,
documentary, or other similar taxes, assessments, or charges levied by any
Governmental Authority in respect of this Agreement or any of the other Loan
Documents; (e) all costs, expenses, assessments, and other charges incurred in
connection with any filing, registration, recording, or perfection of any
security interest or Lien contemplated by this Agreement or any other Loan
Document; and (f) all other reasonable costs and expenses incurred by the Agents
in connection with this Agreement or any other Loan Document, including, without
limitation, all costs, expenses, and other charges incurred in connection with
obtaining any mortgagee title insurance policy, survey, audit, appraisal in
respect of the Collateral, and other out-of-pocket costs and expenses.
SECTION 13.2 INDEMNIFICATION. BORROWER SHALL INDEMNIFY THE AGENTS AND
EACH LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST,
ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) TO
WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR
RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION,
OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY BORROWER OF ANY
REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE
LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL,
REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR
AFFECTING ANY OF THE PROPERTIES OR ASSETS OF BORROWER OR ANY SUBSIDIARY OF
BORROWER, OR (E) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING,
WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER
PROCEEDING RELATING TO ANY OF THE FOREGOING. WITHOUT LIMITING THE FOREGOING,
THIS INDEMNITY SHALL APPLY TO ANY LOSS, LIABILITY, OBLIGATION, DAMAGE, PENALTY,
JUDGMENT, CLAIM, DEFICIENCY OR EXPENSE ARISING OUT OF THE SOLE OR CONCURRENT
NEGLIGENCE OF ANY AGENT OR ANY LENDER, BUT SHALL EXCLUDE ANY LOSS, LIABILITY,
OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM, DEFICIENCY OR EXPENSE ARISING BY
REASON OF THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF ANY AGENT OR LENDER.
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SECTION 13.3 NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by the Agents and the Lenders
shall have the right to act exclusively in the interest of the Agents and the
Lenders and shall have no duty of disclosure, duty of loyalty, duty of care, or
other duty or obligation of any type or nature whatsoever to Borrower, any
shareholder or Subsidiary of Borrower or any other Person.
SECTION 13.4 NO FIDUCIARY RELATIONSHIP. The relationship between
Borrower and each Lender is solely that of debtor and creditor, and none of the
Agents nor any of the Lenders has any fiduciary or other special relationship
with Borrower, and no term or condition of any of the Loan Documents shall be
construed so as to deem the relationship between Borrower and any Lender to be
other than that of debtor and creditor.
SECTION 13.5 NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
the Agents or any Lender to exercise and no delay in exercising, and no course
of dealing with respect to, any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement and the other
Loan Documents are cumulative and not exclusive of any rights and remedies
provided by law.
SECTION 13.6 SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Borrower may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Administrative Agent and all of the Lenders. Any Lender
may sell participations to one or more banks or other institutions in or to all
or a portion of its rights and obligations under this Agreement and the other
Loan Documents (including, without limitation, all or a portion of its
Commitments and the Advances owing to it); provided, however, that (i) such
Lender's obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitments) shall remain unchanged, (ii)
such Lender shall remain solely responsible to Borrower for the performance of
such obligations, (iii) such Lender shall remain the holder of its Notes for all
purposes of this Agreement, (iv) Borrower shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents, and (v) such
Lender shall not sell a participation that conveys to the participant the right
to vote or give or withhold consents under this Agreement or any other Loan
Document, other than the right to vote upon or consent to (A) any increase of
such Lender's Commitments, (B) any reduction of the principal amount of, or
interest to be paid on, the Advances of such Lender, (C) any reduction of any
commitment fee or other amount payable to such Lender under any Loan Document,
or (D) any postponement of any date for the payment of any amount payable in
respect of the Advances of such Lender.
(b) Borrower and each of the Lenders agree that any Lender (an "ASSIGNING
LENDER") may at any time assign to one or more Eligible Assignees all, or a
portion of all, of its rights and obligations under this Agreement and the other
Loan Documents (including, without limitation, its Commitment and Advances)
(each an "ASSIGNEE"); provided, however, that (i) except in the case of an
assignment of all of a Lender's rights and obligations under this Agreement and
the other Loan Documents, or as otherwise acceptable to Borrower and the
Administrative Agent the amount of the Commitments of the assigning Lender being
assigned pursuant to each assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no event be
less than $5,000,000.00, and (ii) the parties to each such assignment shall
execute and deliver to the Administrative Agent for its acceptance and recording
in the Register (as defined below), an Assignment and Acceptance, together with
the Note subject to such assignment, and a processing and recordation fee of
$3,000.00 (except that no fee will be required by any
51
<PAGE>
Person for assignments by NationsBank of any portion of the Term Loan B). Upon
such execution, delivery, acceptance, and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof, or, if so
specified in such Assignment and Acceptance, the date of acceptance thereof by
the Administrative Agent, (x) the assignee thereunder shall be a party hereto as
a "LENDER" and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and under the Loan Documents and (y) the
Lender that is an assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement and the other Loan Documents (and, in the case of an Assignment
and Acceptance covering all or the remaining portion of a Lender's rights and
obligations under the Loan Documents, such Lender shall cease to be a party
thereto).
(c) By executing and delivering an Assignment and Acceptance, the
Assigning Lender and its Assignee confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, such Assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties, or
representations made in or in connection with the Loan Documents or the
execution, legality, validity, and enforceability, genuineness, sufficiency, or.
value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (ii) such Assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or any Obligated Party or the performance or observance by Borrower or
any Obligated Party of its obligations under the Loan Documents; (iii) the
Assignee confirms that it has received copies of the Loan Documents, together
with copies of the financial statements referred to in SECTION 7.2 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
the Assignee will, independently and without reliance upon the Administrative
Agent or such assignor and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents;
(v) the Assignee confirms that it is an Eligible Assignee; (vi) the Assignee
appoints and authorizes the Administrative Agent to take such action as
Administrative Agent on its behalf and exercise such powers under the Loan
Documents as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; and (vii) the
Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.
(d) The Administrative Agent shall maintain at its Principal Office a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Advances owing to, each Lender from
time to time (the "REGISTER"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and Borrower, the
Administrative Agent, and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes under the Loan
Documents. The Register shall be available for inspection by Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and Assignee representing that it is an Eligible Assignee (or
other assignee permitted hereunder), together with any Note subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of EXHIBIT A, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register, and (iii) give prompt written notice thereof to Borrower. Within
five (5) Business Days after its receipt of such notice, Borrower, at its
expense, shall execute and deliver to the Administrative Agent in exchange for
the surrendered Note a new Note to the order
52
<PAGE>
of such Eligible Assignee (or other assignee permitted hereunder) in an amount
equal to the portion of the Commitments assumed by it pursuant to such
Assignment and Acceptance and, if the Assigning Lender has retained a portion of
the Commitments, a new Note to the order of the Assigning Lender in an amount
equal to the portion of the Commitments retained by it hereunder (each such
promissory note shall constitute a "NOTE" for purposes of the Loan Documents).
Such new Notes shall be in an aggregate principal amount of the surrendered
Note, shall be dated the effective date of such Assignment and Acceptance, and
shall otherwise be in substantially the form of EXHIBIT B and EXHIBIT C.
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this SECTION, disclose to the
Assignee or participant or proposed Assignee or participant, any information
relating to Borrower or any Subsidiary of Borrower furnished to such, Lender by
or on behalf of Borrower or any of its Subsidiaries.
(g) Notwithstanding any other term of this Agreement to the contrary, any
Lender may (without requesting the consent of either the Administrative Agent or
Borrower) pledge its Notes to a Federal Reserve Bank in support of borrowings
made by such Lender from such Federal Reserve Bank.
(h) Notwithstanding any other term of this Agreement to the contrary, any
Lender may assign all, or a portion of all, of its rights and obligations under
this Agreement and the other Loan Documents (including, without limitation, its
Commitment and Advances) to an Affiliate of such Lender, any other Lender or an
Approved Fund with respect to such Lender or any other Lender, provided that:
(i) such assignor Lender has obtained the written consent of the
Administrative Agent (which consent shall not be unreasonably delayed or
withheld) if the effect of such assignment or delegation shall entitle such
Affiliate or other Lender to claim compensation from Borrower pursuant to
ARTICLE IV; and
(ii) in every other case, such assignor Lender has furnished notice
to, but not obtained the consent of, the Administrative Agent.
SECTION 13.7 SURVIVAL. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents until the
Obligations have been paid and performed in full, and no investigation by the
Administrative Agent or any Lender or any closing shall affect the
representations and warranties or the right of the Administrative Agent or any
Lender to rely upon them. Without prejudice to the survival of any other
obligation of Borrower hereunder, the obligations of Borrower under ARTICLE IV
and SECTIONS 13.1 and 13.2 shall survive repayment of the Notes and termination
of the Commitments. The obligations of the Administrative Agent and the Lenders
under SECTION 13.18 shall survive repayment of the Notes and termination of the
Commitments.
SECTION 13.8 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
53
<PAGE>
SECTION 13.9 AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, the Notes, or any other Loan Document to which Borrower is a
party, nor any consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be agreed or consented to by the
Required Lenders and Borrower, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that no amendment, waiver, or consent shall, unless in writing
and signed by all of the Lenders and Borrower, do any of the following: (a)
increase Commitments of the Lenders or subject the Lenders to any additional
obligations; (b) reduce the principal of, or interest on, the Notes or any fees
or other amounts payable to the Lenders, (but not the Administrative Agent)
hereunder; (c) alter the allocation among Lenders of, or postpone any date fixed
for any payment or prepayment (whether or not mandatory) of principal of, or
interest on, the Notes or any fees or other amounts payable to the
Administrative Agent or the Lenders hereunder; (d) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes or the
number of Lenders which shall be required for the Lenders or any of them to take
any action under this Agreement; (e) change any provision contained in this
SECTION 13.9; or (f) release any material Guarantor or any material portion of
the Collateral, except in accordance with the relevant Loan Document.
Notwithstanding anything to the contrary contained in this SECTION, no
amendment, waiver, or consent shall be made with respect to ARTICLE XII without
the prior written consent of the Administrative Agent.
SECTION 13.10 MAXIMUM INTEREST RATE. No provision of this Agreement or of
any other Loan Document shall require the payment or the collection of interest
in excess of the maximum amount permitted by applicable law. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to be
so provided, in any Loan Document or otherwise in connection with this loan
transaction, the provisions of this SECTION shall govern and prevail and neither
Borrower nor the sureties, guarantors, successors, or assigns of Borrower shall
be obligated to pay the excess amount of such interest or any other excess sum
paid for the use, forbearance, or detention of sums loaned pursuant hereto. In
the event any Lender ever receives, collects, or applies as interest any such
sum, such amount which would be in excess of the maximum amount permitted by
applicable law shall be applied as a payment and reduction of the principal of
the indebtedness evidenced by the Notes; and, if the principal of the Notes has
been paid in full, any remaining excess shall forthwith be paid to Borrower. In
determining whether or not the interest paid or payable exceeds the Maximum
Rate, Borrower and each Lender shall, to the extent permitted by applicable law,
(a) characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the entire contemplated term of the indebtedness
evidenced by the Notes so that interest for the entire term does not exceed the
Maximum Rate.
SECTION 13.11 NOTICES. All notices and other communications provided for
in this Agreement and the other Loan Documents to which Borrower is a party
shall be given or made by telecopy or in writing and telecopied, mailed by
certified mail return receipt requested, or delivered to the intended recipient
at the "ADDRESS FOR NOTICES" specified below its name on the signature pages
hereof-, or, as to any party at such other address as shall be designated by
such party in a notice to each other party given in accordance with this
SECTION. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or addressed as aforesaid; provided, however, notices to the
Administrative Agent pursuant to ARTICLE II shall not be effective until
received by the Administrative Agent.
SECTION 13.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
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SECTION 13.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 13.14 SEVERABILITY. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
SECTION 13.15 HEADINGS. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
SECTION 13.16 CONSTRUCTION. Borrower, the Administrative Agent, and each
Lender acknowledges that each of them has had the benefit of legal counsel of
its own choice and has been afforded an opportunity to review this Agreement and
the other Loan Documents with its legal counsel.
SECTION 13.17 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
SECTION 13.18 CONFIDENTIALITY.
(a) The Agents and the Lenders shall treat the Confidential Information in
confidence and undertake the following obligations with respect thereto:
(i) The Agents and each Lender and each Other Recipient (hereinafter
defined) shall not make use of, disseminate, or in any way disclose,
directly or indirectly, to any other Person other than the senior
executives, employees, attorneys, accountants of and Governmental
Authorities having jurisdiction over, the Agents and each Lender, who
reasonably require access to the Confidential Information for the proper
performance of their assigned duties, and any contemplated assignee of all
or a portion of a Lender's rights and obligations under this Agreement
(collectively, the "OTHER RECIPIENTS") any Confidential Information without
receiving prior written permission from Borrower. Each Other Recipient
will be informed of the terms and provisions of this SECTION 13.18, and the
Lenders shall be liable for any breach of any term or provision of this
SECTION 13.18 by any Other Recipient as if such person was a signatory
hereto, unless such Other Recipient has entered into a confidentiality
agreement directly with Borrower; and
(ii) The Agents and each Lender and each Other Recipient shall use
the Confidential Information solely in connection with the Loan Documents
or in connection with the ordinary course of business of the Agents or the
Lenders (except if such ordinary course of business activities are adverse
to the Companies' interests) and shall not use any of such Confidential
Information for any other purpose or aid any Person (other than the Agents,
any Lender or any Other Recipient) in learning of or using it or permit
others to learn of or use it.
(b) In the event that any Agent, any Lender or any Other Recipient becomes
legally compelled to disclose any of the Confidential Information in any legal
proceeding, it shall provide Borrower with notice promptly after receiving
notice of such proceeding relating to such disclosure so that the Companies may
seek a protective order or other appropriate remedy. In the event that such
protective order or other remedy is not obtained on or before the date that
disclosure must be made, such Agent, such Lender or the Other Recipient,
55
<PAGE>
as the case may be, will furnish only that portion of the Confidential
Information which it is legally required to disclose.
(c) The Agents and the Lenders are aware, and agree to inform all Other
Recipients, that the United States securities laws prohibit any Person who has
received material, non-public information such as is the subject of this SECTION
13.18 from an issuer from purchasing or selling the securities of such issuer or
from communicating such information to any other Person under circumstances in
which it is reasonably foreseeable that such Person is likely to purchase or
sell such securities.
(d) The Companies and the Agents and the Lenders agree that monetary
damages would not be a sufficient remedy for any breach of this SECTION 13.18 by
the Agents, the Lenders or any Other Recipient and that, in addition to all
other remedies, the Companies shall be entitled to specific performance and
injunction or other equitable relief as a remedy for any such breach.
(e) The restrictions and obligations of this SECTION 13.18 shall survive
the repayment of the Obligations and shall continue to bind the Agents, the
Lenders and the Other Recipients.
SECTION 13.19 RENEWAL AND INCREASE. The Revolving Credit Loan is in
renewal, extension, modification, restatement, increase and amendment of the
Original Credit Agreement and the loan documents executed in connection
therewith, and all liens and security interests securing payment thereof.
SECTION 13.20 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF ANY AGENT
OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
SECTION 13.21 CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND
JURISDICTION. Any suit, action or proceeding against Borrower with respect to
this Agreement or the Loan Documents, or any judgment entered by any court in
respect thereof, may be brought in the courts of the Commonwealth of
Massachusetts, County of Suffolk, or in the United States courts located in the
Commonwealth of Massachusetts as the Administrative Agent shall, at the
direction of the Required Lenders elect in their sole discretion, and Borrower
irrevocably submits to the non-exclusive jurisdiction of such courts for the
purpose of any suit, action or proceeding. Borrower irrevocably consents to the
service of process in any suit, action or proceeding in said court by the
mailing thereof by the Administrative Agent by registered or certified mail,
postage prepaid to Borrower's address shown opposite its name on the signature
pages hereof. Nothing herein or in any of the other Loan Documents shall affect
the right of the Administrative Agent to serve process in any other manner
permitted by law or shall limit the right of the Administrative Agent to bring
any action or proceeding against Borrower or with respect to any of its property
in courts in other jurisdictions. Borrower irrevocably waives any objections
which it may now or hereafter have to laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents brought in the courts located in the Commonwealth of Massachusetts,
County of Suffolk, and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in any
inconvenient forum. Any action or proceeding by Borrower against the
Administrative Agent or any Lender shall be brought only in a court located in
Suffolk County, Massachusetts.
Remainder of page intentionally blank.
56
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Signature pages follow.
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
BORROWER:
PRIME MEDICAL SERVICES, INC.
By:/s/ Cheryl Williams
---------------------------------------------
Cheryl Williams
Vice President - Finance
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attention: President
Fax No.: (512) 328-8510
Telephone No.: (512) 328-2892
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
FNBB:
THE FIRST NATIONAL BANK OF BOSTON,
as Administration Agent, and a Lender
By:/s/ Elizabeth Everett
----------------------------------------------
Elizabeth Everett
Director, High Technology
Division, Medical Technology Group
Address for Notices:
100 Federal Street
P.O. Box 2016
Boston, Massachusetts 02100
Attention: Elizabeth Everett
Fax No.: (617) 434-0819
Telephone No.: (617) 434-2318
Lending Office for Base Rate Advances:
100 Federal Street
P. 0. Box 2016
Boston, Massachusetts 02100
Lending Office for Eurodollar Advances:
100 Federal Street
P.O. Box 2016
Boston, Massachusetts 02100
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
NATIONSBANK:
NATIONSBANK OF TEXAS, N.A.,
as Documentation Agent and a Lender
By: /s/ Teena Belcik
---------------------------------------------
Teena Belcik
Vice President
Address for Notices:
515 Congress Avenue, 11th Floor
Post Office Box 908
Austin, Texas 78701-0908
Attention: Teena Belcik
Fax No.: (512) 397-2052
Telephone No.: (512) 397-2841
Lending Office for Base Rate Advances:
515 Congress Avenue, 11th Floor
Post Office Box 908
Austin, Texas 78701-0908
Lending Office for Eurodollar Advances:
515 Congress Avenue, 11th Floor
Post Office Box 908
Austin, Texas 78701-0908
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
NATIONSBANC CAPITAL MARKETS, INC.,
as Syndication Agent
By: /s/ Gary L. Kahn
----------------------------------------------
Gary L. Kahn
Senior Vice President
Address for Notices:
901 Main Street, 66th Floor
Post Office Box 831000
Dallas, Texas 75283-1000
Attention: Gary L. Kahn
Fax No.: (214) 508-2881
Telephone No.: (214) 508-3507
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
OTHER LENDERS:
IMPERIAL BANK
By: /s/ Kelly Davis
----------------------------------------------
Name:Kelly Davis
-----------------------------------------
Title: Vice President
----------------------------------------
Address for Notices:
226 Airport Parkway
San Jose, CA 95110
Attention: Kelly Davis
-----------------------------
Fax No.: (408) 451-8586
Telephone No.: (408) 451-8589
-------------------
Lending Office for Base Rate Advances:
Imperial Bank
---------------------------------------
226 Airport Parkway
---------------------------------------
San Jose, CA 95110
---------------------------------------
Lending Office for Eurodollar Advances:
Imperial Bank
---------------------------------------
226 Airport Parkway
---------------------------------------
San Jose, CA 95110
---------------------------------------
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
THE SUMITOMO BANK, LIMITED
By: /s/ John J. O'Neill
---------------------------------------------
Name: John J. O'Neill
----------------------------------------
Title: VP
---------------------------------------
By: /s/ Bruce Portillo
---------------------------------------------
Name: Bruce Portillo
----------------------------------------
Title: VP
---------------------------------------
Address for Notices:
2 Houston Center, Suite 3750
Houston, TX 77010-1086
Attention: Bruce Portillo
-------------------------
Fax No.: (713) 759-1419
Telephone No.: (713) 759-0770
Lending Office for Base Rate Advances:
233 South Wacker, Suite 5400
---------------------------------------
Chicago, IL 60606
---------------------------------------
Attn: Maria Martinez
---------------------------------------
Lending Office for Eurodollar Advances:
233 South Wacker, Suite 5400
---------------------------------------
Chicago, IL 60606
---------------------------------------
Attn: Maria Martinez
---------------------------------------
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
BANK ONE, TEXAS, N.A.
By: /s/ Edward W. Lick, Jr.
----------------------------------------------
Edward W. Lick, Jr.
Vice President
Address for Notices:
221 West 6th Street, Suite 200
Austin, TX 78701
Attention: Ed Lick
Fax No.: (512) 479-1565
Telephone No.: (512) 479-5730
Lending Office for Base Rate Advances:
Bank One, Austin
221 West 6th Street, Suite 200
Austin, TX 78701
Lending Office for Eurodollar Advances:
Bank One, Austin
221 West 6th Street, Suite 200
Austin, TX 78701
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
CRESCENT/MACH PARTNERS, L.P.
By: TCW ASSET MANAGEMENT COMPANY,
Its Investment Manger
By: /s/ Justin Driscoll
------------------------------------------
Name: Justin Driscoll
-------------------------------------
Title:
------------------------------------
Address for Notices:
TCW Asset Management Company
200 Park Avenue, Suite 2200
New York, NY 10166-0228
Attention: Mark J. Gold/Justin Driscoll
Fax No.: (212) 297-4159
Telephone No.: (212) 297-4000
With copies to:
Crescent/Mach I Partners, L.P.
c/o State Street Bank & Trust Co.
Two International Place
Boston, MA 02110
Attention: Jackie Kilroy
Fax No.: (617) 664-5366
Telephone No.: (617) 664-5477
Lending Office for Base Rate Advances:
TCW Asset Management Company
200 Park Avenue, Suite 2200
New York, NY 10166-0228
Lending Office for Eurodollar Advances:
TCW Asset Management Company
200 Park Avenue, Suite 2200
New York, NY 10166-0228
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: /s/ Douglas Henderson
-----------------------------------------------
Douglas Henderson
Vice President
Address for Notices:
Merrill Lynch Senior Floating Rate Fund, Inc.
800 Scudders Mill Road, Area 1B
Plainsboro, NJ 08536
Attention: Jill Montanye
Fax No.: (609) 282-2550
Telephone No.: (609) 282-3102
Lending Office for Base Rate Advances:
Merrill Lynch Senior Floating Rate Fund, Inc.
800 Scudders Mill Road, Area 1B
Plainsboro, NJ 08536
Lending Office for Eurodollar Advances:
Merrill Lynch Senior Floating Rate Fund, Inc.
800 Scudders Mill Road, Area 1B
Plainsboro, NJ 08536
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By: /s/ Michael J. Bacevich
----------------------------------------------
Name: Michael J. Bacevich
-----------------------------------------
Title: Vice President
----------------------------------------
Address for Notices:
Pilgrim America Prime Rate Trust
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
Attention: Michael Bacevich
Fax No.: (602) 417-8327
Telephone No.: (602) 417-8258
Lending Office for Base Rate Advances:
Pilgrim America Prime Rate Trust
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
Lending Office for Eurodollar Advances:
Pilgrim America Prime Rate Trust
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
THE ING CAPITAL SENIOR SECURED
HIGH INCOME FUND, L.P.
By: ING CAPITAL ADVISORS, INC., as Investment
Advisor
By: /s/ Kathleen Lenarcic
----------------------------------------
Name: Kathleen Lenarcic
-------------------------------------
Vice President - Portfolio Manager
Address for Notices:
ING Capital Advisors, Inc.
333 South Grand Avenue
Suite 4250
Los Angeles, CA 90071
Attention: Kathleen Lenarcic
Fax No.: (213) 346-3995
Telephone No.: (213) 346-3971
Lending Office for Base Rate Advances:
ING Capital Advisors, Inc.
333 South Grand Avenue
Suite 4250
Los Angeles, CA 90071
Lending Office for Eurodollar Advances:
ING Capital Advisors, Inc.
333 South Grand Avenue
Suite 4250
Los Angeles, CA 90071
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
---------------------------------------------
Jeffrey W. Maillet
Senior Vice President & Portfolio Manager
Address for Notices:
Van Kampen American Capital Prime Rate Income Trust
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Jeffrey W. Maillet
Fax No.: (630) 684-6740/41
Telephone No.: (630) 684-6438
Lending Office for Base Rate Advances:
Van Kampen American Capital Prime Rate Income Trust
One Parkview Plaza
Oakbrook Terrace, IL 60181
Lending Office for Eurodollar Advances:
Van Kampen American Capital Prime Rate Income Trust
One Parkview Plaza
Oakbrook Terrace, IL 60181
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
PARIBAS CAPITAL FUNDING LLC.
By: /s/ Eric Green
----------------------------------------------
Name: Eric Green
-----------------------------------------
Title: Director
----------------------------------------
Address for Notices:
Paribas Capital Funding LLC
787 Seventh Avenue
32nd Floor
New York, NY 10019
Attention: Michael Weinberg
Fax No.: (212) 841-2144
Telephone No.: (212) 841-2544
Lending Office for Base Rate Advances:
Paribas Capital Funding LLC
787 Seventh Avenue
32nd Floor
New York, NY 10019
Lending Office for Eurodollar Advances:
Paribas Capital Funding LLC
787 Seventh Avenue
32nd Floor
New York, NY 10019
SECOND AMENDED AND RESTATED LOAN AGREEMENT
SIGNATURE PAGE
<PAGE>
EXHIBIT A
ADVANCE REQUEST FORM
TO: The First National Bank of Boston, as Administrative Agent
100 Federal Street
Boston, Massachusetts 02110
Attention: Elizabeth Everett
Ladies and Gentlemen:
The undersigned is an officer of Prime Medical Services, Inc. ("BORROWER"), and
is authorized to make and deliver this certificate pursuant to that certain
Second Amended and Restated Loan Agreement dated as of March 31, 1997, among
Borrower, The First National Bank of Boston, as Administrative Agent (the
"ADMINISTRATIVE AGENT"), and the Lenders named therein (as the same may be
amended, supplemented or modified from time to time, the "LOAN AGREEMENT").
Capitalized terms used and not otherwise defined herein shall have the same
meanings as set forth in the Loan Agreement. In accordance with the Loan
Agreement, Borrower hereby (check whichever is applicable):
1. Requests that the Lenders make a Eurodollar Advance under the
- ------- Revolving Credit Commitments in the manner set forth in item
(c) below for the following Interest Period:
One (1) month
-----------
Two (2) months
-----------
Three (3) months
-----------
Six (6) months
-----------
2. Requests that the Lenders make an Alternate Rate Advance in
- ------- the amount set forth in item (c) below./1/
In connection with the foregoing and pursuant to the terms and provisions of the
Loan Agreement, the undersigned hereby certifies to the Administrative Agent and
the Lenders that the following statements are true and correct:
(i) The representation and warranties contained in ARTICLE VII of
the Loan Agreement and in each of the other Loan Documents are
true and correct on and as of the date hereof with the same
force and effect as if made on and as of such date, except to
the extent that such representations and warranties speak to a
specific date or the facts on which such
- -------------------------
1 Alternate Rate Advances shall only be available to the extent
Eurodollar Advances are not available, as required by Article
IV of the Loan Agreement.
<PAGE>
representations and warranties are based have been changed by
transactions permitted by the Loan Documents.
(ii) No Default has occurred and is continuing or would result from
the Advance requested hereunder.
(iii) The amount of the Advance requested hereunder, when added to all
outstanding Advances, will not exceed the Revolving Credit
Commitments.
(iv) All information supplied below is true, correct, and complete
as of the date hereof.
(v) If the proceeds of the requested Advance are to be used to finance
a Permitted Acquisition, then the information set forth on
SCHEDULE 1 attached hereto is true, correct, and complete as of
the date hereof.
(a) Outstanding principal amount of Advances under the Revolving
Credit Commitments $
---------
(b) Net Availability for Advances:
[The amount of the Revolving Credit Commitments minus
outstanding Advances under the Revolving Credit Commitments] $
---------
(c) Amount of Requested Advance $
---------
BORROWER:
PRIME MEDICAL SERVICES, INC.
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date of Requested Advance:
----------------------------------
[insert date of Requested Advance]
-2-
<PAGE>
SCHEDULE 1
PERMITTED ACQUISITION CERTIFICATION
Borrower hereby to the Administrative Agent and Lenders that:
1. The name of the Person, or from which the business or assets to be,
acquired is _________________.
2. The proposed Acquisition by Borrower or its Subsidiary is of a business,
assets or Person which is engaged in substantially the same business as the
business conducted by Borrower or such Subsidiary, or any other business
reasonably related thereto.
3. The Acquisition has been approved and recommended by the board of directors
or other applicable governing body of the Person to be acquired or from
which such business or assets are to be acquired.
4. After giving effect to such Acquisition, Borrower or the Subsidiary that is
the acquiring party is Solvent and the Companies, on a consolidated basis,
are Solvent.
5. After giving effect to such Acquisition, no Default shall exist or occur as
a result of, and after giving effect to, such Acquisition.
6. If such Acquisition is a merger, Borrower or the Subsidiary that is the
acquiring party will be the surviving entity after giving effect to such
merger;
7. (a) The aggregate purchase price with respect to such Acquisition is
$_____________________;
(b) The EBITDA of the Person acquired (for the four (4) fiscal quarters
ending on the most recently ended fiscal period prior to the date of
the Acquisition) times five (5) is $____________; and
(c) The excess of (b) over (a) is $_______.
8. The aggregate consideration for such Acquisition does not exceed
$10,000,000.00, and the aggregate cash consideration for all Acquisitions
during the immediately preceding twelve (12) month period does not exceed
$20,000,000.00.
9. After giving effect to the Acquisition:
(a) The aggregate Debt of the Companies (including any Advances under the
Revolving Credit Commitments) will be $______________.
(b) The EBITDA of the Companies (including EBITDA for the Person, assets
or business acquired pursuant to the Acquisition) for the four
(4) fiscal quarters ending on the closing of the Acquisition is
$________________.
(c) 2.75 or other applicable number pursuant to the definition of
"PERMITTED ACQUISITION" times (b) = $_____________.
-i-
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT AND ACCEPTANCE
Dated ____________, 19__
Reference is hereby made to that certain Amended and Restated Loan
Agreement dated as of March 31, 1997 (as the same may be amended, supplemented
or modified from time to time, the "LOAN AGREEMENT"), among PRIME MEDICAL
SERVICES, INC., a Delaware corporation ("BORROWER"), each of the Lenders or
other lending institutions which are or may from time to time become signatories
thereto (the "LENDERS"), and THE FIRST NATIONAL BANK OF BOSTON, as
Administrative Agent for itself and the other Lenders (in such capacity, the
"ADMINISTRATIVE AGENT"). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Loan Agreement.
______________________________________________________ (the "ASSIGNOR")
and___________________________________ (the "ASSIGNEE") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse, and the Assignee hereby purchases and assumes from the Assignor as of
the Effective Date (as defined in SECTION 4 below), the following (the "ASSIGNED
INTEREST"): [check and complete, as appropriate]
[ ] A - % interest in the Revolving Credit Commitment of the Assignor
-----
and of the outstanding principal amount owed to the Assignor in
respect of its Advances under its Revolving Credit Commitment,
together with all of the rights and obligations of the Assignor
relating to such Assigned Interest under the Loan Agreement and the
other Loan Documents.
[ ] A - % interest the Term Loan A Commitment of the Assignor and
-----
of the outstanding principal amount owed to the Assignor in respect of
its Advances under its Term Loan A Commitment, together with all of
the rights and obligations of the Assignor relating to such Assigned
Interest under the Loan Agreement and the other Loan Documents.
[ ] A - % interest in the Term Loan B Commitment of the Assignor and
-----
of the outstanding principal amount owed to the Assignor in respect of
its Advances under its Term Loan B Commitment, together with all of
the rights and obligations of the Assignor relating to such Assigned
Interest under the Loan Agreement and the other Loan Documents.
[ ] 100% of all of the Assignor's rights and obligations under the Loan
Agreement and the other Loan Documents, including without limitation,
100% of the Assignor's interest in its Revolving Credit Commitment,
100% of the Assignor's interest in its Term Loan A Commitment and 100%
of the total outstanding principal amount owed to the Assignor.
2. The Assignor: (i) represents that as of the date hereof, its Revolving
Credit Commitment is $______________________ and the outstanding principal of
its Advances, if any, under its Revolving Credit Commitment is
$_________________________, the outstanding principal amount of its Term Loan A
Commitment, if any, is $______________________, the outstanding principal
balance of its Advances under its Term Loan A Commitment, if any, is
$____________________ (all as unreduced by any assignments which have not yet
become effective), its Term Loan B Commitment, if any, is $__________________,
and the outstanding principal balance of its Advances under the Term Loan B
Commitment, if any, is $________________________; (ii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the
<PAGE>
Loan Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Agreement or any
other Loan Document, other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear
of any adverse claim; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower, any
Guarantor or any other Obligated Party or the performance or observance by the
Borrower, any guarantor or any other Obligated Party of any of their obligations
under the Agreement or any other Loan Document; and (iv) attaches the Notes held
by Assignor and requests that the Administrative Agent exchange such Notes for
new Notes payable to the order of (A) Assignee in an amount equal to the
Commitments assumed by the Assignee pursuant hereto, and (B) the Assignor in an
amount equal to the Commitments, if any, retained by the Assignor under the Loan
Agreement, respectively, as specified above.
3. The Assignee: (i) represents and warrants that it is legally
authorized to enter in this Assignment and Acceptance; (ii) confirms that it has
received a copy of the Loan Agreement, together with copies of the most recent
financial statements delivered pursuant to SECTION 8.1 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (iii) agrees
that it will, independently and without reliance upon the Administrative Agent,
the Assignor, or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Loan Agreement and the other Loan
Documents; (iv) confirms that it is eligible to be an Assignee: (v) appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all the obligations which by the terms of the Loan Agreement
and the other Loan Documents are required to be performed by it as a Lender; [;
and (vii) attaches the forms prescribed by the Internal Revenue Service of the
United States certifying as to the Assignee's exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Loan Documents or such other documents as are necessary to indicate that all
such payments are subject to such tax at a rate reduced by an applicable tax
treaty]./1/
4. The effective date for this Assignment and Acceptance shall be _____,
19_______ (the "EFFECTIVE DATE")./2/ Following the execution of this Assignment
and Acceptance, it will be delivered to the Administrative Agent for acceptance
and recording by the Administrative Agent.
5. Upon such acceptance and recording, from and after the Effective Date,
(i) the Assignee shall be a party to the Loan Agreement and, to the extent
provided in this Assignment and Acceptance, shall have the rights and
obligations of a Lender thereunder and under the other Loan Documents and (ii)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Loan
Agreement and the other Loan Documents.
6. Upon such acceptance and recording, from and after the Effective Date,
the Administrative Agent shall make all payments in respect of the interest
assigned hereby (including payments of principal, interest, fees, and other
amounts) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective Date by the
Administrative Agent or with respect to the making of this assignment directly
between themselves.
- --------------------------
1 If the Assignee is organized under the laws of a jurisdiction outside
the United States.
2 Such date shall be at least five (5) Business Days after the execution
of this Assignment and Acceptance and delivery thereof to the
Administrative Agent.
-2-
<PAGE>
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts and applicable
laws of the United States of America.
[NAME OF ASSIGNOR],
By:
----------------------------------------
Name:
-------------------------------
Title:
------------------------------
[NAME OF ASSIGNEE],
By:
----------------------------------------
Name:
-------------------------------
Title:
------------------------------
ACCEPTED BY:
THE FIRST NATIONAL BANK OF BOSTON
By:
----------------------------------
Name:
-------------------------
Title:
------------------------
Date:
-------------------------
-3-
<PAGE>
EXHIBIT C
FORM OF REVOLVING CREDIT NOTE
$______________ Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
________________________________ ("PAYEE"), at the offices of The First National
Bank of Boston, as Administrative Agent (together with any successor as provided
in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100
Federal Street, Boston, Massachusetts, on April 30, 2001, in lawful money of the
United States of America, the principal sum of______________________________
DOLLARS ($_______________), or so much thereof as may be advanced and
outstanding hereunder together with the interest on the outstanding principal
balance from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms of
that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Revolving Credit Notes described therein.
Capitalized terms used and not otherwise defined herein shall have the same
meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's right as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. Accrued and unpaid interest on this Note shall
be due and payable on each Payment Date and on the Termination Date. All past-
due principal and interest shall bear interest as the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If and excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in
<PAGE>
full, any remaining excess shall forthwith be paid to Maker. In determining
whether or not the interest paid or payable exceeds the Maximum Rate, Maker, the
Administrative Agent and Payee shall, to the extent permitted by applicable law,
(i) characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the entire contemplated term of the
indebtedness evidenced by this Note so that the interest for the entire term
does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any effort
in any attempt to enforce payment of all or any part or installment of any sum
due the holder hereunder, or if this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings, Maker
agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable laws of the United States
of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
Maker hereby authorizes the Administrative Agent, Payee and the holder
hereof to endorse on the SCHEDULE attached to this Note or any continuation
thereof or to record in their internal records all Advances made to Maker
hereunder and all payments made on account of the principal thereof, which
endorsements or recordings shall be prima facie evidence as to the outstanding
principal amount of this Note; provided, however, any failure by the
Administrative Agent, Payee or the holder hereof to make any such endorsement or
recording shall not limit or otherwise affect the obligations of Maker under the
Agreement or this Note.
-2-
<PAGE>
[This Note, together with all the other Revolving Credit Notes issued on
the date hereof are given in renewal, amendment, increase and restatement, but
not extinguishment, of the Revolving Credit Notes issued under the Amended and
Restated Loan Agreement dated as of April 26, 1996 among Maker, NationsBank, the
Administrative Agent, and each of the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By:
--------------------------------------
Cheryl Williams
Vice President-Finance
-3-
<PAGE>
SCHEDULE
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Date Advance Principal Payment Balance
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<PAGE>
EXHIBIT D
FORM OF TERM NOTE A
$_________________ Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
_______________________________________ ("PAYEE"), at the offices of The First
National Bank of Boston, as Administrative Agent (together with any successor as
provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at
100 Federal Street, Boston, Massachusetts, in lawful money of the United States
of America, the principal sum of ______________ DOLLARS ($_________), together
with interest on the outstanding principal balance from day to day remaining, as
herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Term Notes described therein. Capitalized terms
used and not otherwise defined herein shall have the same meanings as set forth
in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent
<PAGE>
permitted by applicable law, (i) characterize any non-principa l payment as an
expense, fee, or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by this Note so that the
interest for the entire term does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
[This Note, together with all the other Term Notes A issued on the date
hereof, are given in renewal, amendment, and restatement, but not extinguishment
of, the Term Notes issued under the Amended and Restated Loan Agreement dated as
of April 26, 1996 among Maker, NationsBank, the Administrative Agent and each of
the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By:
---------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
EXHIBIT E
FORM OF TERM NOTE B
$_______________ Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of_______
("PAYEE"), at the offices of The First National Bank of Boston, as
Administrative Agent (together with any successor as provided in the Agreement,
hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100 Federal Street, Boston,
Massachusetts, in lawful money of the United States of America, the principal
sum of ________ DOLLARS ($_______), together with interest on the outstanding
principal balance from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same has been amended through the date hereof and may be further amended,
supplemented or modified from time to time, the "AGREEMENT") and is one of the
Term B Notes described therein. Capitalized terms used and not otherwise defined
herein shall have the same meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid
<PAGE>
or payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent permitted by applicable law, (i) characterize any non-
principal payment as an expense, fee, or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by this Note so that the interest for the entire term does not exceed the
Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable. attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
PRIME MEDICAL SERVICES, INC.
By:
-----------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
$$NOFOLIO
EXHIBIT F
PERFECTION CERTIFICATE
The undersigned is an officer of PRIME MEDICAL SERVICES, INC., a Delaware
corporation ("BORROWER"), and is authorized to make and deliver this
certificate. Borrower hereby certifies, with reference to that certain Borrower
Security Agreement (herein so called) dated as of April 26, 1996 between
Borrower and The First National Bank of Boston, as Administrative Agent
("AGENT") for itself and certain other Lenders (the "LENDERS"), as amended and
those certain Guarantor Security Agreements (herein so called) dated as of April
26, 1996 between the Guarantors (as defined in that certain Second Amended and
Restated Loan Agreement of even date herewith among Borrower, the Administrative
Agent and the Lenders), as amended and the Administrative Agent (the Borrower
Security Agreement and the Guarantor Security Agreements being herein referred
to collectively as the "SECURITY AGREEMENTS") (capitalized terms used and not
otherwise defined herein shall have the same meanings as set forth in the
Security Agreements), to the Administrative Agent and each Lender as follows:
1. NAMES.
(a) There have been no changes since April 26, 1996 in the exact
corporate name of Borrower and each Guarantor as such name appears on each
such company's Certificate of Incorporation or Articles of Incorporation
is:
(b) The following is a list of all other names (including trade names
or similar appellations) used by Borrower and each Guarantor, or any other
business or organization to which any such company has succeeded, now or at
any time since April 26, 1996:
<PAGE>
2. CURRENT LOCATIONS.
(a) Any change of the chief executive office of Borrower and each
Guarantor since April 26, 1996 is at the address indicated for each such
company below:
Debtor:
Mailing Address:
County:
State:
Debtor:
Mailing Address:
County:
State:
(b) The following are all other new locations since April 26, 1996 in the
United States of America at which Borrower or any Guarantor maintains any books
or records relating to any of the Collateral consisting of accounts, contract
rights, chattel paper, general intangibles or mobile goods:
Debtor:
Mailing Address: [Complete for Borrower and each Guarantor]
County:
State:
(c) The following are the names and addresses of all persons or entities
other than Borrower and each Guarantor, such as lessees or consignees, which
since April 26, 1996 have possession or are intended to have possession of any
of the Collateral consisting of chattel paper, inventory or equipment:
Name:
Mailing Address:
County:
State:
-2-
<PAGE>
3. CAPITALIZATION. Any changes in the capitalization of each of the
Subsidiaries of Borrower since April 26, 1996 is as set forth below:
[Complete for each Subsidiary]
4. PARTNERSHIP INTERESTS. Changes in the partnership interests acquired
by Borrower since April 26, 1996 and the Subsidiaries of Borrower and
information regarding each Partnership is set forth below:
5. UNUSUAL TRANSACTIONS. Except as set forth in SCHEDULE 1 attached
hereto, all of the Collateral has been originated by the applicable company in
the ordinary course of such company's business or consists of goods which have
been acquired by such company in the ordinary course from a person in the
business of selling goods of that kind.
EXECUTED as of March _________, 1997.
---------------------------------------
Cheryl Williams
Chief Financial Officer
-3-
<PAGE>
EXHIBIT G
FORM OF OPINION OF COUNSEL FOR BORROWER AND GUARANTORS
1. Borrower is a Delaware corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and has
all corporate power and authority required to own its property and carry on its
business as presently conducted and proposed to be conducted. Borrower is duly
qualified or licensed to do business in each jurisdiction where the nature of
the business in which it is engaged makes such qualification or licensing
necessary including, without limitation, the States of ___________________./3/
2. Borrower has the corporate power and requisite authority to execute,
deliver and carry out the terms and provisions of the Loan Documents, and all
other documents and instruments delivered pursuant to the terms of such Loan
Documents, and has taken all corporate action necessary to duly authorize (i)
the execution, delivery and performance by Borrower of the terms and provisions
of the Loan Documents, and (ii) the performance by Borrower of its obligations
under the Loan Documents.
3. Each Guarantor has the corporate power and requisite authority to
execute, deliver and carry out the terms and provisions of the Loan Documents to
which it is a party, and all other documents and instruments delivered pursuant
to the terms of such Loan Documents, and has taken all corporate action
necessary to duly authorize (i) the execution, delivery and performance by such
Guarantor of the terms and provisions of the Loan Documents to which it is a
party, and (ii) the performance by such Guarantor of its obligations under the
Loan Documents to which it is a party.
4. Neither the execution and delivery by Borrower of the Loan Documents,
nor the performance by Borrower of its obligations thereunder, nor compliance by
Borrower with the terms and provisions thereof, will (a) contravene any
provision of law, statute, rule or regulation of the State of Texas (or any
political subdivision thereof) or the United States of America, to which
Borrower is subject, or conflict with, or result in any breach of, any material
agreement, mortgage, indenture, deed of trust or other instrument known to us to
which Borrower may be subject, including, without limitation, the agreements set
forth on EXHIBIT A attached hereto, or result in the creation of any mortgage,
lien, pledge or encumbrance in respect of any property of Borrower (other than
liens in your favor), (b) contravene any judgment, decree, license, order or
permit known to us to be applicable to Borrower, (c) violate any provision of
the certificate of incorporation or bylaws of Borrower, or (d) violate or cause
a result under any partnership agreement of any Partnership. To the best of our
knowledge, after reasonable inquiry, no consent, approval, authorization or
order of any governmental or public body or authority, or of any third party, is
required in connection with the execution, delivery and performance by Borrower
of the Loan Documents or the borrowing and repayment of money by Borrower
thereunder.
5. Neither the execution and delivery by the Guarantors of the Loan
Documents, nor the performance by Guarantors of their respective obligations
thereunder, nor compliance by Guarantors with the terms and provisions thereof,
will (a) contravene any provision of law, statute, rule or regulation of the
State of Texas (or any political subdivision thereof) or the United States of
America, to which any Guarantor is subject, or conflict with, or result in any
breach of, any material agreement, mortgage, indenture, deed of trust or other
instrument known to us to which any Guarantor may be subject, including, without
limitation, the agreements set forth on EXHIBIT A attached hereto, or result in
the creation of any mortgage, lien, pledge or encumbrance in respect of any
property of any Guarantor (other than liens in your favor), (b) contravene any
judgment, decree, license, order or permit known to us to be applicable to any
Guarantor, (c) violate any provision of the certificate of incorporation or
bylaws of any Guarantor, or (d) violate or cause a default under any partnership
agreement of any Partnership. To the best of our knowledge, after reasonable
inquiry, no consent, approval, authorization or order of any governmental or
public body or authority, or of any third party, is required in connection with
the execution, delivery and performance by Guarantors of the Loan Documents or
the borrowing and repayment of money by Guarantors thereunder.
- --------------------------
3 Include a corresponding opinion for each Guarantor and each
Partnership.
<PAGE>
6. ________________, __________________ of Borrower is authorized to
execute the Loan Documents on behalf of Borrower./4/
7. The Loan Documents to which Borrower is a party have been duly
executed, presented and delivered by Borrower and constitute the legal and
binding obligations of Borrower, enforceable in accordance with their respective
terms.
8. The Loan Documents to which each Guarantor is a party have been duly
executed, presented and delivered by such Guarantor and constitute the legal and
binding obligations of such Guarantor, enforceable in accordance with their
respective terms.
9. To the best of our knowledge, there are no legal or arbitral actions,
suits or proceedings pending or threatened against Borrower, any Guarantor or
any Partnership which, if adversely determined, would have a material adverse
effect on the financial condition, operations, properties, assets or business of
any of Borrower, Guarantors or the Partnerships or on the transactions
contemplated in the Loan Documents.
10. The Security Agreements and the Pledge Agreements create in favor of
the Administrative Agent, for the benefit of the Lenders, a valid lien and
security interest, which attaches to the Collateral.
11. Upon the filing of the Financing Statements in the Office of the
Secretary of State of ___________ and in the Real Property Records of the
__________ County, ___________________, the liens and security interests created
by the Security Agreements shall constitute perfected, first priority liens and
security interests in the Collateral.
12. ______________'s authorized capitalization consists of ____________
shares of common stock, $_____________ par value per share, of which
______________ shares are issued and outstanding. The outstanding shares have
been authorized and validly issued and are fully paid and nonassessable./5/
13. Assuming that the Administrative Agent takes and keeps possession of
the Pledged Shares under the Security Agreements, all actions have been taken to
create and to perfect the security interest of the Administrative Agent, for the
benefit of the Lenders, in the Pledged Shares.
14. Borrower is not an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1940, as amended.
15. A Texas court, in a case properly presented, would uphold the
Massachusetts choice of law provisions in the Loan Documents.
16. The Loan, as evidenced by the Loan Documents, is not usurious.
- --------------------------
4 Similar opinion for each Guarantor.
5 Similar opinion for each Guarantor.
-2-
<PAGE>
EXHIBIT H
FORM OF COMPLIANCE CERTIFICATE
TO: The First National Bank of Boston, as Administrative Agent
and each of the Lenders party to the
Loan Agreement (hereinbelow defined)
100 Federal Street
Boston, Massachusetts 02110
Attention: Elizabeth Everett
Ladies and Gentlemen:
The undersigned is the __________ of PRIME MEDICAL SERVICES, INC.
("BORROWER"), and is authorized to make and deliver this certificate pursuant to
that certain Second Amended and Restated Loan Agreement (the "LOAN AGREEMENT")
dated as of March 31, 1997, among Borrower, each of the Lenders or other lending
institutions which is or may from time to time become a signatory thereto
(collectively, the "LENDERS" and individually, a "LENDER"), and The First
National Bank of Boston, as Administrative Agent for itself and the other
Lenders (together with its successors in such capacity, the "ADMINISTRATIVE
AGENT"). Capitalized terms used and not otherwise defined herein shall have the
same meanings as set forth in the Loan Agreement.
This certificate is being delivered as of______ , 19________ [insert the
end of the most recent reporting period required by SECTION 8.1(c) of the Loan
Agreement (the "REPORT DATE") pursuant to SECTION 8.1(c) of the Loan Agreement.
All of the calculations set forth on EXHIBIT A hereto are as of the Report Date
and have been made pursuant to the terms of the Loan Agreement.
The undersigned, as an authorized officer of Borrower, hereby certifies to
the Administrative Agent and the Lenders that:
1. DEFAULTS. No Default has occurred and is continuing, or if a Default
has occurred, EXHIBIT B attached hereto describes the nature thereof and the
steps taken or to be taken by Borrower to remedy such Default.
2. REPRESENTATIONS. The representations and warranties contained in the
Loan Agreement and each of the other Loan Documents are true and correct on and
as of the date hereof with the same force and effect as if made on and as of the
date hereof, except to the extent that such representations and warranties speak
to a specific date or the facts on which such representations and warranties are
based have been changed by transactions permitted by the Loan Documents.
3. CALCULATIONS. Attached hereto as schedules are the calculations
supporting the computations set forth in EXHIBIT A hereto. All information
contained in EXHIBIT A and on the attached schedules is true and correct.
4. GAAP FINANCIAL STATEMENTS. The unaudited financial statements
attached hereto, if any, were prepared in accordance with GAAP and fairly
represent (subject to year-end audit adjustments) the financial conditions and
results of operations of the Companies on a consolidated or consolidating, as
the case may be, basis as of the date and for the periods indicated therein.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Compliance
Certificate effective this day of _________________, 19____.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
-2-
<PAGE>
EXHIBIT A
TO
COMPLIANCE CERTIFICATE
CALCULATIONS
A. TOTAL DEBT TO EBITDA.
1. Aggregate amount of Debt of the Companies $
------------
2. EBITDA of the Companies (for the four (4) fiscal
quarter period ending) $
------------
3. Ratio of Debt to EBITDA (1 divided by 2)
------------
4. Maximum Permitted /1/
------------
- ----------------------
1 Maximum permitted for the following periods:
=====================================================================
PERIOD RATIO
---------------------------------------------------------------------
January 1, 1997 through December 31, 1997 3.00 to 1.0
---------------------------------------------------------------------
January 1, 1998 through December 31, 1998 2.75 to 1.0
---------------------------------------------------------------------
January 1, 1999 through December 31, 1999 2.25 to 1.0
---------------------------------------------------------------------
January 1, 2000 and thereafter 2.00 to 1.0
=====================================================================
-i-
<PAGE>
B. INTEREST COVERAGE RATIO.
1. EBITDA $
------------
2. Consolidated Interest Expense $
------------
3. Ratio of EBITDA to Interest Expense
(1 divided by 2)
------------
4. Minimum Required /2/
------------
- ----------------------
2 Minimum required for the following periods:
=====================================================================
PERIOD RATIO
---------------------------------------------------------------------
As of the last day of March 31, 1997, June 3.75 to 1.0
30, 1997, September 30, 1997 and December
31, 1997, in each case for the four (4)
fiscal quarters then ended
---------------------------------------------------------------------
As of the last day of March 31, 1998, June 4.50 to 1.0
30, 1998, September 30, 1998 and December
31, 1997, in each case for the four (4)
fiscal quarters then ended
----------------------------------------------------------------------
As of the last day of each fiscal quarter of 5.25 to 1.0
Borrower thereafter, commencing March 31,
1999, in each case for the four (4) fiscal
quarters then ended
======================================================================
-ii-
<PAGE>
C. TOTAL DEBT SERVICE COVERAGE RATIO.
1. EBITDA $
------------
2. Less: Capital Expenditures $
------------
3. EBITDA less Capital Expenditures (1-2)
------------
4. Total Principal and Interest Expense
------------
5. Ratio of EBITDA to Total Debt Service
(3 divided by 4)
------------
6. Minimum Required /3/
------------
- ---------------------
3 Minimum Required for the following periods:
=====================================================================
PERIOD RATIO
---------------------------------------------------------------------
As of the last day of each fiscal quarter of 1.30 to 1.0
Borrower thereafter, commencing March 31,
1997, in each case for the four (4) fiscal
quarters then ended
======================================================================
-iii-
<PAGE>
D. CONSOLIDATED NET WORTH.
1. Consolidated Net Worth $
------------
2. Required Minimum:
a. Base Minimum $ /4/
------------
b. Plus: Beginning June 30, 1996 to and $
including March 30, 1998, an amount ------------
equal to one hundred percent (100%)
of the increase in net worth arising from
any acquisition or equity issuance
c. Plus: Beginning June 30, 1998, an amount $
equal to seventy-five percent (75%) of ------------
Consolidated Net Income for each fiscal
quarter
TOTAL REQUIRED MINIMUM: $
------------
- ---------------------
4 The base minimum is as follows:
=====================================================================
PERIOD AMOUNT
---------------------------------------------------------------------
September 30, 1996 through March 30, 1997 $65,000,000.00
---------------------------------------------------------------------
March 31, 1997 through September 29, 1997 $70,000,000.00
---------------------------------------------------------------------
September 30, 1997 through March 30, 1998 $75,000,000.00
---------------------------------------------------------------------
March 31, 1998 and thereafter $75,000,000.00
=====================================================================
-iv-
<PAGE>
E. MINIMUM EBITDA.
1. Last Quarter:
a. EBITDA for Current Fiscal Quarter $
------------
b. Required Minimum $ 5,000,000.00
2. Last Two Quarters:
a. EBITDA for last two (2) fiscal quarters $
--------------
b. Required Minimum $12,000,000.00.
-v-
<PAGE>
SCHEDULE 1
COMMITMENTS AND WIRING INFORMATION
- --------------------------------------------------------------------------------
ADMINISTRATIVE AGENT
- -----------------------------------------
The First National Bank of Boston
100 Federal Street
P.O. Box 2016
Boston, Massachusetts 02100
Attention: Elizabeth Everett
Fax No.: (617) 434-0819
Telephone No.: (617) 434-2318
Wiring Instructions:
The First National Bank of Boston
ABA # 011-000-390
Reference: Prime Medical Services, Inc.
Attention: HT & ENV SVCS. ADM 50, 60
Account # ____________________
- --------------------------------------------------------------------------------
REVOLVING
CREDIT TERM LOAN A TERM LOAN B
LENDER COMMITMENTS COMMITMENTS COMMITMENTS
- --------------------------------------------------------------------------------
The First National Bank of Boston $13,888,888.89 $12,500,000.00 $ 0.00
100 Federal Street
P.O. Box 2016
Boston, Massachusetts 02100
Attention: Elizabeth Everett
Fax No.: (617) 434-0819
Telephone No.: (617) 434-2318
Wiring Instructions:
The First National Bank of Boston
ABA # 011-000-390
Reference: Prime Medical Services, Inc.
Attention: HT & ENV SVCS. ADM 50, 60
Account # ___________________
- --------------------------------------------------------------------------------
-i-
<PAGE>
- --------------------------------------------------------------------------------
REVOLVING
CREDIT TERM LOAN A TERM LOAN B
LENDER COMMITMENTS COMMITMENTS COMMITMENTS
- --------------------------------------------------------------------------------
NationsBank of Texas, N.A. $14,111,111.11 $12,500,000.00 $10,00,000.00
515 Congress Avenue, 11th Floor
Austin, Texas 78701
Attention: Teena Belcik
Fax No.: (512) 397-2052
Telephone No.: (512) 397-2841
Wiring Instructions:
NationsBank of Texas, N.A.
1401 Elm Street
Dallas, Texas 75202
Credit Account No. 0180019828
ABA # 111000025
Reference: Prime Medical
Services, Inc.
Attention: Teena Belcik
- --------------------------------------------------------------------------------
Imperial Bank $ 6,666,666.67 $ 7,500,000.00 $ 0.00
226 Airport Parkway
San Jose, CA 95110
Attention: Kelly Davis
Fax No.: (408) 451-8586
Telephone No.: (408) 451-8589
Wiring Instructions:
Imperial Bank
9920 South La Cienga Blvd.
Inglewood, CA 90301
Attention: Santa Clara
Valley Regional Office
Routing #: 122201444
Account Name to Credit:
Prime Medical
Account Number to Credit:
717015211
- --------------------------------------------------------------------------------
The Sumitomo Bank Limited $ 7,000,000.00 $ 5,000,000.00 $ 0.00
2 Houston Center, Suite 3750
Houston, TX 77010-1086
Attention: Bruce Portillo
Fax No.: (713) 759-1419
Telephone No.: (713) 759-0770
Wiring Instructions:
Sumitomo USCBD, Chicago
ABA #: 071001850
Reference: Prime Medical
================================================================================
-ii-
<PAGE>
- --------------------------------------------------------------------------------
REVOLVING
CREDIT TERM LOAN A TERM LOAN B
LENDER COMMITMENTS COMMITMENTS COMMITMENTS
- --------------------------------------------------------------------------------
Bank One, Texas, N.A. $ 8,333,333.33 $ 7,500,000.00 $ 0.00
221 West 6th Street, Suite 200
Austin, TX 78701
Attention: Ed Lick
Fax No.: (512) 479-1565
Telephone No.: (512) 479-5730
Wiring Instructions:
Bank One, Texas, N.A.
ABA # 111000614
Acct: 0749905618
Reference: Prime Medical
Services, Inc.
Loan Acct #: 1517169342
Attention: Lora Roberts
Telephone No.: (817) 884-4399
================================================================================
-iii-
<PAGE>
- --------------------------------------------------------------------------------
REVOLVING
CREDIT TERM LOAN A TERM LOAN B
LENDER COMMITMENTS COMMITMENTS COMMITMENTS
- --------------------------------------------------------------------------------
Crescent/MACH Partners,L.P. $ 0.00 $ 0.00 $ 5,000,000.00
Address for Notices:
TCW Asset Management Company
200 Park Avenue, Suite 2200
New York, NY 10166-0228
Attention: Mark J. Gold/Justin Driscoll
Fax No.: (212) 297-4159
Telephone No.: (212) 297-4000
With copies to:
Crescent/Mach I Partners, L.P.
c/o State Street Bank & Trust Co.
Two International Place
Boston, MA 02110
Attention: Jackie Kilroy
Fax No.: (617) 664-5366
Telephone No.: (617) 664-5477
Wiring Instructions:
State Street Bank and Trust Co., Boston
ABA #: 011-00-0028
A/C #: 9900-126-5
Re: Crescent/MACH I
Ref: Prime Medical Services, Inc.
Agent Bank I.D. #: 987
Institutional I.D. #: 93548
Tax I.D. #: 95-431-9954
Attention: Steven Savage
Phone: (617) 664-5629
================================================================================
-iv-
<PAGE>
- --------------------------------------------------------------------------------
REVOLVING
CREDIT TERM LOAN A TERM LOAN B
LENDER COMMITMENTS COMMITMENTS COMMITMENTS
- --------------------------------------------------------------------------------
Merrill Lynch Senior $ 0.00 $ 0.00 $ 5,000,000.00
Floating Rate Fund, Inc.
800 Scudders Mill Road, Area 1B
Plainsboro, NJ 08536
Attention: Jill Montanye
Fax No.: (609) 282-2550
Telephone No.: (609) 282-3102
Wiring Instructions:
Bank of New York
New York, NY
ABA #: 021000018
Account #: IOC # 612 Mutual Funds
Custody Incoming
Secondary Account #: 245215
Account Name: Merrill Lynch Senior
Floating Rate Fund, Inc.
Attention: Michelle Moore
(212) 495-2929
Reference: Prime Medical Services,
Inc.
- --------------------------------------------------------------------------------
Pilgrim America Prime Rate Trust $ 0.00 $ 0.00 $5,000,000.00
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
Attention: Michael Bacevich
Fax No.: (602) 417-8327
Telephone No.: (602) 417-8258
Wiring Instructions:
State Street Bank & Trust Co.
Boston, MA
ABA #: 011-00-0028
A/C #: 9903-942-2
Reference: Pilgrim America Prime
Rate Trust Prime Medical
================================================================================
-v-
<PAGE>
- --------------------------------------------------------------------------------
REVOLVING
CREDIT TERM LOAN A TERM LOAN B
LENDER COMMITMENTS COMMITMENTS COMMITMENTS
- --------------------------------------------------------------------------------
The ING Capital Senior $ 0.00 $ 0.00 $ 5,000,000.00
Secured High Income Fund, L.P.
Address for Notices:
ING Capital Advisors, Inc.
333 South Grand Avenue
Suite 4250
Los Angeles, CA 90071
Attention: Kathleen Lenarcic
Fax No.: (213) 346-3995
Telephone No.: (213) 346-3971
Wiring Instructions:
State Street Bank & Trust Co.
Boston, MA
ABA # 0110-0002-8
Account: Corporate Trust Dept.,
Acct. #9903-942-2
FFC ING Capital SSHIF
Acct. #EW0673, Fund T91A
Attn: Lenore Crummey-Benoit,
AVP Operations
Ref: Prime Medical Services, Inc.
- --------------------------------------------------------------------------------
Van Kampen American Capital Prime $ 0.00 $ 0.00 $ 5,000,000.00
Rate Income Trust
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Jeffrey W. Maillet
Fax No.: (630) 684-6740/41
Telephone No.: (630) 684-6438
Wiring Instructions:
State Street Bank & Trust,
Boston, MA
ABA #: 011000028
Account #: 99001265
Re: VKAC PRIT - Prime Medical
- --------------------------------------------------------------------------------
-vi-
<PAGE>
- --------------------------------------------------------------------------------
REVOLVING
CREDIT TERM LOAN A TERM LOAN B
LENDER COMMITMENTS COMMITMENTS COMMITMENTS
- --------------------------------------------------------------------------------
Paribas Capital Funding LLC $ 0.00 $ 0.00 $ 5,000,000.00
787 Seventh Avenue
32nd Floor
New York, NY 10019
Attention: Michael Weinberg
Fax No.: (212) 841-2144
Telephone No.: (212) 841-2544
Wiring Instructions:
State Street Bank & Trust Company
Corporate Trust Department
ABA #: 011-00-0028
A/C#: 99039422
Reference: Paribas Capital
Attention: Matt Callahan
- --------------------------------------------------------------------------------
TOTAL COMMITMENTS $ 50,000,000 $ 45,000,000 $ 40,000,000
================================================================================
-vii-
<PAGE>
SCHEDULE 2
LIST OF GUARANTORS
1. Prime Medical Operating, Inc., a Delaware corporation
2. Prime Management, Inc., a Nevada Corporation
3. Prime Cardiac Rehabilitation Services, Inc., a Delaware corporation
4. Prime Diagnostic Services, Inc., a Delaware corporation
5. Prime Lithotripsy Services, Inc., a New York corporation
6. Prime Kidney Stone Treatment, Inc., a New Jersey corporation
7. Prime Diagnostic Corp. of Florida, a Delaware corporation
8. Prime Lithotripter Operations, Inc., a New York corporation
9. Rehab Leasing Corp., a New York corporation
10. Texas Litho, Inc., a Delaware corporation
11. R.R. Litho, Inc., a Texas corporation
12. Ohio Litho, Inc., a Delaware corporation
13. Alabama Renal Stone Institute, Inc., an Alabama corporation
14. Sun Medical Technologies, Inc., a California corporation
15. Sun Acquisition, Inc., a California corporation
16. Lithotripters, Inc., a North Carolina corporation
17. Prime Medical Management, L.P., a Delaware limited partnership
18. Prostatherapies, Inc., a Delaware corporation
-i-
<PAGE>
SCHEDULE 3
LIST OF PARTNERSHIPS
1. Metro Atlanta Stonebusters, G.P.
2. Shasta Diagnostic Medical Group, J.V.
3. Southern California Stone Center, L.L.C.
4. Kidney Stone of South Florida, L.C.
5. Texas ESWL/Laser Lithotripter, Ltd.
6. Ohio Mobile Lithotripter, Ltd.
7. Ohio Mobile Lithotripter II, Ltd.
8. ARKLATX Mobile Lithotripter Limited
9. Northern California Kidney Stone Center, Ltd.
10. Mobile Kidney Stone Centers, Ltd.
11. Northern California Lithotripsy Associates
12. Lithotripter Institute of Northern California
13. Fayetteville Lithotripters Limited Partnership - Arizona I
14. Fayetteville Lithotripters Limited Partnership - Arkansas I
15. California Lithotripter Limited Partnership II, L.P.
16. Florida Lithotripters Limited Partnership I
17. Indiana Lithotripters Limited Partnership I
18. Louisiana Lithotripters Investment Limited Partnership
19. Fayetteville Lithotripters Limited Partnership - Louisiana I
20. Montana Lithotripters Limited Partnership I
21. Pacific Medical Limited Partnership
22. San Diego Lithotripters Limited Partnership
23. Fayetteville Lithotripters Limited Partnership - South Carolina I
24. Fayetteville Lithotripters Limited Partnership - South Carolina II
25. Tennessee Lithotripters Limited Partnership
26. Texas Lithotripsy Limited Partnership I L.P.
27. Texas Lithotripsy Limited Partnership II L.P.
28. Texas Lithotripsy Limited Partnership IV L.P.
29. Texas Lithotripsy Limited Partnership V L.P.
30. Fayetteville Lithotripters Limited Partnership - Utah I
31. Fayetteville Lithotripters Limited Partnership - Virginia I
32. California Lithotripters Limited Partnership III, L.P.
33. Las Vegas Lithotripters Limited Partnership
34. Mountain Lithotripsy Limited Partnership - I
35. Texas Lithotripsy Limited Partnership III L.P.
36. Pacific Lithotripsy
37. Mountain Lithotripsy
-i-
<PAGE>
SCHEDULE 7.5
EXISTING LITIGATION
NONE.
-i-
<PAGE>
SCHEDULE 7.9
EXISTING DEBT
1. Promissory Note dated April 26, 1994, issued by Prime Lithotripsy Services,
Inc. to Metro Atlanta Stonebusters, Inc. in the amount of $3,700,000.00.
Current Balance $983,333.00
2. Promissory Note dated July 15, 1992, issued by Prime Diagnostic Corp. of
Florida, Inc. to Image America of Tampa, Inc. in the amount of
$2,000,000.00.
Current Balance $40,000.00
3. Promissory Note dated August 30, 1994, issued by Prime Lithotripter
Operations to Baptist Medical Center - Montclair in the amount of
$316,000.08.
Current Balance $52,667.00
4. Promissory Note dated December 15, 1994, issued by Mobile Kidney Stone
Centers of California, Ltd. I to Imperial Bank in the amount of
$400,000.00.
Current Balance $200,000.00
5. Promissory Note dated August 5, 1991, issued by Texas Litho, Inc. to Texas
ESWL/Laser Lithotripter, Ltd. in the amount of $15,000.00.
Current Balance $15,000.00
6. Promissory Note dated August 1, 1991, issued by Ohio Litho, Inc. to Ohio
Mobile Lithotripter, Ltd. in the amount of $10,000.00.
Current Balance $10,000.00
7. Promissory Note dated December 17, 1990, issued by R.R. Litho, Inc. to
Arklatx Mobile Lithotripter, L.P. in the amount of $10,000.00.
Current Balance $10,000.00
8. Promissory Note dated December 31, 1995, issued by Ohio Litho, Inc. to Ohio
Mobile Lithotripter II, Ltd. in the amount of $30,000.00.
Current Balance $30,000.00
9. Equipment Lease dated July 28, 1993 between Copelco Leasing Corp. and Sun
Medical Technology, Inc., in the amount of $28,097.00.
Current Balance $11,195.00
10. Promissory Note dated February 6, 1996, issued by Fayetteville
Lithotripters Limited Partnership - Arizona I to First Citizens Bank in the
amount of $1,500,000.00.
Current Balance $930,111.00
11. Promissory Note dated August 26, 1996, issued by Mountain Lithotripsy
Limited Partnership I to First Citizens Bank in the amount of
$1,459,706.25.
Current Balance $1,240,806.26
-i-
<PAGE>
12. Promissory Note dated April 16, 1996, issued by Florida Limited Partnership
I to First Citizens Bank in the amount of $1,435,000.00.
Current Balance $548,995.00
13. Promissory Note dated November 14, 1995, issued by Fayetteville
Lithotripters Limited Partnership - South Carolina I to First Citizens Bank
in the amount of $600,000.00.
Current Balance $256,236.00
-ii-
<PAGE>
SCHEDULE 7.14.1
CAPITALIZATION OF SUBSIDIARIES
<TABLE>
<CAPTION>
COMPANY NAME CLASS/SERIES PAR VALUE AUTHORIZED OUTSTANDING
- ------------------------------------------ ----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Subsidiaries 100% Owned by Prime Medical
Services, Inc.
Prime Medical Operating, Inc. Common $ .05 10,000 1,000
Texas Litho, Inc. Common $ .01 1,000 1,000
R.R. Litho, Inc. Common $ .01 100,000 1,000
Ohio Litho, Inc. Common $ .01 1,000 1,000
Lithotripters, Inc. Common no par 100,000 40,000
FastStart, Inc. Common no par 100,000 10,000
National Lithotripters Association, Inc. Common no par 100,000 100
Prostatherapies, Inc. Common no par 1,000 100
Subsidiaries 100% Owned by Prime Medical
Operating, Inc.
Prime Management, Inc. Common $1.00 1,000 1,000
Prime Cardiac Rehabilitation Services, Inc. Common no par 100 50
Prime Diagnostic Services, Inc. Common no par 100 100
Prime Lithotripsy Services, Inc. Common no par 200 60
Prime Diagnostic Corp. of Florida Common no par 100 100
Prime Lithotripter Operations, Inc. Common no par 200 200
Rehab Leasing Corp. Common $ .01 1,000 100
Sun Medical Technologies, Inc. Common no par 37,751,525 5,385,313
Preferred-A no par 3,853,475 3,853,475
Preferred-B no par 18,395,000 12,703,265
Subsidiaries 100% Owned by Prime Lithotripsy
Services, Inc.
Prime Kidney Stone Treatment, Inc. Common no par 1,000 1,000
Alabama Renal Stone Institute, Inc. Common $1.00 1,000 1,000
Subsidiaries 100% Owned by Sun Medical
Technologies, Inc.
Sun Acquisition, Inc. Common no par 10,000,000 100,000
</TABLE>
-i-
<PAGE>
SCHEDULE 7.14.2
LIST OF PARTNERSHIP INTERESTS
OWNED BY COMPANIES
<TABLE>
<CAPTION>
%
------
<C> <S> <C>
1. Metro Atlanta Stonebusters, G.P. 60.00
2. Shasta Diagnostic Medical Group, J.V. 50.00
3. Southern California Stone Center, L.L.C. 32.50
4. Kidney Stone of South Florida L.C. 70.00
5. Texas ESWL/Laser Lithotripter, Ltd. 21.15
6. Ohio Mobile Lithotripter, Ltd. 17.64
7. Ohio Mobile Lithotripter II, Ltd. 27.33
8. ARKLATX Mobile Lithotripter Limited 19.25
9. Northern California Kidney Stone Center, Ltd. 38.06
10. Mobile Kidney Stone Centers, Ltd. 50.50
11. Northern California Lithotripsy Associates 19.35
12. Lithotripsy Institute of Northern California 1.00
13. Fayetteville Lithotripters Limited Partnership - Arizona I 37.00
14. Fayetteville Lithotripters Limited Partnership - Arkansas I 40.66
15. California Lithotripters Limited Partnership II, L.P. 20.00
16. Florida Lithotripters Limited Partnership I 20.00
17. Indiana Lithotripters Limited Partnership I 26.70
18. Louisiana Lithotripters Investment Limited Partnership 3.73
19. Fayetteville Lithotripters Limited Partnership - Louisiana I 27.46
20. Montana Lithotripters Limited Partnership I 53.00
21. Pacific Medical Limited Partnership 41.00
22. San Diego Lithotripters Limited Partnership 28.66
23. Fayetteville Lithotripters Limited Partnership - South Carolina I 39.00
24. Fayetteville Lithotripters Limited Partnership - South Carolina II 32.33
25. Tennessee Lithotripters Limited Partnership 33.00
26. Texas Lithotripsy Limited Partnership I L.P. 45.50
27. Texas Lithotripsy Limited Partnership II L.P. 46.00
28. Texas Lithotripsy Limited Partnership IV L.P. 50.00
29. Texas Lithotripsy Limited Partnership V L.P. 58.00
30. Fayetteville Lithotripters Limited Partnership - Utah I 35.57
31. Fayetteville Lithotripters Limited Partnership - Virginia I 36.19
32. California Lithotripters Limited Partnership III, L.P. 20.00
33. Las Vegas Lithotripters Limited Partnership 27.00
34. Mountain Lithotripsy Limited Partnership - I 44.00
35. Texas Lithotripsy Limited Partnership III L.P. 55.96
36. Pacific Lithotripsy 90.91
37. Mountain Lithotripsy 44.00
</TABLE>
-i-
<PAGE>
SCHEDULE 7.15
AGREEMENTS
Equipment Lease entered into by Texas ESWL/Laser Lithotripter, Ltd. (Lessee) and
Debis Financial Services, Inc. (Lessor) on October 5, 1992 in the amount of
$1,275,450. Equipment covered is Dornier MFL-5000 Lithotripter and 1992 Calumet
Coach. Monthly lease payments are $28,075. Lease expires November 1997.
Vehicle Lease Service Agreement entered into by Texas ESWL/Laser Lithotripter,
Ltd. (Lessee) and Paccar Leasing Corporation (Lessor) on October 9, 1995.
Equipment covered is a 1996 Peterbilt tractor. Monthly lease payments are $1,705
plus $0.058 per mile. Lease expires November 2000.
Lease Agreement entered into by ARKLATX Mobile Lithotripter, LP. (Lessee) and
Rollins Leasing Corp. (Lessor) on October 23, 1995. Equipment covered is a 1996
Freightliner tractor. Monthly lease payments are $1,574 plus $0.059 per mile.
Lease expires February 2001.
Lease Agreement entered into by Prime Kidney Stone Treatment, Inc. (Lessee) and
Rollins Leasing Corp. (Lessor) on January 18, 1996. Equipment covered is a 1996
Ford tractor. Monthly lease payments are $1,867 plus $0.073 per mile. Lease
expires February 2001.
See SCHEDULE 7.9.
-i-
<PAGE>
SCHEDULE 7.16
COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
NONE.
-i-
<PAGE>
SCHEDULE 7.19
ENVIRONMENTAL MATTERS
NONE.
-i-
<PAGE>
SCHEDULE 9.2
LIENS
<TABLE>
<CAPTION>
====================================================================================================================================
DATE AND
TIME DESCRIPTION
NAME LOCATION SECURED PARTY FILE NO. OF FILING OF COLLATERAL
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alabama Renal Stone Alabama Secretary A. Derrill Crowe and 94-28224 July 29, 1994 All cash, securities or
Institute, Inc. of State Paul R. Butrus at 11:31 a.m. other property now or
100 Brookwood Place hereafter held under
Suite 500 escrow agreement at
Birmingham, AL 35209 First Alabama Bank of
Birmingham; and all
accounts and all other
rights of Debtor to the
payment of money, now
existing or hereafter
arising.
- ------------------------------------------------------------------------------------------------------------------------------------
Alabama Renal Stone Texas Secretary A. Derrill Crowe and 94-149806 July 29, 1994 All cash, securities or
Institute, Inc. of State Paul R. Butrus at 8:00 a.m. other property now or
100 Brookwood Place hereafter held under
Suite 500 escrow agreement at
Birmingham, AL 35209 First Alabama Bank of
Birmingham; and all
accounts and all other
rights of Debtor to the
payment of money, now
existing or hereafter
arising
- ------------------------------------------------------------------------------------------------------------------------------------
ARKLATX Mobile Orleans Parish, DVI Capital Company 36-64439 March 13, 1992 1 Siemens Lithostar and
Lithotripter, L.P. Louisiana 6611 Rockside Rd. at 3:05 p.m. Calumet Coach Model
Suite 110 MMT-483L,
Independence, OH 44131 Lease# 2124-01
- ------------------------------------------------------------------------------------------------------------------------------------
ARKLATX Mobile Texas Secretary DVI Capital Company 92-00050885 March 16, 1992 1 Siemens Lithostar and
Lithotripter, L.P. of State 6611 Rockside Rd. at 8:00 a.m. Calumet Coach Model
Suite 110 MMT-483L,
Independence, OH 44131 Lease# 2124-01
- ------------------------------------------------------------------------------------------------------------------------------------
California Lithotripters California First-Citizens Bank & 91071264 April 4, 1991 1 Siemens Medical
Limited Partnership II, Secretary of State Trust Company of South at 11:44 a.m. Systems, Inc. Lithostar
L.P. Carolina extracorporeal
P.O. Box 29 shock-wave lithotripter
Columbia, SC 29202 S/N 3131 and 1 Calumet
Coach VIN
44KFB6487MWZ17358
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DATE AND
TIME DESCRIPTION
NAME LOCATION SECURED PARTY FILE NO. OF FILING OF COLLATERAL
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Fayetteville Lithotripters Cumberland First-Citizens Bank & 001613 February 15, All accounts receivable,
Limited Partnership - County, North Trust Company 1996 at 9:00 1 Siemens Lithostar
Arizona I Carolina Register P.O. Box 27568 a.m. extracorporeal
of Deeds Raleigh, NC 27611 shock-wave lithotripter
and Calumet Coach
Lithostar S/N 4005
- ------------------------------------------------------------------------------------------------------------------------------------
Fayetteville Lithotripters North Carolina First-Citizens Bank & 1309915 February 15, All accounts receivable,
Limited Partnership - Secretary of State Trust Company 1996 at 8:00 1 Siemens Lithostar
Arizona I P.O. Box 27568 a.m. extracorporeal
Raleigh, NC 27611 shock-wave lithotripter
and Calumet Coach
Lithostar S/N 4005
- ------------------------------------------------------------------------------------------------------------------------------------
Fayetteville Lithotripters Cumberland First-Citizens Bank & 001847 February 23, Lien canceled on
Limited Partnership - County, North Trust Company 1996 February 23, 1996
Arkansas I Carolina Register P.O. Box 27568
of Deeds Raleigh, NC 27611
- ------------------------------------------------------------------------------------------------------------------------------------
Fayetteville Lithotripters Cumberland First-Citizens Bank & 001846 February 23, 1 Siemens Lithostar
Limited Partnership - County, North Trust Company 1996 at 9:00 extracorporeal shockwave
Arkansas I Carolina Register P.O. Box 27568 a.m. lithotripter S/N 1154
of Deeds Raleigh, NC 27611
- ------------------------------------------------------------------------------------------------------------------------------------
Fayetteville Lithotripters North Carolina First-Citizens Bank & 1312452 & February 26, 1 Siemens Lithostar
Limited Partnership - Secretary of State Trust Company 1312453 1996 at 8:00 extracorporeal shockwave
Louisiana I P.O. Box 27568 a.m. lithotripter S/N 3094
Raleigh, NC 27611
- ------------------------------------------------------------------------------------------------------------------------------------
Fayetteville Lithotripters Cumberland First-Citizens Bank & 010956 November 14, All accounts receivable
Limited Partnership - County, North Trust Company 1995 and 1 Lithostar
South Carolina I Carolina Register P.O. Box 27568 extracorporeal
of Deeds Raleigh, NC 27611 shock-wave lithotripter
- ------------------------------------------------------------------------------------------------------------------------------------
Fayetteville Lithotripters North Carolina First-Citizens Bank & 1281907 November 15, All accounts receivable
Limited Partnership - Secretary of State Trust Company 1995 at 8:00 and 1 Lithostar
South Carolina I P.O. Box 27568 a.m. extracorporeal
Raleigh, NC 27611 shock-wave lithotripter
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DATE AND
TIME DESCRIPTION
NAME LOCATION SECURED PARTY FILE NO. OF FILING OF COLLATERAL
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Florida Lithotripters Florida Secretary First-Citizens Bank & 950000078107 April 18,1995 All accounts receivable
Partnership I of State Trust Company at 8:00 a.m.
P.O. Box 27568
Raleigh, NC 27611
- ------------------------------------------------------------------------------------------------------------------------------------
Florida Lithotripters Florida Secretary Siemens Credit 920000001815 January 9, 1992 Collateral covered under
Partnership I of State Corporation at 11:00 a.m. Lease Agreement dated
2201 Corporate Blvd NW January 1, 1992 for 1
Boca Raton, FL 33431 Siemens Mobile Lithostar
S/N 03191 and Calumet
Coach VIN
44KFB6489MWZ17362
- ------------------------------------------------------------------------------------------------------------------------------------
Florida Lithotripters North Carolina First-Citizens Bank & 0822029 September 27, 1 Siemens Medical
Partnership I Secretary of State Trust Company 1991 at 8:00 Systems, Inc. Lithostar
P.O. Box 789 a.m. extracorporeal
Fayetteville, NC 28302 shock-wave lithotripter
S/N 3182 and Calumet
Coach VIN
44KFB6486MWZ17352
- ------------------------------------------------------------------------------------------------------------------------------------
Lithotripters, Inc Cumberland First-Citizens Bank & 001021 February 3, 1994 1 Siemens Medical
County, North Trust Company Systems Lithostar
Carolina Register P.O. Box 789 extracorporeal
of Deeds Fayetteville, NC 28302 shock-wave lithotripter
and 1 Calumet Coach
- ------------------------------------------------------------------------------------------------------------------------------------
Lithotripters, Inc Cumberland First-Citizens Bank & 012307 December 27, 1 Lithostar S/N 1187 and
County, North Trust Company 1995 Calumet Coach VIN
Carolina Register P.O. Box 27568 44KFB648XKW21706
of Deeds Raleigh, NC 27611
- ------------------------------------------------------------------------------------------------------------------------------------
Lithotripters, Inc Cumberland First-Citizens Bank & 93-8129 July 27, 1993 Lien released on
County, North Trust Company February 23, 1996
Carolina Register P.O. Box 789
of Deeds Fayetteville, NC 28302
- ------------------------------------------------------------------------------------------------------------------------------------
Lithotripters, Inc. North Carolina First-Citizens Bank & 1074959 February 3, 1 Siemens Medical
Secretary of State Trust Company 1994 at 8:00 Systems Lithostar
P.O. Box 789 a.m. extracorporeal
Fayetteville, NC 28302 shock-wave lithotripter
and 1 Calumet Coach
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DATE AND
TIME DESCRIPTION
NAME LOCATION SECURED PARTY FILE NO. OF FILING OF COLLATERAL
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Lithotripters, Inc. North Carolina First-Citizens Bank & 1294590 December 28, 1 Lithostar S/N 1187 and
Secretary of State Trust Company 1995 at 8:00 Calumet Coach VIN
P.O. Box 27568 a.m. 44KFB648XKW217061
Raleigh, NC 27611
- ------------------------------------------------------------------------------------------------------------------------------------
Metro Atlanta Stone Travis County, Metro Atlanta 00984 April 28, 1994 60% undivided interest
Busters, G.P. Texas County Clerk Stonebusters, Inc. at 12:28 p.m. in certain assets
428 Winn Court obtained from Metro
Decatur, GA 30030 Atlanta Stonebusters,
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Mountain Lithotripsy Colorado First-Citizens Bank & 952045460 June 15, 1995 1 1995 Western Star
Limited Partnership I Secretary of State Trust Company at 12:37 p.m. tractor-trailer VIN
P.O. Box 789 2WKPDCJH8SK936895 with
Fayetteville, NC 28302 Siemens Medical Systems,
Inc. Lithostar
extracorporeal
shock-wave lithotripter
S/N 04004 and all
accounts receivable
- ------------------------------------------------------------------------------------------------------------------------------------
Mountain Lithotripsy Cumberland First-Citizens Bank & 005722 June 14, 1995 1 1995 Western Star
Limited Partnership I County, North Trust Company tractor-trailer VIN
Carolina Register P.O. Box 789 2WKPDCJH8SK936895 with
of Deeds Fayetteville, NC 28302 Siemens Medical Systems,
Inc. Lithostar
extracorporeal
shock-wave lithotripter
S/N 04004 and all
accounts receivable
- ------------------------------------------------------------------------------------------------------------------------------------
Mountain Lithotripsy Nebraska First-Citizens Bank & 659814 June 14, 1995 1 1995 Western Star
Limited Partnership I Secretary of State Trust Company at 10:09 a.m. tractor-trailer VIN
P.O. Box 789 2WKPDCJH8SK936895 with
Fayetteville, NC 28302 Siemens Medical Systems,
Inc. Lithostar
extracorporeal
shock-wave lithotripter
S/N 04004 and all
accounts receivable
- ------------------------------------------------------------------------------------------------------------------------------------
Mountain Lithotripsy North Carolina First-Citizens Bank & 1235086 June 15, 1995 1 1995 Western Star
Limited Partnership I Secretary of State Trust Company at 8:00 a.m. tractor-trailer VIN
P.O. Box 789 2WKPDCJH8SK936895 with
Fayetteville, NC 28302 Siemens Medical Systems,
Inc. Lithostar
extracorporeal
shock-wave lithotripter
S/N 04004 and all
accounts receivable
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DATE AND
TIME DESCRIPTION
NAME LOCATION SECURED PARTY FILE NO. OF FILING OF COLLATERAL
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Prime Diagnostic Corp. Florida Secretary Copelco Leasing 93-0000165975 August 5, 1993 1 Alpha III System 160
of Florida of State Corporation at 11:14 a.m. Diagnostic Mammography
1700 Suckle Highway System S/N A31916
Pennsauken, NJ 08110
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Diagnostic Corp. Florida Secretary Instrumentarium Finance 92-0000267315 December 30, 1 Alpha III System 160
of Florida of State P.O. Box 767 1992 at 12:17 Diagnostic Mammography
Bellevue, WA 98009 p.m. System S/N A31916
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Diagnostic Corp. Florida Secretary U.S. Concord, Inc. 92-0000193158 September 23, 1 Toshiba America
of Florida of State 40 Richards Avenue 1992 at 12:30 Medical Systems Model
Norwalk, CT 06856 p.m. SSA-270A Ultrasound
System with Spectral and
Color Doppler including
all parts, accessories
and attachments
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Diagnostic Corp. Texas Secretary Copelco Leasing 93-154508 August 9, 1993 1 Alpha III System 160
of Florida of State Corporation Diagnostic Mammography
1700 Suckle Highway System S/N A31916
Pennsauken, NJ 08110
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Diagnostic Corp. Texas Secretary U.S. Concord, Inc. 92-163143 August 17, 1992 1 Toshiba America
of Florida of State 40 Richards Avenue at 8:00a.m. Medical Systems Model
Norwalk, CT 06856 SSA-270A Ultrasound
System with Spectral and
Color Doppler including
all parts, accessories
and attachments
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Lithotripsy Dekalb County, Metro Atlanta 94-02947 April 28, 1994 60% undivided interest
Services, Inc. Georgia Clerk of Stonebusters, Inc. at 12:05 p.m. in certain assets
Superior Court 428 Winn Court obtained from Metro
Decatur, GA 30030 Atlanta Stonebusters,
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DATE AND
TIME DESCRIPTION
NAME LOCATION SECURED PARTY FILE NO. OF FILING OF COLLATERAL
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Prime Lithotripsy Texas Secretary Alabama Renal Stone 92-00128931 June 29, 1992 All cash, securities or
Services, Inc. of State Institute, Inc. at 8:00 a.m. other property now or
hereafter held under
escrow agreement at
First Alabama Bank of
Birmingham; and all
accounts and all other
rights of Debtor to the
payment of money, now
existing or hereafter
arising.
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Lithotripsy Texas Secretary Metro Atlanta 94-00082951 April 28, 1994 60% undivided interest
Services, Inc. of State Stonebusters, Inc. at 8:00 a.m. in certain assets
428 Winn Court obtained from Metro
Decatur, GA 30030 Atlanta Stonebusters,
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Lithotripsy Travis County, Metro Atlanta 00983 April 28, 1994 60% undivided interest
Services, Inc. Texas County Clerk Stonebusters, Inc. at 12:28 p.m. in certain assets
428 Winn Court obtained from Metro
Decatur, GA 30030 Atlanta Stonebusters,
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Lithotripter Alabama Secretary Alabama Lithotripsy 94-33480 September 6, Brother fax machine,
Operations, Inc. of State Associates, Inc. 1994 at 2:30 Panasonic telephone,
2055 E South p.m. desk with return,
Boulevard, Suite 507 computer work station, 2
Montgomery, AL 36116 metal shelves, wooden
shelf, metal file
cabinet, telephone
number lease agreements,
accounts receivable,
prepaid insurance,
prepaid maintenance, all
governmental licenses
listed in Sch 3.6, and
all contract rights
listed in Sch 3.12
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Lithotripter Alabama Secretary Baptist Medical Center - 94-33113 September 2, Mon-A Therm Monitor,
Operations, Inc. of State Montclair 1994 at 11:57 C0\\2\\ Monitor,
3500 Blue Lake Drive p.m. Anesthesia Unit, Monitor
Birmingham, AL 35243 - Dinamap 8100, Curix
Auto Processor,
Lithotripter Unit,
I.R.I.S. Unit, Personal
Computer, Printer -
Thermal, NEC Monitor,
and Lithotripsy Trailer
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-vi-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DATE AND
TIME DESCRIPTION
NAME LOCATION SECURED PARTY FILE NO. OF FILING OF COLLATERAL
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Prime Lithotripter Texas Secretary of Alabama Lithotripsy 94-174429 September 6, Brother fax machine,
Operations, Inc. State Associates, Inc. 1994 at 8:00 Panasonic telephone,
2055 E. South Boulevard a.m. desk with return,
Suite 507 computer work station, 2
Montgomery, AL 36116 metal shelves, wooden
shelf, metal file
cabinet, telephone
number lease agreements,
accounts receivable,
prepaid insurance,
prepaid maintenance, all
governmental licenses
listed in Sch 3.6, and
all contract rights
listed in Sch 3.12
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Lithotripter Texas Secretary of Third National Bank 94-208378 October 24, Dornier Extracorporeal
Operations, Inc. State P.O. Box 305110 1994 at 8:00 Shock Wave Lithotripter
Nashville, TN a.m. Model HM3 enclosed in a
37230-5110 48ft. Calumet Coach
Trailer S/N 609201-DID
3205 in a Model MMT-481
Calumet Unit with S/N
1T9FA0Z26GB021679
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Medical Services, Texas Secretary of Siemens Credit 92-00212305 October 27, The equipment covered
Inc. State Corporation 1992 at 8:00 under Leasing Schedule
2201 Corporate Blvd NW a.m. No 130-0001061-000 to
Boca Raton, FL 33431 Master Equipment Lease
Agreement No
130-0001060-000 (Siemens
Magnetom Impact)
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Medical Services, Texas Secretary of Siemens Credit 92-00212306 October 27, The equipment covered
Inc. State Corporation 1992 at 8:00 under Leasing Schedule
2201 Corporate Blvd NW a.m. No 210-0001009-000 to
Boca Raton, FL 33431 Master Equipment Lease
Agreement No
130-0001060-000 (Siemens
Litebox Workstation)
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Medical Services, Texas Secretary of Siemens Credit 92-00212307 October 27, The equipment covered
Inc. State Corporation 1992 at 8:00 under Leasing Schedule
2201 Corporate Blvd NW a.m. No 110-0001030-000 to
Boca Raton, FL 33431 Master Equipment Lease
Agreement No
130-0001060-000 (Siemens
Somatom AR.T)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-vii-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DATE AND
TIME DESCRIPTION
NAME LOCATION SECURED PARTY FILE NO. OF FILING OF COLLATERAL
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Sun Medical Technologies, California Secretary Copelco Leasing 93162570 August 9, 1993 1 Versyss computerized
Inc. of State Corporation at 8:00 a.m. billing system with
1700 Suckle Highway hardware and software
Pennsauken, NJ 08110
- ------------------------------------------------------------------------------------------------------------------------------------
Tennessee Lithotripters, Tennessee Secretary First-Citizens Bank & 910882052 May 17, 1991 at All accounts receivable
Limited Partnership I of State Trust Company 4:47 p.m.
P.O. Box 789
Fayetteville, NC 28302
- ------------------------------------------------------------------------------------------------------------------------------------
Tennessee Lithotripters, Tennessee Secretary Siemens Credit 910849844 February 4, Equipment covered under
Limited Partnership I of State Corporation 1991 at 9:49 lease agreement
2201 Corporate Blvd NW a.m. #01000969 for 1 Siemens
Boca Raton, FL 33431 Mobile Lithostar in
Calumet Coach
- ------------------------------------------------------------------------------------------------------------------------------------
Texas ESWL/Laser Oklahoma County, Prime Leasing, Inc. 062652 December 23, (1) 1991 Ford E150
Lithotripter, Ltd. Oklahoma County Two Continental Towers 1991 at 12:06 Custom Lift Van and
Clerk 1701 Golf Road p.m. Accessories and (1)
Rolling Meadows, IL Pulsolith Pulsed Dye
60008 Laser and accessories.
- ------------------------------------------------------------------------------------------------------------------------------------
Texas ESWL/Laser Texas Secretary Debis Financial 93-00004990 January 8, 1993 1 Dornier MFL-5000
Lithotripter, Ltd. of State Services, Inc. at 8:00 a.m. Lithotripter, Serial No
201 Merritt 7, Suite 5012, with Calumet
700 Coach, Model MMT-451L
Norwalk, CT 06856 and all accessories.
- ------------------------------------------------------------------------------------------------------------------------------------
Texas ESWL/Laser Texas Secretary Prime Leasing, Inc. 91-00242830 December 23, (1) 1991 Ford E150
Lithotripter, Ltd. of State Two Continental Towers 1991 at 8:00 Custom Lift Van and
1701 Golf Road a.m. Accessories and (1)
Rolling Meadows, IL Pulsolith Pulsed Dye
60008 Laser and accessories.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-viii-
REVOLVING CREDIT NOTE
$14,111,111.11 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
NATIONSBANK OF TEXAS, N.A.("PAYEE"), at the offices of The First National
Bank of Boston, as Administrative Agent (together with any successor as provided
in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100
Federal Street, Boston, Massachusetts, on April 30, 2001, in lawful money of the
United States of America, the principal sum of FOURTEEN MILLION ONE HUNDRED
ELEVEN THOUSAND ONE HUNDRED ELEVEN AND 11/100 DOLLARS ($14,111,111.11), or so
much thereof as may be advanced and outstanding hereunder together with the
interest on the outstanding principal balance from day to day remaining, as
herein specified.
This Note has been executed and delivered by Maker pursuant to the terms of
that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Revolving Credit Notes described therein.
Capitalized terms used and not otherwise defined herein shall have the same
meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's right as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. Accrued and unpaid interest on this Note shall
be due and payable on each Payment Date and on the Termination Date. All past-
due principal and interest shall bear interest as the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If and excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in
<PAGE>
full, any remaining excess shall forthwith be paid to Maker. In determining
whether or not the interest paid or payable exceeds the Maximum Rate, Maker, the
Administrative Agent and Payee shall, to the extent permitted by applicable law,
(i) characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the entire contemplated term of the
indebtedness evidenced by this Note so that the interest for the entire term
does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any effort
in any attempt to enforce payment of all or any part or installment of any sum
due the holder hereunder, or if this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings, Maker
agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable laws of the United States
of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
Maker hereby authorizes the Administrative Agent, Payee and the holder
hereof to endorse on the SCHEDULE attached to this Note or any continuation
thereof or to record in their internal records all Advances made to Maker
hereunder and all payments made on account of the principal thereof, which
endorsements or recordings shall be prima facie evidence as to the outstanding
principal amount of this Note; provided, however, any failure by the
Administrative Agent, Payee or the holder hereof to make any such endorsement or
recording shall not limit or otherwise affect the obligations of Maker under the
Agreement or this Note.
-2-
<PAGE>
[This Note, together with all the other Revolving Credit Notes issued on
the date hereof are given in renewal, amendment, increase and restatement, but
not extinguishment, of the Revolving Credit Notes issued under the Amended and
Restated Loan Agreement dated as of April 26, 1996 among Maker, NationsBank, the
Administrative Agent, and each of the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
--------------------------------------
Cheryl Williams
Vice President-Finance
-3-
<PAGE>
SCHEDULE
================================================================================
Date Advance Principal Payment Balance
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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-i-
<PAGE>
REVOLVING CREDIT NOTE
$13,888,888.89 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
THE FIRST NATIONAL BANK OF BOSTON("PAYEE"), at the offices of The First National
Bank of Boston, as Administrative Agent (together with any successor as provided
in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100
Federal Street, Boston, Massachusetts, on April 30, 2001, in lawful money of the
United States of America, the principal sum of THIRTEEN MILLION EIGHT HUNDRED
EIGHTY EIGHT THOUSAND EIGHT HUNDRED EIGHTY EIGHT AND 89/100 DOLLARS
($13,888,888.89), or so much thereof as may be advanced and outstanding
hereunder together with the interest on the outstanding principal balance from
day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms of
that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Revolving Credit Notes described therein.
Capitalized terms used and not otherwise defined herein shall have the same
meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's right as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. Accrued and unpaid interest on this Note shall
be due and payable on each Payment Date and on the Termination Date. All past-
due principal and interest shall bear interest as the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If and excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in
<PAGE>
full, any remaining excess shall forthwith be paid to Maker. In determining
whether or not the interest paid or payable exceeds the Maximum Rate, Maker, the
Administrative Agent and Payee shall, to the extent permitted by applicable law,
(i) characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the entire contemplated term of the
indebtedness evidenced by this Note so that the interest for the entire term
does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any effort
in any attempt to enforce payment of all or any part or installment of any sum
due the holder hereunder, or if this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings, Maker
agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable laws of the United States
of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
Maker hereby authorizes the Administrative Agent, Payee and the holder
hereof to endorse on the SCHEDULE attached to this Note or any continuation
thereof or to record in their internal records all Advances made to Maker
hereunder and all payments made on account of the principal thereof, which
endorsements or recordings shall be prima facie evidence as to the outstanding
principal amount of this Note; provided, however, any failure by the
Administrative Agent, Payee or the holder hereof to make any such endorsement or
recording shall not limit or otherwise affect the obligations of Maker under the
Agreement or this Note.
-2-
<PAGE>
[This Note, together with all the other Revolving Credit Notes issued on
the date hereof are given in renewal, amendment, increase and restatement, but
not extinguishment, of the Revolving Credit Notes issued under the Amended and
Restated Loan Agreement dated as of April 26, 1996 among Maker, NationsBank, the
Administrative Agent, and each of the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
--------------------------------------
Cheryl Williams
Vice President-Finance
-3-
<PAGE>
SCHEDULE
================================================================================
Date Advance Principal Payment Balance
================================================================================
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-i-
<PAGE>
REVOLVING CREDIT NOTE
$8,333,333.33 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
BANK ONE, TEXAS,N.A.("PAYEE"), at the offices of The First National
Bank of Boston, as Administrative Agent (together with any successor as provided
in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100
Federal Street, Boston, Massachusetts, on April 30, 2001, in lawful money of the
United States of America, the principal sum of EIGHT MILLION THREE HUNDRED
THIRTY-THREE THOUSAND THREE HUNDRED THIRTY-THREE AND 33/100 DOLLARS
($8,333,333.33), or so much thereof as may be advanced and outstanding
hereunder together with the interest on the outstanding principal balance from
day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms of
that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Revolving Credit Notes described therein.
Capitalized terms used and not otherwise defined herein shall have the same
meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's right as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. Accrued and unpaid interest on this Note shall
be due and payable on each Payment Date and on the Termination Date. All past-
due principal and interest shall bear interest as the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If and excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in
<PAGE>
full, any remaining excess shall forthwith be paid to Maker. In determining
whether or not the interest paid or payable exceeds the Maximum Rate, Maker, the
Administrative Agent and Payee shall, to the extent permitted by applicable law,
(i) characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the entire contemplated term of the
indebtedness evidenced by this Note so that the interest for the entire term
does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any effort
in any attempt to enforce payment of all or any part or installment of any sum
due the holder hereunder, or if this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings, Maker
agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable laws of the United States
of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
Maker hereby authorizes the Administrative Agent, Payee and the holder
hereof to endorse on the SCHEDULE attached to this Note or any continuation
thereof or to record in their internal records all Advances made to Maker
hereunder and all payments made on account of the principal thereof, which
endorsements or recordings shall be prima facie evidence as to the outstanding
principal amount of this Note; provided, however, any failure by the
Administrative Agent, Payee or the holder hereof to make any such endorsement or
recording shall not limit or otherwise affect the obligations of Maker under the
Agreement or this Note.
-2-
<PAGE>
[This Note, together with all the other Revolving Credit Notes issued on
the date hereof are given in renewal, amendment, increase and restatement, but
not extinguishment, of the Revolving Credit Notes issued under the Amended and
Restated Loan Agreement dated as of April 26, 1996 among Maker, NationsBank, the
Administrative Agent, and each of the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
--------------------------------------
Cheryl Williams
Vice President-Finance
-3-
<PAGE>
SCHEDULE
================================================================================
Date Advance Principal Payment Balance
================================================================================
- --------------------------------------------------------------------------------
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-i-
<PAGE>
REVOLVING CREDIT NOTE
$6,666,666.67 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
IMPERIAL BANK ("PAYEE"), at the offices of The First National
Bank of Boston, as Administrative Agent (together with any successor as provided
in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100
Federal Street, Boston, Massachusetts, on April 30, 2001, in lawful money of the
United States of America, the principal sum of SIX MILLION SIX HUNDRED
SIXTY-SIX THOUSAND SIX HUNDRED SIXTY-SIX AND 67/100 DOLLARS
($6,666,666.67), or so much thereof as may be advanced and outstanding
hereunder together with the interest on the outstanding principal balance from
day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms of
that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Revolving Credit Notes described therein.
Capitalized terms used and not otherwise defined herein shall have the same
meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's right as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. Accrued and unpaid interest on this Note shall
be due and payable on each Payment Date and on the Termination Date. All past-
due principal and interest shall bear interest as the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If and excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in
<PAGE>
full, any remaining excess shall forthwith be paid to Maker. In determining
whether or not the interest paid or payable exceeds the Maximum Rate, Maker, the
Administrative Agent and Payee shall, to the extent permitted by applicable law,
(i) characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the entire contemplated term of the
indebtedness evidenced by this Note so that the interest for the entire term
does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any effort
in any attempt to enforce payment of all or any part or installment of any sum
due the holder hereunder, or if this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings, Maker
agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable laws of the United States
of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
Maker hereby authorizes the Administrative Agent, Payee and the holder
hereof to endorse on the SCHEDULE attached to this Note or any continuation
thereof or to record in their internal records all Advances made to Maker
hereunder and all payments made on account of the principal thereof, which
endorsements or recordings shall be prima facie evidence as to the outstanding
principal amount of this Note; provided, however, any failure by the
Administrative Agent, Payee or the holder hereof to make any such endorsement or
recording shall not limit or otherwise affect the obligations of Maker under the
Agreement or this Note.
-2-
<PAGE>
[This Note, together with all the other Revolving Credit Notes issued on
the date hereof are given in renewal, amendment, increase and restatement, but
not extinguishment, of the Revolving Credit Notes issued under the Amended and
Restated Loan Agreement dated as of April 26, 1996 among Maker, NationsBank, the
Administrative Agent, and each of the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
--------------------------------------
Cheryl Williams
Vice President-Finance
-3-
<PAGE>
SCHEDULE
================================================================================
Date Advance Principal Payment Balance
================================================================================
- --------------------------------------------------------------------------------
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-i-
<PAGE>
REVOLVING CREDIT NOTE
$7,000,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
THE SUMITOMO BANK, LIMITED ("PAYEE"), at the offices of The First National
Bank of Boston, as Administrative Agent (together with any successor as provided
in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100
Federal Street, Boston, Massachusetts, on April 30, 2001, in lawful money of the
United States of America, the principal sum of SEVEN MILLION AND 00/100 DOLLARS
($7,000,000.00), or so much thereof as may be advanced and outstanding
hereunder together with the interest on the outstanding principal balance from
day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms of
that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Revolving Credit Notes described therein.
Capitalized terms used and not otherwise defined herein shall have the same
meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's right as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. Accrued and unpaid interest on this Note shall
be due and payable on each Payment Date and on the Termination Date. All past-
due principal and interest shall bear interest as the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions of
this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If and excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in
<PAGE>
full, any remaining excess shall forthwith be paid to Maker. In determining
whether or not the interest paid or payable exceeds the Maximum Rate, Maker, the
Administrative Agent and Payee shall, to the extent permitted by applicable law,
(i) characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the entire contemplated term of the
indebtedness evidenced by this Note so that the interest for the entire term
does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any effort
in any attempt to enforce payment of all or any part or installment of any sum
due the holder hereunder, or if this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings, Maker
agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable laws of the United States
of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
Maker hereby authorizes the Administrative Agent, Payee and the holder
hereof to endorse on the SCHEDULE attached to this Note or any continuation
thereof or to record in their internal records all Advances made to Maker
hereunder and all payments made on account of the principal thereof, which
endorsements or recordings shall be prima facie evidence as to the outstanding
principal amount of this Note; provided, however, any failure by the
Administrative Agent, Payee or the holder hereof to make any such endorsement or
recording shall not limit or otherwise affect the obligations of Maker under the
Agreement or this Note.
-2-
<PAGE>
[This Note, together with all the other Revolving Credit Notes issued on
the date hereof are given in renewal, amendment, increase and restatement, but
not extinguishment, of the Revolving Credit Notes issued under the Amended and
Restated Loan Agreement dated as of April 26, 1996 among Maker, NationsBank, the
Administrative Agent, and each of the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
--------------------------------------
Cheryl Williams
Vice President-Finance
-3-
<PAGE>
SCHEDULE
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Date Advance Principal Payment Balance
================================================================================
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-i-
<PAGE>
TERM NOTE A
$12,500,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. ("PAYEE"), at the offices of The First
National Bank of Boston, as Administrative Agent (together with any successor as
provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at
100 Federal Street, Boston, Massachusetts, in lawful money of the United States
of America, the principal sum of TWELVE MILLION FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($12,500,000.00), together with interest on the outstanding principal
balance from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Term Notes described therein. Capitalized terms
used and not otherwise defined herein shall have the same meanings as set forth
in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent
<PAGE>
permitted by applicable law, (i) characterize any non-principa l payment as an
expense, fee, or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by this Note so that the
interest for the entire term does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
[This Note, together with all the other Term Notes A issued on the date
hereof, are given in renewal, amendment, and restatement, but not extinguishment
of, the Term Notes issued under the Amended and Restated Loan Agreement dated as
of April 26, 1996 among Maker, NationsBank, the Administrative Agent and each of
the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
---------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE A
$12,500,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
THE FIRST NATIONAL BANK OF BOSTON ("PAYEE"), at the offices of The First
National Bank of Boston, as Administrative Agent (together with any successor as
provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at
100 Federal Street, Boston, Massachusetts, in lawful money of the United States
of America, the principal sum of TWELVE MILLION FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($12,500,000.00), together with interest on the outstanding principal
balance from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Term Notes described therein. Capitalized terms
used and not otherwise defined herein shall have the same meanings as set forth
in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent
<PAGE>
permitted by applicable law, (i) characterize any non-principa l payment as an
expense, fee, or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by this Note so that the
interest for the entire term does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
[This Note, together with all the other Term Notes A issued on the date
hereof, are given in renewal, amendment, and restatement, but not extinguishment
of, the Term Notes issued under the Amended and Restated Loan Agreement dated as
of April 26, 1996 among Maker, NationsBank, the Administrative Agent and each of
the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
---------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE A
$7,500,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
BANK ONE, TEXAS, N.A. ("PAYEE"), at the offices of The First National Bank
of Boston, as Administrative Agent (together with any successor as
provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at
100 Federal Street, Boston, Massachusetts, in lawful money of the United States
of America, the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($7,500,000.00), together with interest on the outstanding principal
balance from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Term Notes described therein. Capitalized terms
used and not otherwise defined herein shall have the same meanings as set forth
in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent
<PAGE>
permitted by applicable law, (i) characterize any non-principa l payment as an
expense, fee, or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by this Note so that the
interest for the entire term does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
[This Note, together with all the other Term Notes A issued on the date
hereof, are given in renewal, amendment, and restatement, but not extinguishment
of, the Term Notes issued under the Amended and Restated Loan Agreement dated as
of April 26, 1996 among Maker, NationsBank, the Administrative Agent and each of
the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
---------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE A
$7,500,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
IMPERIAL BANK ("PAYEE"), at the offices of The First National Bank
of Boston, as Administrative Agent (together with any successor as
provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at
100 Federal Street, Boston, Massachusetts, in lawful money of the United States
of America, the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($7,500,000.00), together with interest on the outstanding principal
balance from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Term Notes described therein. Capitalized terms
used and not otherwise defined herein shall have the same meanings as set forth
in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent
<PAGE>
permitted by applicable law, (i) characterize any non-principa l payment as an
expense, fee, or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by this Note so that the
interest for the entire term does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
[This Note, together with all the other Term Notes A issued on the date
hereof, are given in renewal, amendment, and restatement, but not extinguishment
of, the Term Notes issued under the Amended and Restated Loan Agreement dated as
of April 26, 1996 among Maker, NationsBank, the Administrative Agent and each of
the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
---------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE A
$5,000,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
THE SUMITOMO BANK, LIMITED ("PAYEE"), at the offices of The First National Bank
of Boston, as Administrative Agent (together with any successor as
provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at
100 Federal Street, Boston, Massachusetts, in lawful money of the United States
of America, the principal sum of FIVE MILLION AND 00/100 DOLLARS
($5,000,000.00), together with interest on the outstanding principal
balance from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same may be amended, supplemented or modified from time to time, the
"AGREEMENT") and is one of the Term Notes described therein. Capitalized terms
used and not otherwise defined herein shall have the same meanings as set forth
in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid or
payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent
<PAGE>
permitted by applicable law, (i) characterize any non-principa l payment as an
expense, fee, or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by this Note so that the
interest for the entire term does not exceed the Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
[This Note, together with all the other Term Notes A issued on the date
hereof, are given in renewal, amendment, and restatement, but not extinguishment
of, the Term Notes issued under the Amended and Restated Loan Agreement dated as
of April 26, 1996 among Maker, NationsBank, the Administrative Agent and each of
the other Lenders party thereto.]
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
---------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE B
$10,000,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
NATIONSBANK OF TEXAS, N.A.("PAYEE"), at the offices of The First National Bank
of Boston, as Administrative Agent (together with any successor as provided in
the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100 Federal
Street, Boston, Massachusetts, in lawful money of the United States of America,
the principal sum of TEN MILLION AND 00/100 DOLLARS ($10,000,000.00), together
with interest on the outstanding principal balance from day to day remaining,
as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same has been amended through the date hereof and may be further amended,
supplemented or modified from time to time, the "AGREEMENT") and is one of the
Term B Notes described therein. Capitalized terms used and not otherwise defined
herein shall have the same meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid
<PAGE>
or payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent permitted by applicable law, (i) characterize any non-
principal payment as an expense, fee, or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by this Note so that the interest for the entire term does not exceed the
Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable. attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
-----------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE B
$5,000,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
CRESCENT/MACH PARTNERS, L.P.("PAYEE"), at the offices of The First National Bank
of Boston, as Administrative Agent (together with any successor as provided in
the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100 Federal
Street, Boston, Massachusetts, in lawful money of the United States of America,
the principal sum of FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00), together
with interest on the outstanding principal balance from day to day remaining,
as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same has been amended through the date hereof and may be further amended,
supplemented or modified from time to time, the "AGREEMENT") and is one of the
Term B Notes described therein. Capitalized terms used and not otherwise defined
herein shall have the same meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid
<PAGE>
or payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent permitted by applicable law, (i) characterize any non-
principal payment as an expense, fee, or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by this Note so that the interest for the entire term does not exceed the
Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable. attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
-----------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE B
$5,000,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.("PAYEE"), at the offices of The
First National Bank of Boston, as Administrative Agent (together with any
successor as provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE
AGENT") at 100 Federal Street, Boston, Massachusetts, in lawful money of the
United States of America, the principal sum of FIVE MILLION AND 00/100 DOLLARS
($5,000,000.00), together with interest on the outstanding principal balance
from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same has been amended through the date hereof and may be further amended,
supplemented or modified from time to time, the "AGREEMENT") and is one of the
Term B Notes described therein. Capitalized terms used and not otherwise defined
herein shall have the same meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid
<PAGE>
or payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent permitted by applicable law, (i) characterize any non-
principal payment as an expense, fee, or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by this Note so that the interest for the entire term does not exceed the
Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable. attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
-----------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE B
$5,000,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of
PILGRIM AMERICA PRIME RATE TRUST ("PAYEE"), at the offices of The
First National Bank of Boston, as Administrative Agent (together with any
successor as provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE
AGENT") at 100 Federal Street, Boston, Massachusetts, in lawful money of the
United States of America, the principal sum of FIVE MILLION AND 00/100 DOLLARS
($5,000,000.00), together with interest on the outstanding principal balance
from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same has been amended through the date hereof and may be further amended,
supplemented or modified from time to time, the "AGREEMENT") and is one of the
Term B Notes described therein. Capitalized terms used and not otherwise defined
herein shall have the same meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid
<PAGE>
or payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent permitted by applicable law, (i) characterize any non-
principal payment as an expense, fee, or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by this Note so that the interest for the entire term does not exceed the
Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable. attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
-----------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE B
$5,000,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of THE ING
CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P. ("PAYEE"), at the offices of The
First National Bank of Boston, as Administrative Agent (together with any
successor as provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE
AGENT") at 100 Federal Street, Boston, Massachusetts, in lawful money of the
United States of America, the principal sum of FIVE MILLION AND 00/100 DOLLARS
($5,000,000.00), together with interest on the outstanding principal balance
from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same has been amended through the date hereof and may be further amended,
supplemented or modified from time to time, the "AGREEMENT") and is one of the
Term B Notes described therein. Capitalized terms used and not otherwise defined
herein shall have the same meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid
<PAGE>
or payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent permitted by applicable law, (i) characterize any non-
principal payment as an expense, fee, or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by this Note so that the interest for the entire term does not exceed the
Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable. attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
-----------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE B
$5,000,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of THE ING
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST ("PAYEE"), at the offices of
The First National Bank of Boston, as Administrative Agent (together with any
successor as provided in the Agreement, hereinbelow defined, the "ADMINISTRATIVE
AGENT") at 100 Federal Street, Boston, Massachusetts, in lawful money of the
United States of America, the principal sum of FIVE MILLION AND 00/100 DOLLARS
($5,000,000.00), together with interest on the outstanding principal balance
from day to day remaining, as herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same has been amended through the date hereof and may be further amended,
supplemented or modified from time to time, the "AGREEMENT") and is one of the
Term B Notes described therein. Capitalized terms used and not otherwise defined
herein shall have the same meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid
<PAGE>
or payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent permitted by applicable law, (i) characterize any non-
principal payment as an expense, fee, or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by this Note so that the interest for the entire term does not exceed the
Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable. attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
-----------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
TERM NOTE B
$5,000,000.00 Boston, Massachusetts March 31, 1997
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("MAKER"), hereby promises to pay to the order of THE ING
PARIBAS CAPITAL FUNDING LLC ("PAYEE"), at the offices of The First National Bank
of Boston, as Administrative Agent (together with any successor as provided in
the Agreement, hereinbelow defined, the "ADMINISTRATIVE AGENT") at 100 Federal
Street, Boston, Massachusetts, in lawful money of the United States of America,
the principal sum of FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00), together
with interest on the outstanding principal balance from day to day remaining, as
herein specified.
This Note has been executed and delivered by Maker pursuant to the terms
of that certain Second Amended and Restated Loan Agreement of even date herewith
among Maker, Payee, the Administrative Agent and each of the other Lenders which
is or may become a party thereto or any successor or assignee thereof (as the
same has been amended through the date hereof and may be further amended,
supplemented or modified from time to time, the "AGREEMENT") and is one of the
Term B Notes described therein. Capitalized terms used and not otherwise defined
herein shall have the same meanings as set forth in the Agreement.
Reference is hereby made to the Agreement for provisions affecting this
Note, including, without limitation, provisions regarding payments, prepayments
(optional and mandatory), Events of Default and the Administrative Agent's and
Payee's rights as a result of the occurrence thereof.
The outstanding principal balance hereof shall bear interest prior to
maturity at a varying rate per annum which shall from day to day be equal to the
lesser of (a) the Maximum Rate, or (b) the Applicable Rate in effect from day to
day, each such change in the rate of interest charged hereunder to become
effective, without notice to Maker, on the effective date of each change in the
Applicable Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the Applicable Rate shall exceed the Maximum Rate, thereby causing
the interest rate hereon to be limited to the Maximum Rate, then any subsequent
reduction in the Applicable Rate shall not reduce the rate of interest hereon
below the Maximum Rate until the total amount of interest accrued hereon equals
the amount of interest which would have accrued hereon if the Applicable Rate
had at all times been in effect. The unpaid principal balance of, and all
accrued and unpaid interest on, this Note shall be due and payable on the dates
and at the times set forth in the Agreement. All past-due principal and interest
shall bear interest at the Default Rate.
Notwithstanding anything to the contrary contained herein, no provisions
of this Note shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is herein
provided for, or shall be adjudicated to be so provided, in this Note or
otherwise in connection with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required or permitted by any
court of competent jurisdiction, any such excess shall be applied as a payment
and reduction of the principal of indebtedness evidenced by this Note; and, if
the principal amount hereof has been paid in full, any remaining excess shall
forthwith be paid to Maker. In determining whether or not the interest paid
<PAGE>
or payable exceeds the Maximum Rate, Maker, the Administrative Agent and Payee
shall, to the extent permitted by applicable law, (i) characterize any non-
principal payment as an expense, fee, or premium rather than as interest, (ii)
exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the indebtedness evidenced
by this Note so that the interest for the entire term does not exceed the
Maximum Rate.
Upon the occurrence of an Event of Default, the Administrative Agent may
(and if directed by the Required Lenders, shall) declare the entire unpaid
principal of and accrued interest on this Note immediately due and payable
without notice, demand or presentment, all of which are hereby waived, and upon
such declaration, the same shall become and shall be immediately due and
payable, and the Administrative Agent shall have the right to foreclose or
otherwise enforce all Liens or security interests, securing payment hereof, or
any part hereof, and offset against this Note any sum or sums owed by the
Administrative Agent, Payee or the holder hereof to Maker. Failure of the
Administrative Agent, Payee or the holder hereof to exercise this option shall
not constitute a waiver of the right to exercise the same upon the occurrence of
a subsequent Event of Default.
If the Administrative Agent, Payee or the holder hereof expends any
effort in any attempt to enforce payment of all or any part or installment of
any sum due the holder hereunder, or if this Note is placed in the hands of an
attorney for collection, or if it is collected through any legal proceedings,
Maker agrees to pay all costs, expenses, and fees incurred by the Administrative
Agent, Payee or the holder, including reasonable. attorneys' fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable laws of the United
States of America.
Except as provided in the Agreement, Maker and each surety, guarantor,
endorser, and other party ever liable for payment of any sums of money payable
on this Note jointly and severally waive notice, presentment, demand for
payment, protest, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, and any impairment of any Collateral
securing this Note, all without prejudice to the Administrative Agent, Payee or
the holder. The Administrative Agent, Payee and the holder shall similarly have
the right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release or
substitute part or all of the Collateral securing this Note, or to grant any
other indulgences or forbearances whatsoever, without notice to any other party
and without in any way affecting the personal liability of any party hereunder.
PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
-----------------------------------------
Cheryl Williams, Vice President-Finance
-2-
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") is by and between Prime Medical
Operating, Inc., a Delaware corporation ("Employer") and William J. Walsh, an
individual ("Employee") and shall be effective as of April 1, 1997 (the
"Effective Date").
RECITALS:
WHEREAS, Employee desires to enter into the employment of Employer, and
Employer desires to employ Employee provided that, in so doing, it can protect
its confidential information, business, accounts, patronage and goodwill.
NOW, THEREFORE, in consideration of the foregoing recital and of the mutual
covenants set forth below, the parties hereto agree as follows:
1. Term; Termination.
-----------------
1.1. Employer hereby hires Employee and Employee accepts such employment
for a two (2) year term commencing on the Effective Date.
1.2. After expiration of the two (2) year term described in Section 1.1
above, this Agreement shall remain in full force and effect unless and until
either party gives the other at least six (6) months prior written notice of its
determination to terminate this Agreement.
<PAGE>
1.3. This Agreement shall be automatically terminated on the death
of Employee or on the permanent disability of Employee if Employee is no longer
able to perform in all material respects the usual and customary duties of its
employment hereunder. For purposes hereof, any condition which in reasonable
likelihood is expected to impair Employee's ability to materially perform its
duties hereunder for a period of three (3) months or more shall be considered to
be permanent.
1.4. Employer may terminate this Agreement for cause if:
(a) Employee is convicted of an offense constituting a felony or
involving moral turpitude; or
(b) in any material or substantial way, Employee (i) violates any
rule, regulation, practice or policy of the Employer; (ii) violates any
provision of this Agreement; (iii) is materially dishonest in the performance of
its duties hereunder or engages in a material conflict of interest with the
Employer that is not fully disclosed to and approved by the President of
Employer; (iv) fails to follow reasonable instructions or directions from the
President of Employer, or any other person authorized by the Board of Directors
to give such instructions (for purposes of this Agreement, the President of
Employer and/or such other authorized persons are collectively referred to as
the "President"); or (v) fails to perform the services required pursuant to this
Agreement.
<PAGE>
A notice of termination pursuant to this Section 1.4 shall be in writing and
shall state the alleged reason for termination. Employee, within not less than
fifteen (15) nor more than thirty (30) days after such notice, shall be given
the opportunity to appear before the Board of Directors of the Employer, or a
committee thereof, to rebut or dispute the alleged reason for termination. If
the Board of Directors or committee determines, by a majority of the
disinterested directors, after having given Employee the opportunity to rebut or
dispute the allegations, that such reason is indeed valid, Employer may
immediately terminate Employee's employment under this Agreement for cause.
Immediately upon giving the notice contemplated by this paragraph, Employer may
elect, during the pendency of such inquiry, to relieve Employee of Employee's
regular duties.
1.5. Upon termination, Employee shall be entitled to the following:
(a) If this Agreement and Employee's employment is terminated
pursuant to Section 1.3 as a result of Employee's death or disability, or by
Employee, then Employer shall pay Employee or Employee's representative, as the
case may be, Employee's then-current base salary (excluding any bonuses and non-
cash benefits) through the effective date of termination, and Employer shall
have no further obligations hereunder.
(b) If Employer terminates this Agreement and Employee's employment
for cause pursuant to Section 1.4, or this Agreement is terminated at the end of
its initial or any
<PAGE>
renewal term by either party, Employee shall not be entitled to receive any
additional salary, bonus or benefits beyond those earned or accrued as of the
effective date of the termination.
(c) If Employer terminates this Agreement and Employee's employment
without cause other than pursuant to the provisions of Section 1.2, then
Employee shall be entitled to continue to receive the base salary that Employee
was receiving immediately prior to such action by Employer, through the end of
the then-current initial or renewal term of this Agreement.
1.6. Any termination of this Agreement or Employee's employment
shall not release either Employer or Employee from their respective obligations
to the date of termination nor from the provisions of Section 4 hereof.
2. Duties of Employee.
------------------
2.1. During the period of employment hereunder, Employee shall
devote substantially its entire time and best efforts to the business of
Employer for the profit, benefit and advantage of Employer, and shall perform
such other services as shall be designated, from time to time, by the President
of Employer; provided, however, that this Section shall not be construed as
preventing Employee from investing its personal assets in business ventures that
do not compete with Employer or Employer's Affiliates (as hereinafter defined)
or are not otherwise prohibited by this Agreement, and spending reasonable
amounts of personal time in the management thereof. Employee shall use its best
efforts to promote the interests of Employer and Employer's Affiliates,
<PAGE>
and to preserve their goodwill with respect to their employees, customers,
suppliers and other persons having business relations with Employer. Employee
agrees to accept and hold all such offices and/or directorships with Employer
and Employer's Affiliates as to which Employee may, from time to time, be
elected. For purposes of this Agreement, Employer's subsidiaries, parent
companies and other affiliates are collectively referred to as "Affiliates."
2.2. Subject to the approvals by and the ultimate supervision of the
President of Employer, Employee during the term hereof shall serve as the Senior
Vice President of a subsidiary of the Employer (the "Operating Subsidiary").
Subject to the control of the President and in compliance with its instructions
and directives, Employee, as the Senior Vice President of a subsidiary of the
Employer, shall have the responsibilities commensurate with such office and as
provided in the Operating Subsidiaries' bylaws and other governing documents.
3. Salary; Expense Reimbursements.
------------------------------
3.1. As compensation for Employee's service under and during the term of
this Agreement (or until terminated pursuant to the provisions hereof) Employer
shall pay Employee a salary of $12,500 per calendar month (prorated for partial
months), payable in accordance with the regular payroll practices of Employer,
as in effect from time to time. Such salary shall be subject to withholding for
the prescribed federal income tax, social security and other items as required
by law and for other items consistent with Employer's policy with respect to
health insurance and other
<PAGE>
benefit plans for similarly situated employees of Employer in which Employee may
elect to participate.
3.2. During the term of this Agreement, Employee also shall be entitled
to two (2) weeks paid vacation per year and to receive such paid sick leave,
insurance and other fringe benefits as are made available to other personnel of
Employer in comparable positions, with comparable service credit and with
comparable duties and responsibilities. Any benefits in excess of those granted
other salaried employees of Employer shall be subject to the prior approval of
the Board of Directors of Employer.
3.3. In the discretion of the President of the Employer, and without
implying any obligation on Employer ever to award a bonus to Employee, Employee
may from time to time be awarded a cash bonus or bonuses for services rendered
to the Employer during the term of Employee's employment under this Agreement.
If and to the extent a bonus is ever considered for Employee, it is expected
that any such bonus will be based not only on Employee's individual performance
and Employee's relative position, service tenure and responsibilities with
Employer, but also on the performance and profitability of the entire business
of Employer. During the second full year of this Agreement, Employee and
Employer may agree on a formula to be utilized in determining the amount of any
bonus for Employee. In the event Employer and Employee so agree, both parties
agree to execute an addendum to this Agreement specifying such bonus formula and
the terms and conditions thereof.
<PAGE>
3.4. Employer shall reimburse all reasonable out-of-pocket travel and
business expenses incurred by Employee in connection with the performance of
Employee's duties pursuant to this Agreement. Employer may also reimburse
reasonable out-of-pocket moving costs incurred by Employee in connection with
Employee's move to Austin, Texas, including two trips to Austin, Texas, by
Employee's spouse, provided such reimbursable moving costs shall be mutually
agreed upon by Employer and Employee. Employee shall provide Employer with a
written accounting of Employee's expenses, on a form acceptable to Employer,
together with supporting documentation, which satisfies applicable federal
income tax reporting and record keeping requirements.
3.5. The parties acknowledge and agree that Employee's employment duties
hereunder are performable in Austin, Texas, subject to business travel
commensurate with Employee's duties hereunder and as otherwise requested by
Employer.
4. Employee's Restrictive Covenants. In consideration of this Agreement,
--------------------------------
the employment of Employee hereunder, the salary paid hereunder, and other good
and valuable consideration the receipt and sufficiency of which Employee hereby
acknowledges, Employee acknowledges and agrees that:
4.1. (a) In Employee's position of employment, Employee will be exposed
to confidential information and trade secrets ("Proprietary Information")
pertaining to, or arising from, the business of Employer and/or Employer's
Affiliates, that such Proprietary Information is unique and valuable and that
Employer and/or Employer's Affiliates would suffer irreparable injury if this
<PAGE>
information were divulged to those in competition with Employer or Employer's
Affiliates. Therefore, Employee agrees to keep in strict secrecy and confidence,
both during and after the period of Employee's employment, any and all
information which Employee acquires, or to which Employee has access, during
Employee's employment by Employer, that has not been publicly disclosed by
Employer or Employer's Affiliates or that is not a matter of common knowledge by
their respective competitors. The Proprietary Information covered by this
Agreement shall include, but shall not be 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 Employer, marketing and other business and pricing strategies, and
trade secrets of Employer and/or Employer's Affiliates.
(b) Except with prior written approval of Employer, either during or
after Employee's employment hereunder, Employee will neither: (i) directly or
indirectly, disclose any Proprietary Information to any person except authorized
personnel of Employer; nor, (ii) use Proprietary Information in any way. Upon
termination of employment, whether voluntary or involuntary, within forty-eight
(48) hours of termination, Employee will deliver to Employer (without retaining
copies thereof) all documents, records or other memorializations including
copies of documents and any notes which Employee has prepared, that contain
Proprietary Information or relate to Employer's or Employer's Affiliates'
business, all other tangible Proprietary Information in Employee's possession or
control, and all of Employer's and the Affiliates' credit
<PAGE>
cards, keys, equipment, vehicles, supplies and other materials that are in
possession or under Employee's control.
4.2. (a) During the Employee's employment hereunder and for a period of
five (5) years after Employee ceases to be employed by the Employer, the
Employee shall not, directly or indirectly, for Employee's own account or
otherwise (i) solicit business from, divert business from, or attempt to convert
to other methods of using the same or similar products or services as provided
by the Employer or Employer's Affiliates, any client, account or location of the
Employer or Employer's Affiliates with which the Employee has had any contact as
a result of its employment hereunder; or (ii) solicit for employment or employ
any employee or former employee of the Employer or Employer's Affiliates.
(b) For a period of five (5) years after the termination of the
Employee's employment hereunder (except as provided in the last sentence of this
paragraph), the Employee shall not, directly or indirectly, own, engage in,
manage, operate, join, control, or participate in the ownership, management,
operation, or control of, or be connected as a stockholder, director, officer,
employee, agent, partner, joint venturer, member, beneficiary or otherwise with
any corporation, limited liability company, partnership, sole proprietorship,
association, business, trust, or other organization, entity or individual which
in any way provides physician practice management services within one hundred
(100) miles of any physician practice that is managed by Employer, the Operating
Subsidiary or any other of Employer's Affiliates; provided, however, that (i)
-------- -------
Employee may own, directly or indirectly, securities of any entity traded on any
national securities exchange
<PAGE>
or listed on the National Association of Securities Dealers Automated Quotation
System if Employee does not, directly or indirectly, own 3% or more of any class
of equity securities, or securities convertible into or exercisable or
exchangeable for 3% or more of any class of equity securities, of such entity,
and (ii) the one hundred (100) mile restriction shall only apply so as to
prohibit Employee with respect to physician practice management businesses that
are providing services to physicians of the same medical practice specialty as
those being serviced by Employer, the Operating Subsidiary or any of Employer's
Affiliates within the one hundred (100) mile restriction area at the time of
Employee's termination.
4.3. Employee understands and acknowledges damages at law alone will be
an insufficient remedy for Employer and Employer will suffer irreparable injury
if Employee violates the terms of this Agreement. Accordingly, Employer, upon
application to a court of competent jurisdiction, shall be entitled to
injunctive relief to enforce the provisions of this Agreement in the event of
any breach, or threatened breach, of its terms. Employee hereby waives any
requirement that Employer post bond or other security prior to obtaining such
injunctive relief. Injunctive relief may be sought in addition to any other
available rights or remedies at law. Employer shall additionally be entitled to
reasonable attorneys' fees incurred in enforcing the provisions of this
Agreement.
5. Miscellaneous.
-------------
<PAGE>
5.1. This Agreement is performable in Travis County, Texas and is
governed by the laws of Texas. This Agreement supersedes all prior
understandings and agreements between the parties and contains the entire
understanding of the parties hereto with respect to the subject matter hereof;
and is binding upon the parties hereto, their successors and permitted assigns.
Employer may assign its interest in this Agreement and all covenants, conditions
and provisions hereunder shall inure to the benefit of and be enforceable by its
assignee or successor in interest. The rights and obligations of Employee under
this Agreement are personal to Employee, and no such rights, benefits or
obligations shall be subject to voluntary or involuntary alienation, assignment
or transfer.
5.2. If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that shall, in no way,
affect the validity or enforceability of any other provision of this Agreement
and that provision shall be deemed modified to the minimum extent necessary to
render it valid, legal and enforceable.
5.3. No waiver by either the Employer or the Employee of a breach of any
provision of this Agreement shall operate as or be construed as a waiver of any
subsequent breach.
<PAGE>
EXECUTED by Employer and Employee to be effective for all purposes as of the
Effective Date provided above.
EMPLOYER: PRIME MEDICAL OPERATING, INC.
By: /s/ Cheryl Williams
-------------------------------------
Printed Name: Cheryl Williams
---------------------------
Title: Chief Financial Officer
---------------------------------
EMPLOYEE:
/s/ William J. Walsh
----------------------------------------
William J. Walsh
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") is by and between AK
Associates, L.L.C., a Texas limited liability company ("Employer") and Robert
Bachman ("Employee") and shall be effective as of October 8, 1997 (the
"Effective Date").
RECITALS:
WHEREAS, Employee desires to enter into the employment of Employer, and
Employer desires to employ Employee provided that, in so doing, it can protect
its confidential information, business, accounts, patronage and goodwill.
NOW, THEREFORE, in consideration of the foregoing recital and of the mutual
covenants set forth below, the parties hereto agree as follows:
1. Term; Termination.
-----------------
1.1. Employer hereby hires Employee and Employee accepts such
employment for a two (2) year term commencing on the Effective Date.
1.2. After expiration of the two (2) year term described in Section 1.1
above, this Agreement shall automatically terminate. However, Employee's
employment may continue thereafter as provided in Section 5.4 hereof.
1.3. This Agreement shall be automatically terminated on the death of
Employee or on the permanent disability of Employee if Employee is no longer
able to perform in all material respects the usual and customary duties of its
employment hereunder. For purposes hereof, any condition which in reasonable
likelihood is expected to impair Employee's ability to materially perform its
duties hereunder for a period of three (3) months or more shall be considered to
be permanent.
1.4. Employer may, upon written notice to Employee, terminate this
Agreement for cause if:
(a) Employee is convicted of an offense constituting a felony or
involving moral turpitude; or
(b) Employee (i) violates any rule, regulation, practice or policy
of the Employer; (ii) violates, breaches, or is in default under any provision
of this Agreement or that certain Contribution Agreement dated effective
September 1, 1997 by and among Prime Kidney Stone Treatment, Inc., AK
Associates, Inc. ("AK"), Employee, Lawrence Sodomire and Employer (the
"Contribution Agreement"); (iii) is materially dishonest in the performance of
its duties hereunder or engages in a material conflict of interest with the
Employer that is not fully disclosed to and approved by the President of
Employer; (iv) fails to follow reasonable
<PAGE>
instructions or directions from the President of Employer, or any other person
authorized by the Board of Directors to give such instructions (for purposes of
this Agreement, the President of Employer and/or such other authorized persons
are collectively referred to as the "President"); or (v) fails to perform the
services required pursuant to this Agreement. Notwithstanding the foregoing,
prior to any termination by Employer for any of the reasons described in clauses
(i), (iv) or (v), Employee will be given written notice specifying such reason
and ten (10) days opportunity to cure such deficiency or condition. Furthermore,
notwithstanding the foregoing, prior to any termination by Employer for the
reason described in clause (ii), Employee will be given written notice
specifying such reason and thirty (30) days opportunity to cure such deficiency
or condition. However, Employer will not be required to give more than three (3)
notices and opportunities to cure pursuant to either or both of the preceding
two sentences. Employer also agrees to comply with such employee disciplinary
processes as may be provided, from time to time, in the employment manual (the
"Employment Manual") utilized by Prime Medical (as hereinafter defined) and its
subsidiaries with respect to their employees. Employee acknowledges having
received and read a current copy of the Employment Manual prior to entering into
this Agreement. To the extent such Employment Manual provides for a greater or
different notice and opportunity to cure than that provided in this paragraph,
then Employer shall be entitled to comply with such process without also giving
the written notice and opportunity to cure expressly provided for in this
paragraph.
1.5. Upon termination, Employee shall be entitled to the following:
(a) If this Agreement and Employee's employment is terminated
pursuant to Section 1.3, or by Employee, then Employer shall pay Employee or
Employee's representative, as the case may be, Employee's then-current base
salary (excluding any bonuses and non-cash benefits) through the effective date
of termination, and the amount of any accrued but unused benefits (but only if
and to the extent payment of such benefits upon termination is required by the
then current Employment Manual), and Employer shall have no further obligations
hereunder.
(b) If Employer terminates this Agreement and Employee's
employment for cause pursuant to Section 1.4, or this Agreement automatically
terminates at the end of its term, Employee shall not be entitled to receive any
additional salary or benefits (but only as to accrued benefits payable upon
termination as required by the then current Employment Manual) beyond those
earned or accrued as of the effective date of the termination.
(c) If Employer terminates this Agreement and Employee's
employment without cause prior to the end of the term described in Section 1.1,
then Employee shall be entitled to payment for any accrued and unused benefits
through the date of termination (but only if and to the extent payment of such
benefits upon termination is required by the then current Employment Manual) and
continue to receive the base salary described in Section 3.1 through the end of
the term described in Section 1.1.
1.6. No termination or expiration of this Agreement or Employee's
employment shall release either Employer or Employee from (i) their respective
obligations
2
<PAGE>
hereunder to the date of termination, or (ii) the provisions of Section 4
hereof, or (iii) their respective obligations under the Contribution Agreement.
2. Duties of Employee. During the period of employment hereunder,
------------------
Employee shall serve as Vice President of Employer and devote substantially its
entire time and best efforts, on a full-time basis, to the business of Employer
for the profit, benefit and advantage of Employer. The headquarters for the
services to be rendered by Employee hereunder shall be in the Chicago, Illinois,
area unless otherwise consented to by the Employee. Employee, together with the
other Vice President of Employer, and subject to the supervision of the
President of Employer, shall be responsible for the day-to-day management of the
operations of Employer, including sales and marketing efforts and overall shop
supervision, and shall have such other responsibilities as are normally accorded
to the Vice President of a company, consistent with the duties and
responsibilities which Employee had with respect to AK Associates, Inc. prior to
the acquisition of its assets by Employer. Employee shall further perform such
services as shall be designated, from time to time, by the President of
Employer. However, this Section shall not be construed as preventing Employee
from investing its personal assets in business ventures that do not compete with
Employer or are not otherwise prohibited by this Agreement or the Contribution
Agreement, and spending reasonable amounts of personal time in the management
thereof. Employer consents to Employee continuing to own and operate AK and be
an employee of AK, so long as it does not interfere with Employee's full-time
employment hereunder. Employee shall use its best efforts to promote the
interests of Employer, and to preserve Employer's goodwill with respect to
Employer's employees, customers, suppliers and other persons having business
relations with Employer. For purposes of this Agreement, Employer's
subsidiaries, parent companies and other affiliates are collectively referred to
as "Affiliates."
3. Salary; Options and Benefits.
----------------------------
3.1. As compensation for Employee's service under and during the term
of this Agreement (or until terminated pursuant to the provisions hereof)
Employer shall pay Employee a salary of $150,000 per calendar year, payable in
accordance with the regular payroll practices of Employer, as in effect from
time to time. Such salary shall be subject to withholding for the prescribed
federal income tax, social security and other items as required by law and for
other items consistent with Employer's policy with respect to similarly situated
employees of Employer.
3.2. During the term of this Agreement, Employee also shall be entitled
to vacation, sick leave, insurance and other fringe benefits as are generally
made available to other similarly situated personnel of Employer.
3.3. As soon as reasonably practicable after the date of this
Agreement, Employee shall be issued a six-year stock option covering 25,000
shares of Common Stock of Prime Medical Services, Inc., a Delaware corporation
affiliated with Employer ("Prime Medical"), which option shall be granted
pursuant to Prime Medical's employee stock option plan. The per share exercise
price of such option shall be the closing price of the Common Stock of Employer
on the Closing Date (as such term is defined in the Contribution Agreement). One
3
<PAGE>
fifth of the shares of Common Stock covered by such option shall vest on each of
the first, second, third, fourth and fifth anniversary, respectively, of the
date of the grant of such option. Employees rights under the option, including
Employee's right to exercise the option as to any shares vested thereunder,
shall terminate in the event Employee breaches or defaults under any of
Employee's obligations hereunder or under the Contribution Agreement (provided
Employee has been given written notice of any such breach or default under the
Contribution Agreement and has failed to cure such breach or default within
thirty (30) days thereafter).
3.4. Employer shall reimburse all reasonable out-of-pocket travel and
business expenses incurred by Employee in connection with the performance of
Employee's duties pursuant to this Agreement. Employee shall provide Employer
with a written accounting of Employee's expenses, on a form acceptable to
Employer, together with supporting documentation, which satisfies applicable
federal income tax reporting and record keeping requirements.
4. Employee's Restrictive Covenants.
--------------------------------
4.1. In consideration of this Agreement, the employment of Employee
hereunder, the salary paid hereunder, and other good and valuable consideration
the receipt and sufficiency of which Employee hereby acknowledges, Employee
acknowledges and agrees that:
(a) In Employee's position of employment, Employee will be exposed
to confidential information and trade secrets pertaining to, or arising from,
the business of Employer and/or Employer's affiliates, that such information and
trade secrets are unique and valuable and that Employer and/or Employer's
affiliates would suffer irreparable injury if this information or trade secrets
were divulged to those in competition with Employer or Employer's affiliates.
Therefore, Employee agrees to keep in strict secrecy and confidence, both during
and after the period of Employee's employment, any and all information
concerning Employer and Employer's affiliates which Employee acquires, or to
which Employee has access, during Employee's employment by Employer, that has
not been publicly disclosed by Employer or that is not a matter of common
knowledge by Employer's competitors (collectively, "Proprietary Information").
The Proprietary Information covered by this Agreement shall include, but shall
not be 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 Employer, marketing and other
business and pricing strategies, and trade secrets of Employer and/or Employer's
affiliates.
(b) Except with prior written approval of Employer, either during
or after Employee's employment hereunder, Employee will neither: (i) directly or
indirectly, disclose any Proprietary Information to any person except authorized
personnel of Employer; nor, (ii) use Proprietary Information in any way. Upon
termination of employment, whether voluntary or involuntary, within forty-eight
(48) hours of termination, Employee will deliver to Employer (without retaining
copies thereof) all documents, records or other memorializations including
4
<PAGE>
copies of documents and any notes which Employee has prepared, that contain
Proprietary Information or relate to Employer's or Employer's affiliates'
business, all other tangible Proprietary Information in Employee's possession or
control, and all of Employer's and the affiliates' credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Employee's control.
4.2. Employee understands and acknowledges damages at law alone will be an
insufficient remedy for Employer and Employer will suffer irreparable injury if
Employee violates any of the terms of this Section 4. Accordingly, Employer,
upon application to a court of competent jurisdiction, shall be entitled to
injunctive relief to enforce the provisions of this Agreement in the event of
any breach, or threatened breach, of its terms. Employee hereby waives any
requirement that Employer post bond or other security prior to obtaining such
injunctive relief. Injunctive relief may be sought in addition to any other
available rights or remedies at law. Employer shall additionally be entitled to
reasonable attorneys' fees incurred in enforcing the provisions of this
Agreement.
5. Miscellaneous.
-------------
5.1. This Agreement is performable in Illinois and is governed by the
laws of Illinois. This Agreement supersedes all prior understandings and
agreements between the parties and contains the entire understanding of the
parties hereto with respect to the subject matter hereof; and is binding upon
the parties hereto, their successors and permitted assigns. Employer may assign
its interest in this Agreement and all covenants, conditions and provisions
hereunder shall inure to the benefit of and be enforceable by its assignee or
successor in interest. The rights and obligations of Employee under this
Agreement are personal to Employee, and no such rights, benefits or obligations
shall be subject to voluntary or involuntary alienation, assignment or transfer.
5.2. If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that shall, in no way,
affect the validity or enforceability of any other provision of this Agreement
and that provision shall be deemed modified to the minimum extent necessary to
render it valid, legal and enforceable.
5.3. No waiver by either the Employer or the Employee of a breach of
any provision of this Agreement shall operate as or be construed as a waiver of
any subsequent breach.
5.4 Upon expiration of the term of this Agreement described in Section
1.1, Employee's employment with Employer (if not previously terminated) shall
not automatically terminate, and Employee shall continue thereafter as an
at-will employee of Employer until Employee's employment is terminated by either
Employee or Employer. However, any employment that continues after the
expiration of the two-year term described in Section 1.1 shall not be governed
by the terms of this Agreement, and thereafter only the post-termination
provisions contained in Section 4 shall continue to apply.
5
<PAGE>
SIGNATURE PAGE TO
BACHMAN EMPLOYMENT AGREEMENT
EXECUTED by Employer and Employee to be effective for all purposes as of
the Effective Date provided above.
EMPLOYER: AK ASSOCIATES, L.L.C.
/s/ Michael S. Madler
---------------------------------------
Michael S. Madler, President
EMPLOYEE:
/s/ Robert Bachman
---------------------------------------
Robert Bachman
6
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") is by and between AK
Associates, L.L.C., a Texas limited liability company ("Employer") and Lawrence
Sodomire ("Employee") and shall be effective as of October 8, 1997 (the
"Effective Date").
RECITALS:
WHEREAS, Employee desires to enter into the employment of Employer, and
Employer desires to employ Employee provided that, in so doing, it can protect
its confidential information, business, accounts, patronage and goodwill.
NOW, THEREFORE, in consideration of the foregoing recital and of the mutual
covenants set forth below, the parties hereto agree as follows:
1. Term; Termination.
-----------------
1.1. Employer hereby hires Employee and Employee accepts such
employment for a two (2) year term commencing on the Effective Date.
1.2. After expiration of the two (2) year term described in Section 1.1
above, this Agreement shall automatically terminate. However, Employee's
employment may continue thereafter as provided in Section 5.4 hereof.
1.3. This Agreement shall be automatically terminated on the death of
Employee or on the permanent disability of Employee if Employee is no longer
able to perform in all material respects the usual and customary duties of its
employment hereunder. For purposes hereof, any condition which in reasonable
likelihood is expected to impair Employee's ability to materially perform its
duties hereunder for a period of three (3) months or more shall be considered to
be permanent.
1.4. Employer may, upon written notice to Employee, terminate this
Agreement for cause if:
(a) Employee is convicted of an offense constituting a felony or
involving moral turpitude; or
(b) Employee (i) violates any rule, regulation, practice or policy
of the Employer; (ii) violates, breaches, or is in default under any provision
of this Agreement or that certain Contribution Agreement dated effective
September 1, 1997 by and among Prime Kidney Stone Treatment, Inc., AK
Associates, Inc. ("AK"), Employee, Robert Bachman and Employer (the
"Contribution Agreement"); (iii) is materially dishonest in the performance of
its duties hereunder or engages in a material conflict of interest with the
Employer that is not fully disclosed to and approved by the President of
Employer; (iv) fails to follow reasonable
<PAGE>
instructions or directions from the President of Employer, or any other person
authorized by the Board of Directors to give such instructions (for purposes of
this Agreement, the President of Employer and/or such other authorized persons
are collectively referred to as the "President"); or (v) fails to perform the
services required pursuant to this Agreement. Notwithstanding the foregoing,
prior to any termination by Employer for any of the reasons described in clauses
(i), (iv) or (v), Employee will be given written notice specifying such reason
and ten (10) days opportunity to cure such deficiency or condition. Furthermore,
notwithstanding the foregoing, prior to any termination by Employer for the
reason described in clause (ii), Employee will be given written notice
specifying such reason and thirty (30) days opportunity to cure such deficiency
or condition. However, Employer will not be required to give more than three (3)
notices and opportunities to cure pursuant to either or both of the preceding
two sentences. Employer also agrees to comply with such employee disciplinary
processes as may be provided, from time to time, in the employment manual (the
"Employment Manual") utilized by Prime Medical (as hereinafter defined) and its
subsidiaries with respect to their employees. Employee acknowledges having
received and read a current copy of the Employment Manual prior to entering into
this Agreement. To the extent such Employment Manual provides for a greater or
different notice and opportunity to cure than that provided in this paragraph,
then Employer shall be entitled to comply with such process without also giving
the written notice and opportunity to cure expressly provided for in this
paragraph.
1.5. Upon termination, Employee shall be entitled to the following:
(a) If this Agreement and Employee's employment is terminated
pursuant to Section 1.3, or by Employee, then Employer shall pay Employee or
Employee's representative, as the case may be, Employee's then-current base
salary (excluding any bonuses and non-cash benefits) through the effective date
of termination, and the amount of any accrued but unused benefits (but only if
and to the extent payment of such benefits upon termination is required by the
then current Employment Manual), and Employer shall have no further obligations
hereunder.
(b) If Employer terminates this Agreement and Employee's
employment for cause pursuant to Section 1.4, or this Agreement automatically
terminates at the end of its term, Employee shall not be entitled to receive any
additional salary or benefits (but only as to accrued benefits payable upon
termination as required by the then current Employment Manual) beyond those
earned or accrued as of the effective date of the termination.
(c) If Employer terminates this Agreement and Employee's
employment without cause prior to the end of the term described in Section 1.1,
then Employee shall be entitled to payment for any accrued and unused benefits
through the date of termination (but only if and to the extent payment of such
benefits upon termination is required by the then current Employment Manual) and
continue to receive the base salary described in Section 3.1 through the end of
the term described in Section 1.1.
1.6. No termination or expiration of this Agreement or Employee's
employment shall release either Employer or Employee from (i) their respective
obligations
2
<PAGE>
hereunder to the date of termination, or (ii) the provisions of Section 4
hereof, or (iii) their respective obligations under the Contribution Agreement.
2. Duties of Employee. During the period of employment hereunder,
------------------
Employee shall serve as Vice President of Employer and devote substantially its
entire time and best efforts, on a full-time basis, to the business of Employer
for the profit, benefit and advantage of Employer. The headquarters for the
services to be rendered by Employee hereunder shall be in the Chicago, Illinois,
area unless otherwise consented to by the Employee. Employee, together with the
other Vice President of Employer, and subject to the supervision of the
President of Employer, shall be responsible for the day-to-day management of the
operations of Employer, including sales and marketing efforts and overall shop
supervision, and shall have such other responsibilities as are normally accorded
to the Vice President of a company, consistent with the duties and
responsibilities which Employee had with respect to AK Associates, Inc. prior to
the acquisition of its assets by Employer. Employee shall further perform such
services as shall be designated, from time to time, by the President of
Employer. However, this Section shall not be construed as preventing Employee
from investing its personal assets in business ventures that do not compete with
Employer or are not otherwise prohibited by this Agreement or the Contribution
Agreement, and spending reasonable amounts of personal time in the management
thereof. Employer consents to Employee continuing to own and operate AK and be
an employee of AK, so long as it does not interfere with Employee's full-time
employment hereunder. Employee shall use its best efforts to promote the
interests of Employer, and to preserve Employer's goodwill with respect to
Employer's employees, customers, suppliers and other persons having business
relations with Employer. For purposes of this Agreement, Employer's
subsidiaries, parent companies and other affiliates are collectively referred to
as "Affiliates."
3. Salary; Options and Benefits.
----------------------------
3.1. As compensation for Employee's service under and during the term
of this Agreement (or until terminated pursuant to the provisions hereof)
Employer shall pay Employee a salary of $150,000 per calendar year, payable in
accordance with the regular payroll practices of Employer, as in effect from
time to time. Such salary shall be subject to withholding for the prescribed
federal income tax, social security and other items as required by law and for
other items consistent with Employer's policy with respect to similarly situated
employees of Employer.
3.2. During the term of this Agreement, Employee also shall be entitled
vacation, sick leave, insurance and other fringe benefits as are generally made
available to other similarly situated personnel of Employer.
3.3. As soon as reasonably practicable after the effective date of this
Agreement, Employee shall be issued a six-year stock option covering 25,000
shares of Common Stock of Prime Medical Services, Inc., a Delaware corporation
affiliated with Employer ("Prime Medical"), which option shall be granted
pursuant to Prime Medical's employee stock option plan. The per share exercise
price of such option shall be the closing price of the Common Stock of Employer
on the Closing Date (as such term is defined in the Contribution Agreement). One
3
<PAGE>
fifth of the shares of Common Stock covered by such option shall vest on each of
the first, second, third, fourth and fifth anniversary, respectively, of the
date of the grant of such option. Employees rights under the option, including
Employee's right to exercise the option as to any shares vested thereunder,
shall terminate in the event Employee breaches or defaults under any of
Employee's obligations hereunder or under the Contribution Agreement (provided
Employee has been given written notice of any such breach or default under the
Contribution Agreement and has failed to cure such breach or default within
thirty (30) days thereafter).
3.4. Employer shall reimburse all reasonable out-of-pocket travel and
business expenses incurred by Employee in connection with the performance of
Employee's duties pursuant to this Agreement. Employee shall provide Employer
with a written accounting of Employee's expenses, on a form acceptable to
Employer, together with supporting documentation, which satisfies applicable
federal income tax reporting and record keeping requirements.
4. Employee's Restrictive Covenants.
--------------------------------
4.1. In consideration of this Agreement, the employment of Employee
hereunder, the salary paid hereunder, and other good and valuable consideration
the receipt and sufficiency of which Employee hereby acknowledges, Employee
acknowledges and agrees that:
(a) In Employee's position of employment, Employee will be exposed
to confidential information and trade secrets pertaining to, or arising from,
the business of Employer and/or Employer's affiliates, that such information and
trade secrets are unique and valuable and that Employer and/or Employer's
affiliates would suffer irreparable injury if this information or trade secrets
were divulged to those in competition with Employer or Employer's affiliates.
Therefore, Employee agrees to keep in strict secrecy and confidence, both during
and after the period of Employee's employment, any and all information
concerning Employer and Employer's affiliates which Employee acquires, or to
which Employee has access, during Employee's employment by Employer, that has
not been publicly disclosed by Employer or that is not a matter of common
knowledge by Employer's competitors (collectively, "Proprietary Information").
The Proprietary Information covered by this Agreement shall include, but shall
not be 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 Employer, marketing and other
business and pricing strategies, and trade secrets of Employer and/or Employer's
affiliates.
(b) Except with prior written approval of Employer, either during
or after Employee's employment hereunder, Employee will neither: (i) directly or
indirectly, disclose any Proprietary Information to any person except authorized
personnel of Employer; nor, (ii) use Proprietary Information in any way. Upon
termination of employment, whether voluntary or involuntary, within forty-eight
(48) hours of termination, Employee will deliver to Employer (without retaining
copies thereof) all documents, records or other memorializations including
4
<PAGE>
copies of documents and any notes which Employee has prepared, that contain
Proprietary Information or relate to Employer's or Employer's affiliates'
business, all other tangible Proprietary Information in Employee's possession or
control, and all of Employer's and the affiliates' credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Employee's control.
4.2. Employee understands and acknowledges damages at law alone will be
an insufficient remedy for Employer and Employer will suffer irreparable injury
if Employee violates any of the terms of this Section 4. Accordingly, Employer,
upon application to a court of competent jurisdiction, shall be entitled to
injunctive relief to enforce the provisions of this Agreement in the event of
any breach, or threatened breach, of its terms. Employee hereby waives any
requirement that Employer post bond or other security prior to obtaining such
injunctive relief. Injunctive relief may be sought in addition to any other
available rights or remedies at law. Employer shall additionally be entitled to
reasonable attorneys' fees incurred in enforcing the provisions of this
Agreement.
5. Miscellaneous.
-------------
5.1. This Agreement is performable in Illinois and is governed by the
laws of Illinois. This Agreement supersedes all prior understandings and
agreements between the parties and contains the entire understanding of the
parties hereto with respect to the subject matter hereof; and is binding upon
the parties hereto, their successors and permitted assigns. Employer may assign
its interest in this Agreement and all covenants, conditions and provisions
hereunder shall inure to the benefit of and be enforceable by its assignee or
successor in interest. The rights and obligations of Employee under this
Agreement are personal to Employee, and no such rights, benefits or obligations
shall be subject to voluntary or involuntary alienation, assignment or transfer.
5.2. If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that shall, in no way,
affect the validity or enforceability of any other provision of this Agreement
and that provision shall be deemed modified to the minimum extent necessary to
render it valid, legal and enforceable.
5.3. No waiver by either the Employer or the Employee of a breach of
any provision of this Agreement shall operate as or be construed as a waiver of
any subsequent breach.
5.4 Upon expiration of the term of this Agreement described in Section
1.1, Employee's employment with Employer (if not previously terminated) shall
not automatically terminate, and Employee shall continue thereafter as an at-
will employee of Employer until Employee's employment is terminated by either
Employee or Employer. However, any employment that continues after the
expiration of the two-year term described in Section 1.1 shall not be governed
by the terms of this Agreement, and thereafter only the post-termination
provisions contained in Section 4 shall continue to apply.
5
<PAGE>
SIGNATURE PAGE TO
SODOMIRE EMPLOYMENT AGREEMENT
EXECUTED by Employer and Employee to be effective for all purposes as of
the Effective Date provided above.
EMPLOYER: AK ASSOCIATES, L.L.C.
/s/ Michael S. Madler
-----------------------------------
Michael S. Madler, President
EMPLOYEE:
Lawrence Sodomire
-----------------------------------
Lawrence Sodomire
6
<PAGE>
PARTNERSHIP INTEREST PURCHASE AGREEMENT
Among
TENN-GA STONE GROUP TWO, L.P.,
a Tennessee Limited Partnership,
NGST, INC.,
a Tennessee Corporation,
PRIME LITHOTRIPTER OPERATIONS, INC.,
And
ALL OF THE SHAREHOLDERS OF
NGST, INC.
___________________
Dated May 1, 1997
___________________
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I Agreement of Purchase and Sale 1
1.1 Agreement 1
1.2 Closing 2
1.3 No Assumption of Liabilities 2
ARTICLE II Representations and Warranties of Prime 4
2.1 Due Organization and Principal Executive Office 4
2.2 Due Authorization 4
2.3 Claims and Proceedings 5
2.4 Certain Consents 5
2.5 Liens 5
ARTICLE III Representations and Warranties to Prime 6
3.1 Due Organization 6
3.2 Subsidiaries 7
3.3 Due Authorization 7
3.4 Financial Statements 8
3.5 Conduct of Business; Certain Actions 8
3.6 Ownership of Assets: Licenses, Permits, etc 10
3.7 Environmental Issues. 11
3.8 Intellectual Property Rights 12
3.9 Compliance with Laws 12
3.10 Insurance 12
3.11 Employee Benefit Matters 13
3.12 Contracts and Agreements 13
3.13 Claims and Proceedings 14
3.14 Taxes 14
3.15 Personnel 15
3.16 Business Relations 16
3.17 Accounts Receivable 17
3.18 Agents 17
3.19 Indebtedness To and From Partners and Employees 17
3.20 Commission Sales Contracts 17
3.21 Certain Consents 17
3.22 Interest in Competitors, Suppliers, and Customers 17
3.23 Warranties 18
3.24 Partnership Interests 18
3.25 NGST Shareholders 18
3.26 No Known Breaches by Other Parties 19
<PAGE>
ARTICLE IV Covenants 19
4.1 Inspection 19
4.2 Compliance 19
4.3 Satisfaction of All Conditions Precedent 20
4.4 No Solicitation 20
4.5 Notice of Developments 20
4.6 Notice of Breach 20
4.7 Notice of Litigation by Partnership and NGST 21
4.8 Notice of Litigation by Prime 21
4.9 Continuation of Insurance Coverage 22
4.10 Maintenance of Credit Terms 22
4.11 Updating Information 22
4.12 Financial Statements 22
4.13 Interim Operations of the Partnership 23
4.14 Cooperation Relating to Financial Statements 25
4.15 Necessary Filings 25
4.16 Compliance with Laws 25
ARTICLE V Conditions to Closing 26
5.1 Conditions to Obligations of Prime 26
5.2 Conditions to Obligations of the Parties Other than Prime 28
ARTICLE VI Termination 29
ARTICLE VII Indemnification of Prime 30
7.1 Indemnification of Prime 30
7.2 Defense of Third-Party Claims 32
ARTICLE VIII Indemnification of the Partnership, NGST and the
Shareholders 34
8.1 Indemnification of the Partnership, NGST and the Shareholders 34
8.2 Defense of Third-Party Claims 34
ARTICLE IX Noncompetition Agreements 36
ARTICLE X Miscellaneous 40
10.1 Collateral Agreements, Amendments, and Waivers 40
10.2 Successors and Assigns 40
10.3 Expenses 41
10.4 Invalid Provisions 41
10.5 Information and Confidentiality 41
10.6 Waiver 42
10.7 Notices 42
10.8 Survival of Representations, Warranties, and Covenants 43
<PAGE>
10.9 Further Assurances 43
10.10 No Third-Party Beneficiaries 43
10.11 Construction 43
10.12 Arbitration 44
10.13 Counterparts 44
10.14 Definition of Knowledge 45
Exhibit A - Form of Amended and Restated Partnership Agreement
Exhibit B - Financial Statements of the Partnership and NGST
Exhibit C - Form of Assignment Agreement
Exhibit D - Form of Noncompetition Agreement
<PAGE>
SUMMARY OF SCHEDULES
TO
PARTNERSHIP INTEREST PURCHASE AGREEMENT
Schedule 3.6 - Liens and Encumbrances
Schedule 3.12 - Contracts, Leases and Other Agreements
Schedule 3.13 - Claims and Proceedings
Schedule 3.15 - Personnel
Schedule 3.21 - Third Party Consents
Schedule 3.22 - Interest in Competitors, Suppliers and Customers
Schedule 3.24 - Partnership Interests
Schedule 3.25 - List of NGST Shareholders and Percentage of Stock Holdings
<PAGE>
PARTNERSHIP INTEREST PURCHASE AGREEMENT
This Partnership Interest Purchase Agreement (this "Agreement") is entered
into to be effective as of May 1, 1997 (the "Effective Time"), among Prime
Lithotripter Operations, Inc., a New York corporation ("Prime"), Tenn-Ga Stone
Group Two, L.P., a Tennessee limited partnership (the "Partnership"), NGST,
Inc., a Tennessee corporation ("NGST"), and all of the shareholders of NGST
(each of which is individually referred to herein as a "Shareholder" and all of
which are collectively referred to herein as the "Shareholders") Thomas C.
Bright, M.D.; Argil J. Wheelock, M.D.; R. Smith Murray, M.D.; Richard S. Lasky,
M.D.; John F. Bryant, M.D.; Marty Scheinberg, M.D.; James E. McKinney, M.D.;
Paul E. Henson, M.D.; Oliver Benton, III, M.D.; Stephen W. Jackson, M.D.; C. A.
Kyle, Jr., M.D.; Nicholas Newton, M.D.; Jack Monnig, M.D.; Samuel M. Currin,
M.D.; J. Patrick Dilworth, M.D.; David Sahaj, M.D.; John Bryan, M.D.; Paula
Willingham and Robert DeBord.
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) NGST and the Shareholders will cause all of the general partners
of the Partnership (the "Partners"), as of the Effective Time, to execute the
Partnership Agreement (the "Amended Partnership
<PAGE>
Agreement"), the form of which is attached hereto as Exhibit A, (b) as of, or
prior to, the Effective Time, NGST and the Shareholders will cause the Partners
to take such action as shall be necessary to convert the Partnership into a
general partnership to be governed by the Amended Partnership Agreement, which
general partnership will include all assets, liabilities, rights and business of
the Partnership, and will have the same capital accounts for the Partners as
existed prior to such conversion; and (c) Prime agrees to purchase, as of the
Effective Time, from NGST, a 38.25% general partnership interest in the
Partnership for a total purchase price of $3,470,000 to be paid in cash or
certified funds at the Closing (as hereinafter defined), and Prime will execute
the Amended Partnership Agreement in the form attached hereto as Exhibit A.
Immediately after such purchase, Prime's beginning capital account shall be
zero. The parties hereto that are also Partners agree that, by execution of this
Agreement, they have given all necessary consents to the transactions
contemplated in this Section 1.1 and that no further or separate consents from
them will be necessary for purposes of complying with the organizational and
governing documents of the Partnership. For purposes of this Agreement, the term
"Partnership" shall be deemed to mean and include both the Partnership
identified above as it exists immediately prior to the execution of this
Agreement, as well as the Partnership as it will be reconstituted immediately
after the transactions contemplated in (a) and (b) of this Section 1.1.
1.2 Closing. The closing of the transactions contemplated by Section 1.1
-------
(the "Closing") shall, subject to the parties right to terminate pursuant to
ARTICLE VI, take place at such time and place as Prime and NGST may agree. The
date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
<PAGE>
1.3 No Assumption of Liabilities. All parties hereto acknowledge and
----------------------------
agree that neither Prime nor any affiliate of Prime shall, by virtue of entering
into and performing this Agreement or by virtue of the consummation of the
transactions contemplated hereby, assume any liabilities or obligations of any
kind whatsoever from any Partners, NGST, or any of the Shareholders.
Furthermore, neither Prime nor any affiliate of Prime shall, by virtue of
entering into and performing this Agreement or by virtue of the consummation of
the transactions contemplated hereby, assume any liabilities or obligations of
any kind whatsoever from, or relating to, the Partnership to the extent such
liabilities or obligations are existing on the Closing Date, or arise out of
events or omissions occurring prior to the Closing Date. Without limiting the
generality of the foregoing, the parties hereto expressly acknowledge and agree
that Prime is not assuming any debts, liabilities, or obligations of the
Partnership, any Partners, NGST or any of the Shareholders, or any claims
against the Partnership, any Partners, NGST or any of the Shareholders, whether
known or unknown, or absolute, contingent or otherwise (including, but not
limited to, federal, state, and local taxes, any sales taxes, any taxes arising
from the transactions contemplated by this Agreement and any liabilities arising
from any civil, criminal or regulatory litigation or action involving or related
to the Partnership, any Partners, NGST or any of the Shareholders or their
businesses), and the Partnership, NGST and the Shareholders each hereby agree
(severally and not jointly) to indemnify Prime and hold Prime harmless from and
against any such debts, liabilities and obligations; provided, however, that
with regard to the Partnership only, the foregoing shall not be construed to
preclude Prime's liability, in its role as a general partner of the Partnership
after the Closing with respect to claims, debts, liabilities or obligations that
arise wholly out of actions, events or omissions occurring after the Closing
Date.
<PAGE>
ARTICLE II
Representations and Warranties of Prime
---------------------------------------
Prime represents and warrants to the other parties hereto as follows (with
the understanding that the other parties hereto 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 New York and has full corporate power and authority to
carry on its business as now conducted and to enter into and perform this
Agreement and each other agreement, instrument and document required to be
executed by Prime in connection herewith. Prime's principal executive offices
are located at 1301 Capital of Texas Highway, Austin, Texas 78746.
2.2 Due Authorization. This Agreement and each other agreement,
-----------------
instrument, and document required 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 to be executed by Prime will
not (a) to the best knowledge of Prime, 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
certificate of incorporation or bylaws
<PAGE>
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 Claims and Proceedings. Prime is not a party to any claims, actions,
----------------------
suits, proceedings, or investigations affecting it, or any of its properties or
assets, 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.
2.4 Certain Consents. There are no consents, waivers or approvals
----------------
required to be executed and/or obtained by Prime from third parties in
connection with the execution, delivery and performance of this Agreement, which
have not been so executed and/or obtained.
2.5 Liens. It is acknowledged that Prime's partnership interest in the
-----
Partnership shall be subject to a lien that arises as a result of Prime's credit
facility with the Bank of Boston and NationsBank. By execution hereof, all
parties hereto grant, and agree to cause any Partners who are not parties hereto
to grant, all consents necessary with respect to the creation, continuance and
enforcement of such lien; provided such consents shall not be deemed to allow
the lienholder to become a substitute partner in the Partnership and such
lienholder, upon enforcement of such lien, shall only be entitled to the
financial rights of Prime as a partner, and not as to rights with respect to
governance matters.
<PAGE>
ARTICLE III
Representations and Warranties to Prime
---------------------------------------
Each of the parties hereto, other than Prime, hereby (severally, and not
jointly) represents and warrants to Prime as follows (with the understanding
that Prime is relying materially on each such representation and warranty in
entering into and performing this Agreement). If a particular representation and
warranty is expressly stated below to be made, in whole or in part, about the
"Shareholders," each Shareholder will be deemed to be making that representation
and warranty only about themselves, except with regard to Section 3.26.
Representations and warranties expressly about the "Partnership" will be deemed
to be made by the Partnership, NGST and such of the Shareholders who are also
Partners. Representations and warranties expressly about "NGST" will be deemed
to be made by NGST and each of the Shareholders. Otherwise, all parties hereto,
other than Prime, severally (and not jointly) are making each of the
representations and warranties in this ARTICLE III as to all matters stated
therein (including without limitation Section 3.26).
3.1 Due Organization. The Partnership, prior to the Closing, was a
----------------
limited partnership, and immediately prior to and after the Closing (as of the
Effective Time) will be a general partnership, duly organized, validly existing,
and in good standing under the laws of the State of Tennessee and has full power
and authority to carry on its business as now conducted and as proposed to be
conducted. Complete and correct copies of the limited partnership agreement and
all amendments thereto have been delivered to Prime. NGST is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Tennessee
<PAGE>
and has full power and authority to carry on its businesses as now conducted and
as proposed to be conducted. Complete and correct copies of the Articles of
Incorporation, Charter and Bylaws of NGST and all amendments thereto, have been
delivered to Prime. Each of the Partnership and NGST is qualified to do business
and is in good standing in every jurisdiction where such qualification is
required for the business and transactions contemplated by this Agreement.
3.2 Subsidiaries. The Partnership 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, association, joint venture, trust, or other entity.
3.3 Due Authorization. The Partnership, NGST and each of the Shareholders
-----------------
has full power and authority to enter into and perform this Agreement and each
other agreement, instrument, and document required to be executed by it in
connection herewith. The execution, delivery, and performance of this Agreement
and such other agreements, instruments, and documents have been, or prior to
Closing will be, duly authorized by the Partners of the Partnership and the
Shareholders and directors of NGST. This Agreement has been duly and validly
executed and delivered by the Partnership, NGST and each of the Shareholders and
constitutes a valid and binding obligation of the Partnership, NGST and each of
the Shareholders enforceable against them in accordance with its terms. The
execution, delivery, and performance of this Agreement by the Partnership, NGST
and each of the Shareholders shall not (a) to the best knowledge of the
Partnership, NGST and each of the Shareholders, violate any federal, state,
county, or local law, rule, or regulation applicable to the Partnership, NGST or
any of the Shareholders, or their properties, (b) violate or conflict with, or
permit the cancellation of, any agreement to which the Partnership or NGST is a
party, or by which they or any of their
<PAGE>
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 indebtedness secured by the property
of, the Partnership or NGST , or (d) violate or conflict with any provision of
the limited partnership agreement of the Partnership or the Articles of
Incorporation, Charter or Bylaws of NGST. No action, consent, or approval of, or
filing with, any governmental authority is required by the Partnership, NGST or
any of the Shareholders in connection with the execution, delivery, or
performance of this Agreement (or any agreement or other document executed by
the Partnership, NGST or any of the Shareholders in connection herewith).
3.4 Financial Statements. The unaudited balance sheet and income
--------------------
statement of each of the Partnership and NGST as of and for the years ended
December 31, 1995 and 1996 and the unaudited balance sheet and income statement
of the Partnership as of and for the three (3) months ended March 31, 1997
(collectively, the "Financial Statements") are attached hereto as Exhibit B.
The Financial Statements have been prepared on a consistent basis throughout the
periods indicated and fairly present the financial position and results of
operations of the Partnership and NGST as of the indicated dates and for the
indicated periods. Except to the extent reflected or provided for in the
Financial Statements (including the notes thereto), neither the Partnership nor
NGST has had any 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
of NGST and the Partnership subsequent to December 31, 1996 and March 31, 1997,
respectively. Since March 31, 1997 (with respect to the Partnership) and
December 31, 1996 (with respect to NGST), there has been
<PAGE>
no material adverse change in the financial position, assets, results of
operations, or business of the Partnership or NGST.
3.5 Conduct of Business; Certain Actions. Since March 31, 1997, the
------------------------------------
Partnership has conducted its business and operations in the ordinary course and
consistent with its past practices and has not (a) purchased or retired any
indebtedness or partnership interest from any of its partners, (b) increased the
compensation of any of its partners, or employees, (c) incurred any indebtedness
exceeding $10,000 in the aggregate (other than open accounts payable arising in
the ordinary course of business), (d) sold any asset (or any group of related
assets) in any transaction (or series of related transactions) in which the
purchase price for such asset (or group of related assets) exceeded $10,000
(other than sales of inventory in the ordinary course of business), (e) made or
guaranteed any loans or advances whatsoever, (f) suffered or permitted any lien,
security interest, claim, charge, or other encumbrance to arise or be granted or
created against or upon any of the assets of the Partnership, real or personal,
tangible or intangible, (g) canceled, waived, or released any of the
Partnership's debts, rights, or claims against third parties, (h) had any
amendments to its partnership agreement, (i) made or paid any severance or
termination payment to any employee or consultant in excess of $10,000, (j) made
any change in the method of accounting of the Partnership, (k) made any
investment or commitment therefor in any person, business, corporation,
association, partnership, joint venture, trust, or other entity, (l) made,
entered into, amended, or terminated any written employment contract, or
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 Section 414(f) of the
Internal Revenue Code of 1986, as amended (the "Code")) so as to create
<PAGE>
any liability under ERISA (as hereinafter defined) to any entity, (m) amended,
terminated or experienced a termination of any material contract, agreement,
lease, franchise, or license to which the Partnership is a party, (n) entered
into any other material transactions except in the ordinary course of business,
(o) entered into any contract, commitment, agreement, or understanding to do any
acts described in the foregoing clauses (a)-(n) of this Section, or (p) suffered
any material damage, destruction, or loss (whether or not covered by insurance)
to any assets.
3.6 Ownership of Assets: Licenses, Permits, etc. NGST has good and
--------------------------------------------
marketable title to the partnership interest being purchased by Prime pursuant
hereto, subject to no liens or encumbrances whatsoever, and at the Closing,
Prime will be acquiring a 38.25% general partnership interest in the Partnership
subject to no liens, claims or encumbrances whatsoever, other than the lien
described in Section 2.5 hereof. The Partnership has good and marketable title
to all of its assets subject only to the liens and encumbrances described on
Schedule 3.6. The Partnership has such property and assets, real, personal and
- ------------
mixed, tangible and intangible, including leases, which are required for, or
used in connection with, the operation of the Partnership as currently
conducted. Except as set forth on Schedule 3.6 attached hereto, the real and
------------
personal properties of the Partnership are free and clear of all liens, security
interests, claims, rights of another, and encumbrances of any kind whatsoever.
To the best knowledge of the Partnership, NGST and each of the Shareholders, the
Partnership is in compliance with the terms and conditions of all federal,
state, county, and local governmental licenses, certificates, certificates of
need and permits, the violation of which would materially and adversely affect
the business and properties of the Partnership. To the best knowledge of the
Partnership, NGST and
<PAGE>
each of the Shareholders, no additional license, certificate, certificate of
need or permit is required from any federal, state, county, or local
governmental agency or body thereof in connection with the conduct of the
business of the Partnership which, if not obtained, would materially and
adversely affect the business or properties of the Partnership. The Partnership
has not received any written notice of any claim by any governmental authority
(and, to the knowledge of the Partnership, no such claim has been threatened) to
the effect that a license, permit, certificate, certificate of need or order not
possessed by the Partnership is necessary with respect to the business conducted
by the Partnership.
3.7 Environmental Issues.
--------------------
(a) For purposes of this Agreement, the term "environmental laws" shall
mean all laws of any applicable jurisdiction as in effect as of the Effective
Date and/or the Closing Date relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge, or release, of any pollutant, contaminant, chemical, or
industrial toxic or hazardous substance or waste and any order related thereto.
(b) To the best knowledge of the Partnership, NGST and each of the
Shareholders, the Partnership has complied in all material respects with and
obtained all authorizations and made all filings required by all applicable
environmental laws. To the best knowledge of the Partnership, NGST and each of
the Shareholders, the properties occupied or used by the Partnership have not
been contaminated with any hazardous wastes, hazardous substances, or other
hazardous or toxic materials in violation of any applicable environmental law.
(c) The Partnership has not received any written notice from the United
States Environmental Protection Agency that it is a potentially responsible
party under the
<PAGE>
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, registered in the name of
the Partnership. The Partnership is not a party to any license agreements,
either as licensor or licensee, with respect to any patents, trademarks, trade
names, or copyrights. The Partnership has not received any written notice that
it is infringing any patent, trademark, trade name, or copyright of others.
3.9 Compliance with Laws. To the best knowledge of the Partnership, NGST
--------------------
and each of the Shareholders, the Partnership has complied in all material
respects, and the Partnership is in compliance in all material respects, with
all federal, state, county, and local laws and regulations currently in effect
and applicable to its business, the violation of which would have a material
adverse impact on the assets, business or financial condition of the
Partnership. No claim has been made by any governmental authority (and, to the
knowledge of the Partnership, no such claim has been threatened) against the
Partnership to the effect that the business conducted by the Partnership fails
to comply, in any material respect, with any law, rule, regulation, or
ordinance.
<PAGE>
3.10 Insurance. Prime has been provided with access to copies of all
---------
policies of fire, liability, business interruption, and other forms of insurance
and all fidelity bonds held by or applicable to the Partnership. To the best
knowledge of the Partnership, NGST and each of the Shareholders, no event
directly relating to the Partnership has occurred which will result in a
retroactive upward adjustment of premiums under any such policies. There has
been no material change in the type of insurance coverage maintained by the
Partnership during the period since the formation of the Partnership which has
resulted in any period during which the Partnership had no insurance coverage.
Excluding insurance policies which have expired and been replaced, no insurance
policy of the Partnership has been canceled within the last three years and, to
the knowledge of the Partnership, no threat has been made to cancel any
insurance policy of the Partnership within such period.
3.11 Employee Benefit Matters. Except for the maintenance of major
------------------------
medical and disability insurance, the Partnership 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 section 3(2) of
ERISA and not exempted under section 4(b) or 201 of ERISA). The Partnership
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
Section 414(j) of the Code, without regard to whether such defined benefit plan
met the requirements of section 401(a) of the Code.
<PAGE>
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, promissory notes, loan agreements, and other
evidences of indebtedness) to which the Partnership is a party or by which the
Partnership or its properties are bound, pursuant to which the obligations
thereunder of either 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, $5,000 or greater, or which are
otherwise material to the business of the Partnership; including, without
limitation, all mortgages, deeds of trust, security agreements, pledge
agreements, lithotripsy service agreements, and similar agreements and
instruments and all confidentiality agreements (collectively, the "Contracts").
The Partnership is not and, to the best knowledge of the Partnership, NGST and
each of the Shareholders 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 the Partnership or, to the best knowledge of the
Partnership, by any other party thereto) under any of the Contracts, and the
Partnership has not waived any material right under any of the Contracts, which
default or waiver would have a material adverse impact on the assets, business
or financial condition of the Partnership. Except as set forth on Schedule 3.12
-------------
attached hereto, the Partnership has not guaranteed any obligations of any other
person or entity.
3.13 Claims and Proceedings. Except as set forth on Schedule 3.13, there
---------------------- -------------
are no claims, actions, suits, proceedings, or investigations pending or, to the
knowledge of the Partnership, NGST and each of the Shareholders, threatened
against the Partnership or affecting any of its properties or assets, at law or
in equity, or before or by any court, municipal or other
<PAGE>
governmental department, commission, board, agency, or instrumentality which, if
decided adversely to the Partnership, would have a material adverse impact on
the assets, or the business or financial condition of the Partnership. No
inquiry, action, or proceeding has been asserted, instituted, or, to the best
knowledge of the Partnership, NGST and each of the Shareholders, threatened
against the Partnership 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 the
Partnership 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 the Partnership. 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 the Partnership's estimated Tax liabilities for the
respective periods then ended and all prior periods. As of the Closing, no
Taxes for any period prior to the Closing will be due and payable by the
Partnership. The Partnership 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, to the best knowledge of the Partnership, NGST
and each of the Shareholders, threatened claims, assessments, notices, proposals
to assess, deficiencies, or audits (collectively, "Tax
<PAGE>
Actions") against the Partnership with respect to any Taxes owed or allegedly
owed by the Partnership. The Partnership's federal income tax returns have not
been audited. There are no tax liens on any of the assets of the Partnership.
Proper and accurate amounts have been withheld and remitted by the Partnership
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. The Partnership is not a party to any tax
sharing agreement with any partner or any other person. The Partnership utilizes
the cash method of accounting for federal income tax purposes. The entering into
and performance of this Agreement, and the consummation of the transactions
contemplated hereby, will not constitute or cause a termination or liquidation
of the Partnership for tax purposes.
3.15 Personnel. Schedule 3.15 lists the names and annual rates of
--------- -------------
compensation of the employees of the Partnership whose rates of compensation, on
an annualized basis, during the fiscal year ended December 31, 1996 (including
base salary, bonus, commissions, and incentive pay) exceeded $20,000. Prime has
been provided with access to information regarding the bonus, profit sharing,
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable by the Partnership to such employees from
December 31, 1996 through the date hereof. Prime has been provided with access
to employment agreements and confidentiality agreements to which the Partnership
is a party and all severance benefits which any director, officer, employee, or
sales representative of the Partnership is or may be entitled to receive. The
Partnership has delivered to Prime accurate and complete copies of all such
employment agreements, confidentiality agreements, and all other
<PAGE>
agreements, plans, and other instruments to which the Partnership is a party and
under which its employees are entitled to receive benefits of any nature. None
of the employees of the Partnership are represented by any labor union or
organization. There is no unfair labor practice claim against the Partnership
before the National Labor Relations Board or any strike, labor dispute, work
slowdown, or work stoppage pending or, to the best knowledge of the Partnership,
NGST and the Shareholders, threatened against or involving the Partnership.
3.16 Business Relations. The Partnership, NGST and the Shareholders have
------------------
no knowledge that any supplier or customer of the Partnership will cease or
refuse to do business with the Partnership as a result of or soon after the
consummation of the transactions contemplated hereby in the same manner as
previously conducted with the Partnership. The Partnership 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 the
Partnership.
3.17 Accounts Receivable. To the best knowledge of the Partnership, NGST
-------------------
and the Shareholders, all of the accounts, notes, and loans receivable that have
been recorded on the books of the Partnership are bona fide and represent
amounts validly due.
3.18 Agents. Except for the Partners of the Partnership and Mr. Tom
------
Johnson, the Partnership has not designated or appointed any person 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. Prior to the Closing, the Partnership will
have terminated Tom Johnson's authority to act for it or on its behalf.
3.19 Indebtedness To and From Partners and Employees. The Partnership
-----------------------------------------------
does not owe any indebtedness to any of its partners or employees or, have
indebtedness owed to it from any of its partners or employees, excluding
indebtedness for travel advances or similar advances
<PAGE>
for expenses incurred on behalf of and in the ordinary course of business of the
Partnership and consistent with the Partnership's past practices.
3.20 Commission Sales Contracts. The Partnership does not employ or have
--------------------------
any relationship with any individual, corporation, partnership, or other entity
whose compensation from the Partnership is in whole or in part determined on a
commission basis.
3.21 Certain Consents. Except for the consent of Charles Hawkins, M.D.
----------------
("Hawkins"), and 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
the Partnership from third parties in connection with the execution, delivery
and performance of this Agreement.
3.22 Interest in Competitors, Suppliers, and Customers. Except as set
-------------------------------------------------
forth in Schedule 3.22, no Partner or employee of the Partnership or any
-------------
affiliate of any partner or employee has any ownership interest in any
competitor, customer or supplier of the Partnership or any property used in the
operation of the business of the Partnership.
3.23 Warranties. Except as set forth in those contracts and agreements
----------
described on Schedule 3.12, there are no warranties or guarantees made by the
-------------
Partnership to third parties with respect to any products sold or services
rendered by it. No claims for breach of product or service warranties have been
made against the Partnership since January 1, 1995.
3.24 Partnership Interests. Schedule 3.24 contains a complete listing of
--------------------- -------------
the name and address of each general and limited partner of the Partnership,
including their ownership percentages in the Partnership, both as such will be
in effect immediately before and immediately after the Closing. There are no
outstanding rights for any party hereto or any third party, to acquire any
interest of any kind in the ownership, cash flow, or profits of the Partnership.
<PAGE>
Hawkins, is the only Partner who is not a party to this Agreement. Hawkins owns
a 2.7% general partnership interest in the Partnership, has been retired from
the practice of medicine for approximately two (2) years as of the Effective
Time, has not referred any patients or other customers to the Partnership for
lithotripsy services or other services provided by the Partnership in the two
(2) year period ending on the Closing Date, and has given, or prior to Closing
will give, all consents and approvals necessary to consummate the transactions
contemplated hereby.
3.25 NGST Shareholders. Schedule 3.25 contains a complete listing of the
----------------- -------------
name, address and NGST stock holdings (by number of shares and percentage of
total) of each shareholder of NGST, both as such will be in effect immediately
before and immediately after the Closing. There are no outstanding rights,
options or warrants for any person or entity that is not a party hereto to
acquire any stock or other ownership interest in NGST.
3.26 No Known Breaches by Other Parties. The Shareholders, NGST and the
----------------------------------
Partnership each severally, and not jointly, represent and warrant to Prime that
they have no knowledge of any breach or default of any representation, warranty,
covenant or other agreement contained in this Agreement, by any of the other
parties hereto.
ARTICLE IV
Covenants
---------
4.1 Inspection. From the date hereof to the Closing, the Partnership
----------
shall give Prime and its officers, attorneys, accountants, and representatives
free, full, and complete access during reasonable business hours to all books,
records, tax returns, files, correspondence, personnel, facilities, and
properties of the Partnership and provide Prime and its officers, attorneys,
<PAGE>
accountants, and representatives all information and material pertaining to the
business and affairs of the Partnership as Prime may deem necessary or
appropriate. Any investigation by Prime or its officers, attorneys,
accountants, or representatives shall not in any manner affect the
representations and warranties contained herein, unless an officer of Prime has
actual knowledge of the untruth or inaccuracy of any such representation and
warranty. Any investigation by the Partnership or its attorneys, accountants,
or representatives shall not in any manner affect the representations and
warranties of Prime contained herein, unless the Partnership has knowledge of
the untruth or inaccuracy of any representation of Prime.
4.2 Compliance. From the date hereof to the Closing, none of the parties
----------
hereto shall take or fail to take any action which action or failure to take
such action shall cause the respective representations and warranties made by
such parties herein to be untrue or incorrect as of the Closing.
4.3 Satisfaction of All Conditions Precedent. From the date hereof to the
----------------------------------------
Closing, each party shall use its best efforts to cause all conditions precedent
to the obligations of the other parties hereunder to be satisfied by the
Closing.
4.4 No Solicitation. From the date hereof to the Closing, the Partners
---------------
and the Partnership shall not offer any interest in the Partnership or any
material part of its assets in one transaction or a series of transactions for
sale, or solicit offers to buy any interest in the Partnership or any material
part of its assets in one transaction or in a series of related transactions, or
hold discussions with any party (other than Prime) looking toward such an offer
or solicitation or toward a merger or consolidation of the Partnership with or
into another entity or any similar transaction. From the date hereof to the
Closing, neither the Partnership nor the
<PAGE>
Partners shall enter into any agreement with any party other than Prime with
respect to the sale or other disposition of either partnership interests or the
assets of the Partnership or with respect to any merger, consolidation, or
similar transaction involving the Partnership.
4.5 Notice of Developments. From the date hereof to the Closing, the
----------------------
parties hereto, other than Prime, shall notify Prime of any material problems or
material adverse developments with respect to the business or operations of the
Partnership.
4.6 Notice of Breach. From the date hereof to the Closing, the parties
----------------
hereto shall, immediately upon becoming aware thereof, give detailed written
notice to all the other parties hereto of the occurrence of, or the impending or
threatened occurrence of, any event which would cause or constitute a breach, or
would have caused or constituted a breach had such event occurred or been known
to such party prior to the date of this Agreement, of any of their covenants,
agreements, representations, or warranties contained or referred to herein or in
any document delivered in accordance with the terms hereof.
4.7 Notice of Litigation by Partnership and NGST. From the date hereof to
--------------------------------------------
the Closing, immediately upon becoming aware thereof, the parties hereto, other
than Prime, shall notify Prime of (a) any suit, action, or proceeding
(including, without limitation, any Tax Action or proceeding involving a labor
dispute or grievance or union recognition) to which the Partnership or NGST
becomes a party or which is threatened against the Partnership or NGST, (b) any
order or decree or any complaint praying for an order or decree restraining,
enjoining or otherwise adversly affecting the consummation of this Agreement or
the transactions contemplated hereby, or (c) any notice from any tribunal of its
intention to institute an investigation into, or to institute a suit or
proceeding to restrain, enjoin or otherwise adversely
<PAGE>
affect the consummation of, this Agreement or the transactions contemplated
hereby or to nullify or render ineffective this Agreement or such transactions
if consummated.
4.8 Notice of Litigation by Prime. From the date hereof to the Closing,
-----------------------------
immediately upon becoming aware thereof, Prime shall notify the other parties
hereto of (a) any order or decree or any complaint praying for an order or
decree restraining, enjoining or otherwise adversly affecting the consummation
of this Agreement or the transactions contemplated hereby or (b) any notice from
any tribunal of its intention to institute an investigation into, or to
institute a suit or proceeding to restrain, enjoin or otherwise adversely affect
the consummation of, this Agreement or the transactions contemplated hereby or
to nullify or render ineffective this Agreement or such transactions if
consummated.
4.9 Continuation of Insurance Coverage. From the date hereof to the
----------------------------------
Closing, the Partnership shall keep in full force and effect all insurance
coverage for the Partnership and its assets and operations as is now maintained
covering the Partnership and its assets and operations.
4.10 Maintenance of Credit Terms. From the date hereof to the Closing,
---------------------------
the Partnership shall continue to effect sales of its services only on the terms
that have been offered by the Partnership consistent with past practices of the
Partnership or on such other terms which are no less favorable.
4.11 Updating Information. As of the Closing, the parties hereto, other
--------------------
than Prime, shall advise Prime of any material changes in the information set
forth in the schedules to this Agreement.
4.12 Financial Statements. Until the Closing, as soon as available, and
--------------------
in any event within 30 days after the end of each calendar month, the
Partnership shall furnish to Prime a
<PAGE>
balance sheet and statement of income for such month prepared on a cash basis,
but otherwise prepared in accordance with the same accounting principles applied
in the preparation of the Financial Statements. Such monthly financial
statements shall fairly present the financial position, results of operations,
and changes in financial position as of the indicated dates and for the
indicated periods. In addition to the monthly Financial Statements, until the
Closing, as soon as available, and in any event within 30 days after the end of
each calendar quarter after March 31, 1997, the Partnership shall furnish to
Prime a balance sheet and statement of income as of the end of the quarter and
for the calendar quarter and year-to-date period then ended prepared on an
accrual basis, and otherwise prepared in accordance with the same accounting
principles applied in the preparation of the Financial Statements. Such
quarterly financial statements shall fairly present the financial position,
results of operation and changes in financial position as of the indicated dates
and for the indicated periods.
4.13 Interim Operations of the Partnership.
-------------------------------------
(a) From the date hereof to the Closing, the Partnership shall conduct its
business only in the ordinary course consistent with past practice, and the
Partnership shall not, unless Prime gives its prior express written approval,
(i) amend or otherwise change its partnership agreement as such document is in
effect on the date hereof, (ii) issue or sell, or authorize for issuance or
sale, additional partnership interests of any class or type, or issue, grant, or
enter into any subscription, option, warrant, right, convertible security, or
other agreement or commitment of any character obligating the Partnership to
issue additional partnership interests, (iii) redeem, purchase, or otherwise
acquire, directly or indirectly, any of its partnership interests, (iv) except
in the ordinary course of business, sell, pledge,
<PAGE>
dispose of, or encumber, or agree to sell, pledge, dispose of, or encumber, any
assets of the Partnership, or authorize any capital expenditure in excess of
$5000, (v) acquire (by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership, or other business organization or division
thereof, or enter into any contract, agreement, commitment, or arrangement with
respect to any of the foregoing, (vi) incur any indebtedness for borrowed money,
issue any debt securities, or enter into or modify any contract, agreement,
commitment, or arrangement with respect thereto, (vii) enter into, amend, or
terminate any employment agreement with any director, officer, or key employee
or sales representative of the Partnership, or enter into, amend, or terminate
any employment agreement (other than the termination of any such agreement that
may exist with Mr. Tom Johnson) with any other person otherwise than in the
ordinary course of business, or take any action with respect to the grant or
payment of any severance or termination pay other than pursuant to policies or
agreements of the Partnership in effect on the date hereof, (viii) enter into,
extend, or renew any lease for office or manufacturing space otherwise than in
the ordinary course of business, (ix) except as required by law, adopt, amend,
or terminate any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment, or other employee benefit plan,
agreement, trust, fund, or arrangement for the benefit or welfare of any
employee, or sales representative of the Partnership, or withdraw from any
multi-employer plan so as to create any liability under ERISA to any entity, (x)
grant any increase in compensation to any employee or sales representative of
the Partnership, except for wage and salary increases made in the ordinary
course of business and consistent with past practices of the Partnership, or
(xi) declare, set aside, make or pay any distribution of revenues received after
the Effective Time.
<PAGE>
(b) From the date hereof to the Closing, the Partnership shall use its best
efforts to preserve intact the business organization of the Partnership, to keep
available in all material respects the services of its present employees, to
preserve intact its banking relationships and credit facilities, to preserve the
goodwill of those having business relationships with it, and to comply with all
applicable laws the violation of which would have a material adverse impact on
the assets or the business or financial position of the Partnership.
(c) Immediately prior to the Closing the Partnership may make a cash
distribution to the Partners according to their interests, in an amount equal to
all available cash on-hand, less a reasonable reserve for anticipated cash
expenses and capital expenditures for the thirty (30) days after the Closing
Date; provided, however that (i) no distribution by the Partnership of revenues
received by it on or after the Effective Time will be made unless and until
approved after the Closing Date by Prime and the other Partners, and (ii) the
Partnership will have reasonable reserves for the anticipated cash expenses and
capital expenditures for the thirty (30) days after the Closing Date on hand
immediately after the Closing.
4.14 Cooperation Relating to Financial Statements. The Partnership and
--------------------------------------------
the Partners who are parties hereto agree to cooperate with Prime in the
preparation of, and/or audit related to, any financial statements of the
Partnership for any period prior to the Closing, which Prime or its affiliates
may be required by any applicable law to prepare.
4.15 Necessary Filings. The Partnership and the Partners who are parties
-----------------
hereto agree to timely prepare, execute and file a cancellation of the
Certificate of Limited Partnership and all other certificates, documents,
notices or instruments required with respect to the Partnership in connection
with the transactions contemplated by this Agreement.
<PAGE>
4.16 Compliance with Laws. All parties hereto acknowledge and agree that,
--------------------
to the best of their knowledge, the transactions contemplated by this Agreement
comply with now current health laws, including the so-called "Stark" laws. While
the parties acknowledge that Congressman Stark has stated that the "Stark" laws
do not apply to lithotripsy operations, the parties nonetheless acknowledge and
agree that none of them is able to guarantee to any of the others that such
transactions will not be found to be in violation of such health care laws or
will not be subject to investigation or possible enforcement action under such
health care laws, and no party to this Agreement shall be deemed to be in breach
hereof, or to have any indemnity obligation hereunder, with respect to any loss
sustained, or claim asserted, to the extent any such loss or claim is based on,
or alleges, that the transactions contemplated hereby violates any of such
health care laws.
ARTICLE V
Conditions to Closing
---------------------
5.1 Conditions to Obligations of Prime. The obligations of Prime to
----------------------------------
consummate the transactions contemplated hereby are subject to the fulfillment
of each of the following conditions:
(a) The representations and warranties of the parties hereto, other than
Prime, contained in this Agreement shall be true and correct at and as of the
Closing with the same effect as through such representations and warranties had
been made on and as of the Closing; the parties hereto, other than Prime, shall
have performed and complied with all agreements
<PAGE>
required by this Agreement to be performed or complied with by them at or prior
to the Closing; and Prime shall have received a certificate to the foregoing
effect, dated as of the Closing Date, signed on behalf of such parties.
(b) No action or proceeding shall have been instituted or threatened for
the purpose or with the probable effect of enjoining, preventing or otherwise
adversly affecting the consummation of this Agreement or seeking damages on
account thereof.
(c) Prior to the Closing, there shall not have occurred any material
casualty or damage (whether or not insured) to any facility, property, or
equipment owned or used by the Partnership which would have a material adverse
impact on the assets, business or financial condition of the Partnership; and,
except as specifically permitted in this Agreement, the business of the
Partnership shall have been conducted only in the ordinary course consistent
with past practices.
(d) All consents and approvals required in connection with the execution,
delivery, and performance of this Agreement shall have been obtained, and the
obtaining of such consents and approvals shall not have required any guaranty by
Prime.
(e) All necessary action (by vote of its partners and otherwise) shall have
been taken by the Partnership to authorize, approve, and adopt this Agreement
and the consummation and performance of the transactions contemplated hereby,
and the certificate to be received by Prime as described in Section 5.1(a)
above, shall contain a statement to the foregoing effect. The form of ballot
and resolutions utilized by the Partnership for obtaining the approval of the
transaction contemplated hereby by the Partners shall be in form and substance
acceptable to Prime.
(f) All of the Partners shall have executed the Amended Partnership
Agreement. Furthermore, NGST shall have assigned a 38.25% general partnership
interest in the Partnership
<PAGE>
to Prime by execution and delivery of the Assignment Agreement in the form
attached hereto as Exhibit C.
(g) Any Partner who has any loan outstanding and payable to the Partnership
shall have repaid such loan (including, without limitation, all accrued
interest) in full on the Closing Date.
(h) Each Partner (other than Hawkins), each Shareholder and HealthTronics,
Inc., a Georgia corporation ("HealthTronics") shall have executed a
Noncompetition Agreement in the form of Exhibit D attached hereto.
(i) The Partnership and NGST shall have delivered such good standing
certificates, officer's certificates, and similar documents and certificates as
counsel for Prime shall have reasonably requested prior to the Closing Date.
The decision of Prime to consummate the transactions contemplated hereby
without the satisfaction of any of the preceding conditions shall not constitute
a waiver of any of the Partnership's representations, warranties, covenants, or
indemnities herein; provided, however, that Prime, prior to or at the Closing,
shall advise the Partnership in writing of any failure to satisfy such
conditions of which Prime has actual knowledge on the Closing Date.
5.2 Conditions to Obligations of the Parties Other than Prime. The
---------------------------------------------------------
obligations of the Parties other than Prime to consummate the transactions
contemplated hereby are subject to the fulfillment of the following conditions:
(a) Prime's representations and warranties contained in this Agreement
shall be true and correct at and as of the Closing with the same effect as
though such representations and warranties had been made as of the Closing; all
agreements to be performed and complied with
<PAGE>
hereunder by Prime at or prior to the Closing shall have been performed or
complied with; and the Partnership shall have received a certificate, dated as
of the Closing Date, signed by the President of Prime to the foregoing effects.
(b) No action or proceeding shall have been instituted or threatened for
the purpose or with the probable effect of enjoining, preventing or otherwise
adversly affecting the consummation of this Agreement or seeking damages on
account thereof.
(c) Prime shall have executed the Amended Partnership Agreement.
(d) NGST shall have received from Prime $3,470,000 in cash or certified
funds.
(e) All consents and approvals required in connection with the execution,
delivery, and performance of this Agreement shall have been obtained.
(f) All necessary action (corporate or otherwise) shall have been taken by
Prime to authorize, approve, and adopt this Agreement and the consummation and
performance of the transactions contemplated hereby, and the Partnership and
NGST shall have received a copy of the corresponding board resolution or
consent, dated as of the Closing Date and certified by the President of Prime.
(g) Prime shall have delivered to the Partnership and NGST such good
standing certificates, officer's certificates, and similar documents and
certificates as counsel for the Partnership and NGST shall have reasonably
requested prior to the Closing Date.
The decision of the Partnership, NGST and the Shareholders to consummate
the transactions contemplated hereby without the satisfaction of any of the
preceding conditions shall not constitute a waiver of any of Prime's
representations, warranties, covenants, or indemnities herein; provided,
however, that the Partnership, NGST and the Shareholders, prior to or at the
<PAGE>
Closing, shall each advise Prime in writing of any failure to satisfy such
conditions of which the Partnership, NGST or the Shareholders has actual
knowledge on the Closing Date.
ARTICLE VI
Termination
-----------
This Agreement may be terminated prior to the Closing by (a) the unanimous
written consent of all parties hereto, (b) the Partnership, NGST and the
Shareholders upon the failure of Prime to substantially perform or comply with
any of Prime's covenants or agreements contained herein prior to the Closing or
if any representation or warranty of Prime hereunder shall not have been true
and correct in any material respect as of the time at which such was made, if
Prime has been provided with written notice of any such failure which is not
cured within ten (10) business days after such notice is received or deemed
received, (c) Prime upon the failure of the Partnership, NGST or any of the
Shareholders to substantially perform or comply with any of their covenants or
agreements contained herein prior to the Closing or if any representation or
warranty of the Partnership, NGST or any of the Shareholders hereunder shall not
have been true and correct in any material respect as of the time at which such
was made, if Prime has provided the Partnership, NGST and the Shareholders with
written notice of any such failure which is not cured within ten (10) business
days after such notice is received or deemed received, or (d) any of the parties
hereto if the Closing does not occur by May 9, 1997; provided, that no party may
terminate this Agreement pursuant to (b) or (c) above if such party is, at the
time of any such attempted termination, in breach of any term hereof.
<PAGE>
Each of the parties hereto agree to use its reasonable efforts (which does
not include the waiver of any rights under this Agreement) to bring about the
satisfaction of the conditions set forth in ARTICLE V. If any condition of
Closing is not satisfied on or prior to May 9, 1997, the party for whose benefit
of such condition is stated may proceed with the Closing or may terminate this
Agreement by notice in writing to the other party; provided, however, that such
party may not terminate this Agreement without first notifying the other party
of the condition which has not been satisfied and allowing at least ten business
(10) days opportunity after such notice is received or deemed received to cure
such failure. Upon any such termination, this Agreement shall thereupon cease
to have any further force and effect and no party hereto shall have any
liability hereunder of any nature whatsoever to any other party hereto.
ARTICLE VII
Indemnification of Prime
------------------------
7.1 Indemnification of Prime. The Partnership (but not Hawkins by virtue
------------------------
of his being a general partner of the Partnership), NGST and the Shareholders
each severally, and not jointly, agree to indemnify and hold Prime and each
officer, director, employee, and affiliate of Prime (collectively, the "Prime
Indemnified Parties") harmless 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,
<PAGE>
arising out of, or with respect to, (a) any breach or default by the
Partnership, NGST or any of the Partners of any of the representations,
warranties, covenants or agreements contained in this Agreement or any agreement
or document executed in connection herewith (including, without limitation, the
certificates to be delivered pursuant to Section 5.1(a) and 5.1(e), or (b) any
obligations or liabilities, including without limitation, any professional
liability claims, claims by any finder, broker or sales agent engaged or
retained by the Partnership, NGST or any of the Partners or Shareholders, or
other claims, against or involving the Partnership, or due from the Partnership,
which obligations, liabilities or claims existed at the Closing Date, or arise,
in whole or in part, out of events, actions or omissions that occurred prior to
the Closing Date.
The liability of each Shareholder under this Section 7.1 shall be limited
to its allocable share (determined ratably based on each Shareholder's
respective ownership percentage of common stock of NGST ("Ownership Percentage")
as set forth on Schedule 3.25 of each Indemnified Cost, except in instances
-------------
where a particular representation, warranty or covenant is expressly made by a
particular Shareholder, in which case Indemnified Costs arising out of or
relating to a breach or default of such a representation, warranty or covenant
shall be the obligation solely of the applicable Shareholder, and allocated
among them based on their respective Ownership Percentages if there is more than
one such Shareholder. The indemnity obligations of the Partnership and NGST
shall not be so limited; provided the Partnership's indemnity obligation shall
be limited to the value of its assets at the time the indemnity obligation
arises.
7.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
-----------------------------
prompt written notice to the Partnership, NGST and the Shareholders of the
commencement or assertion
<PAGE>
of any third party action in respect of which such Prime Indemnified Party shall
seek indemnification hereunder. Any failure so to notify the Partnership, NGST
and the Shareholders shall not relieve the Partnership, NGST and the
Shareholders from any liability that they may have to such Prime Indemnified
Party under this Article VII unless the failure to give such notice materially
and adversely prejudices the Partnership, NGST and the Shareholders. The
Partnership, NGST and the Shareholders shall have the right to assume control of
the defense of, settle, or otherwise dispose of such third-party action on such
terms as they deem 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) The Partnership, NGST and the Shareholders shall obtain the prior
written approval of the Prime Indemnified Party, which approval shall not be
unreasonably withheld or delayed, 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 or if, in
the reasonable opinion of the Prime Indemnified Party, such settlement,
compromise, admission, or acknowledgment would have a material adverse effect on
its business or, in the case of a Prime Indemnified Party who is a natural
person, on his or her assets or interests;
(c) The Partnership, NGST and the Shareholders shall not consent to the
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the
<PAGE>
giving by each claimant or plaintiff to each Prime Indemnified Party of a
release from all liability in respect of such third-party action; and
(d) The Partnership, NGST and the Shareholders 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 (i) as to which the Partnership, NGST
and the Shareholders fail to assume the defense within a reasonable length of
time or (ii) to the extent the third-party action seeks an order, injunction, or
other equitable relief against the Prime Indemnified Party which, if successful,
would materially adversely affect the business, operations, assets, or financial
condition of the Prime Indemnified Party; provided, however, that the Prime
-------- -------
Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment which would give rise to liability on the part of the
Partnership, NGST or the Shareholders without the prior written consent of the
Partnership, NGST and the Shareholders.
(e) The Partnership, NGST and the Shareholders shall make payments of all
amounts required to be made pursuant to the foregoing provisions of this Section
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 the Partnership, NGST and the Shareholders 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 VII and, in
connection therewith,
<PAGE>
shall furnish such records, information, and testimony and attend such
conferences, discovery proceedings, hearings, trials, and appeals as may be
reasonably requested.
ARTICLE VIII
Indemnification of the Partnership, NGST and the Shareholders
-------------------------------------------------------------
8.1 Indemnification of the Partnership, NGST and the Shareholders. Prime
-------------------------------------------------------------
agrees to indemnify and hold harmless the Partnership, NGST and each
Shareholder, and their respective officers, directors, employees, and affiliates
(collectively, the "Partnership Indemnified Parties") from and against any and
all Indemnified Costs in connection with (a) the commencement or assertion of
any action, proceeding, demand or claim by a third party which any of the
Partnership 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 agreement or document executed in
connection herewith, including, without limitation, the certificates to be
delivered pursuant to Sections 5.2(a) and 5.2(f), or (b) any obligations or
liabilities to any finder, broker or sales agent engaged or retained by Prime.
8.2 Defense of Third-Party Claims. A Partnership Indemnified Party shall
-----------------------------
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such the Partnership 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 the Partnership
Indemnified Party under this Article VIII unless the failure to give such notice
materially and adversely prejudices Prime. Prime shall have the right to assume
control of the
<PAGE>
defense of, settle, or otherwise dispose of such third-party action on such
terms as it deems appropriate; provided, however, that:
(a) The Partnership Indemnified Party shall be entitled, at his, her, or
its own expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the Partnership
Indemnified Party, which approval shall not be unreasonably withheld or delayed,
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 Partnership Indemnified Party or if, in the reasonable
opinion of the Partnership Indemnified Party, such settlement, compromise,
admission, or acknowledgment would have a material adverse effect on its
business or, in the case of an the Partnership Indemnified Party who is a
natural person, on his or her assets or interests;
(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 giving by
each claimant or plaintiff to each the Partnership Indemnified Party of a
release from all liability in respect of such third-party action; 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 Partnership
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
(i) as to which Prime fails to assume the defense within a reasonable length of
time or (ii) to the extent the third-party action seeks an order, injunction, or
other equitable relief
<PAGE>
against the Partnership Indemnified Party which, if successful, would materially
adversely affect the business, operations, assets, or financial condition of the
Partnership Indemnified Party; provided, however, that the Partnership
-------- -------
Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment which would give rise to liability on the part of Prime without
the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be made pursuant
to the foregoing provisions of this Section to or for the account of the
Partnership Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Partnership Indemnified Party has agreed in writing to reimburse Prime for
the full amount of such payments if the Partnership 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 VIII 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 IX
Noncompetition Agreements
-------------------------
Each of the parties hereto, severally and not jointly, hereby agree that,
until the expiration of their respective Restriction Period (as defined for each
below), they will not directly or indirectly, either through any kind of
ownership (other than ownership of securities of a publicly held corporation of
which they own less than five percent of any class of outstanding securities),
<PAGE>
or as a principal, agent, employer, advisor, consultant, co-partner or in any
individual or representative capacity whatever, either for their own benefit or
for the benefit of any other person, firm or corporation, without the prior
written consent of the other parties hereto, commit any of the following acts,
which acts shall be considered violations of this covenant not to compete:
A. Except for services provided by the Partnership, directly or indirectly
provide lithotripsy services, including without limitation, patient lithotripsy
services, lithotripsy management services, lithotripter leasing, or similar
lithotripsy services, anywhere within 50 miles of the Chattanooga, Hamilton
County, Tennessee Courthouse;
B. Directly or indirectly request or advise any patient or physician or
any other person, firm or corporation having a business relationship with Prime,
any of Prime's affiliates or the Partnership to withdraw, curtail, or cancel its
business with such entity; or
C. Directly or indirectly hire any employee of Prime, any of Prime's
affiliates or the Partnership or induce or attempt to influence any employee of
Prime, any of Prime's affiliates or the Partnership to terminate his or her
employment with such entity.
Provided, however, that nothing in this Agreement shall be construed to
limit or infringe upon the professional medical judgment or ability to practice
medicine of any party hereto that is a physician (including, but not limited to,
the selection of appropriate facilities for medical care), and no exercise of
such a party's professional medical judgment or act constituting the practice of
medicine shall be considered a violation of this Agreement.
Notwithstanding the foregoing, or anything else contained herein to the
contrary (i) Prime shall not be restricted as described in B. above with respect
to any of its own business
<PAGE>
relationships or any of the business relationships of its affiliates, (ii) Prime
shall not be restricted as set forth in C. above with respect to its own
employees or the employees of its affiliates, (iii) upon any merger of NGST and
HealthTronics such transaction shall not constitute a breach of this ARTICLE IX
by NGST or any of the Shareholders for so long as HealthTronics continues to
comply with the provisions of the Noncompetition Agreement entered into by it in
connection with the Closing of the transactions contemplated by this Agreement,
and (iv) Prime shall not be deemed in violation of this ARTICLE IX in connection
with its providing of lithotripsy services and related services to and/or at the
Cleveland Community Hospital in Cleveland, Tennessee (and its successors and
assigns). Furthermore, the parties agree that in the event there is a need or
opportunity to provide lithotripsy services as contemplated in subparagraph A.
above at a location within the restricted area at which none of Prime, any of
Prime's affiliates or the Partnership then provides such services, the parties
will cooperate in good faith to agree on the appropriate method of providing
such services as between Prime and the Partnership, it being understood that, in
any event, Prime and/or Prime's affiliates shall be entitled to provide such
services in the event the technology preferred by the third party to be
contracting for the services is not the technology which the Partnership has
available at that time, and the Partnership, with Prime abstaining from voting,
does not elect to acquire and implement such technology within the time frame
necessary to provide the services requested before the contracting third party
looks elsewhere for a service provider.
For purposes of this Agreement, the "Restriction Period" for the parties shall
be as follows:
<PAGE>
(i) The Restriction Period for the Partnership and Prime shall begin on the
Closing Date and continue until five (5) years after the date that Prime, or
Prime's successors or permitted assigns, is no longer a partner in the
Partnership; and
(ii) The Restriction Period for NGST and each of the Shareholders shall begin
on the Closing Date and continue until five (5) years after the date that such
party is no longer, directly or indirectly, (a) a partner in the Partnership,
(b) an owner of any equity or other voting ownership interest, or any right
convertible into any equity or other voting ownership interest, in any partner
in the Partnership, or of any affiliate of the Partnership or of any partner in
the Partnership, or (3) an affiliate of either the Partnership or any of the
other partners in the Partnership. For purposes of this Agreement, the
Partnership shall include the Partnership and its successors and assigns, and
the references to a "partner" in the Partnership shall be deemed to include any
owner of any equity or other voting ownership interest in any such successor or
assign of the Partnership.
The parties have each reviewed and carefully considered the provisions of this
Article and, having done so, agree that the restrictions set forth herein (a)
are fair and reasonable with respect to time, geographic area and scope, (b) are
not unduly burdensome, and (c) are reasonably required for the protection of the
respective interests of the parties.
The parties each agree that a violation on its part of any covenant contained
in this Article will cause the other parties irreparable damage for which
remedies at law may be insufficient, and for that reason, each agrees that the
other parties shall each, independently 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
<PAGE>
addition to whatever other remedies, at law or in equity, may be available,
including, specifically, recovery of additional damages.
ARTICLE X
Miscellaneous
-------------
10.1 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 these
transactions 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.
10.2 Successors and Assigns. No parties' rights or obligations under this
----------------------
Agreement may be assigned without the express written consent of all parties
hereto; except that Prime shall be entitled to 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
Prime Medical Services, Inc., a Delaware corporation; provided no such
assignment shall relieve Prime of its obligations hereunder to any of the
parties hereto. 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,
<PAGE>
successors, and assigns. The parties acknowledge and agree that the shareholders
of NGST may engage in a transaction or transactions pursuant to which some or
all of their shares in NGST will be transferred to HealthTronics, and all
parties hereto agree that such transfer of ownership of NGST is hereby consented
to for all purposes of this Agreement and the Amended Partnership Agreement.
10.3 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 counsel.
10.4 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.
10.5 Information and Confidentiality. Each party hereto agrees that such
-------------------------------
party shall hold in strict confidence, and shall not use for the benefit of
itself or any third party, any and all information and documents received from
any other party hereto, and if the Closing does not occur each such party shall
return to the other parties hereto all such documents then in such receiving
party's possession without retaining copies; provided, however, that each
party's obligations under this Section shall not apply to (a) any information or
document required to be disclosed by law, (b) any information or document in the
public domain due to no breach of the
<PAGE>
terms of this Section, or (c) any information or document that Prime discloses
to any potential lender to or investor in Prime or Prime's affiliates; provided
Prime has required any such lender or investor to agree to maintain the
confidentiality of the disclosure.
10.6 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.
10.7 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 personally delivered 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 Lithotripter Operations, Inc.
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attention: President
with a copy to: Mr. Timothy L. LaFrey
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
816 Congress Avenue, Suite 1900
Austin, Texas 78701
the Partnership, NGST Attn: Argil Wheelock, M.D.
and the Shareholders: 1000 Scenic Highway
Lookout Mountain, Tennessee 37350
<PAGE>
with a copy to: Mr. Roy C. Maddox, Jr.
Horton, Maddox and Anderson, P.L.L.C.
One Central Plaza, Suite 600
Chattanooga, Tennessee 37402
Each party may change its address for purposes of this Section by proper notice
to the other parties.
10.8 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,
indemnity obligations, representations, and warranties made hereunder or
pursuant hereto or in connection with the transactions contemplated hereby shall
survive the Closing for a period of five (5) years after the Closing Date.
Notwithstanding the foregoing, (i) the provisions of ARTICLE IX shall not expire
as set forth in the preceding sentence and shall, instead, be governed by the
expiration provisions for each of the parties described in ARTICLE IX, and (ii)
a party's indemnity obligation hereunder shall not expire as to any
indemnifiable event, act or omission including without limitation the defense of
a third party claim, with respect to which notice and demand for indemnification
was given to the party or parties obligated to indemnify hereunder prior to the
expiration of the five (5) year period described in the preceding sentence.
10.9 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.
<PAGE>
10.10 No Third-Party Beneficiaries. No person or entity not a party to this
----------------------------
Agreement shall be deemed to be a third-party beneficiary hereunder or entitled
to any rights hereunder.
10.11 Construction. 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.
10.12 Arbitration. Except as set forth in ARTICLE IX, 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. Any
such dispute will be detailed in writing and submitted by the complaining party
for binding arbitration by a retired judge associated with Judicial Arbitration
and Mediation Services, Inc. ("JAMS") to take place in a location to be agreed
upon by the parties, but in the event of a failure to so agree, in Denver,
Colorado, and a copy shall be sent to the other parties pursuant to the notice
provision of this Agreement. The parties agree that if JAMS is unavailable,
such dispute shall be submitted instead to any arbitrator or organization of a
similar nature mutually agreed to by the parties. The parties may agree on a
retired judge from the JAMS panel for the binding arbitration. If they are
unable to agree, JAMS will provide a list of three (3) available judges and each
party may strike one (1), with the party requesting arbitration striking first.
The remaining judge will serve as arbitrator. The parties agree that their sole
remedy in the event of such dispute shall be binding arbitration pursuant to
<PAGE>
the terms of this Section and that judgment upon the arbitrator's award may be
entered in any court having jurisdiction thereof.
10.13 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall constitute an original and all of which together shall
constitute one and the same instrument. Any party hereto may execute this
Agreement by signing any one counterpart.
10.14 Definition of Knowledge. Whenever there are references in this
-----------------------
Agreement to "the knowledge of" a party or "to the best knowledge of" a party,
or similar references to a party's "knowledge", such provision shall be
construed as follows: (a) with regard to the Partnership, the Partnership shall
be deemed to have knowledge if any of the Partners has actual knowledge of such
applicable fact or matter; (b) with regard to NGST, NGST shall be deemed to have
knowledge if any Shareholder, or any officer or director, of NGST has actual
knowledge of the applicable fact or matter; and (c) with regard to Prime, Prime
shall be deemed to have knowledge if any officer of Prime has actual knowledge
of the applicable fact or matter.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
PRIME LITHOTRIPTER OPERATIONS, INC.
By: /s/ Cheryl Williams
---------------------------------
Cheryl Williams, Treasurer
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
TENN-GA STONE GROUP TWO, L.P.,
a Tennessee Limited Partnership
By: /s/ Argil J. Wheelock, M.D.
---------------------------------
Printed Name: Argil J. Wheelock, M.D.
-----------------------
Title: Partner
------------------------------
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
PARTNERS:
NGST, Inc., a Tennessee corporation
By: /s/ Argil J. Wheelock, M.D.
---------------------------------
Printed Name:Argil J. Wheelock, M.D.
-----------------------
Title: Partner
------------------------------
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Thomas C. Bright, M.D.
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Thomas C. Bright, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Argil J. Wheelock, M.D.
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Argil J. Wheelock, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ R. Smith Murray, M.D.
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R. Smith Murray, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Richard S. Lasky, M.D.
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Richard S. Lasky, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ John F. Bryant, M.D.
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John F. Bryant, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Marty Scheinberg, M.D.
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Marty Scheinberg, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ James E. McKinney, M.D.
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James E. McKinney, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Paul E. Henson, M.D.
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Paul E. Henson, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Oliver Benton, III, M.D.
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Oliver Benton, III, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Stephen W. Jackson, M.D.
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Stephen W. Jackson, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ C. A. Kyle, Jr., M.D.
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C. A. Kyle, Jr., M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Nicholas Newton, M.D.
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Nicholas Newton, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Jack Monnig, M.D.
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Jack Monnig, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Samuel M. Currin, M.D.
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Samuel M. Currin, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ J. Patrick Dilworth, M.D.
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J. Patrick Dilworth, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ David Sahaj, M.D.
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David Sahaj, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ John Bryan, M.D.
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John Bryan, M.D.
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SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Paula Willingham
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Paula Willingham
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP INTEREST PURCHASE AGREEMENT
/s/ Robert DeBord
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Robert DeBord
<PAGE>
EXHIBIT A
PARTNERSHIP AGREEMENT OF
------------------------
TENN-GA STONE GROUP TWO
-----------------------
A TENNESSEE GENERAL PARTNERSHIP
-------------------------------
This Partnership Agreement is made effective the 1st day of May, 1997, by and
among the Partners (as hereinafter defined).
RECITALS
WHEREAS, the Partners, other than Prime Lithotripter Operations, Inc., a New
York Corporation ("Prime"), were the sole partners of Tenn-Ga Stone Group Two,
L.P. a Tennessee Limited Partnership (the "Prior Partnership"); and
WHEREAS, pursuant to that certain Partnership Interest Purchase Agreement
dated May 1, 1997, the parties thereto agreed that the Prior Partnership, if not
previously converted into a general partnership, would be converted into a
general partnership and Prime would purchase a 38.25% general partnership
interest therein from NGST, Inc., and all of the Partners would execute this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE>
1. Definitions. As used in this Agreement, the following terms have the
-----------
meanings indicated:
"Act" means the Tennessee Uniform Partnership Act, Tennessee Code
Annotated Section 61-1-101 et. seq., as amended from time to time.
-- ---
"Agreement" means Partnership Agreement, as amended, modified, or
supplemented from time to time.
"Bankruptcy" of a Partner shall be deemed to have occurred upon the
happening of any of the following: (1) the filing of an application by a Partner
for, or a consent to, the appointment of a trustee of the Partner's assets, (2)
the filing by a Partner of a voluntary petition in bankruptcy or the filing of a
pleading in any court of record admitting in writing the Partner's inability to
pay the Partner's debts as they become due, (3) the making by a Partner of a
general assignment for the benefit of creditors, (4) the filing by a Partner of
an answer admitting the material allegations of, or consenting to, or defaulting
in answering a bankruptcy petition filed against the Partner in any bankruptcy
proceeding, or (5) the entry of an order, judgment or decree by a court of
competent jurisdiction adjudicating a Partner a bankrupt or appointing a trustee
of the Partner's assets, and that order, judgment, or decree continuing unstayed
and in effect for a period of sixty (60) days.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of future laws.
2
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"Managing Partner" means NGST, Inc., a Tennessee corporation, or such
other persons or entities designated from time to time by a Majority Vote of the
Partners.
"Majority Vote" means a vote of the Partners which, to be valid, must
include the affirmative vote of at least 75% of the Percentage Interests owned
by the Partners.
"Partners" means, collectively, those persons and/or entities that appear
on Exhibit A to this Agreement, and who have executed a counterpart of this
---------
Agreement. References to a "Partner" shall be to any one of the Partners.
"Additional Partners" and "Substituted Partners" shall mean those persons
subsequently admitted to the Partnership in accordance with the provisions of
this Agreement.
"Partnership" means the General Partnership carried on pursuant to this
Agreement.
"Percentage Interests" means the respective ownership percentages of the
Partners in the Partnership as set forth in Exhibit A hereto.
---------
2. Continuation of Prior Partnership. The Partners hereby create a general
---------------------------------
Partnership formed pursuant to the Act and other applicable laws of the State of
Tennessee, which shall in all respects be the successor to the Prior
Partnership, and not a new partnership, and the Partnership hereby assumes all
of the assets (tangible and intangible), properties, rights, liabilities,
obligations, business and goodwill of the Prior Partnership. The rights and
duties shall be as provided in the Act except as modified by this Agreement.
The Partners (other than Prime) shall promptly take
3
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such action and make such filings as shall be required under applicable laws to
give effect to the provisions of this Agreement and to vest fully in the
Partnership all right, title and interest in and to all of the assets (tangible
and intangible), properties, rights, business and goodwill of the Prior
Partnership.
3. Name and Place of Business. The name of the Partnership is "Tenn-Ga Stone
--------------------------
Group Two" and the principal office and place of business of the Partnership
shall be 725 Glenwood Drive, Suite E484, Chattanooga, Tennessee, or such other
name or location as the Partners shall hereafter designate by Majority Vote.
4. Purposes. The Partnership has been formed to operate one or more mobile
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Lithotripters to provide high technology, state of the art equipment to patients
in the east Tennessee and north Georgia areas; to provide a diversification of
skill and an increased ability to meet competition; and such other business
purposes as the Partners, by Majority Vote, may specify.
5. Term. The Partnership shall terminate on December 31, 2034, unless
----
earlier terminated as provided in this Agreement or as provided by law.
6. Capital Contributions and Capital Accounts.
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(a) Interests in Partnership Capital. The individual Percentage Interests
--------------------------------
of the Partners in Partnership capital are shown on Exhibit A.
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4
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(b) No Partner Contribution Obligations. No Partner shall be required to
-----------------------------------
make any contribution to capital whatsoever and no Partner shall be required to
lend funds to the Partnership or guarantee any debts of the Partnership or any
Partner.
(c) Withdrawal and Return of Capital Contribution. No Partner shall be
---------------------------------------------
entitled to withdraw any part of its capital contribution or capital account or
to receive any distributions from the Partnership except as provided by this
Agreement.
(d) Capital Accounts. An individual capital account shall be maintained
----------------
for each Partner. The capital account balances will not earn interest. The
capital account of a Partner shall consist of the original contribution of
capital, if any, increased by (1) the balance in any capital account purchased
by such Partner from another Partner upon purchase of some or all of another
Partner's Percentage Interest in the Partnership, (2) any additional
contributions to capital and (3) such Partner's share of Partnership profits and
gains; and decreased by (4) distributions to such Partner and (5) such Partner's
share of Partnership losses. Notwithstanding the preceding sentence, the
beginning capital account of Prime shall be zero, as Prime's capital account is
not to include any portion of the balance of NGST, Inc.'s capital account which
is attributable to that portion of NGST, Inc.'s Percentage Interest in the
Partnership which was initially purchased by Prime (being 38.25% Percentage
Interest).
(e) Negative Capital Accounts. If, upon the dissolution and liquidation of
-------------------------
the Partnership, after crediting all income upon sale of the Partnership's
assets that have been sold, any
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Partner has a negative capital account, then the Partner shall be obligated to
contribute to the Partnership an amount equal to the amount of his negative
capital account for distribution to creditors of the Partnership or to other
Partners who have positive capital account balances.
(f) Transfer of Partnership Interest. If a Partnership interest is
--------------------------------
transferred, the transferee shall be assigned the capital account balance of the
transferor Partner at the time of the transfer, unless otherwise agreed by a
Majority Vote of the Partners.
(g) Alternative Allocation. Subject to the last sentence of paragraph 6(d),
----------------------
if any allocation is required by the Code to be allocated in a manner contrary
to the terms of this Agreement, the allocations under this Agreement shall be
automatically reformed to comply with the Code requirements and the capital
accounts of the Partners shall be adjusted accordingly.
7. Rights, Powers and Obligations of the Partners.
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(a) Management by Partners. The Partners each have equal rights in the
----------------------
management of the Partnership business. Except where a Majority Vote is
required, a decision receiving a 2/3 (in Percentage Interests) vote of the
Partners constitutes the action by the Partners. Subject in all respects to the
approvals required pursuant to this Paragraph 7(a), the day-to-day Partnership
business shall be carried out by the Managing Partner. Notwithstanding the
foregoing, or anything else contained herein, the following acts and
transactions by the Partnership shall require the prior approval of the Partners
by Majority Vote:
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(i) Amending this Agreement.
(ii) Terminating, altering or amending the Partnership's licensing
status with applicable regulatory authorities.
(iii) Purchasing any lithotripter (except for a lithotripter to replace
a lithotripter already owned by the Partnership.)
(iv) Issuing, selling, purchasing or redeeming any interest in the
Partnership or any other form of debt or equity security.
(v) Admitting an additional Partner of the Partnership.
(vi) Assigning the rights in specific Partnership property to any
Partner.
(vii) Dissolving, liquidating, or filing bankruptcy or seeking relief
under any debtor relief law.
(viii) Confessing a judgment, initiating arbitration or litigation or
granting releases, indemnities or waivers, or entering into any settlements of
same where the amount at issue exceeds Twenty-Five Thousand Dollars ($25,000).
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(ix) Restricting or removing from the Partnership's principal place of
business, the organization and financial books and records of the Partnership or
the access and availability of such books and records for all Partners.
(x) Any other act or transaction involving the Partnership not in the
ordinary course of business as currently conducted or contemplated by any budget
approved by a Majority Vote of the Partners.
(xi) Performing any act or taking any action which may make it
impossible to carry on the ordinary business of the Partnership or any of its
subsidiaries.
(xii) Incurring any debt or liability on behalf of the Partnership, that
is not contemplated by the then current, Partner approved, budget of the
Partnership, in excess of Twenty-Five Thousand Dollars ($25,000).
(xiii) Entering into any transaction or agreement with a Partner or any
affiliate of a Partner, or engaging in any other act which directly or
indirectly constitutes self-dealing.
(xiv) Amending, waiving or failing to enforce the Partnership's rights
under any agreement between the Partnership and any third party.
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(xv) Investing funds of the Partnership other than in (i) accounts or
instruments fully insured by the United States Government or an agency thereof,
or (ii) obligations of the federal government or agencies thereof.
(xvi) Encumbering assets of the Partnership or incurring debt, whether
direct or contingent, by way of guaranty or otherwise.
(xvii) Opening bank or other depository accounts and establishing or
altering the signature withdrawal authority for any such accounts.
(xviii) Hiring or termination of any executive or managerial employee,
consultant or agent, or entering into any employment or other benefits
agreements or plans except as may be required to comply with applicable law or
in connection with the compliance with regulations relating to "affiliated
service group" issues.
(xix) Making any tax election under the Code.
(xx) Organizing any subsidiary of the Partnership, including the
adoption of all organizational documents for any such subsidiary.
(xxi) Materially changing any accounting principles or methods of the
Partnership.
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(xxii) Adoption of annual operating and capital expenditure budgets for
the Partnership.
(xxiii) Any other matter which, by the terms of this Agreement, requires
a Majority Vote of the Partners.
Notwithstanding the foregoing, none of the Partners will unreasonably
refuse to consent to approve the conversion of the Partnership to a Limited
Liability Company in the event the Partnership's independent, outside
accountants and/or legal counsel render an opinion that such conversion would be
advantageous to the Partners.
(b) Partners' Fees. The Partners shall not receive compensation for their
--------------
services as Partners. The Managing Partner shall receive Forty Thousand Dollars
($40,000.00) per year as compensation for its services as Managing Partner,
unless the Partnership engages another person or entity to provide management
services, in which case the compensation otherwise payable to the Managing
Partner will be reduced dollar-for-dollar by the amount paid such other person
or entity. The Partners agree that the Managing Partner may engage the services
of HealthTronics, Inc. to provide such management services. Such compensation
may be changed by a Majority Vote of Partners. Such payments to the Managing
Partner shall be made at least annually or at such other interval as the
Partners may elect. All payments to the Managing Partner as provided in this
Paragraph shall be a normal operating expense of the Partnership.
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<PAGE>
(c) Other Business Ventures. During the existence of the Partnership, the
-----------------------
Partners shall devote such time and effort to the Partnership business as may be
necessary to promote adequately the interest of the Partnership and the mutual
interests of the Partners. Any Partner or any officer, director, employee,
shareholder or other person holding a legal or beneficial interest in any entity
which is a Partner, may engage in or possess an interest in other business
ventures of every nature and description, independently or with others, and
neither the Partnership nor the other Partners shall have any right by virtue of
this Agreement in or to such independent ventures or to the income or profits
derived therefrom; provided, however, that nothing contained in this Paragraph
is intended to absolve the Partners from any liability to the Partnership or the
Partners arising as a result of any breach of fiduciary obligations to the
Partnership or the Partners. Furthermore, notwithstanding the foregoing or
anything else contained herein to the contrary, each of the Partners (severally
and not jointly) hereby agrees that, as long as they are Partners in the
Partnership, they will not directly or indirectly, either through any kind of
ownership (other than ownership of securities of a publicly held corporation of
which they own less than five percent of any class of outstanding securities),
or as a principal, agent, employer, advisor, consultant, co-partner or in any
individual or representative capacity whatever, either for their own benefit or
for the benefit of any other person, firm or corporation, without the prior
written consent of all the other Partners:
(i) Except for services provided by the Partnership, directly or
indirectly provide lithotripsy services, including without limitation, patient
lithotripsy services, lithotripsy
11
<PAGE>
management services, lithotripter leasing, or similar lithotripsy services,
anywhere within 50 miles of the Chattanooga, Hamilton County, Tennessee
Courthouse;
(ii) Directly or indirectly request or advise any patient or physician
or any other person, firm or corporation having a business relationship with the
Partnership to withdraw, curtail, or cancel its business with the Partnership;
or
(iii) Directly or indirectly hire any employee of the Partnership or
induce or attempt to influence any employee of the Partnership to terminate his
or her employment with the Partnership.
Provided, however, that nothing in this Agreement shall be construed to limit
or infringe upon the professional medical judgment or ability to practice
medicine of any Partner who is a physician (including, but not limited to, the
selection of appropriate facilities for medical care), and no exercise of such
Partner's professional medical judgment or act constituting the practice of
medicine shall be considered a violation of this Agreement.
Notwithstanding the foregoing, or anything else contained herein to the
contrary, Prime shall not be deemed in violation of this Agreement in connection
with its providing of lithotripsy services and related services to and/or at the
Cleveland Community Hospital in Cleveland, Tennessee (and its successors and
assigns). Furthermore, the parties agree that in the event there is a need or
opportunity to provide lithotripsy services as contemplated in subparagraph (i)
above at a location within the restricted area at which none of Prime, any of
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<PAGE>
Prime's affiliates or the Partnership then provides such services, the parties
will cooperate in good faith to agree on the appropriate method of providing
such services as between Prime and the Partnership, it being understood that, in
any event, Prime and/or Prime's affiliates shall be entitled to provide such
services in the event the technology preferred by the third party to be
contracting for the services is not the technology which the Partnership has
available at that time, and the Partnership, with Prime abstaining from voting,
does not elect to acquire and implement such technology within the time frame
necessary to provide the services requested before the contracting third party
looks elsewhere for a service provider.
(d) Indemnification of Partners. The Partnership shall indemnify and hold
---------------------------
harmless any Partner from and against any claim, loss, expense, liability,
action or damage resulting from any act or omission, or alleged act or omission,
arising out of its activities on behalf of the Partnership in furtherance of the
interests of the Partnership including, without limitation, reasonable costs and
expenses of litigation and appeal (including reasonable fees and expenses of
attorneys engaged by such Partner in defense of such act or omission) if the
act, omission or alleged act or omission upon which the actual or threatened
action, proceeding, or claim is based was for a purpose reasonably believed to
be in the best interests of the Partnership. However, a Partner shall not be
entitled to be indemnified or held harmless due to, or arising from, its fraud,
bad faith, gross negligence, malfeasance or its failure to comply with any
representation, warranty, covenant, condition or other agreement contained
herein, provided that any indemnification under this Paragraph shall be paid out
of and only to the extent of Partnership assets.
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<PAGE>
(e) Net Worth of Partners. Each Partner and any Additional or Substituted
---------------------
Partner shall have and maintain at all times during which it is a Partner an
aggregate net worth sufficient to conduct the Partnership business in a prudent
manner and to preserve the classification of "partnership" for federal income
tax purposes.
8. Transfer of Partnership Interests.
---------------------------------
(a) Transfer of Partnership Interests. Subject to the right of first
---------------------------------
refusal contained in Paragraph 8(f) below, a Partner may sell, transfer, assign,
--------------
pledge or hypothecate ("transfer") all or part of its interest in the
Partnership, but no purchaser, transferee or assignee ("transferee") of a
Partner shall become a Substituted Partner in the place of his seller,
transferor, or assignor (the "transferor") unless the provisions of Paragraph
---------
8(c) have been satisfied. Any attempt to transfer a Partnership interest without
- ----
the prior written consent of all the other Partners shall be null and void ab
--
initio. The Partnership shall have no obligation to recognize, or furnish
- ------
information or make distributions to, any transferee of a Partner who does not
become a Substituted Partner, and such transferee's rights shall be only against
his transferor. The transferee is not entitled to any of the rights, powers, or
privileges of his predecessor in interest.
(b) Changes of Control. The change of control of ownership or management of
------------------
any legal entity that is a Partner shall not constitute a "transfer" for
purposes of this Agreement and shall not require any approvals of the other
Partners. Furthermore, the transfer of all or a portion of a Partner's interest
in the Partnership to an entity that controls, is controlled by, or is under
common control with, such Partner, shall not constitute a "transfer" or require
any approval of the other
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<PAGE>
Partners, provided the person or entity to whom such a permitted transfer is
made executes a counterpart of this Agreement and agrees to be bound by all the
terms hereof.
(c) Substitution or Admission of a Partner. A new Partner or transferee of
--------------------------------------
the whole or any part of a Partnership interest of a Partner shall not be
substituted or admitted as a Partner without the prior written consent of all
the other Partners, which consent is solely within the discretion of the other
Partners and which the Partners are under no obligation to give. In addition to
the foregoing, the Partners shall not allow a new Partner to be admitted or a
transferee of a Partner to become a substituted Partner until such new partner
or transferee shall have:
(i) Executed and acknowledged such instruments as the Partners may
reasonably deem necessary or desirable to effect such substitution or admission,
including the written acceptance and adoption by the new partner or transferee
of the provisions of this Agreement;
(ii) Provided an opinion of counsel, in form and substance reasonably
satisfactory to counsel for the Partnership, that neither the offering nor the
transfer of the Partnership interest violates any registration provisions of any
Federal or State securities law or will have an adverse effect on the
Partnership under the Code; and
(iii) Paid such reasonable expenses as the Partnership may incur in
connection with such substitution or admission.
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<PAGE>
(d) Limitation on Sale or Exchange of Partnership Interest. Notwithstanding
------------------------------------------------------
anything in this Agreement to the contrary, no transfer of a Partnership
interest or any portion thereof shall be made if such transfer would in the
opinion of the Partnership's counsel result in a termination of the Partnership
for federal income tax purposes or jeopardize unreasonably, or result in the
loss of, any exemption under federal or state securities laws.
(e) Survival of Liabilities. No substitution of a transferee as a Partner
-----------------------
shall operate to relieve the transferor of any liabilities imposed on such
transferor under the Act.
(f) Right of First Refusal. Subject to the right of first refusal granted
----------------------
herein, a Partner may sell, transfer, assign or subject to a security interest,
any or all of the Partnership Interest owned by such Partner, provided, however,
that such Partner and the purchaser, transferee or assignee execute, acknowledge
and deliver to the Partners such instruments of transfer and assignment with
respect to such transaction as are in form and substance reasonably satisfactory
to the Partners. Each Partner agrees that, at least thirty (30) days prior to
any sale, transfer (by operation of law or otherwise) or assignment of an
interest, such Partner will give written notice thereof to the other Partners
including all of the terms, conditions and other material details of such sale,
transfer or assignment. The Partnership shall have the right of first refusal
for twenty days (20) following receipt of such written notice in which to elect
to consummate such sale, transfer or assignment itself on the same price, terms
and conditions. If the Partnership does not elect to exercise its option to
purchase such Partnership interest, the Partner is free to sell, transfer or
assign its interest to the proposed purchaser, transferee or assignee on the
terms and conditions
16
<PAGE>
contained in the notice to the other Partners. However, if the Partner shall not
consummate the sale, transfer or assignment within ten (10) days after the
expiration of the Partnership's right of first refusal, such interest shall
again be subject to the right of first refusal contained herein.
9. Allocation of Profit and Loss.
-----------------------------
(a) Definition of Net Profit and Net Loss. "Net profit" and "net loss"
-------------------------------------
shall mean the income or loss of the Partnership after taking into account all
expenses incurred in connection with the Partnership's business, including fees
paid to the Managing Partner, and interest on any Partnership obligations, but
without any allowance for depreciation of the Partnership's property and assets
or other non-cash expenses. The Partnership has no right to the professional
fees billed by any physician, whether such physician is a Partner or not, for
any services including, but not limited to, administering treatment using the
Partnership's facilities, interpreting results or rendering a diagnosis at the
Partnership's facility. The Partnership shall maintain its books and records on
the cash receipts and disbursements method of accounting.
(b) Allocation of Net Profit or Net Loss.
------------------------------------
(i) For each fiscal year in which there is a net profit in the
Partnership, such net profit shall be allocated as of the last day of each year
in which there is a net profit to the Partners ratably in accordance with their
respective Percentage Interests. For each fiscal year in which there is a net
loss in the Partnership, such net loss shall be allocated as of the last day of
each
17
<PAGE>
Partnership year in which there is a net loss to the Partners ratably in
accordance with their respective Percentage Interests.
(ii) Any allocation to a Partner of a share of the net profit earned or
net loss incurred by the Partnership under this Paragraph shall be deemed to be
an allocation to that Partner of the same pro rata share of each item of income,
gain, loss, deduction or credit, that is earned, realized, or available by or to
the Partnership for federal income tax purposes.
(c) Allocation of Gain or Loss Upon Sale of Assets. Notwithstanding
----------------------------------------------
anything in this Agreement to the contrary, the net gain or loss from a sale or
other disposition of Partnership capital assets shall be allocated among the
Partners ratably in proportion to their respective Percentage Interests as of
the date such sale or other disposition is consummated.
10. Distributions.
-------------
(a) Definition of Distributable Cash. The term "Distributable Cash" shall
--------------------------------
mean the net profit or loss for the taxable year (as defined in Paragraph 9(a),
--------------
above) decreased by (i) principal payments on any indebtedness of the
Partnership for the year, and (ii) provisions for adequate reserves for
reasonably anticipated cash expenses and potential expansion of services and
contingencies, which provisions are in the reasonable discretion of the
Partners, but consistent with Partnership budgets approved by a Majority Vote of
the Partners. The Partners shall not create reserves in order to avoid
distributions.
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<PAGE>
(b) Distribution of Distributable Cash. To the extent that Distributable
----------------------------------
Cash for a taxable year exists or is projected, the Partnership will make
distributions of such Distributable Cash to the Partners from time-to-time as
the Managing Partner deems reasonably prudent, but not less frequently than
quarterly. Such distributions shall be made to the persons recognized as holders
of interests as of the date of distribution in proportion to the Partners'
respective Percentage Interests.
(c) Distribution of Proceeds of Refinancing and Sale. The term "Net
------------------------------------------------
Proceeds" shall mean the net proceeds resulting from the refinancing of any
loan, from the sale of all or a portion of the Partnership's business or assets,
from the liquidation of the property of the Partnership following a dissolution
of the Partnership, from hazard or casualty insurance payments in excess of
amounts expended in the restoration or repair of Partnership property or applied
to Partnership obligations, from awards resulting from the condemnation of
Partnership property, or any part thereof, in excess of the amount expended in
restoration of property affected by the condemnation or applied to Partnership
obligations and from other voluntary or involuntary conversions of Partnership
property. Net Proceeds shall be distributed and applied in the following order
of priority (except that Paragraph 10(c)(i) will be applicable only in the event
------------------
of liquidation):
(i) To the payment of the expenses of liquidation, and the debts and
liabilities of the Partnership, including indebtedness to any Partner;
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<PAGE>
(ii) To the establishment of reasonable reserves, if, after the
payment of all Partnership liabilities and obligations, the Partners deem it
reasonably necessary to set up reserves for any contingent or unforeseen
liabilities or obligations of the Partnership, provided, however, that said
reserves shall be deposited with a bank or trust company designated by the
Partners for the purpose of disbursing such reserves for the payment of any of
the aforementioned contingencies and, at the expiration of such period as the
Partners may deem advisable, for the purpose of distributing the balance
thereafter remaining as hereinafter provided; and
(iii) All such Net Proceeds remaining, or subsequently distributed
from the reserves established pursuant to (ii) above, shall be distributed to
the Partners in proportion to their respective Percentage Interests.
(d) Good Faith Distribution by Partners. Upon the determination to
-----------------------------------
distribute funds in the manner herein provided made in good faith, the Partners
shall incur no liability on account of such distribution, even though such
distribution may have resulted in the Partnership retaining insufficient funds
for the operation of its business which insufficiency resulted in loss to the
partnership or necessitated the borrowing of funds by the Partnership.
11. Books of Account and Partnership Records.
----------------------------------------
(a) Books of Account. The Partners shall keep and maintain, or cause to be
----------------
kept and maintained, complete and accurate books, records and accounts of the
Partnership, which reflect all Partnership transactions and other matters
relative to the Partnership's business and shall
20
<PAGE>
be appropriate and adequate for the Partnership's business. The expense of
maintaining the books of account shall be an expense of the Partnership.
(b) Inspection. All books, records and accounts of the Partnership,
----------
together with executed copies of this Agreement and any amendments, shall be
kept at all times at the principal office of the Partnership. All Partners and
their duly authorized representatives shall have the right to examine such
books, records and accounts at any and all reasonable times and to make copies
or extracts therefrom.
(c) Financial Reports. The Partners will be provided with monthly,
-----------------
quarterly and annual reports detailing the performance of the Partnership during
the preceding month, quarter and calendar year, respectively. Each monthly
report shall be due not later than the 15th day of the immediately following
month, each quarterly report shall be due no later than the 15th day of the
immediately following quarter and each annual report shall be due no later than
January 31 of the immediately following year. These reports shall contain, among
other things, a balance sheet and a profit and loss statement as of the end of
the applicable month, quarter or year, as well as aged accounts receivable
listings categorized by payor class, procedure code and such narrative
explanation as reasonably necessary to make the reports informative and not
misleading. The monthly balance sheets and profit and loss statements shall be
prepared on a cash basis. The annual and quarterly balance sheets and profit and
loss statements shall be prepared on an accrual basis. The cost of preparing the
foregoing financial statements shall be borne by the Partnership, as shall the
costs of any audits thereof that may be required in order for any of the
Partners to comply with applicable securities laws. In addition to the
foregoing, as soon as practicable after the close of each
21
<PAGE>
fiscal year but in no event later than April 1 of the next succeeding year, the
Managing Partner shall deliver to each Partner a financial report of the
Partnership for such fiscal year showing (i) distributions to the Partners and
allocations to the Partners of Partnership taxable income, gains, losses,
deductions, credits and items of tax preference, and (ii) all necessary tax
reporting information required by the Partners for preparation of their
respective income tax returns.
(d) Accounting Decisions. All decisions as to accounting matters, except
--------------------
as specifically provided to the contrary herein, shall be made by the Partners.
Such decisions must be acceptable to the Partnership's accountants.
(e) Tax Returns, Taxable Year and Accounting Method. All books and records
-----------------------------------------------
of the Partnership shall be kept on the basis of an annual accounting period
ending December 31st of each year, except for the final accounting period, which
shall end on the dissolution or termination of the Partnership. The
Partnership's taxable and fiscal years shall be the calendar year. Subject to
(f) below, all elections required or permitted to be made by the Partnership
under the Code shall be made by the Partners in such manner as will, in the
opinion of the Partnership's accountants, be most advantageous to the Partners.
At least thirty (30) days prior to its due date, the Managing Partner shall
distribute a draft of the Partnership's federal tax return to the Partners and
will not file such return unless it is approved by a Majority Vote; provided no
Partner may unreasonably withhold such approval. If the Partnership's federal
tax return is prepared in accordance with federal tax laws, no Partner may
withhold approval; and if a Partner withholds approval in such a situation that
Partner shall indemnify and hold harmless all other Partners from any loss,
claim, penalty or taxes imposed or sustained as a result of the withholding of
such
22
<PAGE>
approval. All references herein to "fiscal year of the Partnership" or to
"fiscal year" or to "taxable year" are to the annual accounting period ending
December 31st of each year, whether the same shall consist of twelve months or
less.
(f) Budget and Business Plan. By no later than November of each year, the
------------------------
Managing Partner shall prepare and submit to the Partners for their approval (i)
a budget setting forth the estimated income and expenditures (capital, operating
and other) of the Partnership for the next calendar year, and (ii) a business
plan setting forth the activities and projects to be undertaken and the services
to be performed by the Partnership for the next calendar year. Once approved by
a Majority Vote of the Partners, the Partners shall implement the approved
budgets and business plans and shall be authorized to make the expenditures and
incur the obligations provided for in the approved budgets and business plans.
The Partners shall not pursue any activities or business on behalf of the
Partnership which are not contemplated by approved budgets and business plans
except with the prior approval by Majority Vote of the Partners.
12. Bank Accounts. All funds of the Partnership are to be deposited in the
-------------
Partnership's name in such separate bank account or accounts or invested in such
interest-bearing or non-interest-bearing investments as may be designated by the
Partners. Funds of the Partnership shall be held in the name of the Partnership
and shall not be commingled with those of any other person.
13. Death, Incompetency, Bankruptcy or Dissolution of a Partner. Upon the
-----------------------------------------------------------
death or legal incompetency of an individual Partner, the liquidation,
dissolution or other cessation to exist as a legal entity of a Partner not an
individual, or the insolvency or bankruptcy of any Partner, the
23
<PAGE>
Partnership shall not dissolve or terminate, unless such Partner was the last
remaining partner and subject to Paragraphs 14(d), 14(e) and 14(f) hereof, and
---------------------------------
the personal representative or successor in interest of such Partner shall have
such rights of a Partner as are necessary for the purpose of settling or
managing his estate or its affairs and the same power as said Partner had to
constitute a transferee of such Partner's Partnership interest as a substituted
Partner, but said representative shall not become a substituted Partner without
complying with the requirements of Paragraph 8(c).
--------------
14. Resignation, Removal or Change of a Partner.
-------------------------------------------
(a) Withdrawal by a Partner. A Partner shall have the right to resign or
-----------------------
withdraw from the Partnership only with the prior written consent of all the
remaining Partners; provided however, the withdrawal shall not be effective
until such time as the Partnership shall have received an opinion of counsel,
satisfactory to counsel for the Partnership, that the permitted withdrawal will
not result in (1) the reclassification of the Partnership as an association
taxable as a corporation for federal income tax purposes, (2) a termination of
the Partnership under the then existing provisions of the Code and applicable
regulations, or (3) that such withdrawal will not result in a default under any
loan agreement to which the Partnership is a party.
(b) Removal of a Partner. Partners owning more than 67% of the Percentage
--------------------
Interests shall have the right, for cause, exercisable by written notice given
to the Partner they seek to remove and all other Partners, to cause the removal
of a Partner. In that event, the removed Partner must sell its Partnership
interest to the Partnership, the purchase price to be the balance in such
Partner's capital account plus any debts or obligations owed to such removed
Partner by the
24
<PAGE>
Partnership and less any debt or obligation owed to the Partnership by such
removed Partner. For purposes hereof, cause shall mean bad faith, gross
negligence, misfeasance, fraud, or intentional misconduct. In the event the
removed Partner shall contest the propriety of such removal, such dispute shall
be arbitrated in accordance with the rules then in effect of the American
Arbitration Association.
(c) Change of Last Remaining Partner. Upon the withdrawal, bankruptcy,
--------------------------------
dissolution, death, or legal incapacity of the last remaining Partner, such
Partner or the heirs, executors, administrators or personal representatives of
such Partner shall within ninety (90) days from his withdrawal, bankruptcy,
dissolution, death, or legal incapacity, select a successor Partner or Partners
who shall receive all or a portion of the Partnership interest of such Partner
and shall be admitted as a Partner upon compliance with Paragraph 14(d).
---------------
(d) Appointment of Substituted or Additional Partners. The Partners may, by
-------------------------------------------------
Majority Vote, appoint one or more Substituted or Additional Partners, who, upon
obtaining the written consent of all the Partners, shall assume all of the
rights and obligations of the Partners designated herein. No Substituted or
Additional Partner may be appointed hereunder unless the Partnership shall have
received:
(i) Executed and acknowledged instruments as the Partners may reasonably
deem necessary or desirable to effect such substitution or admission, including
the written acceptance and adoption by the successor or additional Partner of
the provisions of this Agreement;
25
<PAGE>
(ii) An opinion of counsel, in form and substance reasonably
satisfactory to counsel for the Partnership, that the admission or substitution
of the Partner will not violate any registration provisions of any federal or
state securities law or have an adverse effect on the Partnership under the
Code; and
(iii) Payment of such reasonable expenses as the Partnership may incur
in connection with such substitution or admission.
(e) Reformation of Partnership. If at any time there is not at least one
--------------------------
(1) Partner in office, the holders of a majority of the Percentage Interests
may, within three (3) months following the date on which there ceased to be at
least one (1) Partner, vote to reform the Partnership and elect one or more
Partners to continue the business of the Partnership, which Substituted or
Additional Partners will be required to purchase all of the interest of the last
remaining Partner at a price equal to the capital account of such predecessor
Partner. Expenses incurred in the reformation or attempted reformation of the
Partnership shall be deemed expenses of the Partnership.
(f) No Dissolution. The retirement, withdrawal, bankruptcy, dissolution,
death, disability, legal incapacity, or removal of a Partner or any other event
which results in such person ceasing to be a Partner shall not cause the
dissolution of the Partnership unless there is no remaining Partner to continue
the business of the Partnership, and (1) there is no transfer of a
26
<PAGE>
Partnership interest to a person who is admitted as a Partner pursuant to this
Paragraph 14, or (2) the Partnership is not reformed pursuant to Paragraph 14.
- ------------ ------------
(g) Accounting. If the withdrawal or removal of a Partner does not
----------
result in the dissolution and winding up of the Partnership's business because
such business is being continued, the remaining Partners shall promptly have an
accounting prepared by the Partnership's accountants covering the transactions
of the Partnership since the end of the immediately preceding fiscal year
through the date of such withdrawal or removal.
(h) Continuing Liability of Partner. Any Partner who resigns or withdraws
-------------------------------
from the Partnership in violation of the provisions of this Paragraph 14 shall
------------
remain liable for payment of all debts, obligations, liabilities and commitments
of the Partnership incurred while it was a Partner to the extent the Partnership
does not have funds available for such payment and to the extent he would
otherwise have been liable. In addition, such withdrawing Partner shall be
liable to the Partnership and the other Partners for any damages sustained by
reason of such withdrawal.
15. Dissolution of the Partnership.
------------------------------
(a) Events Causing Dissolution. The Partnership shall be dissolved and
--------------------------
its affairs wound up on the first to occur of the following:
(i) The withdrawal or removal of a sole remaining Partner, unless the
Partnership is reformed pursuant to Paragraph 14, above;
------------
27
<PAGE>
(ii) An election to dissolve the Partnership made in writing by all the
Partners;
(iii) The sale or other disposition by the Partnership of all or
substantially all of the Partnership's assets and the distribution of the net
proceeds from such sale; or
(iv) The happening of an event that, under Tennessee law, causes the
dissolution of a general partnership.
(b) Liquidation of Assets and Application of Proceeds. Upon the dissolution
-------------------------------------------------
of the Partnership the person required by law to wind up the Partnership's
affairs (the "Liquidating Trustee") shall liquidate and reduce to cash the
assets of the Partnership as promptly as is consistent with obtaining the fair
value thereof and apply and distribute the proceeds of such liquidation in
accordance with Paragraph 10 hereof, provided that if such dissolution resulted
------------
from the withdrawal of a Partner in contravention of this Agreement, any payment
to that Partner pursuant to said Paragraph 10 shall be subject to offset for any
------------
such claim for damages against such Partner resulting from such withdrawal. In
connection with any such winding up and liquidation, the Partnership's
accountants shall audit the balance sheet of the Partnership as of the date of
dissolution, and such balance sheet shall promptly be furnished to all Partners.
(c) Indemnification of Liquidating Trustee. The Liquidating Trustee shall
--------------------------------------
be indemnified and held harmless by the Partnership from and against any and all
claims, demands,
28
<PAGE>
liabilities, costs, damages and causes of action of any nature whatsoever
arising out of or incidental to the Liquidating Trustee's taking of any action
authorized under or within the scope of this Agreement.
(d) Distribution in Kind. In the event it becomes necessary for the
--------------------
Liquidating Trustee to make distribution of the Partnership property in kind,
such property shall be transferred and conveyed to the Partners so as to vest in
each of them, as tenants-in-common, an undivided interest in the whole of said
property equal to that Partner's interest in the capital of the Partnership.
16. Miscellaneous.
-------------
(a) Notices. All notices, demands, requests, consents or other
-------
communications required or permitted to be given or made under this Agreement
shall be in writing and signed by the party giving the same and shall be deemed
given or made when mailed by certified or registered mail, postage prepaid, to
the intended recipient at the address set forth in this Agreement or any other
address of which prior written notice has been given. A copy of any notice given
to NGST, Inc. shall also be given to Argil J. Wheelock, M.D.
(b) Severability. Each provision hereof is intended to be severable and
------------
the invalidity or illegality of any portion of this Agreement shall not affect
the validity or legality of the remainder hereof.
29
<PAGE>
(c) Captions. Paragraph captions contained in this Agreement are inserted
--------
only as a matter of convenience and for reference and in no way define, limit,
or extend or describe the scope of this Agreement or the intent of any provision
hereof.
(d) Person and Gender. The masculine gender shall include the feminine and
-----------------
neuter genders, the singular shall include the plural and the word "person"
shall include a corporation, firm, partnership or other form of association.
(e) Binding Agreement. Subject to the restrictions on assignment herein
-----------------
contained, the terms and provisions of this Agreement shall be binding upon, and
inure to the benefit of, the successors, assigns, personal representatives,
estates, heirs and legatees of the respective Partners.
(f) Applicable Law. Notwithstanding the place where this Agreement may be
--------------
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed under the laws of the State of
Tennessee.
(g) Investment Representations. The parties hereby represent each to the
--------------------------
others that they are over twenty-one (21) years of age, that they are acquiring
interests in this Partnership with the purpose of investment and not for the
purpose of resale.
30
<PAGE>
(h) Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties hereto with respect to the matters set forth herein and supersedes
any prior understanding or agreement, oral or written, with respect thereto.
(i) Modifications. No change, modification or amendment of this Agreement
-------------
shall be valid or binding upon the Partners unless it is in writing and signed
by all of the Partners.
(j) Agreement in Counterparts. This Agreement may be executed in several
-------------------------
counterparts and all so executed shall constitute one Agreement, binding on all
the parties hereto, notwithstanding that all the parties are not signatories to
the original or the same counterpart.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of
the date first above written.
31
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
/s/ Argil J. Wheelock, M.D.
------------------------------------
Argil J. Wheelock, M.D.
32
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
/s/ Richard S. Lasky, M.D.
------------------------------------
Richard S. Lasky, M.D.
33
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
/s/ R. Smith Murray, M.D.
------------------------------------
R. Smith Murray, M.D.
34
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
/s/ Thomas C. Bright, M.D
------------------------------------
Thomas C. Bright, M.D.
35
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
/s/ Marty Scheinberg, M.D.
------------------------------------
Marty Scheinberg, M.D.
36
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
/s/ James E. McKinney, M.D.
------------------------------------
James E. McKinney, M.D.
37
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
/s/ Paul E. Henson, M.D.
------------------------------------
Paul E. Henson, M.D.
38
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
/s/ Charles Hawkins, M.D.
------------------------------------
Charles Hawkins, M.D.
39
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
/s/ John F. Bryant, M.D.
------------------------------------
John F. Bryant, M.D.
40
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
NGST, INC.
By: /s/ Argil J. Wheelock, M.D.
---------------------------------
Printed Name: Argil J. Wheelock, M.D.
-----------------------
Title: President
------------------------------
41
<PAGE>
SIGNATURE PAGE TO PARTNERSHIP AGREEMENT
PRIME LITHOTRIPTER
OPERATIONS, INC.
By: /s/ Cheryl Williams
---------------------------------
Printed Name: Cheryl Williams
-----------------------
Title: Treasurer
------------------------------
42
<PAGE>
EXHIBIT A
TO
PARTNERSHIP AGREEMENT
FOR
TENN-GA STONE GROUP TWO
Ownership
Percentage
Partners Interests
- -------- ---------
Thomas C. Bright, M.D.
700 Olympic Plaza Circle 2.777%
Suite 910
Tyler, Texas 75701
John F. Bryant, M.D.
779 E. Third Street 2.777%
Suite 702
Chattanooga, TN 37403
Charles Hawkins, M.D.
409 Dodds Avenue 2.777%
Chattanooga, TN 37404
Paul E. Henson, M.D.
1837 Wood Valley Drive 2.777%
Chattanooga, TN 30720
Richard S. Lasky, M.D.
8320 E. Crestwood Circle 2.777%
Tucson, AZ
James E. McKinney, M.D.
1109 Burleyson Drive 2.777%
Dalton, GA 30720
43
<PAGE>
Ownership
Percentage
Partners Interests
- -------- ---------
R. Smith Murray, M.D.
725 Glenwood Drive 2.777%
Suite 484
Memorial Medical Bldg. East
Chattanooga, TN 37404
Marty Scheinberg, M.D.
779 E. Third Street 2.777%
Suite 702
Chattanooga, TN 37403
Argil J. Wheelock
1000 Scenic Highway 2.777%
Lookout Mountain, TN 37350
NGST, Inc. 36.75 %
One Central Plaza
Sixth Floor
835 Georgia Avenue
Chattanooga, TN 37402
Prime Lithotripter Operations, Inc. 38.25 %
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
------
TOTAL 100.0 %
======
44
<PAGE>
EXHIBIT C
ASSIGNMENT AGREEMENT
--------------------
NGST, Inc., a Tennessee corporation ("Assignor") for and in consideration
of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable
consideration paid by Prime Lithotripter Operations, Inc., a New York
corporation ("Purchaser"), the receipt and sufficiency of which is hereby
acknowledged, and in accordance with the terms and provisions of that certain
Partnership Interest Purchase Agreement (the "Purchase Agreement") made and
entered into effective as of the 1st day of May, 1997, between and among
Purchaser, Tenn-Ga Stone Group Two, L.P., a Tennessee limited partnership (the
"Limited Partnership"); Assignor; and all the shareholders of Assignor, hereby
assigns, transfers and sets over to Purchaser, its successors and assigns, with
such representations, warranties and covenants as are expressly set forth in the
Purchase Agreement, all of Assignor's right, title and interest in and to a
thirty-eight and one-fourth percent (38.25%) general partnership interest in
Tenn-Ga Stone Group Two, a Tennessee general partnership (the "Partnership").
Assignor acknowledges and agrees that Purchaser does not assume any
liabilities or obligations of any kind whatsoever from the Partnership, the
Partnership's predecessor - the Limited Partnership, Assignor or any of the
other parties to the Purchase Agreement. Without limiting the generality of the
foregoing, Assignor hereby expressly acknowledges and agrees that Purchaser is
not assuming any debts, liabilities, or obligations of the Partnership, the
Limited Partnership, Assignor, any of the shareholders of Assignor or any of the
other partners of the Partnership or of the Limited Partnership, or any claims
against the Partnership, the Limited Partnership, Assignor, any of the
shareholders of Assignor or any of the other partners of the
<PAGE>
Partnership or of the Limited Partnership, whether known or unknown, or
absolute, contingent or otherwise (including, but not limited to, any
liabilities arising from any civil, criminal or regulatory litigation or action
involving or related to the Partnership, the Limited Partnership, Assignor, any
of the shareholders of Assignor or any of the other partners in the Partnership
or of the Limited Partnership, or their businesses) and Assignor hereby agrees
to indemnify Purchaser and hold Purchaser harmless from and against any such
debts, liabilities and obligations. However, nothing contained herein is
intended or should be construed to preclude Purchaser's liability, in its role
as a general partner of the Partnership after the Closing (as defined in the
Purchase Agreement) with respect to claims, debts, liabilities or obligations
that arise wholly out of actions, events or omissions occurring after the
Closing Date (as defined in the Purchase Agreement), and Assignor shall have no
indemnity obligation to Purchaser with respect to such claims, debts,
liabilities or obligations.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be executed by
its duly authorized representative effective for all purposes the 1st day of
May, 1997.
ASSIGNOR: NGST, INC.
By: /s/ Argil J. Wheelock, M.D.
-------------------------------
Printed Name: Argil J. Wheelock, M.D.
---------------------
Title: President
----------------------------
<PAGE>
EXHIBIT D
NONCOMPETITION AGREEMENT
------------------------
This Noncompetition Agreement (this "Agreement") is entered into as of the 1st
day of May, 1997, by _____________________________________________ (the
"Affiliate") for the benefit of Prime Lithotripter Operations, Inc., a New York
corporation ("Prime"), and Tenn-Ga Stone Group Two, a Tennessee general
partnership (the "Partnership").
RECITALS:
WHEREAS, Affiliate either (i) owns a partnership interest in the Partnership,
(ii) owns shares in NGST, Inc., a Tennessee corporation ("NGST"), which is the
owner of a partnership interest in the Partnership, and/or (iii) is otherwise
affiliated with, or otherwise has certain common equity owners with, either the
Partnership, NGST, or one or more of the other partners in the Partnership; and
WHEREAS, concurrently with the execution of this Agreement, Prime, NGST, the
shareholders of NGST and the Partnership are consummating that certain
Partnership Interest Purchase Agreement dated effective May 1, 1997 (the
"Purchase Agreement"), pursuant to which Prime will become a general partner in
the Partnership, as more fully described in the Purchase Agreement.
<PAGE>
WHEREAS, in order to induce Prime to consummate the transactions contemplated
by the Purchase Agreement, Affiliate has agreed to certain restrictions on
Affiliate's activities, which restrictions Affiliate deems reasonable in light
of the circumstances.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Noncompetition. During the term of this Agreement, Affiliate hereby
--------------
agrees that, without the prior written consent of Prime, Affiliate shall not
directly or indirectly acquire any interest in (other than ownership of
securities of a publicly held corporation of which Affiliate owns less than five
percent (5%) of any class of outstanding securities), or in any way act as
principal, employee, officer, director, agent, advisor, consultant, co-partner
or in any other capacity of or to, any business venture which competes with
Prime or the Partnership. A business entity shall be considered to compete with
Prime or the Partnership if it directly or indirectly, provides extracorporeal
shockwave lithotripsy services including without limitation, patient lithotripsy
services, lithotripsy management services, lithotripter leasing, or similar
lithotripsy services, anywhere within fifty (50) miles of the Chattanooga,
Hamilton County, Tennessee Courthouse. Further, Affiliate, to the fullest extent
allowed by law, agrees not to:
(i) directly or indirectly request or advise any corporation, firm,
association, entity or individual, having a business relationship with the
Partnership or Prime to withdraw, curtail or cancel its business with the
Partnership or Prime;
2
<PAGE>
(ii) directly or indirectly induce or attempt to influence any employee of
the Partnership or Prime to terminate his or her employment with the
Partnership or Prime; or
(iii) directly or indirectly make any statement, written or oral, or
perform any other act or omission which is, or is likely to be, materially
detrimental to the goodwill of the Partnership or Prime.
Provided, however, that nothing in this Agreement shall be construed to
limit or infringe upon Affiliate's professional medical judgment or ability to
practice medicine (including, but not limited to, the selection of appropriate
facilities for medical care), and no exercise of his or her professional medical
judgment or act constituting the practice of medicine shall be considered a
violation of this Agreement.
2. Term and Termination. The term of this Agreement shall begin on the date
--------------------
hereof and continue until five (5) years after the date that Affiliate is no
longer, directly or indirectly, (i) a partner in the Partnership, (ii) an owner
of any equity or other voting ownership interest, or any right convertible into
any equity or other voting ownership interest, in any partner in the Partnership
or of any affiliate of the Partners or of any partner in the Partnershp, or
(iii) an affiliate of, or affiliated through any common equity owners with,
either the Partnership, or any of partners in the Partnership. For purposes of
this Agreement, the Partnership shall include the Partnership and its successors
and assigns, and the references to a "partner" in the Partnership shall be
deemed to
3
<PAGE>
include any owner of any equity or other voting ownership interest in any such
successor or assign of the Partnership. If during any calendar month within the
term of this Agreement Affiliate is not in compliance with the terms of this
Agreement, the Partnership and Prime shall be entitled to, among all other
remedies, compliance by Affiliate with the terms of this Agreement for an
additional number of full calendar months that equals the number of calendar
months during which such noncompliance occurred. The term of this Agreement
shall also include this additional period. The two immediately preceding
sentences of this Section 2 and the terms of Section 3 hereof shall not in any
way relieve Affiliate of any obligations hereunder or otherwise reduce
Affiliate's liability for damages for breach hereof.
3. Breach. Affiliate agrees that a violation of any covenant contained in
------
Section 1 will irreparably damage the Partnership and Prime for which remedies
at law may be insufficient, and for that reason, Affiliate further agrees that
the Partnership and Prime shall each, independently 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 Partnership or Prime may have, including, specifically, recovery of
additional damages. This Agreement is made for the independent benefit of each
of Prime and the Partnership, and Prime and the Partnership shall be entitled to
enforce this Agreement, or seek damages for any breach or threatened breach
hereof without any requirement of acting jointly. Furthermore, any waiver by the
Partnership or Prime on any one or more occasions shall not be deemed to be a
waiver of the right of the other beneficiary hereof or to constitute a further
or continuing waiver of either beneficiary's rights hereunder. No release by
either Prime or the Partnership of any rights or causes of action against
Affiliate will
4
<PAGE>
constitute a release of the rights of the other beneficiary, it being understood
and agreed that neither Prime nor the Partnership has the right to amend, waive,
discharge, release or otherwise modify any terms or conditions of this Agreement
or the obligations of Affiliate hereunder, for or on behalf of the other
beneficiary of this Agreement.
4. Reasonableness of Restrictions. Affiliate and Affiliate's counsel have
------------------------------
reviewed and carefully considered the provisions of this Agreement, and, having
done so, Affiliate agrees that the restrictions set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to Affiliate, and (c) are reasonably required for the
protection of the interests of the Partnership and Prime.
5. Miscellaneous.
-------------
(a) Entirety and Amendments. This Agreement may be modified or amended
-----------------------
only by an instrument in writing executed by each of Affiliate, the
Partnership and Prime.
(b) Headings. The headings contained in this Agreement are for reference
--------
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
(c) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
5
<PAGE>
(d) Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of Tennessee.
(e) Parties Bound. This Agreement shall be binding upon, inure to the
-------------
benefit of and be enforceable by and against, the Partnership, Prime,
Affiliate and their respective successors, representatives and permitted
assigns. This Agreement is personal to Affiliate and may not be assigned by
Affiliate in whole or in part, without the prior express written consent of
all parties hereto in each instance.
(f) Invalid Provisions. If any provision of this Agreement (including,
------------------
without limitation, any provision relating to the activities covered by, or
time period of, the covenants contained in Section 1 of this Agreement) is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, 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 hereof; and the remaining
provisions shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable.
(g) Construction. This Agreement shall be construed without regard to the
------------
identity of the person who drafted the various provisions of this Agreement.
Each and every
6
<PAGE>
provision of this Agreement shall be construed as though all of the parties
participated equally in the drafting of this Agreement. 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 to this
Agreement.
EXECUTED to be effective as of the date first above written.
PRIME: PRIME LITHOTRIPTER OPERATIONS, INC.
By: /s/ Cheryl Williams
-----------------------------------
Cheryl Williams, Treasurer
7
<PAGE>
SIGNATURE PAGE TO NONCOMPETITION AGREEMENT
PARTNERSHIP: TENN-GA STONE GROUP TWO,
a Tennessee general partnership
By: /s/ Argil J. Wheelock.
------------------------------
Printed Name: Argil J. Wheelock, M.D
-------------------
Title: Partner
---------------------------
8
<PAGE>
SIGNATURE PAGE TO NONCOMPETITION AGREEMENT
AFFILIATE:
By:
------------------------------
Printed Name:
-------------------
Title:
---------------------------
9
<PAGE>
PRIME LITHOTRIPTER OPERATIONS, INC.
Closing Certificate
-------------------
I, Michael S. Madler, as President of Prime Lithotripter Operations, Inc.,
a New York corporation ("Prime"), pursuant to the requirements of that certain
Partnership Interest Purchase Agreement ("Purchase Agreement") made and entered
into effective the 1st day of May, 1997, between and among Tenn-Ga Stone Group
Two, L.P., a Tennessee limited partnership, (the "Partnership"), NGST, Inc., a
Tennessee corporation ("NGST"), and all of the shareholders of NGST (each of
which is individually referred to in the Purchase Agreement as a "Shareholder"
and all of which are collectively referred to therein as the "Shareholders")
Thomas C. Bright, M.D.; Argil J. Wheelock, M.D.; R. Smith Murray, M.D.; Richard
S. Lasky, M.D.; John F. Bryant, M.D.; Marty Scheinberg, M.D.; James E. McKinney,
M.D.; Paul E. Henson, M.D.; Oliver Benton, III, M.D.; Stephen W. Jackson, M.D.;
C. A. Kyle, Jr., M.D.; Nicholas Newton, M.D.; Jack Monnig, M.D.; Samuel M.
Currin, M.D.; J. Patrick Dilworth, M.D.; David Sahaj, M.D.; John Bryan, M.D.;
Paula Willingham and Robert DeBord., do hereby certify:
(1) All of the representations and warranties contained in the Purchase
Agreement by Prime are true and correct at and as of the Closing.
(2) All agreements to be performed and complied with by Prime under the
Purchase Agreement at or prior to the Closing have been performed or complied
with by Prime.
(3) Prime is aware of no breach by the Partnership, NGST or the
Shareholders of (i) their respective representations and warranties contained in
the Purchase Agreement, or (ii) any of their respective agreements to be
performed or complied with at or prior to the Closing, pursuant to the Purchase
Agreement.
The terms as used herein, not otherwise defined herein, shall have the
respective meanings assigned to such terms in the Purchase Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand on this 13th day of May,
1997.
PRIME LITHOTRIPTER OPERATIONS, INC.
By /s/ Michael S. Madler
----------------------------------------
Michael S. Madler, President
<PAGE>
STOCK PURCHASE AGREEMENT
With Respect to All
Outstanding Capital Stock of
EXECUTIVE MEDICAL ENTERPRISES, INC.
EFFECTIVE DATE: JUNE 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - AGREEMENT OF PURCHASE AND SALE AND CLOSING...................... 1
1.1 Purchase and Sale........................................... 1
1.2 Purchase Price.............................................. 1
1.3 Earn-Out Adjustments........................................ 2
1.4 Closing..................................................... 12
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SUN MEDICAL.................. 12
2.1 Due Organization and Principal Executive Office............. 12
2.2 Due Authorization........................................... 13
2.3 Brokers and Finders......................................... 13
2.4 Claims and Proceedings...................................... 14
2.5 Investment Intent........................................... 14
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLERS................. 15
3.1 Due Organization............................................ 15
3.2 Subsidiaries................................................ 15
3.3 Due Authorization........................................... 16
3.4 Financial Statements........................................ 17
3.5 Capital Stock............................................... 18
3.6 Conduct of Business; Certain Actions........................ 19
3.7 Ownership of Assets: Licenses, Permits, etc................ 20
3.8 Liabilities................................................. 22
3.9 Environmental Issues........................................ 23
3.10 Intellectual Property Rights............................... 24
3.11 Compliance with Laws....................................... 24
3.12 Insurance.................................................. 24
3.13 Employee Benefit Matters................................... 25
3.14 Contracts and Agreements................................... 26
3.15 Claims and Proceedings..................................... 26
3.16 Taxes...................................................... 27
3.17 Personnel.................................................. 28
3.18 Business Relations......................................... 29
3.19 Accounts Receivable........................................ 29
3.20 Agents..................................................... 29
3.21 Indebtedness To and From Partners and Employees............ 29
3.22 Commission Sales Contracts................................. 30
3.23 Certain Consents........................................... 30
3.24 Brokers.................................................... 30
3.25 Interest in Competitors, Suppliers, and Customers.......... 30
3.26 Warranties................................................. 31
i
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3.27 Extinguishment of Indebtedness............................. 31
3.28 No Known Breaches.......................................... 31
ARTICLE IV - COVENANTS AND AGREEMENTS....................................... 32
4.1 Cooperation Relating to Financial Statements................ 32
4.2 Strip-Out Transactions...................................... 32
4.3 Guaranty of Prime........................................... 33
4.4 Conduct of EME Post-Closing................................. 33
4.5 Qualification in Washington and Oregon...................... 33
ARTICLE V - CLOSING OBLIGATIONS............................................. 34
5.1 Sun Medical's Closing Obligations........................... 34
5.2 The Sellers' Closing Obligations............................ 35
ARTICLE VI - INDEMNIFICATION OF SUN MEDICAL................................. 36
6.1 Survival of Representations; Time Limits; Knowledge......... 36
6.2 Indemnification of Sun Medical.............................. 37
6.3 Defense of Third-Party Claims............................... 39
6.4 Limitations................................................. 41
ARTICLE VII - INDEMNIFICATION OF THE SELLERS................................ 42
7.1 Survival of Representations; Time Limits; Knowledge......... 42
7.2 Indemnification of the Sellers.............................. 43
7.3 Defense of Third-Party Claims............................... 43
7.4 Limitations................................................. 45
ARTICLE VIII - NON-COMPETITION.............................................. 47
ARTICLE IX - POST CLOSING AGREEMENTS........................................ 49
ARTICLE X - MISCELLANEOUS................................................... 50
10.1 Collateral Agreements, Amendments, and Waivers............. 50
10.2 Successors and Assigns..................................... 51
10.3 Expenses................................................... 51
10.4 Invalid Provisions......................................... 51
10.5 Information and Confidentiality............................ 52
10.6 Waiver..................................................... 52
10.7 Notices.................................................... 52
10.8 Survival of Representations, Warranties, and Covenants..... 53
10.9 Further Assurances......................................... 54
10.10 Construction.............................................. 54
10.11 Arbitration............................................... 54
10.12 Governing Law............................................. 55
10.13 Counterparts.............................................. 55
ii
<PAGE>
Exhibit A -- EMEI Financial Statements
Exhibit B -- Form of Assignment and Stock Power
Exhibit C -- Form of Lease Agreement
iii
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into effective
as of the close of business on June 1, 1997 (the "Effective Time"), between Sun
Medical Technologies, Inc., a California corporation ("Sun Medical"), Prime
Medical Services, Inc., a Delaware corporation ("Prime"), Executive Medical
Enterprises, Inc., a Delaware corporation ("EME"), Joseph Fazio ("Fazio"),
Vernon Gordon ("Gordon") and John Pecora ("Pecora"). Fazio, Gordon and Pecora
are hereinafter referred to collectively as the "Sellers" and individually as a
"Seller."
The parties hereto agree as follows:
ARTICLE I
AGREEMENT OF PURCHASE AND SALE AND CLOSING
------------------------------------------
1.1 PURCHASE AND SALE. Upon the basis of the representations and
-----------------
warranties, for the consideration, and subject to the terms and conditions set
forth in this Agreement, Sellers agree to sell to Sun Medical and Sun Medical
agrees to purchase from Sellers, all of the issued and outstanding shares of
capital stock, including without limitation all common and preferred stock,
(collectively, the "Shares") of EME.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
--------------
for the Shares shall equal (i) $1,339,000, to be paid in cash or wired funds at
the Closing (the "Closing Payment") and to be allocated among the Sellers
ratably in accordance with their respective percentage ownership of the Shares
as set forth on Schedule 1.2(a) attached hereto (the "Ownership Percentages"),
---------------
subject to the Earn-Out Adjustments determined in accordance with
<PAGE>
Section 1.3, plus (ii) the amount of those certain expenses of EME as set forth
on Schedule 1.2(b).
---------------
1.3 EARN-OUT ADJUSTMENTS. The Purchase Price shall be increased or
--------------------
decreased by the following adjustments described in subsections a-g below (the
"Earn-Out Adjustments").
a. The parties have estimated that EME service $400,000, and (ii)
1.75 times the difference agreements set forth under the heading "Class A
between $309,000 and the Projected Revenue (as Contracts" on Schedule 1.3 (the
------------
"Class A defined below) from those of the Class A Contracts Contracts"),
generate $309,000 of revenue to EME which are renewed. As used in the foregoing
annually. The Purchase Price will be increased by sentence "Projected Revenue"
shall mean, with an amount equal to the sum of (i) respect to any Class A
Contract that is renewed, the product of (A) the estimated annualized number of
procedures for such Class A Contract, as set forth on Schedule 1.3 hereto
------------
opposite such Class A Contract, multiplied by (B) the per-procedure amount
payable to EME under such renewed Class A Contract. A Class A Contract shall be
deemed to be "renewed" if either (A) it is formally renewed or extended or a new
contract is entered into by the parties thereto after the Closing Date but prior
to the applicable date for such contract as set forth in (I) or (II) of clause
(B) of this sentence, or (B) EME continues to provide lithotripsy services
thereunder at any time (I) after January 31, 1998, with respect to the "Antelope
Valley" and "General Hospital" Class A Contracts or (II) after April 15, 1998,
with respect to the "Centinela Hospital" and "Ridgecrest Hospital" Class A
Contracts. If the foregoing calculation yields a positive number, such amount
will be paid to Sellers in cash on April 30, 1998, to be allocated among them
ratably in
2
<PAGE>
accordance with their Ownership Percentages. If the calculation yields zero or a
negative number, then no additional amount will be due Sellers under this
subsection a. The following example (which is purely for purposes of
illustration) reflects the foregoing methodology:
Estimated Annual Revenue
- Class A Contracts................... $309,000
Projected Revenue - Class
A Contracts Renewed................... $245,000
---------
Shortfall (deficiency of
Projected from Estimated) ($64,000)
Multiplied by 1.75..................... x 1.75
---------
($112,000)
Add $400,000........................... $400,000
---------
Earn-Out Adjustment -
Payable ratably to
Sellers 4/30/98....................... $288,000
=========
b. The parties have estimated that EME service agreements set forth
unde the heading "Class B" Contracts on Schedule 1.3 (the "Class B Contracts"),
------------
generate $753,000 of revenue to EME annually. The Purchase Price will be
increased by an amount equal to the sum of (i) $939,000, and (ii) 1.75 times the
difference between $753,000 and the Projected Revenue (as defined below) from
those of the Class B Contracts which are renewed during 1998. As used in the
foregoing sentence, "Projected Revenue" shall mean, with respect to any Class B
Contract renewed in 1998, the product of (A) the estimated annualized number of
procedures for such Class B Contract, as set forth on Schedule 1.3 hereto
------------
opposite such Class B Contract, multiplied by (B) the per-procedure amount
payable to EME under such renewed Class B Contract. A Class B Contract shall be
deemed to be "renewed in 1998" if either (A) it is formally renewed or
3
<PAGE>
extended or a new contract is entered into by the parties thereto after the
Closing Date but prior to January 30, 1999, OR (B) EME continues to provide
lithotripsy services under such Class B Contract at any time after January 30,
1999. If the foregoing calculation yields a positive number, such amount will be
paid to Sellers in cash on February 15, 1999, to be allocated among them ratably
in accordance with their Ownership Percentages. If the calculation yields zero
or a negative number, then no additional amount will be due Sellers under this
subsection b. The following example (which is purely for purposes of
illustration) reflects the foregoing methodology:
Estimated Annual Revenue - Class B Contracts................... $753,000
Projected Revenue - Class B Contracts Renewed in 1998.......... $866,000
----------
Excess of Projected over Estimated............................. $113,000
Multiplied by 1.75............................................. x 1.75
----------
$197,750
Add $939,000................................................... $939,000
----------
Earn-Out Adjustment - Payable ratably to Sellers 2/15/99....... $1,136,750
==========
c. The contracts described in Schedule 1.3 as "Class C Contracts"
------------
will not be considered in determining the Earn-Out Adjustments described in
subsections a. and b. above. Sun Medical will pay Sellers (to be allocated
ratably amongst them in accordance with their Ownership Percentages) an amount
equal to fifty percent (50%) of the Gross Revenue from Class C Contracts in each
of the three (3) years ending June 1, 1998, 1999 and 2000. As used in
4
<PAGE>
the foregoing sentence, "Gross Revenue" shall mean the aggregate amounts billed
by EME pursuant to the Class C Contracts, less (i) the amount of applicable
medical director fees, if any, and (ii) reasonable reserves for uncollectible
amounts billed under the Class C contracts for such years, and contractual
reserves related thereto, as established throughout the three (3) year period
based on historical experience. However, if Sun Medical utilizes a new
partnership or other new entity with physician investors to provide lithotripsy
services to any hospital subject to a Class C Contract, then with regard to that
hospital, the amount payable from that point forward through the end of the
three (3) years will be reduced to 50% of the net income earned by Sun Medical
with respect to its ownership interest in such partnership or entity to the
extent such net income is attributable to lithotripsy services provided by the
partnership or entity to that hospital, after deduction of all direct costs
associated therewith and an allocable share of all indirect costs (which
indirect costs will be allocated ratably based on the number of lithotripsy
procedures performed at each hospital or other facility serviced by the
partnership or entity). Any amounts due Sellers under this subsection c. will be
paid in cash within 45 days after the end of the year for which the payment was
due.
d. The EME service agreements listed under the heading "Class D
Contracts" on Schedule 1.3 hereto (the "Class D Contracts") will be subject to
------------
the adjustments described in this subsection d. and not pursuant to subsections
a., b., or c. above.
(i) From the Effective Time through September 30, 1997, EME shall
lease from Newco (as defined in Section 4.2 below) the HM-4 and tractor
identified as the
5
<PAGE>
"Leased Equipment" on Schedule 1.3d.(i) (the "Leased Equipment") in exchange for
-------------
a monthly lease payment of $7,000, and pursuant to the form of lease agreement
attached hereto as Exhibit C;
---------
(ii) On or before October 30, 1997, Sun Medical will pay to the
Sellers, to be allocated amongst them ratably in accordance with their Ownership
Percentages, 50% of the EME Net Income with respect to each such Class D
Contract from the Effective Time through September 30, 1997. As used in the
foregoing sentence, and in clauses (iii) and (v) below, "EME Net Income" with
respect to any Class D Contract shall mean the aggregate amounts billed by EME
with respect thereto during the applicable period less (i) any direct operating
expenses (including, without limitation, rental payments from EME to Newco)
incurred by EME in servicing such Class D Contract, and (ii) reasonable reserves
for uncollectible amounts billed under the Class D Contracts for the applicable
period, and contractual reserves related thereto, as established based on
historical experience;
(iii) If all Class D Contracts are renewed in 1997 (as described
in clause (A) of the definition for renewal, and without any being renewed
pursuant to clause (B) of such definition) without Sun Medical utilizing a new
partnership or other entity with physician investors, on September 30, 1997 Sun
Medical or EME will pay to Newco $250,000 in exchange for Newco's transfer to
Sun Medical or EME of all right, title and interest in and to the Leased
Equipment, subject to no liens, claims or encumbrances whatsoever. Furthermore,
for any Class D Contracts renewed in 1997, within 45 days following each of the
6
<PAGE>
twelve-month periods ended September 30, 1998, 1999 and 2000, Sun Medical will
pay to the Sellers, to be allocated amongst them ratably in accordance with
their Ownership Percentages, 50% of the EME Net Income with respect to each such
renewed Class D Contract during such twelve-month period. As used in this
subsection d., a Class D Contract shall be deemed to be "renewed in 1997" if
either (A) prior to September 30, 1997, it is formally renewed or extended or a
new contract is entered into by the parties thereto, without Sun Medical
utilizing a new partnership or other entity with physician investors, or (B) EME
continues to provide lithotripsy services thereunder at any time after September
30, 1997;
(iv) If any such Class D Contract is not renewed in 1997 but, on
or before September 30, 1997, Sun Medical utilizes a new partnership or other
entity with physician investors to provide lithotripsy services to any hospital
subject to a Class D Contract, then (A) within six (6) months after the date
such entity is formed Sun Medical, at its discretion, will either (I) pay to
Newco $250,000 in exchange for Newco's transfer to Sun Medical of full and clear
title to the Leased Equipment as described in paragraph (iii) above, or (II) in
the event partnership or other entity determines to utilize different
lithotripsy equipment, other than a Dornier HM-4, (which could include equipment
then owned or used by Sun Medical, Prime or any of their respective affiliates)
enter into a month-to-month lease with respect to the Leased Equipment (until
such time as such different lithotripsy equipment is utilized) upon such terms
and conditions, if any, as may be mutually satisfactory to Newco and Sun
Medical, and (B) within 45 days following each of the twelve-month periods ended
September 30, 1998, 1999 and 2000, Sun Medical will pay to the Sellers, to be
allocated amongst them ratably in
7
<PAGE>
accordance with their Ownership Percentages, 50% of the net income earned by Sun
Medical with respect to its ownership interest in such partnership or entity
during such twelve-month period, to the extent such net income is attributable
to lithotripsy services provided by the partnership or entity providing
lithotripsy services to that hospital, after deduction of all direct costs
associated therewith and an allocable share of all indirect costs (which
indirect costs will be allocated ratably based on the number of lithotripsy
procedures performed at each hospital or other facility serviced by the
partnership or entity);
(v) If any such Class D Contract is not renewed in 1997, and
clause (iv) of this subsection d. does not apply, but, on or before September
30, 1997, Sun Medical notifies the Sellers that it has commenced good faith
negotiations with physician investors regarding the utilization of a new
partnership or other entity with physician investors to provide lithotripsy
services to any hospital subject to a Class D Contract, then
(A) Sun Medical shall have until March 31, 1998 to form such
partnership or other entity; and if such partnership or other entity is so
formed, the provisions of clause (iv)(A) above shall apply (except that Sun
Medical shall not have the additional six (6) month period described in that
clause) and the provisions of clause (iv)(B) shall apply with respect to such
hospital for each of the twelve-month periods ended September 30, 1998, 1999 and
2000; and
8
<PAGE>
(B) from September 30, 1997 until the date such new
partnership or other entity is formed (or the date on which Sun Medical
terminates negotiations relating thereto), Sun Medical may lease from Newco the
Leased Equipment on such terms and conditions, if any, that may be mutually
agreeable to Sun Medical and Newco; and
(C) Within 30 days following the date such new partnership
or other entity is formed, and for a period of 36 months after the Effective
Time, Sun Medical will pay to the Sellers, in accordance with their relative
Ownership Percentages, 50% of the net income earned by Sun Medical with respect
to its ownership interest in the new partnership or other entity to the extent
such net income is attributable to lithotripsy services provided by the
partnership or entity to the applicable hospital after deduction of direct and
indirect costs using the same methodology described in subsections c. and d.(iv)
above; and
(vi) At any time EME is leasing the Leased Equipment from Newco
pursuant to this subsection d., EME (or Sun Medical) shall, at its expense, (A)
maintain the Leased Equipment in a reasonably good operating condition, and (B)
insure the Leased Equipment with liability coverage and physical damage
coverage, consistent with such coverage
9
<PAGE>
maintained on Sun Medical's own equipment; and with Newco named as an additional
insured with respect to such coverage.
e. With respect to the renewal of service agreements being considered
in determining any Earn-Out Adjustments under subsections a.-d. above, (i) if
any of such service agreements are not renewed, but are replaced during the
period for which Earn-Out Adjustments would otherwise be due for such
agreements, with lithotripsy service agreements (or such other form of agreement
by which lithotripsy services are provided) from any affiliate of Sun Medical or
Prime, then such contracts shall be deemed to have been renewed when so
replaced, and the replacement agreement, if entered into during the prescribed
period for which Earn-Out Adjustments would otherwise be due for such
agreements, will be analyzed for purposes of calculating any applicable Earn-Out
Adjustments, and (ii) if Prime or any affiliate of Prime or Sun Medical enters
into a partnership or other entity with physician investors with respect to any
of the hospitals covered by the Class C Contracts during the period for which
Earn-Out Adjustments would otherwise be due for such agreements, as described in
subsection c., or the Class D Contracts during the period for which Earn-Out
Adjustments would otherwise be due for such agreements, as described in
subsection d., then the Sellers shall be entitled to the payments described in
subsection c. or subsection d., as applicable, as if Sun Medical had entered
into such partnership or entity.
f. At the Closing, Sellers shall be entitled to retain all EME cash
on hand as of the Effective Time, and Sun Medical shall assign to Newco all
accounts receivable of EME in
10
<PAGE>
existence as of the Effective Time. Thereafter, Sun Medical shall, on a monthly
basis, remit to Newco any collections received by EME after the Effective Time
which were payments of EME accounts receivable in existence as of the Effective
Time. Sun Medical agrees to cause EME to use commercially reasonable efforts to
collect the accounts receivable assigned to Newco, provided such efforts will
not require EME or Sun Medical to institute or threaten legal action, or to
withhold or alter, or threaten to withhold or alter, services.
g. Promptly upon the occurrence of any Earn-Out Adjustment (or upon
any payment by Sun Medical or EME to Sellers or Newco in respect of any Earn-Out
Adjustment), Sun Medical shall provide to each Seller a written summary setting
forth in reasonable detail the amount of such Earn-Out Adjustment and the method
by which it was calculated. Sun Medical shall also promptly provide to Sellers
such directly applicable supporting documentation as any Seller may reasonably
request regarding the determination of any Earn-Out Adjustment.
h. At any time and from time to time from the Closing Date until the
date of the final Earn-Out Adjustment, (but not more than twice during any
calendar year), upon reasonable advance written notice from any Seller, and at
such Seller's expense, Sun Medical shall (and shall cause EME and, if
applicable, Prime and all affiliates of Sun Medical and Prime) provide such
Seller, and such Seller's attorneys, accountants and representatives, full
access, during regular business hours, to all directly relevant books, financial
and accounting records,
11
<PAGE>
and other directly relevant records relating to the nature, amount and
calculation of any Earn-Out Adjustment.
1.4 CLOSING. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., 816 Congress Avenue, Suite 1900, Austin, Texas
78701, and shall be effective as of the Effective Time. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SUN MEDICAL
---------------------------------------------
Sun Medical represents and warrants to the Sellers that each of the
following matters is true and correct in all respects as of the Closing Date
(with the understanding that the Sellers are relying materially on such
representations and warranties 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 and not be merged therein:
2.1 DUE ORGANIZATION AND PRINCIPAL EXECUTIVE OFFICE. Sun Medical is a
-----------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of California and has full corporate power and authority to
carry on its business as now conducted and to enter into and perform this
Agreement and each other agreement, instrument and document required to be
executed by Sun Medical in connection herewith. Sun Medical's principal
executive offices are located at 1301 Capital of Texas Highway, Austin, Texas
78746.
12
<PAGE>
2.2 DUE AUTHORIZATION. This Agreement and each other agreement,
-----------------
instrument, and document required herein to be executed by Sun Medical have been
duly and validly authorized, executed and delivered by Sun Medical and
constitute the valid and binding obligations of Sun Medical enforceable against
it in accordance with its terms, subject to bankruptcy, insolvency,
conservatorship, receivership and other similar laws of general application
affecting the rights and remedies of creditors. The execution, delivery, and
performance of this Agreement and each other agreement, instrument, and document
required herein to be executed by Sun Medical will not (a) violate any federal,
state, county, or local law, rule, or regulation applicable to Sun Medical or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Sun Medical 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, Sun Medical or (d) violate or
conflict with any provision of the Certificate of Incorporation or Bylaws of Sun
Medical. Other than such notification filings as may be required by applicable
state or federal securities law (which filings shall timely be effected by Sun
Medical after the date hereof), no action, consent, or approval of, or filing
with, any federal, state, county, or local governmental authority is required by
Sun Medical in connection with the execution, delivery or performance of this
Agreement (or any agreement, instrument or other document executed in connection
herewith by Sun Medical).
2.3 BROKERS AND FINDERS. Sun Medical has not engaged, or caused to be
-------------------
incurred any liability to, or will pay any money to or enter into an arrangement
with, any finder, broker, or sales agent (or has paid, or will pay, any finder's
fee or similar fee or commission to any person)
13
<PAGE>
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 CLAIMS AND PROCEEDINGS. Sun Medical 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 Sun Medical, no such claim, action, suit, proceeding or
investigation is threatened.
2.5 INVESTMENT INTENT. Sun Medical (a) is acquiring the Shares for
-----------------
its own account for investment and not with a view to or in connection with a
distribution (within the meaning of the Securities Act of 1933, as amended (the
"Act") thereof, (b) is an "accredited investor" within the meaning of Rule 501
under the Act, (c) will not sell or transfer the Shares unless such Shares are
registered under the Act or such sale or transfer is exempt from such
registration requirements, (d) is able to bear the economic risk of its
acquisition of the Shares and (e) has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits of, and
protecting its interests with respect to, its acquisition of the Shares.
14
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
The Sellers, jointly and severally, hereby represent and warrant to Sun
Medical that the following matters are true and correct in all respects as of
the Closing Date(with the understanding that Sun Medical 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 and not be merged
therein:
3.1 DUE ORGANIZATION. EME is a corporation duly organized, validly
----------------
existing, and in good standing under the laws of the State of Delaware and has
full power and authority to carry on its business as now conducted and as
proposed to be conducted. Complete and correct copies of EME's Articles of
Incorporation, Bylaws, all board of directors' resolutions, all shareholders'
resolutions, and all amendments thereto, have been delivered to Sun Medical.
EME is qualified to do business and is in good standing in the states set forth
on Schedule 3.1 attached hereto, which states, except as set forth on Schedule
------------ --------
3.1, represent every jurisdiction where such qualification is required for the
- ----
conduct of EME's business.
3.2 SUBSIDIARIES. EME does not directly or indirectly have, or
------------
possess any options or other rights to acquire, any subsidiaries, or any direct
or indirect ownership interest, in whole or in part, in any person, business,
corporation, partnership, limited liability company, association, joint venture,
trust, or other entity.
15
<PAGE>
3.3 DUE AUTHORIZATION. Each Seller represents and warrants that (i)
-----------------
such 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; (ii) the execution, delivery,
and performance of this Agreement and such other agreements, instruments, and
documents have been duly authorized by all necessary action of the Sellers;
(iii) 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, subject to bankruptcy,
insolvency, conservatorship, receivership and other similar laws of general
application affecting the rights and remedies of creditors; (iv) 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) cause any Seller to violate any federal, state, county, or local law, rule,
or regulation applicable to such Seller or its properties, (b) cause EME or any
Seller to violate, or conflict with or permit the cancellation of, any agreement
to which such Seller or EME is a party, or by which such Seller or EME or any of
their respective 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 indebtedness
secured by the property of, any Seller or EME, or (d) cause EME or any Seller to
violate, or conflict with any provision of, the documents creating or governing
the Seller or EME, in each of cases (a)-(d) unless such violation, conflict,
cancellation, or acceleration would not, individually or in the aggregate, have
a material adverse effect on EME's financial condition, assets, business or
operations; and (v) no action, consent, waiver or approval of, or filing with,
any governmental authority is required by any Seller or EME in
16
<PAGE>
connection with the execution, delivery, or performance of this Agreement (or
any agreement or other document executed in connection herewith by such Seller),
unless the failure to obtain or effect the same would not have a material
adverse effect on EME's financial condition, assets, business or operations.
Notwithstanding anything in this Agreement to the contrary, each Seller is
making the representations in this Section 3.3 as to themselves only (and as to
EME where applicable) and is not making any representation or warranty with
respect to any of the matters addressed in this Section 3.3 relating to any
other Seller. For purposes of this Agreement, whenever there are references to
"material" or "materially", such terms shall be deemed to mean an economic
impact exceeding $25,000 with respect to the fact or matter being referred to or
described.
3.4 FINANCIAL STATEMENTS.
--------------------
(a) The consolidated unaudited balance sheet and income statement of
EME as of and for the years ended December 31, 1995 and 1996 and its
consolidated unaudited balance sheet and income statement as of and for the four
(4) months ended April 30, 1997 (collectively, the "EME Financial Statements")
are attached hereto as Exhibit A. The EME Financial Statements have been
---------
prepared in accordance with generally accepted accounting principles (except as
specifically noted therein or in Schedule 3.4) applied on a consistent basis
------------
throughout the periods indicated and fairly present the consolidated financial
position and results of operations of EME as of the indicated dates and for the
indicated periods, except that (a) the Financial Statements do not contain
footnotes as required by generally accepted accounting
17
<PAGE>
principles and, (b) the balance sheet and income statement for the interim
period ended April 30, 1997 may be subject to year-end adjustments (which
adjustments will not be material in the aggregate). Except to the extent
reflected or provided for in the EME Financial Statements or in Schedule 3.4,
------------
EME has no liabilities of a type that would be required to be reflected as such
in the EME Financial Statements other than current liabilities on open account
incurred in the ordinary course of business subsequent to April 30, 1997. Except
as set forth in Schedule 3.4, since April 30, 1997, there has been no material
------------
adverse change in the financial position, assets, results of operations, or
business of EME.
3.5 CAPITAL STOCK. The authorized and issued shares of all classes of
-------------
capital stock of EME are described in Schedule 3.5 attached hereto, all such
------------
shares are duly authorized, validly issued, outstanding, fully paid, and non-
assessable, and all such shares are owned beneficially and of record by the
Sellers, free and clear of all liens. There are no outstanding securities,
obligations, conversion or other rights, subscriptions, warrants, options,
phantom stock rights, or (except for this Agreement) other contracts of any kind
that give any person or entity the right to (a) purchase or otherwise receive or
be issued any shares of capital stock of EME or any security or obligation of
any kind convertible into or exchangeable for any shares of capital stock of
EME, or (b) receive any benefits or rights that are similar to those enjoyed by
or accruing to any holder of any of the Shares, or that entitle the holder to
participate in the equity, income or election of directors or officers of EME.
Upon the Closing, Sun Medical will own one hundred percent (100%) of each and
every class of outstanding capital stock of EME, subject to no liens, claims or
encumbrances whatsoever (other than restrictions on transfer imposed by Federal
and applicable state securities laws).
18
<PAGE>
3.6 CONDUCT OF BUSINESS; CERTAIN ACTIONS. Except for the Strip-Out
------------------------------------
Transactions (as defined in Section 4.2, below) or as set forth in Schedule 3.6,
------------
since December 31, 1996, EME has conducted its business and operations in the
ordinary course and consistent with its past practices and has not (a) purchased
or retired any indebtedness from any Seller or any of its shareholders,
partners, members or other owners (an "Equity Holder") and has not purchased,
retired, or redeemed any stock, partnership or membership interest, or other
ownership interest from any Seller or Equity Holder, (b) increased the
compensation of any of the Sellers, shareholders, partners, members or other
owners, or key employees or, except for wage and salary increases made in the
ordinary course of business and consistent with the past practices of EME,
increased the compensation of any other employees of EME, (c) made capital
expenditures exceeding $10,000 individually or $25,000 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 for such asset (or group of
related assets) exceeded $10,000 (other than sales of inventory in the ordinary
course of business), (e) discharged or satisfied any lien or encumbrance or paid
any material 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 (other than advances made to employees in the
ordinary course of business consistent with past practices) 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 its material debts, rights, or claims against third parties, (i) amended its
articles of incorporation, articles of organization, bylaws, partnership
agreement or other organizational documents, (j) made or paid
19
<PAGE>
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, (n) 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 Section 414(f) of the Internal Revenue Code
of 1986, as amended (the "Code")) so as to create any liability under Article IV
of ERISA (as hereinafter defined) to any person or entity, (o) amended,
terminated or experienced a termination of any material contract, agreement,
lease, franchise, or license to which it is a party, (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, it.
3.7 OWNERSHIP OF ASSETS: LICENSES, PERMITS, ETC.
---------------------------------------------
(a) Except as set forth on Schedule 3.7(a-1), EME has good and
-----------------
marketable title to all of its Assets (as hereinafter defined) free and clear of
all liens, security interests, claims, rights of another, and encumbrances of
any kind whatsoever. The term "Assets" shall
20
<PAGE>
mean all of the business and assets, tangible or intangible, wherever situated,
including without limitation those necessary or convenient to the providing of
the extracorporeal shockwave lithotripsy and related services ("Lithotripsy
Operations") provided by EME as of April 30, 1997, such Assets to include,
without limitation, accounts receivable; all contract rights, including without
limitation service agreements and management contracts; licenses, certificates
of need and other permits; all trade names and other intellectual property;
leases; computer software; lithotripters and other equipment; other items of
personal property; and all the Assets specifically set out on Schedule 3.7(a-2)
-----------------
attached hereto; provided, that the Assets shall not include (i) the Retained
Assets (as defined in Section 4.2 below) or (ii) all cash of EME on hand
immediately preceding the Effective Time. EME has such Assets as are required
for the continued operation of its Lithotripsy Operations as currently conducted
and as conducted on April 30, 1997, except for the Retained Assets.
(b) The Assets of EME are in reasonably 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 its
Lithotripsy Operations.
(c) Attached hereto as Schedule 3.7(c) is a description of all
---------------
federal, state, county, and local governmental licenses, certificates,
certificates of need and permits held or applied for by EME. EME has complied
in all material respects, and each is in compliance in all material respects,
with the terms and conditions of any such licenses, certificates, certificates
of need and permits. Except as described in Schedule 3.7(c), no additional
---------------
license, certificate,
21
<PAGE>
certificate of need or permit is required from any federal, state, county, or
local governmental agency or body thereof in connection with the conduct of the
business of EME, which, if not obtained, would materially and adversely affect
the Lithotripsy Operations or other business activities of EME. Except as set
forth on Schedule 3.7(c), no claim has been made or threatened by any
---------------
governmental authority to the effect that a license, permit, certificate,
certificate of need or order not possessed by EME is necessary in respect of the
business conducted by EME. None of the licenses, permits, certificates and
certificates of need noted on the attached Schedule 3.7(c) will be terminated as
---------------
a result of the transfer of the Shares to Sun Medical.
3.8 LIABILITIES. Except to the extent specifically reflected in the EME
-----------
Financial Statements or in Schedule 3.4, there were no liabilities against, owed
------------
by, relating to or affecting EME as of April 30, 1997 that individually or in
the aggregate have or may reasonably be expected to have a material adverse
effect on the business, condition (financial or otherwise) or result of
operations of EME. Except as set forth in Schedule 3.4, since April 30, 1997,
------------
EME has not incurred or suffered any liabilities that individually or in the
aggregate have or may reasonably be expected to have a material adverse effect
on the business, condition (financial or otherwise), or results of operations of
EME.
22
<PAGE>
3.9 ENVIRONMENTAL ISSUES.
--------------------
(a) For purposes of this Agreement, the term "environmental laws"
shall mean all laws and regulations relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge, or release, of any pollutant, contaminant, chemical, or
industrial toxic or hazardous substance or waste and any order related thereto.
(b) EME has complied in all material respects with and obtained all
material authorizations and made all material filings required by all applicable
environmental laws. The properties occupied or used by EME have not been
contaminated with any hazardous wastes, hazardous substances, or other hazardous
or toxic materials in violation of any applicable environmental law.
(c) Except as set forth in Schedule 3.9(c) neither EME has 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
23
<PAGE>
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.
3.10 INTELLECTUAL PROPERTY RIGHTS. There are no patents, trademarks,
----------------------------
tradenames, or copyrights, and no applications therefor, owned by or registered
in the name of EME or in which EME has any right, license, or interest. EME is
not a party to any license agreement, either as licensor or licensee, with
respect to any patents, trademarks, tradenames, or copyrights. EME has not
received any notice that it is infringing any patent, trademark, trade name, or
copyright of others.
3.11 COMPLIANCE WITH LAWS. Except as set forth in Schedule 3.11, EME has
-------------------- -------------
complied in all material respects, and is in compliance in all material
respects, with all federal, state, county, and local laws, rules, regulations
and ordinances currently in effect and applicable to its business. No claim has
been made or threatened by any governmental authority against EME to the effect
that the business conducted by EME fails to comply, in any respect, with any
law, rule, regulation, or ordinance.
3.12 INSURANCE. Attached hereto as Schedule 3.12 is a list of all
--------- -------------
policies of fire, liability, business interruption, and other forms of insurance
and all fidelity bonds held by or applicable to EME at any time since January 1,
1995, 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. No event has
occurred which will result in a retroactive upward adjustment of premiums under
any such policies or
24
<PAGE>
which is likely to result in any prospective upward adjustment in such premiums.
There has been no material change in the type of insurance coverage maintained
by EME during the past five (5) years, including without limitation any change
which has resulted in there being any period during such five (5) years in which
EME has had no insurance coverage. Excluding insurance policies which have
expired and been replaced, no insurance policy of EME has been canceled within
the last three (3) years. The Sellers have made all necessary arrangements to
maintain "tail" insurance for professional and general liability coverage, for
claims, acts or omissions occurring prior to the Closing Date, of the same
types, and to the same extent, as was maintained prior to the Effective Time;
and such "tail" insurance coverage shall be maintained in place for a period of
three (3) years after the Closing. Sun Medical or EME will reimburse Sellers at
the Closing for the actual out-of-pocket costs incurred in maintaining insurance
coverage for EME during the period between the Effective Time and the Closing
Date.
3.13 EMPLOYEE BENEFIT MATTERS. EME does not maintain or contribute to,
------------------------
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 section 3(2) of ERISA and not
exempted under section 4(b) or 201 of ERISA). EME does not presently maintain or
has ever maintained, or had any obligation of any nature to contribute to, a
"defined benefit plan" within the meaning of section 414(j) of the Code, without
regard to whether such defined benefit plan met the requirements of section
401(a) of the Code.
25
<PAGE>
3.14 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.14 is a
------------------------ -------------
list of all written or oral contracts, commitments, leases, and other agreements
(including, without limitation, promissory notes, loan agreements, and other
evidences of indebtedness) to which EME is a party or by which EME or its
properties are bound, pursuant to which the obligations thereunder of either
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, $5,000 or greater, or which are otherwise material to
the business of EME (including, without limitation, all mortgages, deeds of
trust, security agreements, pledge agreements, lithotripsy service agreements,
and similar agreements and instruments and all confidentiality agreements).
Neither EME nor, to the knowledge of the Sellers, any of the other parties
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 EME or, to the
knowledge of the Sellers, by any other party thereto) under any such contracts,
commitments, leases, or other agreements, except where such defaults,
individually or in the aggregate, would not be material. EME has not waived any
material right under any such contracts, commitments, leases, or other
agreements, and no consents or approvals (other than consents or approvals that
have been obtained in writing and delivered to Sun Medical prior to Closing) is
required thereunder in connection with the consummation of the sale of the
Shares or other transactions contemplated hereby. EME has not guaranteed any
obligation of any other person or entity.
3.15 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.15 is a list
---------------------- -------------
and description of all claims, actions, suits, proceedings, and investigations
pending or, to the
26
<PAGE>
knowledge of such Seller, threatened against EME, or affecting any of their
properties or assets, 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 3.15 attached hereto, none of such claims,
-------------
actions, suits, proceedings, or investigations will result in any liability or
loss to EME which (individually or in the aggregate) is material, and EME has
not been, or is 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, to the knowledge of such Seller,
threatened against EME 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.
3.16 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 EME
on or before the Closing Date hereof have been filed within the time (including
any applicable extensions) and in the manner (in all material respects) provided
by law, and all such Returns are true and correct in all material respects and
accurately reflect, in all material respects, the Tax liabilities of EME. All
Taxes, assessments, penalties, and interest which have become due pursuant to
such Returns have been paid or adequately accrued in the EME Financial
Statements. The provisions for Taxes reflected on the balance sheet contained
in the EME Financial Statements are adequate to cover all of EME's Tax
liabilities for the respective periods then ended and all prior periods. As of
the Closing, EME will not owe any federal income Taxes for any period prior to
the Effective Time. EME has not executed any presently
27
<PAGE>
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 against EME with respect
to any Taxes owed or allegedly owed by EME. No federal income tax return of EME
has been audited. There are no tax liens on any of the assets of EME. Proper and
accurate amounts have been withheld and remitted by EME 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. EME is not a party to any tax sharing agreement with any other
person. EME utilizes the accrual method of accounting for federal income tax
purposes.
3.17 PERSONNEL. Attached hereto as Schedule 3.17 is a list of names and
--------- -------------
annual rates of compensation of the employees of EME whose rates of
compensation, on an annualized basis, during the fiscal year ended December 31,
1996 (including base salary, bonus, commissions, and incentive pay) exceeded
$20,000, or whose compensation is expected to exceed $20,000 for the fiscal year
ending December 31, 1997. Schedule 3.17 attached hereto also contains a brief
-------------
description of all material terms of employment agreements and confidentiality
agreements to which EME is a party and all severance benefits which any
director, officer, employee, agent or sales representative of EME is or may be
entitled to receive. The Sellers have delivered to Sun Medical accurate and
complete copies of all such employment agreements, confidentiality agreements,
and all other agreements, plans, and other instruments to which EME is a party
and under which its employees are entitled to receive benefits of any nature.
The employee relations of EME are good and there is no pending or, to such
Seller's knowledge, threatened labor dispute or union organization campaign
relating to EME. None of the employees of EME are
28
<PAGE>
represented by any labor union or organization. There is no unfair labor
practice claim against EME before the National Labor Relations Board or any
strike, labor dispute, work slowdown, or work stoppage pending or, to the
Sellers' knowledge, threatened against or involving EME.
3.18 BUSINESS RELATIONS. Sellers have no reason to believe that any
------------------
supplier or customer of EME will cease or refuse to do business with EME in the
same manner as previously conducted as a result of or soon after the
consummation of the transactions contemplated hereby (subject to the expiration
of any service agreements of EME in accordance with their terms). EME 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 EME.
3.19 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of EME are bona fide and
represent amounts validly due subject to no defenses.
3.20 AGENTS. Except as set forth in Schedule 3.20, EME has not
------ -------------
designated or appointed any person 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.
3.21 INDEBTEDNESS TO AND FROM PARTNERS AND EMPLOYEES. Except as set
-----------------------------------------------
forth in Schedule 3.21, EME does not owe any indebtedness to any of the Sellers
-------------
or its partners, members, shareholders, officers, directors or employees and,
EME does not have any indebtedness owed to it from any of the Sellers or its
partners, members, shareholders, officers,
29
<PAGE>
directors or employees, excluding indebtedness for travel advances or similar
advances for expenses incurred on behalf of and in its ordinary course of
business and consistent with its past practices.
3.22 COMMISSION SALES CONTRACTS. Except as set forth in Schedule 3.22,
-------------------------- -------------
EME does not employ or have any relationship with any individual, corporation,
partnership, or other entity whose compensation from such entity is in whole or
in part determined on a commission basis.
3.23 CERTAIN CONSENTS. There are no material consents, waivers, or
----------------
approvals required to be executed and/or obtained by EME or any Seller in
connection with the execution, delivery, and performance of this Agreement.
3.24 BROKERS. Neither EME nor any Seller has engaged, or caused any
-------
liability to be incurred to, any finder, broker, or sales agent (or has paid, or
will pay, any finder's fee or similar fee or commission to any person, other
than a Seller) in connection with the execution, delivery, or performance of
this Agreement or the transactions contemplated hereby.
3.25 INTEREST IN COMPETITORS, SUPPLIERS, AND CUSTOMERS. Neither the
-------------------------------------------------
Sellers nor any of their immediate family members or affiliates have any
ownership interest in any competitor, customer or supplier of EME or any
property used in the operation of the business of EME. Furthermore, no officer
or director of EME, or to the knowledge of Sellers, any employee of EME, has any
such ownership interest.
30
<PAGE>
3.26 WARRANTIES. Attached hereto as Schedule 3.26 is a list and brief
---------- -------------
description of all warranties and guarantees made by EME to third parties with
respect to any products sold or services rendered by it. Except as set forth on
Schedule 3.26 attached hereto, no claims for breach of product or service
- -------------
warranties have been made against EME since January 1, 1995.
3.27 EXTINGUISHMENT OF INDEBTEDNESS. As of the Closing, all indebtedness
------------------------------
and liabilities of EME and all subsidiaries of EME, as of the Effective Time,
including without limitation trade payables and accrued expenses (except accrued
vacation time expense as set forth on Schedule 3.27), will have been paid-off or
-------------
otherwise extinguished, and there will be no liens, claims or encumbrances
whatsoever on any of the Shares or any Assets or properties of EME. None of the
debts or obligations of EME, including without limitation any convertible
indebtedness, was forgiven or otherwise extinguished prior to the Closing such
that any taxable income or gain would be incurred by EME, any of the Sellers or
their other equity owners after the Closing. With respect to the accrued
vacation time expense for employees of EME as set forth on Schedule 3.27, and
-------------
only to the extent set forth on Schedule 3.27, such accrued expense obligation
-------------
shall be retained by EME at the Closing, and Sun Medical shall deduct the amount
so retained from amounts due Sellers at the Closing, allocated ratably amongst
the Sellers in accordance with their Ownership Percentages.
3.28 NO KNOWN BREACHES. None of the Sellers has knowledge of any breach
-----------------
or default by any of the other Sellers of their respective representations and
warranties, covenants or other agreements made in this Agreement.
31
<PAGE>
ARTICLE IV
COVENANTS AND AGREEMENTS
------------------------
4.1 COOPERATION RELATING TO FINANCIAL STATEMENTS. Each Seller agrees to
--------------------------------------------
reasonably cooperate with Sun Medical in the preparation of any financial
statements of EME for any period prior to the Closing, which Sun Medical or its
affiliates may be required by any applicable law to prepare. Sun Medical and
its affiliates will have no obligation to compensate Sellers for such
cooperation, or to reimburse any expenses incurred by Sellers unless such
expenses are preapproved in writing by Sun Medical. However, this Section 4.1
shall not obligate any of the Sellers to incur any out-of-pocket expenses.
4.2 STRIP-OUT TRANSACTIONS. Prior to the Closing, the Sellers may cause
----------------------
EME (the "Strip-Out Transferor") to enter into the transactions described
specifically on Schedule 4.2 attached hereto (the "Strip-Out Transactions") in
------------
order that the assets (the "Retained Assets") listed on Schedule 4.2 attached
------------
hereto, shall be conveyed out of the Strip-Out Transferor and to one or more
Sellers, or into VJJ, Inc., a California corporation ("Newco") which is owned by
the Sellers; provided that the Sellers hereby agree to assume and be fully
liable for any and all debts, liabilities, costs or other expenses (the
"Retained Asset Liabilities") associated with the Retained Assets including
without limitation those listed on Schedule 4.2 attached hereto. Furthermore,
------------
Sellers may cause EME to distribute cash to Sellers prior to the Closing so long
as no cash is distributed from revenues received by EME after the Effective
Time.
32
<PAGE>
4.3 GUARANTY OF PRIME. Prime hereby unconditionally and irrevocably
-----------------
guarantees the timely performance of, and promises timely to perform, each of
the obligations of Sun Medical hereunder. Without limiting the foregoing, Prime
agrees that if Sun Medical shall for any reason fail to pay to Sellers (or any
Seller) any amount then due and payable by Sun Medical to Sellers (or any
Seller) under ARTICLE I or ARTICLE VII hereunder, Prime shall immediately pay
such amount to the Sellers (or the applicable Seller). Prime hereby agrees not
to require any Seller to proceed against Sun Medical or any other person or to
pursue any other remedy before proceeding against Prime under this guaranty.
Prime hereby represents and warrants to each Seller that each of the
representations and warranties in Section 2.1, 2.2 and 2.3 are true and correct
(mutatis mutandis) as if made by Prime with respect to its obligations under
----------------
this Section; except that Prime is a Delaware corporation.
4.4 CONDUCT OF EME POST-CLOSING. Following the Closing, Sun Medical
---------------------------
shall cause EME (or EME's successors or assigns) to (a) comply in all material
respects with all laws, permits and instruments applicable to EME's business or
the Assets; (b) timely perform in all material respects all commitments or
obligations of EME under each of the contracts and agreements described in
Sections 1.3 and 3.14 and (c) use commercially reasonable efforts to renew the
Class A Contracts, the Class B Contracts and the Class D Contracts.
4.5 QUALIFICATION IN WASHINGTON AND OREGON. The parties acknowledge
--------------------------------------
that, as of the Effective Time and the Closing Date, EME was not qualified to do
business in the states of Washington and Oregon, may need new or revised
registrations, licenses, certificates, certificates
34
<PAGE>
of need or permits for the business conducted in Washington and Oregon as of the
Closing Date. The parties agree that, after the Closing, EME will qualify to do
business in, and will obtain the necessary new or revised registration,
licenses, certificates, certificates of need or permits for the business
conducted by EME as of the Closing Date in, Washington and Oregon. Sellers,
jointly and severally, agree to reimburse EME or Sun Medical, on demand, for any
and all reasonable out-of-pocket costs incurred by EME or Sun Medical in
accomplishing the matters described in the preceding sentence. Sun Medical's and
Prime's offset rights described in Section 6.2 shall also extend to any amounts
not promptly reimbursed as required in this Section.
ARTICLE V
CLOSING OBLIGATIONS
-------------------
5.1 SUN MEDICAL'S CLOSING OBLIGATIONS. At the Closing, Sun Medical
---------------------------------
shall:
(a) pay the Closing Payment portion of the Purchase Price and the
prepaid expense amount described in Section 1.2, less the accrued vacation
expense deduction as described in Section 3.27; and
(b) deliver such good standing certificates, officer certificates,
and similar documents and certificates as counsel for the Sellers may reasonably
require.
34
<PAGE>
5.2 THE SELLERS' CLOSING OBLIGATIONS. At the Closing, the Sellers shall:
--------------------------------
(a) deliver the original certificates representing the Shares to Sun
Medical, and execute and deliver an assignment of the Shares and blank stock
power (the "Assignment and Stock Power") to Sun Medical in the form attached
hereto as Exhibit B and such other documents as Sun Medical may request in order
---------
to transfer to Sun Medical the ownership of the Shares on the books of EME;
(b) deliver such good standing certificates, officer, manager and/or
partnership certificates, and similar documents and certificates as counsel for
Sun Medical may reasonably require; and
(c) cause every director and officer of EME and every director and
officer of any other entities which EME has authority to elect or cause to be
elected, to tender to Sun Medical written resignations from such positions which
are effective as of the Effective Time and which contain releases of all claims,
known or unknown, which such former directors and officers have or might have
against EME or any such other entities.
35
<PAGE>
ARTICLE VI
INDEMNIFICATION OF SUN MEDICAL
------------------------------
6.1 SURVIVAL OF REPRESENTATIONS; TIME LIMITS; KNOWLEDGE.
---------------------------------------------------
(a) All representations and warranties of the Sellers hereunder shall
survive the Closing and shall terminate on the third anniversary thereof (the
"Termination Date").
(b) No Sun Medical Indemnified Party (as defined in Section 6.2
below) shall be entitled to indemnification from any Seller under this ARTICLE
VI (or otherwise) unless the Sun Medical Indemnified Party seeking such
indemnification gives the party from which such indemnification is sought
written notice of a claim for indemnification (which shall set forth in
reasonable detail the basis for such claim) on or before the Termination Date;
provided that this Section 6.1(b) shall not apply to a claim for indemnification
- --------
based on a breach by a Seller of his obligations under ARTICLE VIII.
(c) No Sun Medical Indemnified Party (or any person claiming through
such party) shall be entitled to indemnification from any Seller based on any
inaccuracy, falsity or misrepresentation of any representation or warranty made
by such other hereunder if the Sun Medical Indemnified Party or Sun Medical had
actual knowledge of such inaccuracy, falsity or
36
<PAGE>
misrepresentation prior to the Closing and elected to proceed with the Closing,
unless the election to proceed with the Closing was an accommodation to the
Sellers as set forth in a separate written agreement executed by the parties
hereto at or prior to the Closing.
6.2 INDEMNIFICATION OF SUN MEDICAL. Each Seller, jointly and severally,
------------------------------
agrees to indemnify and hold harmless Sun Medical and each officer, director,
employee, and affiliate (including without limitation, EME) of Sun Medical
(collectively, the "Sun Medical 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 Sun Medical Indemnified
Parties may sustain, arising out of or relating to (a) any breach or default by
any Seller of any of their representations, warranties, covenants or agreements
contained in this Agreement or in any agreement or document executed in
connection herewith (including, without limitation, the agreement to extinguish
all liabilities of EME as of the Effective Time and to assume the Retained Asset
Liabilities), or (b) any obligation or liability, direct or contingent, known or
unknown, of EME not reflected in the Schedules to this Agreement in violation of
any representation, warranty, covenant or other provision contained in this
Agreement, or (c) the Strip-Out Transactions, or the sale, liquidation or other
disposition by EME, at, before or after the Closing, of the Retained Assets or
any business lines, subsidiaries, divisions or other business units or assets,
and any Taxes arising from any of such transactions, or (d) any liability,
direct or contingent, known or unknown, of EME which arises from or is
37
<PAGE>
based on facts, acts or omissions occurring at or prior to the Closing Date,
other than trade payables on open account to unaffiliated entities incurred
after the Effective Time in the ordinary course of its Lithotripsy Operations
and accrued expenses related to expenses incurred in the ordinary course of its
Lithotripsy Operations after the Effective Time, or (e) any claims asserted
against EME based on allegations against, or acts or omissions of, Executive
Medical Enterprises I, Inc. ("EME-I"), or any other entity in which any Seller
has an interest and whose name or trade name is similar to EME's, or (f) any
taxes, fines, levies, fees or assessments asserted against any Sun Medical
Indemnified Party attributable to EME's failure to be qualified in Washington or
Oregon, and to have all necessary registrations, licenses, certificates,
certificates of need or permits for the business conducted in Washington and
Oregon as of the Closing Date. Notwithstanding the foregoing, (i) no Seller
shall have any indemnity obligation under clause (e) above with respect to EME-
I, or any other entity whose name or trade name is similar to EME's, for any
period during which such Seller has, or had, no equity interest in such
corporation or other entity, (ii) the indemnity obligations of the Sellers shall
not be joint and several with respect to any violations by a Seller of any of
the covenants in ARTICLE VIII, each Seller shall be solely responsible for any
indemnity obligations arising from a violation of ARTICLE VIII by that Seller,
and no Seller will have any indemnity obligation arising from a violation of
ARTICLE VIII by another Seller, and (iii) no Seller will have an indemnity
obligation under clause (f) above to the extent Indemnified Costs result from
EME failing to apply for (and thereafter diligently pursue the obtaining of)
qualification to do business in Washington and Oregon and any necessary
registrations, licenses or permits for the business conducted in Washington and
Oregon as of the Closing Date, within ninety (90) days after the
38
<PAGE>
Closing Date. Fazio represents and warrants that neither of Gordon or Pecora has
had any interest in EME-I at any time on or prior to the Closing Date; and Sun
Medical and EME agree that no Sun Medical Indemnified Parties will assert an
indemnity claim against Gordon or Pecora under clause (e) above with respect to
EME-I related allegations, acts or omissions on or prior to the Closing Date.
Sun Medical and Prime shall be entitled to credit and offset any indemnity
payments or advances to which any Sun Medical Indemnified Party is entitled
pursuant hereto against any amounts which Sun Medical or EME may owe to the
Sellers, including the Earn-Out Adjustments.
6.3 DEFENSE OF THIRD-PARTY CLAIMS. A Sun Medical Indemnified Party shall
-----------------------------
give prompt written notice to the Sellers of the commencement or assertion of
any third party action in respect of which such Sun Medical Indemnified Party
shall seek indemnification hereunder. Any failure so to notify the Sellers
shall not relieve the Sellers from any liability that it may have to such Sun
Medical Indemnified Party under this ARTICLE unless the failure to give such
notice materially and adversely prejudices the Sellers. The 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 they deem appropriate; provided,
however, that:
(a) The Sun Medical Indemnified Party shall be entitled, at his, her,
or its own expense, to participate in the defense of such third-party action;
39
<PAGE>
(b) The Sellers shall obtain the prior written approval of the Sun
Medical Indemnified Party, which approval shall not be unreasonably withheld or
delayed, 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 Sun Medical Indemnified Party or if, in the reasonable
opinion of the Sun Medical Indemnified Party, such settlement, compromise,
admission, or acknowledgment would have a material adverse effect on its
business or, in the case of a Sun Medical Indemnified Party who is a natural
person, on his or her assets or interests;
(c) The 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 giving by each claimant or plaintiff to each Sun Medical Indemnified Party
of a release from all liability in respect of such third-party action; and
(d) The Sellers shall not be entitled to control (but shall be
entitled to participate at their own expense in the defense of), and the Sun
Medical Indemnified Party shall be entitled to have sole control over, the
defense or settlement, compromise, admission, or acknowledgment of any third-
party action (i) as to which the Sellers fail to assume the defense within a
reasonable length of time or (ii) to the extent the third-party action seeks an
order, injunction, or other equitable relief against the Sun Medical Indemnified
Party which, if successful, would materially adversely affect the business,
operations, assets, or financial
40
<PAGE>
condition of the Sun Medical Indemnified Party; provided, however, that the Sun
-------- -------
Medical Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment which would give rise to liability on the part of the Sellers
without the prior written consent of the Sellers.
(e) The Sellers shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this Section to or for the account
of the Sun Medical Indemnified Party from time to time promptly upon receipt of
bills or invoices relating thereto or when otherwise due and payable, provided
that the Sun Medical Indemnified Party has agreed in writing to reimburse the
Sellers for the full amount of such payments if the Sun Medical 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.
6.4 LIMITATIONS. Notwithstanding anything in this ARTICLE VI to the
-----------
contrary:
(a) In the absence of fraud or intentional misrepresentation, no
Seller shall have any liability or obligation to any Sun Medical Indemnified
Party (or any other person) under ARTICLE VI, or otherwise with respect to any
of the matters set forth herein, in an amount that
41
<PAGE>
exceeds, in the aggregate, the aggregate Purchase Price (including the Earn-Out
Adjustments) under ARTICLE I.
(b) The obligations of any Seller to defend, indemnify and hold
harmless any Sun Medical Indemnified Party (or any other person) under ARTICLE
VI, or otherwise with respect to any of the matters set forth herein, shall
apply only to the extent that the total amount of all Indemnified Costs for
which all Sun Medical Indemnified Parties (or other persons) are entitled to
indemnification exceeds $25,000.
ARTICLE VII
INDEMNIFICATION OF THE SELLERS
------------------------------
7.1 SURVIVAL OF REPRESENTATIONS; TIME LIMITS; KNOWLEDGE.
---------------------------------------------------
(a) All representations and warranties of Sun Medical hereunder shall
survive the Closing and shall terminate on the Termination Date.
(b) No Seller shall be entitled to indemnification from Sun Medical,
or Prime, under this ARTICLE VII (or otherwise) unless the Seller seeking such
indemnification gives the party from which such indemnification is sought
written notice of a claim for indemnification (which shall set forth in
reasonable detail the basis for such claim) on or before the Termination Date.
42
<PAGE>
(c) No Seller (or any person claiming through such party) shall be
entitled to indemnification from Sun Medical or Prime based on any inaccuracy,
falsity or misrepresentation of any representation or warranty made hereunder if
any Seller had actual knowledge of such inaccuracy, falsity or misrepresentation
prior to the Closing and elected to proceed with the Closing.
7.2 INDEMNIFICATION OF THE SELLERS. Sun Medical agrees to indemnify and
------------------------------
hold harmless each of the Sellers from and against any and all Indemnified Costs
in connection with the commencement or assertion of any third party action which
any of the Sellers may sustain, arising out of or relating to (a) any breach or
default by Sun Medical of any of the representations, warranties, covenants or
agreements contained in this Agreement or any agreement or document executed in
connection herewith, or (b) any liability, direct or contingent, known or
unknown, of EME or Sun Medical which arises from or is based on facts, acts or
omissions occurring after the Closing Date.
7.3 DEFENSE OF THIRD-PARTY CLAIMS. A Seller shall give prompt written
-----------------------------
notice to Sun Medical of the commencement or assertion of any third party action
in respect of which such Seller shall seek indemnification hereunder. Any
failure to so notify Sun Medical shall not relieve Sun Medical from any
liability that it may have to such Seller under this ARTICLE unless the failure
to give such notice materially and adversely prejudices Sun Medical. Sun
Medical
43
<PAGE>
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 shall be entitled, at his, her, or its own expense, to
participate in the defense of such third-party action;
(b) Sun Medical shall obtain the prior written approval of the Seller,
which approval shall not be unreasonably withheld or delayed, 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 or if, in the reasonable opinion of the Seller, such settlement,
compromise, admission, or acknowledgment would have a material adverse effect on
its business;
(c) Sun Medical shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to each Seller of a release from all
liability in respect of such third-party action; and
(d) Sun Medical shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
shall be entitled to have sole control over, the defense or settlement,
compromise, admission, or acknowledgment of any third-party action (i) as to
which Sun Medical fails to assume the defense within a reasonable
44
<PAGE>
length of time or (ii) to the extent the third-party action seeks an order,
injunction, or other equitable relief against the Seller which, if successful,
would materially adversely affect the business, operations, assets, or financial
condition of the Seller; provided, however, that the Seller shall make no
-------- -------
settlement, compromise, admission, or acknowledgment which would give rise to
liability on the part of Sun Medical without the prior written consent of Sun
Medical.
(e) Sun Medical shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this Section to or for the account
of the Seller from time to time promptly upon receipt of bills or invoices
relating thereto or when otherwise due and payable, provided that the Seller has
agreed in writing to reimburse Sun Medical for the full amount of such payments
if the Seller 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.
7.4 LIMITATIONS. Notwithstanding anything in this ARTICLE VII to the
-----------
contrary:
(a) In the absence of fraud or intentional misrepresentation, neither
Sun Medical nor Prime shall have any liability or obligation to any Seller (or
any other person or
45
<PAGE>
entity) under ARTICLE VII, or otherwise with respect to any of the matters set
forth herein, in an amount that exceeds, in the aggregate, the Aggregate
Purchase Price (including the Earn-Out Adjustments) under ARTICLE I.
(b) The obligations of Sun Medical or Prime to defend, indemnify and
hold harmless any Seller (or any other person) under ARTICLE VII, or otherwise
with respect to any of the matters set forth herein, shall apply only to the
extent that the total amount of all Indemnified Costs for which all Sellers (or
other persons) are entitled to indemnification exceeds $25,000; provided,
however, this $25,000 requirement shall not apply to claims for payment of any
Earn-Out Adjustments.
46
<PAGE>
ARTICLE VIII
NON-COMPETITION
---------------
Each of the Sellers hereby agrees that until the fifth anniversary of the
Closing Date, he will not directly or indirectly (through Newco or otherwise),
either through any kind of ownership (other than ownership of securities of a
publicly held corporation of which it owns less than five percent (5%) of any
class of outstanding securities), or as a principal, agent, employer, employee,
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,
firm or corporation, without the prior written consent of Sun Medical, commit
any of the following acts, which acts shall be considered violations of this
covenant not to compete:
(a) Directly or indirectly provide lithotripsy services, including
without limitation, lithotripsy patient services, lithoptripsy management
services, lithotripter leasing (except leases to Sun Medical pursuant to this
Agreement), or similar services, anywhere within the States of California,
Oregon or Washington;
(b) Directly or indirectly utilize the Retained Assets for
lithotripsy services, as defined in (a) above, anywhere within the States of
California, Oregon or Washington, or sell, lease or otherwise convey any of the
Retained Assets, or any interest therein, to any third party who provides, or
intends to provide during the period ending on the fifth anniversary of the
Closing Date, lithotripsy services (as defined in (a) above) anywhere within the
States of
47
<PAGE>
California, Oregon or Washington; it being understood and agreed that if any
sale by Sellers or Newco of any of the Retained Assets is to a person or entity
whose primary business with respect to such types of assets is to acquire them
for resale to unrelated parties, then in such case only, the Sellers shall only
be required to use their best efforts to determine where the Retained Assets
sold to such reseller would be resold and used, and to not sell any Retained
Assets to any such reseller who any Seller concludes, based on such best efforts
determination, may (more likely than not) resell any Retained Assets in, or for
use in, any of the States of California, Oregon or Washington prior to the fifth
anniversary of the Closing Date;
(c) Directly or indirectly request or advise any patient or physician
or any other person, firm, corporation or other entity having a business
relationship with Sun Medical, EME or any affiliate or entity related to any of
them, to withdraw, curtail, or cancel its business with Sun Medical, EME or such
affiliate or related entity; or
(d) Directly or indirectly solicit for employment or employ any
employee (other than any employee related to a Seller) of Sun Medical, EME or
any affiliate or entity related to any of them, or induce or attempt to
influence any employee (other than any employee related to a Seller) of Sun
Medical, EME or any such affiliate or related entity to terminate his or her
employment with Sun Medical, EME or any such affiliate or related entity.
Each of the Sellers has reviewed and carefully considered the provisions of
this ARTICLE and, having done so, each agrees that the restrictions set forth
herein (a) are fair and
48
<PAGE>
reasonable with respect to time, geographic area and scope, (b) are not unduly
burdensome to any of the Sellers, and (c) are reasonably required for the
protection of the interests of Sun Medical, EME and their affiliates.
Each of the Sellers agrees that a violation on its part of any covenant
contained in this ARTICLE will cause Sun Medical and EME irreparable damage for
which remedies at law may be insufficient, and for that reason, each of the
Sellers agrees that Sun Medical and EME 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
Sun Medical or EME may have, including, specifically, recovery of additional
damages.
Of the Purchase Price, $10,000, $10,000 and $5,000 shall be allocated to
the agreements of Messrs. Gordon, Pecora and Fazio, respectively, under this
ARTICLE VIII.
ARTICLE IX
POST CLOSING AGREEMENTS
-----------------------
Each of the Sellers agrees to reasonably cooperate with Sun Medical and EME
in transitioning the business conducted, and business relationships maintained
by EME prior to the Closing to the operations established by Sun Medical after
the Closing for so long as any Earn-Out Adjustments are, or may be, due; and
each of the Sellers agrees not to take any action or
49
<PAGE>
make any disclosure, including disclosures related to the transactions
contemplated by this Agreement, which might alter or impair any relationship
with any patient, customer, or other service recipient which did business with
EME prior to the Closing. Sun Medical, EME and their affiliates will have no
obligation to compensate Sellers for such cooperation, or to reimburse any
expenses incurred by Sellers unless such expenses are preapproved in writing by
Sun Medical. However, this ARTICLE IX shall not obligate any of the Sellers to
incur any out-of-pocket expenses. Each of the Sellers agrees to promptly remit
to EME (through Sun Medical) any payments received by such Seller, for services
provided by EME. Furthermore, each of the Sellers agrees to deposit any such
payments received directly to a deposit account designated and controlled by Sun
Medical or to take such other action as may be requested by Sun Medical to
implement and maintain a system for remitting payments due EME which come into
the possession or control of any of the Sellers.
ARTICLE X
MISCELLANEOUS
-------------
10.1 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.
50
<PAGE>
10.2 SUCCESSORS AND ASSIGNS. Neither Sun Medical's nor any of the
----------------------
Sellers' rights or obligations under this Agreement may be assigned without the
prior written consent of all parties hereto, except that (i) Sun Medical may
assign its rights and obligations hereunder to any entity, one hundred percent
(100%) of the voting equity ownership interests of which is at the time owned,
directly or indirectly, by Sun Medical or Prime and (ii) any Seller may assign,
in writing, its rights to receive any amounts under Section 1.3 hereof upon
written notice to Sun Medical, provided the amounts so assigned shall remain
fully subject to the offset rights of Sun Medical and Prime hereunder and, as a
condition of such assignment, the assignor shall obtain the written consent and
acknowledgment thereof from the assignee and provide a copy thereof to Sun
Medical. 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 permitted assigns.
10.3 EXPENSES. 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 counsel.
10.4 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
51
<PAGE>
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.
10.5 INFORMATION AND CONFIDENTIALITY. Each party hereto agrees that such
-------------------------------
party shall hold in strict confidence all information and documents received
from any other party hereto, and if the Closing does not occur, each such party
shall return to the other parties hereto all such documents then in such
receiving party's possession without retaining copies; provided, however, that
each party's obligations under this Section shall not apply to (a) any
information or document required to be disclosed by law, (b) any information or
document in the public domain, or (c) any information or document that Sun
Medical discloses to any potential lender to or investor in Sun Medical or any
of its affiliates.
10.6 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.
10.7 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 personally delivered to the relevant party at its
address as set forth below or (b) if sent by mail, on the third day
52
<PAGE>
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:
Sun Medical: Sun Medical Technologies, Inc.
1301 Capital of Texas Highway
Austin, Texas 78746
Attention: President
with a copy to: Mr. Timothy L. LaFrey
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
816 Congress Avenue, Suite 1900
Austin, Texas 78701
Sellers: Joseph Fazio
2609 Fletcher Avenue
Fort Lee, New Jersey 07024
Vernon Gordon
610 Commerce Drive, Suite A
Roseville, California 95768
John Pecora
710 West Napa Street, Suite 3
Sonoma, California 95476
Each party may change its address for purposes of this Section by proper notice
to the other parties.
10.8 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
53
<PAGE>
survive the Closing until the Termination Date. The provisions of ARTICLE VIII
shall terminate or expire as provided therein, and not on the Termination Date.
10.9 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.
10.10 CONSTRUCTION. 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.
10.11 ARBITRATION. Except as set forth in ARTICLE VIII, 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 San Francisco, California and the arbitrator
54
<PAGE>
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.
10.12 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Texas.
10.13 COUNTERPARTS. This Agreement may be executed in several
------------
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
55
<PAGE>
SIGNATURE PAGE TO EXECUTIVE MEDICAL
ENTERPRISES, INC. STOCK PURCHASE AGREEMENT
SUN MEDICAL: SUN MEDICAL TECHNOLOGIES, INC.
By: /s/ Cheryl Williams
---------------------------------------
Cheryl Williams, Assistant Secretary
PRIME: PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
---------------------------------------
Cheryl Williams, Vice President-Finance
EME: EXECUTIVE MEDICAL ENTERPRISES, INC.
By:
--------------------------------------
Printed Name:
----------------------------
Title:
-----------------------------------
FAZIO:
/s/ Joseph Fazio
-----------------------------------------
Joseph Fazio
GORDON:
/s/ Vernon Gordon
-----------------------------------------
Vernon Gordon
PECORA:
/s/ John Pecora
-----------------------------------------
John Pecora
<PAGE>
CONTRIBUTION AGREEMENT
Among
AK ASSOCIATES, INC.
ROBERT BACHMAN,
LAWRENCE SODOMIRE,
PRIME KIDNEY STONE TREATMENT, INC.,
And
AK ASSOCIATES, L.L.C.
____________________
Dated September 1, 1997
_____________________
- --------------------------------------------------------------------------------
<PAGE>
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is entered into to be
effective as of September 1, 1997 (the "Effective Time"), among Prime Kidney
Stone Treatment, Inc., a New Jersey corporation ("Prime"), AK Associates, Inc.,
an Illinois corporation ("AK"), Robert Bachman ("Bachman"), Lawrence Sodomire
("Sodomire"), and AK Associates, L.L.C., a Texas limited liability company
("Newco"). AK, Bachman and Sodomire are also sometimes referred to collectively
herein as the "Sellers" and individually as a "Seller".
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 AK an
undivided 75% interest in the Assets (as hereinafter defined) for $4,761,050 in
cash (the "Purchase Price), (b) Prime agrees to contribute to Newco, as of the
Effective Time, the undivided 75% interest in the Assets purchased by Prime, and
will receive a 75% ownership interest in Newco; and (c) AK agrees to contribute,
as of the Effective Time, the remaining undivided 25% interest in the Assets to
Newco and will receive a 25% ownership interest in Newco. The Purchase Price
will be allocated to the Assets in accordance with Schedule 1.1 attached hereto.
------------
Prime and AK agree to
<PAGE>
execute the regulations and other organizational documents of Newco, in the form
attached as Exhibit A (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, Hauer &
Feld, L.L.P., 1900 Frost Bank Plaza, 816 Congress Avenue, Austin, Texas 78701,
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 include all of the business and
------
assets, tangible or intangible, wherever situated, of AK, as of the Effective
Time, such assets to include, without limitation: accounts receivable,
inventory, work in process, prepaid expenses, supplies, vehicles, any cash or
other property or amounts received for services rendered on or after the
Effective Time; all contract rights of AK; all licenses, certificates and
permits; the telephone number(s) of AK; the name of AK and all trade names and
other intellectual property; deposits; computer software used by AK in its
operations; all of the leasehold improvements, furniture, fixtures, equipment
and other fixed assets owned or leased by AK; all items of personal property
owned or leased by AK; including without limitation all the assets specifically
set out on Schedule 1.3 attached hereto. Notwithstanding the foregoing, the
------------
following shall not be "Assets" and shall be retained by AK:
(a) the books of account and record books of AK (complete and accurate
copies of which shall be provided to Prime on or before the Closing Date);
(b) AK's rights under this Agreement;
(c) AK's ownership interest in Newco;
2
<PAGE>
(d) all cash balances (excluding all sums received by AK for services
performed by AK on or after the Effective Time); and
(e) all motor vehicles other than the 1992 Ford van.
1.4 ASSUMED LIABILITIES. At the Closing, Newco shall only assume (i) the
-------------------
obligations of AK specifically described on Schedule 1.4 hereto, (ii) those
------------
trade payables on open account incurred in the ordinary course of AK's business
since September 1, 1997 from unrelated parties, and (iii) obligations accruing
after the Effective Time under contracts for jobs in progress or not yet begun
(which jobs Newco agrees to complete according to the terms of such contracts).
Such limited assumption shall be pursuant to that certain general conveyance,
assignment and transfer of assets and assumption of liabilities, attached hereto
as Exhibit B (the "Assignment and Assumption Agreement") to be executed by
---------
Newco, Prime and AK at the Closing, effective as of the Effective Time. With
respect to any lease obligations reflected on Schedule 1.4, and any contracts
------------
described in clause (iii) of the first sentence of this Section 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 AK, 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 AK or its business) shall remain the sole responsibility of AK and AK
covenants to pay promptly all such
3
<PAGE>
debts and liabilities and to fulfill all such obligations as and when the same
become due. Notwithstanding the foregoing, if there should be any controversy
regarding any debt or liability, AK shall not be required to pay promptly such
debt or liability and shall instead indemnify and hold harmless Newco and Prime
from any liability for such debt or liability.
1.5 ADDITIONAL PAYMENT. In addition to the Purchase Price provided in
------------------
Section 1.1 above, AK shall be entitled to receive an additional payment from
Prime, on the terms and subject to the conditions of this Section, based on the
Adjusted Net Income (as hereinafter defined) of Newco for the calendar year
1998.
For purposes of this Agreement, the "Adjusted Net Income" of Newco shall be
defined as the net income of Newco, before any provision for Federal income
taxes, for calendar year 1998, determined in accordance with generally accepted
accounting principles ("GAAP"), but adjusted as necessary to eliminate any Prime
Contribution to Income (as herein defined). The parties agree that for purposes
of calculating Adjusted Net Income of Newco, the completed contract method of
accounting will be utilized such that income will not be recognized until
projects are completed and delivered, and the percentage of completion method of
accounting previously utilized by AK will no longer be utilized.
The parties agree that in applying the completed contract method of
accounting to the measurement of Adjusted Net Income, if a project is
substantially complete at the end of calendar year 1998, and the only reason for
such project not being completed during calendar year 1998 is due to delays by
third parties beyond the control of Newco, such as failure to pay for a
completed project and take delivery thereof (in the absence of bankruptcy,
insolvency, contract disputes or other similar performance issues), or failure
of a third party to provide necessary equipment to
4
<PAGE>
complete a project, then the parties will evaluate such cases, on a case-by-case
basis and engage in good faith negotiations as to whether, and to what extent,
to include the projected income therefrom in the determination of Adjusted Net
Income of Newco.
For purposes of this Agreement, the "Prime Contribution to Income" shall be
deemed to mean all revenue, less only total associated cost of sales (including
associated indirect cost of sales), attributable to any business done by Newco
with or for Prime Medical Services, Inc., a Delaware corporation ("Prime
Medical") or any corporation, partnership, limited liability company or other
entity, any of the voting equity interests of which are owned or controlled,
directly or indirectly, by Prime Medical. For purposes of calculating Prime
Contribution to Income, no allocation or deduction of overhead, fixed costs or
indirect costs (other than associated indirect costs properly included in cost
of sales) of Newco will be taken into consideration. The parties acknowledge and
agree that AK has, prior to the Effective Time, been allocating certain
variable, direct costs to general and administrative expenses, and that such
costs would be more appropriately allocated to cost of sales for purposes of
calculating both Adjusted Net Income and Prime Contribution to Income, in
accordance with GAAP. A description of such previously misclassified variable
direct costs is set forth on Schedule 1.5 hereto, and the parties agree that,
------------
notwithstanding the inconsistency with methodology previously utilized by AK,
such items will be included in variable direct costs attributable to specific
projects for purposes of calculating both Adjusted Net Income and Prime
Contribution to Income for purposes of this Agreement. None of the amortization
expense incurred by Newco in 1998 as a result of amortizing any goodwill created
upon the contribution by Prime to Newco of Prime's
5
<PAGE>
interest in the Assets will be taken into consideration in calculating the
Adjusted Net Income of Newco for purposes of this Section.
The parties hereby further agree that the unanimous agreement of the
managers and members of Newco must be obtained prior to Newco undertaking, or
committing to undertake, any transactions during the 1998 calendar year (other
than the GE Certification Project described below) not within the ordinary
course of Newco's business (consistent with such business as conducted by AK
prior to the Effective Time).
As an exception to the concept in the preceding paragraph, the parties
acknowledge that AK may undertake the development of a new type of trailer for
General Electric (referred to generally herein as the "GE Certification
Project"). The parties agree that the non-recurring capitalizable costs of
obtaining certification by GE of Newco as a vendor for this new type of trailer
---
will be $250,000, of which the parties agree that $50,000 will be amortized in
calendar year 1998. The parties agree that this amortization expense of $50,000
(but not greater than $50,000) will be excluded from the calculation of Adjusted
Net Income of Newco for calendar year 1998 if (i) on December 31, 1998 there is
a written, binding purchase order that has been received and accepted by Newco
for at least two of the GE Certification Project trailers (which may include the
prototype trailer), (ii) the price of the two GE Certification Project trailers
described in (i) would involve a gross profit margin to Newco of at least 10%
for each of the trailers, and (iii) Newco has received a deposit against the
delivery of the two GE Certification Project trailers described in (i) and (ii)
that is comparable to the standard deposit ordinarily received by Newco with
respect to mobile lithotripsy trailer purchase orders. The parties agree that in
the event all requirements of the preceding sentence are met at December 31,
6
<PAGE>
1998, then the $50,000 of amortization expense related to the GE certification
(but not any other cost of sales incurred by Newco with respect to the GE
Certification Project), will be excluded for purposes of calculating Adjusted
Net Income under this Section.
In calculating Adjusted Net Income, any administrative services or
functions previously undertaken by AK which are provided for Newco by Prime
Medical or one of Prime Medical's affiliates during 1998 (such as accounting or
payroll functions) will be charged to Newco by Prime Medical or its applicable
affiliate at the lesser of (i) the fair market value for such services or
functions, or (ii) AK's cost of providing or obtaining such services or
functions prior to the Effective Time; and the amount so determined will be
deducted in calculating Adjusted Net Income for Newco.
In the event there is a dispute between AK and Prime Medical as to the
calculation of Adjusted Net Income, the parties agree that upon written request
from either party, and at least thirty (30) days advance written notice (during
which the parties agree to undertake to resolve such dispute amongst
themselves), the dispute will be submitted to a determination by a national
accounting firm selected by the mutual agreement of AK and Prime, whose written
decision thereon shall be binding on all parties hereto. In the event Prime and
AK cannot agree on such accounting firm, KPMG Peat Marwick will make the
selection of a firm (other than itself) for such purposes. Newco shall pay the
fees and expenses charged by any such national accounting firm.
The following table reflects the amounts of additional payments due, if
any, to AK based on Adjusted Net Income. The maximum additional payment which
would ever be due is $1,050,000. The amounts shown in the right hand column
below are not to be added together,
7
<PAGE>
but rather are alternative, total additional payment amounts depending on where
Adjusted Net Income, determined in accordance with this Section, falls among the
ranges referenced in the left hand column below. Any additional payment due
which is not in dispute will be payable, in cash or wire transferred funds, to
AK on or before March 31, 1999; provided, in the event of a dispute as to the
determination of Adjusted Net Income, any additional disputed payment ultimately
determined to be due will be paid within thirty (30) days after the dispute is
resolved by the written decision of the national accounting firm as herein
provided.
<TABLE>
<CAPTION>
1998 ADJUSTED NET INCOME ADDITIONAL PAYMENT DUE
------------------------ ----------------------
<S> <C>
Under $950,000 None
$950,000 to $1,099,999 $ 262,500
$1,100,000 to $1,249,999 $ 525,000
$1,250,000 to $1,399,999 $ 787,500
$1,400,000 or greater $1,050,000
</TABLE>
1.6 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 AK, Bachman and Sodomire that each of the
following matters is true and correct in all respects as of the Closing (with
the understanding that AK, Bachman and Sodomire are relying materially on such
representations and warranties in entering into and performing this Agreement):
8
<PAGE>
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 New Jersey and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime
is a subsidiary of Prime Medical Services, Inc., a Delaware corporation ("Prime
Medical"). Prime's principal executive offices are located at 1301 Capital of
Texas Highway, Austin, Texas 78746.
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 certificate of incorporation or bylaws 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).
9
<PAGE>
2.3 BROKERS AND FINDERS. Prime has not engaged, or caused to be incurred
-------------------
any liability to, any finder, broker, or sales agent 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AK, BACHMAN AND SODOMIRE
----------------------------------------------------------
AK, Bachman and Sodomire 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 (with the understanding that Prime is relying
materially on each such representation and warranty in entering into and
performing this Agreement):
3.1 DUE ORGANIZATION. AK is a corporation duly organized, validly
----------------
existing, and in good standing under the laws of the State of Illinois and has
full power and authority to carry on its business as now conducted and as
proposed to be conducted. Bachman and Sodomire are the only shareholders of AK.
Complete and correct copies of the Articles of Incorporation and bylaws of AK,
and all amendments thereto, have been delivered to Prime. AK is qualified to do
business and is in good standing in the states set forth on Schedule 3.1
------------
attached hereto, which
10
<PAGE>
states represent every jurisdiction where such qualification is required for the
conduct of AK's business as conducted on the Closing Date.
3.2 SUBSIDIARIES. AK 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,
association, joint venture, trust, or other entity.
3.3 DUE AUTHORIZATION. The Sellers have full power and authority to enter
-----------------
into and perform this Agreement and each other agreement, instrument, and
document required to be executed by them 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 corporate
action of AK. 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 will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to the
Sellers 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, AK, or (d) violate or conflict with any provision of the
Articles of Incorporation or bylaws of AK. No action, consent, or approval of,
or filing with, any federal, state, county or local governmental authority is
required by any of the Sellers in
11
<PAGE>
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 AK as of and for the six (6) months ended June 30, 1997, and the AK
prepared internal financial statements as of and for the eight (8) months ended
August 31, 1997 (collectively, the "Financial Statements") are attached hereto
as Exhibit C. The June 30, 1997 Financial Statements have been prepared in
---------
accordance with the Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants, and are
materially accurate. The August 31, 1997 Financial Statements are AK prepared
internal financial statements and are materially accurate. The Financial
Statements were prepared using the accrual method of accounting and the
percentage of completion method of recognizing income from work in process.
Except for the lease obligations disclosed on Schedule 1.4 and except to the
------------
extent reflected or provided for in the Financial Statements (including the
notes thereto), AK had no liabilities of a type that would be required to be
reflected as such in the Financial Statements (including the notes thereto).
Except as set forth in Schedule 3.4 hereto, and except for increases in cost of
------------
sales and expenses resulting from the operations of AK in the ordinary course of
its business consistent with past practice, since August 31, 1997 there has been
no material adverse change in the financial position, assets, results of
operations, or business of AK.
3.5 CONDUCT OF BUSINESS; CERTAIN ACTIONS. Except as set forth on Schedule
------------------------------------ --------
3.5 attached hereto, since August 31, 1997, AK has conducted its business and
- ---
operations in the ordinary course and consistent with its past practices and has
not (a) increased the compensation of any of the Sellers, or, except for wage
and salary increases made in the ordinary course of
12
<PAGE>
business and consistent with the past practices of AK, increased the
compensation of any other employees of AK, (b) made capital expenditures
exceeding $5,000 individually or $20,000 in the aggregate, (c) sold any asset
(or any group of related assets) in any transaction (or series of related
transactions) in which the purchase price for such asset (or group of related
assets) exceeded $20,000 (other than sales of inventory in the ordinary course
of business), (d) 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, (e) made or guaranteed any
loans or advances to any party whatsoever, (f) suffered or permitted any lien,
security interest, claim, charge, or other encumbrance to arise or be granted or
created against or upon any of the assets of AK, real or personal, tangible or
intangible, (g) canceled, waived, or released any of AK's debts, rights, or
claims against third parties, (h) amended the Articles of Incorporation or
bylaws of AK, (i) made or paid any severance or termination payment to any
employee or consultant in excess of $5,000, (j) made any change in the method of
accounting of AK, (k) made any investment or commitment therefor in any person,
business, corporation, association, partnership, joint venture, trust, or other
entity, (l) except as set forth on Schedule 3.11 and Schedule 3.15, 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 entity, (m) amended, terminated or experienced a termination of
any material contract, agreement, lease, franchise, or license to which AK is a
party, (n) entered into any other material transactions
13
<PAGE>
except in the ordinary course of business, (o) entered into any contract,
commitment, agreement, or understanding to do any acts described in the
foregoing clauses (a)-(n) of this Section, (p) suffered any material damage,
destruction, or loss (whether or not covered by insurance) to any assets, (q)
experienced any strike, slowdown, or demand for recognition by a labor
organization by or with respect to any of the employees of AK, or (r)
experienced or effected any shutdown, slow-down, or cessation of any operations
conducted by, or constituting part of, AK.
3.6 OWNERSHIP OF ASSETS: LICENSES, PERMITS, ETC. AK has good and
--------------------------------------------
marketable title to all of the Assets subject only to the liens, security
interests, claims and encumbrances specifically described on Schedule 3.6. AK
------------
has such 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 AK 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 AK's business. Attached hereto as Schedule 3.6 is a list of all
------------
federal, state, county, and local governmental licenses, certificates and
permits held or applied for by AK. AK has complied in all material respects,
and AK is in compliance in all material respects, with the terms and conditions
of any such licenses, certificates and permits. No additional license,
certificate, or permit is required from any federal, state, county, or local
governmental agency or body thereof in connection with the conduct of the
business of AK. No claim has been made by any governmental authority (and, to
the knowledge of Sellers, no such claim has been threatened) to the effect that
a license, permit, certificate, or order not possessed by AK is necessary in
respect of the business
14
<PAGE>
conducted by AK. All of the licenses, permits, and certificates noted on the
attached Schedule 3.6 are freely assignable to Newco.
------------
3.7 ENVIRONMENTAL ISSUES.
--------------------
(a) For purposes of this Agreement, the term "environmental laws"
shall mean all laws relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, or release, of any pollutant, contaminant, chemical, or industrial
toxic or hazardous substance or waste and any order related thereto.
(b) AK has complied in all material respects with and obtained all
authorizations and made all filings required by all applicable environmental
laws. The properties occupied or used by AK 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 AK.
(c) AK 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.
15
<PAGE>
3.8 INTELLECTUAL PROPERTY RIGHTS. There are no patents, trademarks,
----------------------------
tradenames, or copyrights, and no applications therefor, owned by or registered
in the name of AK or in which AK has any right, license, or interest. AK is not
a party to any license agreements, either as licensor or licensee, with respect
to any patents, trademarks, tradenames, or copyrights. AK has not received any
notice that it is infringing any patent, trademark, tradename, or copyright of
others.
3.9 COMPLIANCE WITH LAWS. AK has complied in all material respects, and
--------------------
AK is in compliance in all material respects, with all federal, state, county,
and local laws, rules, regulations, and ordinances currently in effect and
applicable to its business. No claim has been made by any governmental
authority (and, to the knowledge of Sellers, no such claim has been threatened)
against AK to the effect that the business conducted by AK fails to comply 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
and all fidelity bonds held by or applicable to AK 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 AK 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 AK during the past three (3) years, including without
limitation any change which has resulted in any period during which AK had no
16
<PAGE>
insurance coverage. Excluding insurance policies which have expired and been
replaced, no insurance policy of AK has been canceled within the last three (3)
years and, to the knowledge of Sellers, no threat has been made to cancel any
insurance policy of AK within such period.
3.11 EMPLOYEE BENEFIT MATTERS. Except as set forth on Schedule 3.11, AK
------------------------ -------------
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). AK 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, promissory notes, loan agreements, and other
evidences of indebtedness) to which AK is a party or by which AK 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, $10,000 or greater, or which are otherwise material to the
business of AK (including, without limitation, all mortgages, deeds of trust,
security agreements, pledge agreements, service agreements, and similar
agreements and instruments and all confidentiality agreements). AK 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 AK or, to the best knowledge of Sellers, by
any other party thereto) under any such contracts, commitments, leases, or other
agreements. AK has not waived any material right under any such
17
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contracts, commitments, leases, or other agreements. AK has not guaranteed any
obligations of any other person.
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 Sellers, threatened against AK or affecting any
of its properties or assets, 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 AK which (individually or in the aggregate) is material,
and AK has not been, and AK 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, to the best knowledge
of Sellers, threatened against AK 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. AK has been filing its tax returns as a subchapter S
-----
corporation under the Internal Revenue Code. 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 AK 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 AK. All Taxes,
18
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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 AK's estimated Tax liabilities for the
respective periods then ended and all prior periods. As of the Closing Date, AK
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 AK between the Effective Time and the Closing Date. AK 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, to the best knowledge of Sellers, threatened claims, assessments, notices,
proposals to assess, deficiencies, or audits, other than an excise tax audit
being conducted as disclosed on Schedule 3.13, (collectively, "Tax Actions")
against AK with respect to any Taxes owed or allegedly owed by AK. Otherwise,
AK's Returns have not been audited. There are no tax liens on any of the assets
of AK. Proper and accurate amounts have been withheld and remitted by AK 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. AK 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 employees of AK whose rates of
compensation, on an annualized basis, during calendar year 1997 (including base
salary, bonus, commissions, and incentive pay) are expected to exceed $20,000.
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 AK to such employees from December 31, 1996
through the
19
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Closing Date. Schedule 3.15 attached hereto also contains a brief description of
-------------
all material terms of employment agreements and confidentiality agreements to
which AK is a party and all severance benefits which any director, officer,
employee, agent or sales representative of AK is or may be entitled to receive.
AK 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 AK is a party and under which its employees are
entitled to receive benefits of any nature. There is no pending or, to the best
knowledge of Sellers, threatened (i) labor dispute or union organization
campaign relating to AK, (ii) claims against AK or the Sellers by any employees
of AK (other than those certain Workers' Compensation claims specifically
described on Schedule 3.13), or (iii) terminations, resignations or retirements
-------------
of any employees of AK. None of the employees of AK are represented by any labor
union or organization. There is no unfair labor practice claim against AK before
the National Labor Relations Board or any strike, labor dispute, work slowdown,
or work stoppage pending or, to the best knowledge of Sellers, threatened
against or involving AK.
3.16 BUSINESS RELATIONS. Sellers have not been notified that any supplier
------------------
or customer of AK (other than American Kidney Stone Management, Ltd. of
Columbus, Ohio who attributed a decision not to purchase from AK because of the
relationship with Prime contemplated herein, which has been communicated to
Prime) will cease or refuse to do business with AK or Newco in the same manner
as previously conducted with AK as a result of or within a year after the
consummation of the transactions contemplated hereby. AK 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 AK.
20
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3.17 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 3.17 attached
------------------- -------------
hereto, all of the accounts, notes, and loans receivable that have been recorded
on the books of AK are bona fide and represent amounts validly due.
3.18 AGENTS. Except as set forth on Schedule 3.18 attached hereto, AK has
------ -------------
not designated or appointed any person (other than AK'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 SHAREHOLDERS, DIRECTORS AND EMPLOYEES.
--------------------------------------------------------------
Except as set forth on Schedule 3.19 attached hereto, AK does not owe any
-------------
indebtedness to any of its shareholders, directors or employees or have
indebtedness owed to it from any of its shareholders, directors or employees,
excluding indebtedness for travel advances or similar advances for expenses
incurred on behalf of and in the ordinary course of business of AK and
consistent with AK's past practices. As of the Effective Time and the Closing
Date all amounts due AK from any shareholder, director, officer or employee of
AK (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, AK does not employ or have any relationship with any
individual, corporation, partnership, or other entity whose compensation from AK
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
21
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third parties (including, without limitation, the spouses of Bachman and
Sodomire) in connection with the execution, delivery, and performance of this
Agreement.
3.22 BROKERS. No Seller has engaged, or caused any liability to be
-------
incurred to, any finder, broker, or sales agent 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 employee of AK or any affiliate of
any employee of AK, has any ownership interest in any competitor, customer or
supplier of AK or any property used in the operation of the business of AK.
3.24 WARRANTIES. Except as set forth on Schedule 3.24, AK has not made any
---------- -------------
warranties or guarantees to third parties with respect to any products sold or
services rendered by it. Except as set forth on Schedule 3.24 attached hereto,
-------------
no claims for breach of product or service warranties have been made against AK
since January 1, 1996.
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.
ARTICLE IV
COVENANTS
---------
4.1 NAME CHANGE. The Sellers agree that at, or within thirty (30) days
-----------
after, the Closing Date, AK will change its name to a name that does not contain
the letters "AK" in combination, or the word "Associates".
22
<PAGE>
4.2 COOPERATION RELATING TO FINANCIAL STATEMENTS. Sellers agree to
--------------------------------------------
cooperate with Prime in the preparation of any financial statements of AK and/or
Newco which Prime or its affiliates may be required by any applicable law to
prepare.
4.3 SHAREHOLDER AND DIRECTOR ACTION. Each of Bachman and Sodomire agree
-------------------------------
to vote their shares in AK, and to take such actions as may be necessary in
their capacity as directors of AK, to authorize and direct AK to perform all of
its obligations under this Agreement and under the Organizational Documents.
Furthermore, Bachman and Sodomire each agree that, until such time as neither
Bachman nor Sodomire is an employee of Newco, they will not authorize the
issuance of any additional capital stock of AK to any third party, or cause or
allow any additional directors to be elected to the board of directors of AK.
4.4 CAPITAL CONTRIBUTIONS. The parties acknowledge and agree that initial
---------------------
cash working capital of $400,000 is required for the successful operations of
Newco after the Closing. Accordingly, at the Closing, Prime and AK agree to
contribute cash or immediately available funds to Newco in the amount of
$300,000 and $100,000, respectively. Thereafter, any capital contributions to
Newco shall be governed by the Organizational Documents.
ARTICLE V
Conditions to Closing
---------------------
5.1 PRIME'S CLOSING OBLIGATIONS. At the Closing, Prime shall:
---------------------------
(a) pay the Purchase Price to AK;
(b) execute and deliver the Assignment and Assumption Agreement and
the Organizational Documents;
23
<PAGE>
(c) deliver such good standing certificates, officer certificates, and
similar documents and certificates as counsel for AK may reasonably require;
(d) cause Prime Medical to execute and deliver a Closing Certificate
to AK in the form attached hereto as Exhibit K; and
---------
(e) make the capital contributions to Newco required pursuant to
Section 4.4 above.
5.2 AK'S CLOSING OBLIGATIONS. At the Closing, AK shall:
------------------------
(a) execute and deliver the Assignment and Assumption Agreement and
the Organizational Documents;
(b) deliver such good standing certificates, officer and/or
partnership certificates, and similar documents and certificates as counsel for
Prime may reasonably require; and
(c) make the capital contributions to Newco required pursuant to
Section 4.4 above.
5.3 NEWCO'S CLOSING OBLIGATIONS. At the Closing, Newco shall execute and
---------------------------
deliver the Assignment and Assumption Agreement.
ARTICLE VI
INDEMNIFICATION OF PRIME AND NEWCO
----------------------------------
6.1 INDEMNIFICATION OF PRIME AND NEWCO. The Sellers, each jointly and
----------------------------------
severally, agree to indemnify and hold harmless Prime and, following the
Closing, Newco and each officer, director, employee, and affiliate of Prime and,
following the Closing, Newco (collectively, the
24
<PAGE>
"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 agreement
or document executed in connection herewith (including, without limitation, the
Organizational Documents), (b) any obligation or liability of AK 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 events that
occurred prior to the Closing.
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;
25
<PAGE>
(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 AK, 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
26
<PAGE>
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.
ARTICLE VII
INDEMNIFICATION OF SELLERS
--------------------------
7.1 INDEMNIFICATION OF SELLERS. Prime agrees to indemnify and hold
--------------------------
harmless Sellers (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 agreement or document executed in connection herewith (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
27
<PAGE>
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.
28
<PAGE>
(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
NONCOMPETITION AGREEMENTS
-------------------------
8.1 AGREEMENT OF SELLERS. Each of the Sellers hereby agrees that, until
--------------------
the later of (i) the fifth (5th) anniversary of the Closing Date, or (ii) two
(2) years after the termination of the employment with Newco of Bachman (for
Bachman) or Sodomire (for Sodomire) or both Bachman and Sodomire (for AK); such
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 five percent (5%) 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,
29
<PAGE>
corporation or other entity, without the prior written consent of Prime, commit
any of the following acts, which acts shall be considered violations of this
covenant not to compete:
(a) Directly or indirectly, anywhere within the continental United
States, engage in, or provide any services related to, (i) the manufacture,
maintenance, refurbishing, repair, sale, or leasing, of mobile trailers or
coaches for medical service providers, including without limitation mobile
lithotripsy units, trailers or coaches, or mobile prostatherapy units, trailers
or coaches, or (ii) the manufacturing, design, installation, repair,
maintenance, servicing, upgrading, sale or leasing of fixed site or mobile
diagnostic imaging equipment, or (iii) provide any management services, training
or consulting services related to any of the activities described in (i) or
(ii);
(b) Directly or indirectly provide lithotripsy or prostatherapy
services, including without limitation, lithotripsy or prostatherapy patient
services, lithotripsy or prostatherapy management services, lithotripter or
prostatron leasing or marketing services, or similar services, anywhere within
the continental United States.
(c) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, Newco, or any affiliate or related entity of either of them, to withdraw,
curtail, or cancel its business with Prime, Newco, or such affiliate or related
entity; or
(d) Directly or indirectly hire any employee of Prime, Newco, or any
affiliate or related entity of either of them, or induce or attempt to influence
any employee of Prime, Newco, or any such affiliate or related entity to
terminate his or her employment with Prime, Newco, or any such affiliate or
related entity.
30
<PAGE>
8.2 AGREEMENT BY PRIME. Prime agrees that it will not, including through
------------------
its parent, Prime Medical, a subsidiary, affiliate or otherwise (except through
Newco or except as otherwise provided below), directly or indirectly, acquire or
develop any business that engages in, or provides any services to third parties
related to (i) the manufacture, maintenance, refurbishing, repair or sale of
mobile trailers or coaches for medical service providers, including without
limitation mobile lithotripsy units, trailers or coaches, or mobile
prostatherapy units, trailers or coaches, or (ii) the manufacture, design,
installation, repair, and maintenance, servicing, upgrading or sale of fixed
site or mobile diagnostic imaging equipment, or (iii) the providing of
management services, training or consulting services related to any of the
activities described in (i) or (ii).
Notwithstanding anything contained above or otherwise elsewhere herein to
the contrary, neither Prime, Prime Medical nor any of their subsidiaries or
affiliates (referred to hereinafter in this paragraph as "Prime Acquiring
Entity") shall be prohibited from acquiring any assets, businesses, corporations
or other entities, the acquisition and operation of which would otherwise
constitute a violation of the foregoing provisions of this Section 8.2 provided
either Prime or Prime Medical has provided Newco and the Sellers written notice
of its intent to entertain such acquisition, together with a reasonably detailed
description of the then contemplated terms and conditions of such acquisition,
and has offered Newco the right of first refusal to engage in such acquisition.
Newco shall have forty-five (45) days from the giving of such notice in which to
exercise its right of first refusal, and upon the expiration of such forty-five
(45) day period Newco shall be deemed to have elected not to exercise its right
of first refusal if it has failed for any reason to close, or be fully prepared
to immediately close, the acquisition on the same terms
31
<PAGE>
as would be applicable to the Prime Acquiring Entity. If Newco elects to
exercise its right of first refusal, it must participate in the acquisition as
to all (but not less than all) of the rights and obligations that would
otherwise have been acquired and undertaken by the Prime Acquiring Entity and
any other affiliate of Prime or Prime Medical. Neither Prime, Prime Medical nor
any other affiliate of Prime or Prime Medical will be required to arrange any
financing, provide any payment security or otherwise assist Newco (through
concessions, contractual obligations or otherwise) in making such acquisition in
order to allow Newco to exercise its right of first refusal; provided that Prime
will agree to make its pro rata amount (in accordance with its percentage
membership interest) of capital contributions to Newco, along with Newco's other
members, as necessary to fund such acquisition, if additional equity capital
infusions into Newco are necessary in connection with such acquisition and if
all the members (other than Prime) agree to make, and make, their pro rata
capital contributions.
Notwithstanding anything contained herein to the contrary, it shall not be
a violation of this Agreement for Prime, Prime Medical or any of their
subsidiaries or affiliates, to utilize employees or other contract maintenance
personnel to perform routine maintenance and/or repairs with respect to any
vehicles or equipment owned or operated by Prime, Prime Medical or any of their
respective subsidiaries or affiliates, including without limitation any mobile
trailers or coaches for medical service providers, mobile lithotripsy units,
trailers or coaches, mobile prostatherapy units, trailers or coaches, or any
diagnostic imaging equipment, units, trailers or coaches.
The provisions of this Section 8.2 shall be binding and in effect until the
earlier to occur of (i) the date on which none of the Sellers or any entity, all
of whose equity ownership interests
32
<PAGE>
are owned by one or both of the Sellers, owns a membership interest in Newco, or
(ii) the date on which any of the Sellers ceases to be bound by the agreements
and restrictions contained in Section 8.1 hereof.
8.3 AGREEMENT OF THE PARTIES. Each party hereto has reviewed and
------------------------
carefully considered the provisions of this ARTICLE and, having done so, agrees
that the restrictions applicable to them as set forth herein (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.
Each party hereto agrees that a violation on its part of any
applicable covenant contained in this ARTICLE 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, each party
hereto 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 additional
damages.
ARTICLE IX
POST CLOSING AGREEMENTS
-----------------------
9.1 TRANSITION OF BUSINESS. Each Seller agrees to cooperate fully with
----------------------
Prime and Newco in transitioning the business conducted, and business
relationships maintained by AK
33
<PAGE>
prior to the Closing, to Newco after the Closing; and each Seller agrees not to
take any action or make any disclosure, including disclosures related to the
transactions contemplated by this Agreement, which might alter or impair any
relationship with any customer, or other service recipient, person or entity
which did business with AK prior to the Closing. Each Seller agrees to promptly
remit to Newco any payments received by AK or any Seller for services provided
by AK 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 AK or any Seller.
9.2 RATIFICATION BY NEWCO. Prime and AK 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 as it relates to Newco.
Prime and AK agree to execute such resolutions and written consents, and take
such other actions, in their capacities as members of Newco, as either shall
reasonably require after the Closing to have Newco ratify and adopt this
Agreement as it relates to Newco, notwithstanding the official date of Newco's
creation.
9.3 EMPLOYMENT WITH NEWCO. Bachman and Sodomire each agree to work full-
---------------------
time for Newco for the two (2) year period after the Closing Date, and to enter
into Employment Agreements in the form attached hereto as Exhibit-D at the
---------
Closing. Bachman and Sodomire agree not to terminate such Employment
Agreements, or their employment with Newco thereunder, during such two (2) year
period unless Newco defaults in its obligations under the Employment Agreements,
or this Agreement.
34
<PAGE>
ARTICLE X
MISCELLANEOUS
-------------
10.1 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.
10.2 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 50% of the voting equity ownership interests of which is at
the time owned, directly or indirectly, by Prime Medical Services, Inc., a
Delaware corporation. Furthermore, AK may, upon written notice to Prime, assign
its rights hereunder to Bachman and/or Sodomire or to any entity, all of whose
equity ownership interests are owned by AK, Bachman and/or Sodomire; provided
that in the event of an assignment to any such entity AK, Bachman and Sodomire
must first agree in writing with Prime, in form and substance reasonably
acceptable to Prime, not to transfer or issue any equity ownership interests
therein to any person or entity other than AK, Bachman or Sodomire for so long
as any provisions of this Agreement remain binding and enforceable on any party
hereto. Upon any such permitted assignment, AK and the assignee shall thereafter
be jointly and
35
<PAGE>
severally responsible for the obligations of AK hereunder. Furthermore, no
assignment, of any type, of rights or obligations under this Agreement shall in
any way limit, modify or otherwise affect the obligations of Bachman, Sodomire
or AK pursuant to the provisions of Sections 8.1, 9.1 and 9.3 of this Agreement,
which the parties hereto acknowledge and agree to be the personal obligations of
Bachman, Sodomire and AK not subject to assignment, transfer, modification or
amendment without the express written consent of Prime in each instance. 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.
10.3 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 counsel. The costs
and expenses associated specifically with the formation and documentation of
Newco, including legal fees and expenses for drafting the Organizational
Documents, shall be paid or reimbursed by Newco.
10.4 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
36
<PAGE>
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.
10.5 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.
10.6 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 and Newco: Prime Kidney Stone Treatment, Inc.
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attention: President
with a copy to: Mr. Timothy L. LaFrey
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
816 Congress Avenue, Suite 1900
Austin, Texas 78701
Sellers: Mr. Robert Bachman, Mr. Lawrence Sodomire, and
AK Associates, Inc.
19701 South 97th Avenue
Mokena, Illinois 60448
with a copy to: Mr. Michael P. Mullen
Mullen & Foster
33 North Dearborn Street, Suite 1500
37
<PAGE>
Chicago, Illinois 60602
Each party may change its address for purposes of this Section by proper
notice to the other parties.
10.7 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.
10.8 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.
10.09 CONSTRUCTION AND KNOWLEDGE. 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.
38
<PAGE>
10.10 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Texas.
10.11 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.
10.12 POST EFFECTIVE TIME ADJUSTMENTS. The parties acknowledge and agree
-------------------------------
that AK has, prior to the Closing Date, been receiving revenues, making
disbursements and incurring payables and receivables pursuant to the operations
of AK in the ordinary course since September 1, 1997, including without
limitation paying payroll, payroll taxes, trade vendors and other expenses. AK
will promptly account for all such activity and the parties agree that Newco or
AK, as applicable, will reimburse the other for any net amounts due with respect
to such post-Effective Time activity.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
39
<PAGE>
SIGNATURE PAGE TO
CONTRIBUTION AGREEMENT
PRIME: PRIME KIDNEY STONE TREATMENT, INC.
By: /s/ Michael S. Madler
--------------------------------------------
Michael S. Madler, President
AK: AK ASSOCIATES, INC.
By: /s/ Robert Bachman
--------------------------------------------
Printed Name: Robert Bachman
----------------------------------
Title: Vice President
-----------------------------------------
NEWCO: AK ASSOCIATES, L.L.C.
By: AK ASSOCIATES, INC. -- Member
By: /s/ Lawrence Sodomire
---------------------------------------
Printed Name: Lawrence Sodomire
-----------------------------
Title: Vice President
------------------------------------
By: PRIME KIDNEY STONE TREATMENT,
INC. -- Member
By: /s/ Michael S. Madler
---------------------------------------
Michael S. Madler, President
BACHMAN: /s/ Robert Bachman
-----------------------------------------------
Robert Bachman
<PAGE>
SODOMIRE: /s/ Lawrence Sodomire
-----------------------------------------------
Lawrence Sodomire
GUARANTY OF PRIME MEDICAL SERVICES, INC.
Prime Medical Services, Inc., a Delaware corporation, hereby agrees to guarantee
the performance of all obligations of Prime Kidney Stone Treatment, Inc., a New
Jersey corporation, under this Agreement, and by execution hereof below,
acknowledges its authority to execute this written guaranty.
PRIME MEDICAL SERVICES, INC.
By: /s/ Michael Madler
-----------------------------------
Printed: Michael Madler
------------------------------
Title: Sr. VP - Operations
--------------------------------
<PAGE>
EXHIBIT-A
REGULATIONS OF
AK ASSOCIATES, L.L.C.
Organized under the Texas Limited Liability Company Act
ARTICLE I.
NAME AND LOCATION
-----------------
Section 1.1. Name. The name of this limited liability company is AK
----
ASSOCIATES, L.L.C. (the "Company").
Section 1.2. Members. The initial members of the Company shall be Prime
-------
Kidney Stone Treatment, Inc., a New Jersey corporation, and AK Associates, Inc.,
a Illinois corporation. For purposes of these Regulations, the "Members" shall
include such initial members and any new members admitted pursuant to the terms
of these Regulations, but does not include any person or entity who has ceased
to be a member in the Company.
Section 1.3. Principal Office. The principal office of the Company shall
----------------
be located in Austin, Texas, or such other location as may be selected by the
Members.
Section 1.4. Registered Agent and Address. The name of the registered
-----------------------------
agent and the address of the registered office of the Company as set forth in
the Articles of Organization of the Company are:
1301 Capital of Texas Highway
Suite C-300
Austin, TX 78746
Attn: Michael S. Madler
Section 1.5. Other Offices. Other offices and other facilities for the
-------------
transaction of business shall be located at such places as the Managers may from
time to time determine.
ARTICLE II.
MEMBERSHIP
----------
Section 2.1. Members' Interests. The "Membership Interest" of each Member
------------------
is set forth on Exhibit A.
---------
<PAGE>
Section 2.2. Admission to Membership. The admission of new Members shall
-----------------------
be only by the unanimous vote of the Members. If new members are admitted,
these Regulations shall be amended to reflect each Member's revised Membership
Interest.
Section 2.3. Property Rights. No Member shall have any right, title, or
---------------
interest in any of the property or assets of the Company.
Section 2.4. Liability of Members. No Member of the Company shall be
--------------------
personally liable for any debts, liabilities, or obligations of the Company,
including under a judgment decree, or order of court.
Section 2.5. Transferability of Membership. Except as provided below,
-----------------------------
Membership Interests in the Company are transferable only with the unanimous
written consent of all Members. If such unanimous written consent is not
obtained when required, the transferee shall be entitled to receive only the
share of profits or other compensation by way of income and the return of
contributions to which the transferor Member otherwise would be entitled.
Notwithstanding the foregoing, the Membership Interests of Prime Kidney Stone
Treatment, Inc. ("Prime") may be freely transferred, without consent, to any
entity that is then owned or controlled, directly or indirectly, by Prime
Medical Services, Inc., a Delaware corporation ("Prime Medical"). Furthermore,
the Membership Interest of AK Associates, Inc. ("AK") may be freely transferred,
without consent, to any entity all of whose equity ownership interests are owned
by Robert Bachman ("Bachman") and/or Lawrence Sodomire ("Sodomire"), the sole
shareholders of AK. However, any transfer of any of the equity ownership
interests of AK, or of any such permitted transferee of AK, to any persons other
than Bachman or Sodomire, or to any other entity all of whose equity ownership
interests are not at all times owned by Bachman and/or Sodomire, shall be deemed
a transfer of Membership Interest requiring unanimous written consent of all
Members as provided above.
Section 2.6. Resignation of Members. A Member may not withdraw from the
----------------------
Company except on the unanimous consent of the remaining Members. The terms of
the Members withdrawal shall be determined by agreement between the remaining
Members and the withdrawing Member.
ARTICLE III.
MEMBERS' MEETINGS
-----------------
Section 3.1. Time and Place of Meeting. All meetings of the Members shall
-------------------------
be held at such time and at such place within or without the State of Texas as
shall be determined by the Managers.
Section 3.2. Annual Meetings. In the absence of an earlier meeting at
---------------
such time and place as the Managers shall specify, annual meetings of the
Members shall be held at the principal office of the Company on the date which
is thirty (30) days after the end of the Company's fiscal year if not a legal
holiday, and if a legal holiday, then on the next full business
2
<PAGE>
day following, at 10:00 a.m., at which meeting the Members may transact such
business as may properly be brought before the meeting.
Section 3.3. Special Meetings. Special meetings of the Members may be
----------------
called at any time by any Member. Business transacted at special meetings shall
be confined to the purposes stated in the notice of the meeting.
Section 3.4. Notice. Written or printed notice stating the place, day and
------
hour of any Members' meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten (10) days nor more than thirty (30) days before the date of the special
meeting, either personally or by mail, by or at the direction of the person
calling the meeting, to each Member entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered three (3) days after it is
deposited in the United States mail, postage prepaid, to the Member at his
address as it appears on the records of the Company at the time of mailing.
Section 3.5. Quorum. Members present in person or represented by proxy,
------
holding more than fifty percent (50%) of the total votes which may be cast at
any meeting shall constitute a quorum at all meetings of the Members for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the Members, the Members entitled to vote, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. When any adjourned meeting is
reconvened and a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. Once a quorum is constituted, the Members present or represented by
proxy at a meeting may continue to transact business until adjournment,
notwithstanding the subsequent withdrawal therefrom of such number of Members as
to leave less than a quorum.
Section 3.6. Voting. When a quorum is present at any meeting, the vote of
------
the Members, whether present or represented by proxy at such meeting, holding
more than fifty percent (50%) of the total votes which may be cast at any
meeting shall be the act of the Members, unless the vote of a different number
is required by the Texas Limited Liability Company Act (the "Act"), the Articles
of Organization or these Regulations. Each Member shall be entitled to one vote
for each percentage point represented by their Membership Interest. Fractional
percentage point interests shall be entitled to a corresponding fractional vote.
Section 3.7. Proxy. Every proxy must be executed in writing by the Member
-----
or by his duly authorized attorney-in-fact, and shall be filed with the
Secretary of the Company prior to or at the time of the meeting. No proxy shall
be valid after eleven (11) months from the date of its execution unless
otherwise provided therein. Each proxy shall be revocable unless expressly
provided therein to be irrevocable and unless otherwise made irrevocable by law.
Section 3.8. Action by Written Consent. Any action required or permitted
-------------------------
to be taken at any meeting of the Members may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the Members entitled to vote with respect to the
3
<PAGE>
subject matter thereof, and such consent shall have the same force and effect as
a unanimous vote of Members.
Section 3.9. Meetings by Conference Telephone. Members may participate in
--------------------------------
and hold meetings of Members by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV.
MEMBERSHIP CAPITAL CONTRIBUTIONS
--------------------------------
Section 4.1. Capital Contributions. The initial capital contribution of
---------------------
each Member shall be as set forth in that certain Contribution Agreement dated
effective September 1, 1997, by and among Prime, AK Associates, Inc., Lawrence
Sodomire, Robert Bachman and the Company.
Section 4.2. Additional Contributions. No additional capital
------------------------
contributions shall be required of any Member without the approval of all the
Members to raise additional capital proportionately as to each Member.
Section 4.3. Loans from Members. If, in the reasonable discretion of the
------------------
Managers, additional funds are needed for the operations of the Company, and the
unanimous approval required by Section 4.2 cannot be obtained, upon the approval
of the Managers, any Member may (but shall not be obligated to) advance funds in
the form of a temporary loan to the Company due upon demand. All Members' loans
shall bear interest at a variable, per annum rate equal to the Prime rate (as
quoted in The Wall Street Journal, Southwest edition, from time-to-time), plus
----
three percent (3%), compounded annually, but in no event in excess of the
maximum rate of interest allowable under applicable law.
ARTICLE V.
DISTRIBUTION TO MEMBERS
-----------------------
The Managers shall determine, in their sole discretion, the amount and
timing of all distributions from the Company. Notwithstanding the foregoing, the
Members agree that any available cash accumulated by the Company in excess of a
reserve equal to the reasonably projected cash operating needs of the Company
for six (6) months, shall be distributed to the Members no less frequently than
the end of each calendar quarter. Distributions shall be divided among the
Members in accordance with their Membership Interests. Distributions in kind
shall be made on the basis of agreed value as determined by the Members.
Notwithstanding the foregoing, the Company may not make a distribution to its
Members to the extent that, immediately after giving effect to the distribution,
all liabilities of the Company, other than liabilities to the Members with
respect to their interests and liabilities for which the recourse of
4
<PAGE>
creditors is limited to specified property of the Company, exceed the fair value
of the Company assets; except that the fair value of property that is subject to
liability for which recourse of creditors is limited, shall be included in the
Company assets only to the extent that the fair value of the property exceeds
that liability.
ARTICLE VI.
ALLOCATION OF NET PROFITS AND LOSSES FOR TAX PURPOSES
-----------------------------------------------------
For accounting and income tax purposes, all items of income, gain, loss,
deduction, and credit of the Company for any taxable year shall be allocated
among the Members in accordance with their respective Membership Interests,
except as may be otherwise required by the Internal Revenue Code of 1986, as
amended. However, any amortization expense incurred by the Company as a result
of amortizing any goodwill created upon the initial contribution by Prime of
assets to the Company at the inception of the Company shall be allocated solely
to Prime.
ARTICLE VII.
DISSOLUTION AND WINDING UP
--------------------------
Section 7.1. Dissolution. The Company shall be dissolved upon the first
-----------
of the following to occur:
(a) Forty (40) years from the date of filing the Articles of Organization
of the Company;
(b) Written consent of all Members to dissolution;
(c) The bankruptcy of a Member, unless there is at least one remaining
Member and such Member or, if more than one remaining Member, all remaining
Members agree to continue the Company and its business.
Section 7.2. Winding Up. Unless the Company is continued pursuant to
----------
Section 1(c) of this Article VII., in the event of dissolution of the Company,
the Managers shall wind up the Company's affairs as soon as reasonably
practicable. On the winding up of the Company, the Managers shall pay and/or
transfer the assets of the Company in the following order:
(a) In discharging liabilities (including loans from Members) and the
expenses of concluding the Company's affairs;
(b) The balance, if any, shall be divided between the Members in accordance
with the Members' Membership Interests.
5
<PAGE>
ARTICLE VIII.
MANAGERS
--------
Section 8.1. Selection of Managers. Management of the Company shall be
---------------------
vested in the Managers. Initially, the Company shall have five (5) Managers,
being Michael S. Madler, Vincent Prendergast, Cheryl Williams (as the initial
Manager designees of Prime), Bachman and Sodomire (as the initial Manager
designees of AK). Thereafter, for so long as there are five (5) Managers, Prime
shall be entitled to designate three (3) of the Managers and AK shall be
entitled to designate the remaining two (2) of the Managers. Each of the Members
agrees to vote its respective Membership Interests to elect those persons as
Managers who the other Member designates as their Manager designees, and to
remove any Manager designees of the other Member which the other Member
indicates it wishes to have removed as Managers. However, the Members may, by
unanimous vote of all Members, from time to time, change the number of Managers
of the Company and remove or add Managers accordingly. A Manager shall serve as
a Manager until removed pursuant to Section 2 or 3 of this Article VIII.
Managers need not be residents of the State of Texas or Members of the Company.
Section 8.2. Resignations. Each Manager shall have the right to resign at
------------
any time upon written notice of such resignation to the Members. Unless
otherwise specified in such written notice, the resignation shall take effect
upon the receipt thereof, and acceptance of such resignation shall not be
necessary to make same effective.
Section 8.3. Removal of Managers. Any Manager may be removed, for or
-------------------
without cause, though his term may not have expired, by the unanimous vote of
all Members; provided each Member agrees to vote its respective Membership
Interests for the removal of any of the Manager designees of the other Member
upon the request of the other Member that such Manager designee be removed.
Section 8.4. General Powers. The business of the Company shall be managed
--------------
by its Managers, which may each exercise any and all powers of the Company and
do any and all such lawful acts and things as are not by the Act, the Articles
of Organization or by these Regulations directed or required to be exercised or
done by the Members, including, but not limited to, contracting for or incurring
on behalf of the Company debts, liabilities and other obligations, without the
consent of any other person, except as otherwise provided herein.
Section 8.5. Place of Meetings. The Managers of the Company may hold
-----------------
their meetings, both regular and special, either within or without the State of
Texas.
Section 8.6. Annual Meetings. The annual meeting of the Managers shall be
---------------
held without further notice immediately following the annual meeting of the
Members, and at the same place, unless by unanimous consent of the Managers that
such time or place shall be changed.
Section 8.7. Regular Meetings. Regular meetings of the Managers may be
----------------
held without notice at such time and place as shall from time to time be
determined by the Managers.
6
<PAGE>
Section 8.8. Special Meetings. Special meetings of the Mangers may be
----------------
called by any Manager on seven (7) days notice to each Manager, with such notice
to be given personally, by mail or by telecopy, telegraph or mailgram.
Section 8.9. Quorum and Voting. At all meetings of the Managers the
-----------------
presence of at least a majority of the number of Managers shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the
affirmative vote of at least a majority of the Managers present at any meeting
at which there is a quorum shall be the act of the Managers, except as may be
otherwise specifically provided by the Act, the Articles of Organization or
these Regulations. If a quorum shall not be present at any meeting of Managers,
the Managers present there may adjourn the meeting from time to time without
notice other than announcement at the meeting, until a quorum shall be present.
Section 8.10. Committees. The Managers may, by resolution passed by a
----------
majority of the Managers, designate committees, each committee to consist of one
or more Managers, which committees shall have such power and authority and shall
perform such functions as may be provided in such resolution. Such committee or
committees shall have such name or names as may be designated by the Managers
and shall keep regular minutes of their proceedings and report the same to the
Managers when required.
Section 8.11. Compensation of Managers. The Members shall have the
------------------------
authority to fix the compensation of Managers and such compensation may include
expenses.
Section 8.12. Action by Written Consent. Any action required or permitted
-------------------------
to be taken at any meeting of the Managers or of any committee designated by the
Managers may be taken without a meeting if written consent, setting forth the
action so taken, is signed by all the Managers or of such committee, and such
consent shall have the same force and effect as a unanimous vote at a meeting.
Section 8.13. Meetings by Conference Telephone. Managers or members of
--------------------------------
any committee designated by the Managers may participate in and hold a meeting
of the Managers or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
Section 8.14. Liability of Managers. No Manager of the Company shall be
---------------------
personally liable for any debts, liabilities, or obligations of the Company,
including under a judgment, decree, or order of the court.
Section 8.15. Specific Power of Managers. The Managers shall have the
--------------------------
authority to enter into and execute all documents in relation to the formation
of the Company including, but not limited to, issuance of the Articles of
Organization and these Regulations.
7
<PAGE>
ARTICLE IX.
NOTICES
-------
Section 9.1. Form of Notice. Whenever under the provisions of the Act,
--------------
the Articles of Organization or these Regulations notice is required to be given
to any Manager or Member, and no provision is made as to how such notice shall
be given, notice shall not be construed to mean personal notice only, but any
such notice may also be given in writing, by mail, postage prepaid, addressed to
such Manager or Member at such address as appears on the books of the Company,
or by telecopy, telegraph or mailgram. Any notice required or permitted to be
given by mail shall be deemed to be given three (3) days after it is deposited,
postage prepaid, in the United States mail as aforesaid.
Section 9.2. Waiver. Whenever any notice is required to be given to any
------
Manager or Member of the Company under the provision of the Act, the Articles of
Organization or these Regulations, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether signed before or after the
time stated in such waiver, shall be deemed equivalent to the giving of such
notice.
ARTICLE X.
OFFICERS
--------
All Managers are officers of the Company. The Managers may designate one
or more persons who are not Managers of the Company to serve as officers and may
designate the titles of all officers. The initial officers of the Company shall
be: Michael S. Madler, President; Cheryl Williams, Secretary and Chief
Financial Officer; Robert Bachman, Vice President; and Lawrence Sodomire, Vice
President. Unless otherwise provided in a resolution of the Members or Managers
the officers of the Company shall have the powers designated with respect to
such offices under the Texas Business Corporation Act, and any successor
statute, as amended from time-to-time.
ARTICLE XI.
INDEMNITY
---------
Section 11.1. Indemnification. The Company shall indemnify its Managers,
---------------
officers, employees, agents and others as fully as, and to the same extent, a
corporation may indemnify its directors, officers, employees and agents under
the Texas Business Corporation Act, now in effect or hereafter amended. The
Company shall have the power to purchase and maintain liability insurance
coverage for those persons as, and to the fullest extent, permitted by the Act,
as presently in effect and as may be hereafter amended.
8
<PAGE>
Section 11.2. Indemnification Not Exclusive. The rights of
-----------------------------
indemnification and reimbursement provided for in Section 11.1 of this Article
XI. shall not be deemed exclusive of any other rights to which any such Manager,
officer, employee or agent may be entitled under the Articles of Organization,
any Regulations, agreement or vote of Members, or as a matter of law or
otherwise.
ARTICLE XII.
MISCELLANEOUS
-------------
Section 12.1. Fiscal Year. The fiscal year of the Company shall be fixed
-----------
by resolution of the Managers.
Section 12.2. Records. At the expense of the Company, the Managers shall
-------
maintain records and accounts of all operations of the Company. At a minimum,
the Company shall keep at its principal place of business the following records:
(a) A current list of the name and last known mailing address of each
Member;
(b) A current list of each Member's Membership Interest;
(c) A copy of the Articles of Organization and Regulations of the Company,
and all amendments thereto, together with executed copies of any powers of
attorney;
(d) Copies of the Federal, state, and local income tax returns and reports
for the Company's six most recent tax years; and
(e) Correct and complete books and records of account of the Company.
Section 12.3. Seal. The Company may by resolution of the Managers adopt
----
and have a seal, and said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any manner reproduced. Any officer of the
Company shall have authority to affix the seal to any document requiring it.
Section 12.4. Agents. Every Manager and Officer is an agent of the
------
Company for the purpose of the business. The act of a Manager or Officer,
including the execution in the name of the Company of any instrument for
carrying on in the usual way the business of the Company, binds the Company.
Section 12.5. Checks. All checks, drafts and orders for the payment of
------
money, notes and other evidences of indebtedness issued in the name of the
Company shall be signed by such officer, officers, agent or agents of the
Company and in such manner as shall from time to time be determined by
resolution of the Managers. In the absence of such determination by the
Mangers, such instruments shall be signed by the Treasurer or the Secretary and
countersigned by the President or a Vice President of the Company, if the
Company has such officers.
9
<PAGE>
Section 12.6. Deposits. All funds of the Company shall be deposited from
--------
time to time to the credit of the Company in such banks, trust companies or
other depositories as the Mangers may select.
Section 12.7. Annual Statement. The Managers shall present at each annual
----------------
meeting, and, when called for by vote of the Members, at any special meeting of
the Members, a full and clear statement of the business and condition of the
Company.
Section 12.8. Financial Statements. As soon as practicable after the end
--------------------
of each fiscal year of the Company, a balance sheet as at the end of such fiscal
year, and a profit and loss statement for the period ended, shall be distributed
to the Members, along with such tax information (including all information
returns) as may be necessary for the preparation of each Member of its Federal,
state and local income tax returns. The balance sheet and profit and loss
statement referred to in the previous sentence may be as shown on the Company's
federal income tax return. Any Member shall be entitled to receive, upon written
request and after the Company is provided with a reasonable period to comply,
any financial statements of the Company as of and for the period ended on any
month, calendar quarter or annual period; and the Members shall have access,
upon request and reasonable advance written notice, to all books, records and
accounts of the Company and all information and documents related thereto.
ARTICLE XIII.
AMENDMENTS
----------
Section 13.1. Amendments. These Regulations may be altered, amended or
----------
repealed and new Regulations may be adopted by the vote of a majority of the
Membership Interests of the Members, at any regular meeting or at any special
meeting called for that purpose.
Section 13.2. When Regulations Silent. It is expressly recognized that
-----------------------
when the Regulations are silent or in conflict with the requirements of the Act
as to the manner of performing any Company function, the provisions of the Act
shall control.
10
<PAGE>
SIGNATURE PAGE TO
REGULATIONS
IN WITNESS WHEREOF, the undersigned Members hereby adopt these Regulations
as the Regulations of the Company, effective as of the 1st day of September,
1997.
PRIME KIDNEY STONE TREATMENT, INC.
By: /s/ Michael S. Madler
---------------------------------------------
Michael S. Madler, President
AK ASSOCIATES, INC.
By: /s/ Robert Bachman
---------------------------------------------
Printed Name: Robert Bachman
-----------------------------------
Title: Vice President
-----------------------------------------
11
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EXHIBIT A
OWNERSHIP INTERESTS
-------------------
NAME OWNERSHIP PERCENTAGE
---- --------------------
Prime Kidney Stone Treatment, Inc. 75%
AK Associates, Inc. 25%
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EXHIBIT-B
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (this "Assignment") is made and
entered into effective the 1st day of September, 1997 between and among AK
Associates, Inc., an Illinois corporation ("AK"), Prime Kidney Stone Treatment,
Inc., a New Jersey corporation ("Prime"), and AK Associates, L.L.C., a Texas
limited liability company ("Newco").
For good and valuable consideration, and pursuant to and in accordance with
the terms of that certain Contribution Agreement (the "Contribution Agreement")
made and entered into effective the 1st day of September, 1997, between and
among AK, Prime, Robert Bachman, Lawrence Sodomire, and Newco, the parties
hereto agree as follows:
1. AK hereby assigns, transfers and sets over to Newco all of AK's right,
title and interest in and to all of AK's undivided twenty-five percent (25%)
interest in the Assets (as defined in the Contribution Agreement), and Newco
hereby accepts such assignment and transfer.
2. Prime hereby assigns, transfers and sets over to Newco all of Prime's
right, title and interest in and to all of Prime's undivided seventy-five
percent (75%) interest in the Assets (as defined in the Contribution Agreement),
and Newco hereby accepts such assignment and transfer.
3. Newco hereby assumes, accepts and agrees to discharge and perform (i)
the obligations of AK specifically described on Exhibit-A hereto which accrue on
or after September 1, 1997, (ii) those certain trade payables on open account
incurred in the ordinary course of AK's business since September 1, 1997 from
unrelated parties, and (iii) obligations accruing after September 1, 1997 under
contracts for jobs in progress or not yet begun (which jobs Newco agrees to
complete according to the terms of such contracts). With respect to any lease
obligations reflected on Exhibit-A, and any contracts described in clause (iii)
of the preceding sentence, it is agreed that Newco will only be assuming
obligations thereunder which accrue on or after September 1, 1997, and Newco
will have no responsibility whatsoever for any breaches or defaults which
occurred prior to the Closing Date (as defined in the Contribution Agreement),
or for obligations accruing prior to September 1, 1997.
4. Except for those certain obligations specifically assumed by Newco
pursuant to paragraph 3 above, no party hereto is assuming any debts,
liabilities or obligations of any other party, person or entity whatsoever
pursuant to this Assignment, and any and all debts, liabilities and obligations
of AK, whether known or unknown, absolute, contingent or otherwise (including,
<PAGE>
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 the
Contribution Agreement and any liabilities arising from any litigation or civil,
criminal or regulatory proceeding involving or related to AK or its business)
shall remain the sole responsibility of AK.
5. This Assignment has been executed pursuant to, and in connection with,
the Contribution Agreement and the Closing (as defined therein) of the
transactions contemplated thereby and should be construed consistently
therewith. In the event of any conflict between the terms of this Assignment
and the Contribution Agreement, the terms of the Contribution Agreement shall
control.
2
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SIGNATURE PAGE TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Assignment to be executed
by their duly authorized representatives effective September 1, 1997.
AK: AK ASSOCIATES, INC.
By: /s/ Robert Bachman
------------------------------
Printed Name: Robert Bachman
--------------------
Title: Vice President
----------------------
PRIME: PRIME KIDNEY STONE TREATMENT
INC.
By: /s/ Michael S. Madler
------------------------------
Michael S. Madler, President
NEWCO: AK ASSOCIATES, L.L.C.
By: /s/ Michael S. Madler
------------------------------
Michael S. Madler, President
and
By: /s/ Robert Bachman
------------------------------
Robert Bachman, Vice President
3
<PAGE>
ARTICLES OF ORGANIZATION
OF
AK ASSOCIATES, L.L.C.
The undersigned natural person of the age of eighteen years or more, acting
as the sole organizer of a limited liability company (the "Company") under the
Texas Limited Liability Company Act, does hereby adopt the following Articles of
Organization for such limited liability company:
ARTICLE I.
The name of the Company is AK Associates, L.L.C.
ARTICLE II.
The period of its duration is forty (40) years from the date of the filing
of these Articles of Organization with the Secretary of State of Texas.
ARTICLE III.
The purpose for which the Company is organized is to transact any and all
lawful business for which limited liability companies may be organized under the
Texas Limited Liability Company Act.
ARTICLE IV.
The street address of the Company's initial registered office is 1301
Capital of Texas Highway, Suite C-300, Austin, Texas 78746, and the name of its
initial registered agent at such address is Michael S. Madler.
<PAGE>
ARTICLE V.
The Company is to be managed by managers. The names and addresses of the
persons who are to serve as managers until the first annual meeting of the
members or until their successors are elected and qualified are:
Michael S. Madler 1301 Capital of Texas Hwy.
Suite C-300
Austin, Texas 78746
Vincent Prendergrast 1301 Capital of Texas Hwy.
Suite C-300
Austin, Texas 78746
Cheryl Williams 1301 Capital of Texas Hwy.
Suite C-300
Austin, Texas 78746
Robert Bachman 19701 South 97th Avenue
Mokena, Illinois 60448
Lawrence Sodomire 19701 South 97th Avenue
Mokena, Illinois 60448
ARTICLE VI.
No manager shall be liable to the Company or its members for monetary
damages for an act or omission in the manager's capacity as a manager, except
that this Article does not eliminate or limit the liability of a manager to the
extent the manager is found liable for:
(1) a breach of the manager's duty of loyalty to the Company or its
members;
(2) an act or omission not in good faith that constitutes a breach of duty
of such manager to the Company
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(3) an act or omission not in good faith that constitutes a breach of duty
of the manager to the Company or an act or omission that involves intentional
misconduct or a knowing violation of the law;
(4) a transaction from which the manager received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of the
manager's office; or
(5) an act or omission for which the liability of the manager is expressly
provided by an applicable statute.
Any repeal or modification of this Article by the members of the Company
shall be prospective only and shall not adversely affect any limitation on the
liability of a manager of the Company existing at the time of such repeal or
modification.
ARTICLE VII.
The name and address of the organizer are:
Name Address
---- --------
Tim LaFrey 816 Congress Avenue
Suite 1900
Austin, Texas 78701
EXECUTED BY THE UNDERSIGNED ORGANIZER on this 3rd day of October, 1997.
/s/ Tim LaFrey
---------------------------------
Tim LaFrey
3
AGREEMENT OF LIMITED PARTNERSHIP
OF
PACIFIC MEDICAL LIMITED PARTNERSHIP
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
PACIFIC MEDICAL LIMITED PARTNERSHIP
TABLE OF CONTENTS
Article Heading Page
1. FORMATION..........................................1
2. NAME...............................................1
3. OFFICES............................................2
4. PURPOSE............................................2
5. TERM...............................................2
6. CERTAIN DEFINED TERMS..............................2
7. CAPITAL CONTRIBUTIONS..............................6
8. GUARANTIES.........................................7
9. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF THE
LIMITED PARTNERS...................................7
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
GENERAL PARTNER....................................7
11. ADMISSION OF LIMITED PARTNERS......................8
12. CAPITAL ACCOUNTS...................................8
13. ALLOCATIONS........................................9
14. DISTRIBUTIONS.....................................12
15. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS........13
16. LIMITED LIABILITY.................................13
17. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS...13
18. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS
ON CERTAIN EVENTS.................................17
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19. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST................................22
20. TERMINATION OF THE SERVICES OF THE
GENERAL PARTNER...................................22
21. MANAGEMENT AND OPERATION OF BUSINESS..............23
22. RESERVES..........................................25
23. INDEMNIFICATION AND EXCULPATION OF THE GENERAL
PARTNER...........................................25
24. DISSOLUTION OF THE PARTNERSHIP....................26
25. DISTRIBUTION UPON DISSOLUTION.....................27
26. BOOKS OF ACCOUNT, RECORDS AND REPORTS.............28
27. NOTICES...........................................29
28. AMENDMENTS........................................29
29. LIMITATIONS ON AMENDMENTS.........................29
30. MEETINGS, CONSENTS AND VOTING.....................29
31. SUBMISSIONS TO THE LIMITED PARTNERS...............30
32. ADDITIONAL DOCUMENTS..............................30
33. SURVIVAL OF RIGHTS................................30
34. INTERPRETATION AND GOVERNING LAW..................30
35. SEVERABILITY......................................31
36. AGREEMENT IN COUNTERPARTS.........................31
37. THIRD PARTIES.....................................31
38. POWER OF ATTORNEY.................................31
39. ARBITRATION.......................................32
40. CREDITORS.........................................32
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Schedule A............... Schedule of Partnership Interests
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THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED PARTNERSHIP
AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, UNDER THE HAWAII UNIFORM
SECURITIES ACT (MODIFIED), AS AMENDED, THE ARKANSAS SECURITIES ACT, AS AMENDED,
THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, AS AMENDED, THE LOUISIANA
SECURITIES LAW, AS AMENDED, THE TEXAS SECURITIES ACT OF 1957, AS AMENDED, OR
SIMILAR LAWS OR ACTS OF OTHER STATES IN RELIANCE UPON EXEMPTIONS UNDER THOSE
ACTS (THE "STATE LAWS"). THE SALE OR OTHER DISPOSITION OF THE LIMITED
PARTNERSHIP INTERESTS IS RESTRICTED AS STATED IN THE LIMITED PARTNERSHIP
AGREEMENT, AND IN ANY EVENT IS PROHIBITED UNLESS THE LIMITED PARTNERSHIP
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE LIMITED PARTNERSHIP AND ITS
COUNSEL THAT SUCH SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE APPLICABLE STATE LAWS. BY
ACQUIRING THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED
PARTNERSHIP AGREEMENT, THE LIMITED PARTNERS REPRESENT THAT THEY WILL NOT SELL OR
OTHERWISE DISPOSE OF THEIR RESPECTIVE LIMITED PARTNERSHIP INTERESTS WITHOUT
REGISTRATION OR OTHER COMPLIANCE WITH THE AFORESAID ACTS AND THE RULES AND
REGULATIONS ISSUED THEREUNDER.
AGREEMENT
OF LIMITED PARTNERSHIP
OF PACIFIC MEDICAL
LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP is made as of January
23, 1995, by and among LITHOTRIPTERS, INC., a North Carolina corporation, and
the persons listed on Schedule A attached hereto as the Limited Partners.
1. FORMATION.
The Partnership was formed filing in the Office of the
Secretary of State of Hawaii on December 14, 1995 a Certificate of Limited
Partnership in accordance with the provisions of the Act.
2. NAME.
2.1 The name of the Partnership is "Pacific Medical Limited
Partnership."
2.2 The Partnership business shall be conducted under such
names as the General Partner may from time to time deem necessary or advisable,
provided that appropriate amendments to this Agreement and all necessary filings
under applicable assumed or fictitious name statutes or the Act are first
obtained.
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3. OFFICES.
3.1 The principal office of the Partnership shall be at 2008
Litho Place, Fayetteville, North Carolina 28304, or at such other place as the
General Partner may, from time to time, designate by notice to the Limited
Partners (the "Records Office").
3.2 The Partnership may have such additional offices as the
General Partner may, from time to time, deem necessary or advisable.
4. PURPOSE.
The purpose and business of the Partnership shall be to
operate a LithostarTM extracorporeal shock-wave lithotripter (or any other renal
stone treatment equipment) for lithotripsy of renal stones primarily in a
designated service area consisting of the island of Oahu, Hawaii or in such
other location(s) within or outside such state as the General Partner may
determine, in its sole discretion, to be in the best interests of the
Partnership and to engage in any and all activities incidental or related to the
foregoing, including biliary lithotripsy if the same is ever approved by the
FDA, upon and subject to the terms and conditions of this Agreement.
5. TERM.
The Partnership shall terminate on December 31, 2040, unless
sooner terminated as herein provided.
6. CERTAIN DEFINED TERMS.
Certain terms used in this Agreement shall have the following
meanings:
Act. The Act means the Hawaii Uniform Limited Partnership
Act, as then in effect.
Affiliate. An Affiliate is (i) any person, partnership,
corporation, association or other legal entity ("person") directly or indirectly
controlling, controlled by or under common control with another person; (ii) any
person owning or controlling 10% or more of the outstanding voting interest of
such other person; (iii) any officer, director or partner of such person; and
(iv) if such other person is an officer, director or partner, any entity for
which such person acts in such capacity.
Agreement. This Agreement of Limited Partnership, as the same
may be amended from time to time.
Bank. First-Citizens Bank & Trust Company.
Capital Account. The Partnership capital account of a Partner
as computed pursuant to Article 12 of this Agreement.
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Capital Contributions. All capital contributions made by a
Partner or his predecessor in interest which shall include, without limitation,
contributions made pursuant to Article 7 of this Agreement.
Capital Transaction. Any transaction which, were it to
generate proceeds, would produce Partnership Sales Proceeds or Partnership
Refinancing Proceeds.
Coach. The new or reconditioned self-propelled mobile vehicle
or tractor-trailer upfitted to house the LithostarTM. The Coach will be acquired
by the Partnership with the proceeds of the Loan, together with the proceeds
from the sale of the Units in the event the tractor-trailer model is purchased.
Code. The Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent, superseding revenue laws.
Equipment. The initial equipment to be acquired by the
Partnership for the operation of the LithostarTM Mobile System. The initial
equipment to be used in the operation of the LithostarTM Mobile System will
include the LithostarTM, the Coach and miscellaneous medical equipment and
supplies.
FDA. The Food and Drug Administration.
General Partner. The General Partner of the Partnership,
LITHOTRIPTERS, INC., a North Carolina corporation controlled by William R.
Jordan, M.D.
Guaranty. The Guaranty Agreement pursuant to which each
Limited Partner will guarantee a portion of the Partnership's obligation to the
Bank under the Loan. The form of the Guaranty is included in the Subscription
Packet accompanying the Memorandum.
Initial Limited Partner. Dr. William R. Jordan, a
resident of North Carolina and the majority shareholder of the General Partner.
The Initial Limited Partner is to be the only limited partner of the Partnership
until such time as the new Limited Partners are admitted to the Partnership, at
which time the Initial Limited Partner shall withdraw from the Partnership.
Limited Partners. The Limited Partners are those investors in
the Units admitted to the Partnership and any person admitted as a substitute
Limited Partner in accordance with the provisions of this Agreement.
LithostarTM. The new or reconditioned LithostarTM model
extracorporeal shock wave lithotripter manufactured by Siemens to be acquired by
the Partnership with the proceeds of the Loan.
LithostarTM Mobile System. The Coach with the installed and
operational LithostarTM.
Loan. The loan up to $1,652,014 from the Bank to the
Partnership. A portion of the Loan proceeds will be used by the Partnership to
(i) acquire the LithostarTM (up to $945,000), (ii) acquire and upfit the Coach
(up to $390,590), (iii) pay the Hawaii use tax on the Coach and the LithostarTM
(up to $53,424) and (iv) ship the Coach and the Lithostar(TM) to Hawaii (up to
$12,500). The
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remainder of the Loan proceeds will be used as initial start-up and working
capital (up to $250,000). The maximum amount of the Loan proceeds will be
reduced if the Partnership purchases a reconditioned Coach at a lower cost. The
Loan will be secured by the LithostarTM Mobile System, the Partnership's
accounts receivable and other Partnership assets, the guaranties of the General
Partner (and its shareholders), and the Limited Partner Guaranties.
Losses. The net loss (including Net Losses from Capital
Transactions) of the Partnership for each Year of the Partnership as determined
for federal income tax purposes.
Majority in Interest of the Limited Partners. The Limited
Partners who hold more than 50% of the Limited Partner Percentage Interests in
the Partnership.
Memorandum. The Confidential Private Placement Memorandum of
the Partnership dated January 8, 1996, as amended or as supplemented.
Net Gains from Capital Transactions. The gains realized by the
Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which assets shall include
Code Section 1231 assets) or as a result of or upon the damage or destruction of
such capital assets.
Net Losses from Capital Transactions. The losses realized by
the Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which shall include Code
Section 1231 assets) or as a result of or upon the damage or destruction of such
capital assets.
Nonrecourse Deductions. A deduction as set forth in Treasury
Regulations Section 1.704-2(b)(1). The amount of Nonrecourse Deductions for a
given Year equals the excess, if any, of the net increase, if any, in the amount
of Partnership Minimum Gain during such Year over the aggregate amount of any
Distributions during such Year of proceeds of a Nonrecourse Liability that are
allocable to an increase in Partnership Minimum Gain, determined according to
the provisions of Treasury Regulations Section 1.704-2(h).
Nonrecourse Liability. Any Partnership liability (or portion
thereof) for which no Partner bears the "economic risk of loss," within the
meaning of Treasury Regulations Section 1.704- 2(i).
Partners. The General Partner and the Limited Partners,
collectively, where no distinction is required by the context in which the term
is used herein.
Partner Minimum Gain. An amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704- 2(i).
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Partner Nonrecourse Debt. Any nonrecourse debt (for the
purposes of Treasury Regulations Section 1.1001-2) of the Partnership for which
any Partner bears the "economic risk of loss," within the meaning of Treasury
Regulations Section 1.752-2.
Partner Nonrecourse Deductions. Deductions as described in
Treasury Regulations Section 1.704-2(i)(2). The amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for any Year equals the
excess, if any, of the net increase, if any, in the amount of Partner Minimum
Gain attributable to such Partner Nonrecourse Debt during such Year over the
aggregate amount of any Distributions during that Year to the Partner that bears
the economic risk of loss for such Partner Nonrecourse Debt to the extent such
Distributions are from the proceeds of such Partner Nonrecourse Debt and are
allocable to an increase in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704- 2(i).
Partnership. Pacific Medical Limited Partnership, a Hawaii
limited partnership.
Partnership Cash Flow. For the applicable period the excess,
if any, of (A) the sum of (i) all gross receipts from any source for such
period, other than from Partnership loans, Capital Transactions and Capital
Contributions, and (ii) any funds released by the Partnership from previously
established reserves, over (B) the sum of (i) all cash expenses paid by the
Partnership for such period; (ii) the amount of all payments of principal on
loans to the Partnership; (iii) capital expenditures of the Partnership; and
(iv) such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities and contingencies of the Partnership; provided, however, that
the amounts referred to in (B)(i), (ii) and (iii) above shall be taken into
account only to the extent not funded by Capital Contributions, loans or paid
out of previously established reserves. Such term shall also include all other
funds deemed available for distribution and designated as "Partnership Cash
Flow" by the General Partner.
Partnership Interest. The interest of a Partner in the
Partnership as defined by the Act and this Agreement.
Partnership Minimum Gain. Gain as defined in Treasury
Regulations Section 1.704-2(d).
Partner Nonrecourse Deduction. Deductions as described in
Treasury Regulations Section 1.704-2(i)(2). The amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for any Year equals the
excess, if any, of the net increase, if any, in the amount of Partner Minimum
Gain attributable to such Partner Nonrecourse Debt during such Year over the
aggregate amount of any Distributions during that Year to the Partner that bears
the economic risk of loss for such Partner Nonrecourse Debt to the extent such
Distributions are from the proceeds of such Partner Nonrecourse Debt and are
allocable to an increase in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704- 2(i).
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Partnership Refinancing Proceeds. The cash realized from the
refinancing of Partnership assets after retirement of any secured loans and less
(i) payment of all expenses relating to the transaction and (ii) establishment
of such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements, or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities or contingencies of the Partnership.
Partnership Sales Proceeds. The cash realized from the sale,
exchange, casualty or other disposition of all or a portion of Partnership
assets after the retirement of all secured loans and less (i) the payment of all
expenses related to the transaction and (ii) establishment of such reasonable
reserves as the General Partner shall deem necessary or prudent to set aside for
future repairs, improvements, or equipment replacement or additions, or to meet
working capital requirements or foreseen or unforeseen future liabilities or
contingencies of the Partnership.
Percentage Interest. The interest of each Partner in the
Partnership, to be determined in the case of a Limited Partner by reference to
his Unit ownership based upon the Limited Partners holding an aggregate 80%
Percentage Interest in the Partnership, with each Unit sold representing an
initial 1% interest. The General Partner will own a 20% Percentage Interest in
the Partnership. The Partners' Percentage Interests in the Partnership as of the
date hereof are as set forth in Schedule A attached hereto. The Percentage
Interest of each Partner shall be adjusted as provided in Article 18.6.3.
Profit. The net income of the Partnership (including Net
Gains from Capital Transactions) for each Year of the Partnership as determined
for federal income tax purposes.
Pro Rata Basis. In connection with an allocation or
distribution, an allocation or distribution in proportion to the respective
Percentage Interests of the class of Partners to which reference is made.
Qualified Income Offset Item. An adjustment, allocation or
distribution described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) unexpectedly received by a
Partner.
Sales Commission. The $270 sales commission paid to Medtech
Investments, Inc. for each Unit sold, other than Units sold to the General
Partner and its Affiliates.
Service. The Internal Revenue Service.
Siemens. Siemens Medical Systems, Inc. and its Affiliates.
Units. The 80 equal limited partner interests in the
Partnership offered pursuant to the Memorandum for a price per Unit of $2,500 in
cash, plus a personal guaranty of 1% of the Partnership's obligations under the
Loan (up to a $16,520.14 principal guaranty obligation).
Year of the Partnership. An annual accounting period ending on
December 31 of each year during the term of the Partnership.
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7. CAPITAL CONTRIBUTIONS.
7.1 On or before the date of this Agreement, the General
Partner will contribute to the capital of the Partnership cash in an amount
equal to $__________.
7.2 Each Limited Partner hereby agrees to contribute and shall
contribute to the capital of the Partnership on the date of his admission to the
Partnership the amount set forth opposite his name on Schedule A attached hereto
in cash.
7.3 Except as otherwise provided herein, no interest shall be
paid on any contribution to the capital of the Partnership.
8. GUARANTIES.
Each Partner agrees to execute and deliver to the Partnership
on the date of his admission to the Partnership a Guaranty agreement in the
amount set forth opposite his or her name on Schedule A attached hereto.
9. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF
THE LIMITED PARTNERS.
The obligations of the Limited Partners to make cash Capital
Contributions hereunder are subject to the condition that the representations,
warranties, agreements and covenants of the General Partner set forth in Article
10 of this Agreement are and shall be true and correct or have been and will
have been complied with in all material respects on the date such Capital
Contributions are required to be made, except to the extent that any such
representation or warranty expressly pertains to an earlier date.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE GENERAL PARTNER.
10.1 The General Partner hereby represents and warrants to
the Limited Partners that:
(a) The Partnership is a limited partnership formed in
accordance with and validly existing under the Act and the other
applicable laws of the State of Hawaii;
(b) The interests in the Partnership of the Limited Partners
will have been duly authorized or created and validly issued and the
Limited Partners shall have no personal liability to contribute money
to the Partnership other than the amounts agreed to be contributed by
them in the manner and on the terms set forth in this Agreement,
subject, however, to such limitations as may be imposed under the Act;
(c) No material breach or default adverse to the Partnership
exists under the terms of any other material agreement affecting the
Partnership;
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(d) No material claim or litigation is pending or, to the
knowledge and belief of the General Partner, is threatened against the
General Partner or the Partnership in any court, commission,
administrative body or other authority, which could materially
adversely affect the Partnership, or the ability of the General Partner
to perform any of its obligations contemplated by this Agreement,
except as may be fully covered by liability insurance; and
(e) The General Partner is a North Carolina corporation formed
and existing under the laws of the State of North Carolina.
10.2 The General Partner hereby covenants to the Limited
Partners that:
(a) It will at all times act in a fiduciary manner with
respect to the Partnership, the LithostarTM Mobile System and the
Limited Partners;
(b) Except as provided in Article 19, it will serve as the
General Partner of the Partnership until the Partnership is terminated
without reconstitution;
(c) It will cause the Partnership to carry adequate public
liability, property damage and other insurance as is customary in the
business to be engaged in by the Partnership; and
(d) It will use its best efforts to assure that it meets all
net worth requirements which, in the opinion of counsel for the
Partnership, may, from time to time, be necessary to assure that the
Partnership is classified as a partnership for Federal income tax
purposes.
11. ADMISSION OF LIMITED PARTNERS.
The General Partner may permit the offer and sale of the Units
on the terms and conditions provided in the Memorandum and may admit persons
subscribing for Units as Limited Partners in the Partnership on the terms and
conditions set forth in this Article 11.
(a) The General Partner shall have approved of the admission
of said person in writing on such terms and conditions as the General
Partner shall determine;
(b) Said person shall have executed such documents or
instruments as the General Partner may deem necessary or desirable to
effect his admission as a Limited Partner;
(c) Said person shall have accepted and adopted all of the
terms and provisions of this Agreement, as then amended;
(d) Said person (if a corporation) shall deliver to the
General Partner a certified copy of a resolution of its Board of
Directors authorizing it to become a Limited Partner under the terms
and conditions of this Agreement; and
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(e) Said person upon request shall pay such reasonable
expenses as may be incurred in connection with its admission as a
Limited Partner.
12. CAPITAL ACCOUNTS.
A capital account shall be established for each Partner and
shall at all times be determined and maintained as provided by the Final
Treasury Regulations under Section 704(b) of the Code, as the same may be
amended. A Partner shall not be entitled to withdraw any part of his capital
account or to receive any distribution from the Partnership, except as provided
in Articles 14 and 25.
(a) Each Partners' capital account shall be increased by:
(i)The amount of his Capital Contribution pursuant
to Article 7; and
(ii)The amount of Profits allocated to him pursuant
to Article 13; and
(iii) The Partner's pro rata share (determined in the
same manner as such Partner's share of Profits and Losses
allocated pursuant to Article 13 hereof) of any income or gain
exempt from tax; and
(b) Each Partner's capital account shall be decreased by:
(i) The amount of Losses allocated to him
pursuant to Article 13; and
(ii) The amount of Partnership Cash Flow, Partnership
Sales Proceeds and Partnership Refinancing Proceeds
distributed to him pursuant to Article 14; and
(iii) The Partner's pro rata share of any other
expenditures of the Partnership which are not deductible in
computing Partnership Profits or Losses and which are not
added to the tax basis of any Partnership property, including,
without limitation, expenditures described in Section
705(a)(2)(B) of the Code. The Partner's pro rata share of such
expenditures, other than the Sales Commission, shall be
determined in the same manner as such Partner's share of
Profits and Losses allocated pursuant to Article 13. The
Partner's share of the Sales Commission shall be that amount
allocated to him pursuant to Article 13.
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13. ALLOCATIONS
(a) Nonrecourse Deductions. Nonrecourse Deductions shall
be allocated 20% to the General Partner and 80% to the Limited
Partners on a Pro Rata Basis.
(b) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in
accordance with Treasury Regulation Section 1.704-2(i).
(c) Profits and Losses.
(i) The Profits and Losses of the Partnership shall be
allocated 20% to the General Partner and 80% to the Limited Partners on
a Pro Rata Basis. In allocating Profits and Losses, Net Gains and
Losses from Capital Transactions (a part of Profits and Losses), if
any, shall be allocated first.
(ii) In no event shall Losses be allocated under this Article
13(c) to a Limited Partner if and to the extent that such allocation
would cause, as of the end of the Year, the negative balance in such
Limited Partner's Capital Account to exceed such Limited Partner's
share of Partnership Minimum Gain plus such Limited Partner's share, if
any, of Partner Minimum Gain. Any Losses which are not allocated to the
Limited Partner by virtue of the application of the preceding sentence
shall be allocated to the General Partner. For purposes of this Article
13(c), a Partner's Capital Account shall be treated as reduced by
Qualified Income Offset Items as provided in Article 13(d)(iii). All
items of income, gain, loss, deduction, or credit shall be allocated
among the Partners proportionately. Further, notwithstanding the
foregoing, after giving effect to the special allocations in Article
13(d), the General Partner shall be allocated at least 20% of all items
of income, gain, loss, deduction or credit.
(d) Special Allocations. The following special allocations
shall be made:
(i) Minimum Gain Chargeback. If there is a net decrease in
Partnership Minimum Gain during any Year, each Partner shall be
specially allocated items of Partnership income and gain for such Year
(and, if necessary, subsequent Years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section
1.704-2(g)(2). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated
to each Partner. The items to be so allocated shall be determined in
accordance with Treasury Regulations Section 1.704- 2(f). This Article
13(d)(i) is intended to comply with the minimum gain chargeback
requirement in such Section of the Regulations and shall be interpreted
consistently therewith.
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(ii) Partner Minimum Gain Chargeback. Notwithstanding any
other provision of this Article 13 except Article 13(d)(i), if there is
a net decrease in Partner Minimum Gain attributable to a Partner
Nonrecourse Debt during any Year, each Partner who has a share of the
Partner Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(f),
shall be specially allocated items of Partnership income and gain for
such Year (and, if necessary, subsequent Years) in an amount equal to
such Partner's share of the net decrease in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, to the extent required
by and determined in accordance with Treasury Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations Section
1.704-2(i)(4). This Article 13(d)(ii) is intended to comply with the
minimum gain chargeback requirement in such Section of the Regulations
and shall be interpreted consistently therewith.
(iii) Qualified Income Offset. If any Partner unexpectedly
receives any adjustment, allocation or distribution described in
Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4) through (6) which
causes or increases a deficit balance in such Partner's Capital Account
(adjusted for this purpose in the manner provided in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)), items of Partnership income
and gain shall be specially allocated to each such Partner in an amount
and manner sufficient to eliminate, to the extent required by the
Regulations, the deficit Capital Account of such Partner as quickly as
possible, provided that an allocation pursuant to this Article
13(d)(iii) shall be made if and only to the extent that such Partner
would have a deficit Capital Account after all other allocations
provided for in this Article 13(d) have been tentatively made as if
this Article 13(d)(iii) were not in the Agreement. This provision is
intended to be a "qualified income offset," as defined in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d), such Regulations being
specifically incorporated herein by reference.
(iv) Sales Commission. The Sales Commission shall be allocated
to the Units which are not held by the General Partner and its
Affiliates in proportion to their respective Capital Contributions
represented by such Units (i.e., $270 in Sales Commissions per each
such Unit). The purpose of this Article 13(d)(iv) is to allocate the
Sales Commission to those Partners who actually bore the burden of
paying the Sales Commission.
(e) Ordering Provision. In applying the provisions of Articles
13 and 14 with respect to distributions and allocations, the following
ordering of priorities shall apply:
(i) Capital Accounts shall be deemed to be reduced by
Qualified Income Offset Items.
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(ii) Capital Accounts shall be reduced by Distributions of
Partnership Cash Flow under Article 14(a).
(iii) Capital Accounts shall be reduced by Distributions of
Partnership Sales Proceeds and Partnership Refinancing Proceeds under
Article 14(b).
(iv) Capital Accounts shall be increased by any Minimum Gain
Chargeback under Articles 13(d)(i) and (ii).
(v) Capital Accounts shall be increased by any Qualified
Income Offset under Article 13(d)(iii).
(vi) Capital Accounts shall be reduced by allocations of
Nonrecourse Deductions under Article 13(a).
(vii) Capital Accounts shall be reduced by allocations of
Partner Nonrecourse Deductions under Article 13(b).
(viii) Capital Accounts shall be increased by allocations of
Profits under Article 13(c).
(ix) Capital Accounts shall be reduced by allocations of
Losses under Article 13(c).
To the maximum extent permitted under the Code, allocations of
Profits and Losses shall be modified so that the Partners' Capital
Accounts reflect the amount they would have reflected if adjustments
required by Articles 13(d)(i), (ii) and (iii) had not occurred.
(f) Allocations Between Transferor and Transferee. In the
event of the transfer of all or any part of a Partner's interest (in
accordance with the provisions of this Agreement) in the Partnership at
any time other than at the end of a Year, or the admission of a new
Partner (in accordance with the terms of this Agreement), the
transferring Partner or new Partner's share of the Partnership's
income, gain, loss, deductions and credits, as computed both for
accounting purposes and for Federal income tax purposes, shall be
allocated between the transferor Partner and the transferee Partner (or
Partners), or the new Partner and the other Partners, as the case may
be, in the same ratio as the number of days in such Year before and
after the date of the transfer or admission; provided, however, that if
there has been a sale or other disposition of the assets of the
Partnership (or any part thereof) during such Year, then upon the
mutual agreement of all the Partners (excluding the new Partner and the
transferring Partner), the Partnership shall treat the periods before
and after the date of the transfer or admission as separate Years and
allocate the Partnership's net income, gain, net loss, deductions and
credits for each of such deemed separate Years. Notwithstanding the
foregoing, the Partnership's "allocable cash basis items," as that
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term is used in Section 706(d)(2)(B) of the Code, shall be allocated as
required by Section 706(d)(2) of the Code and the regulations
thereunder.
(g) Tax Withholding. The Partnership shall be authorized to
pay, on behalf of any Partner, any amounts to any federal, state or
local taxing authority, as may be necessary for the Partnership to
comply with tax withholding provisions of the Code or the other income
tax or revenue laws of any taxing authority. To the extent the
Partnership pays any such amounts that it may be required to pay on
behalf of a Partner, such amounts shall be treated as a cash
Distribution to such Partner and shall reduce the amount otherwise
distributable to such Partner.
14. DISTRIBUTIONS.
(a) Distribution of Partnership Cash Flow. Partnership Cash
Flow shall be distributed to the Partners within 60 days after the end
of each Year of the Partnership, or earlier in the discretion of the
General Partner, 20% to the General Partner and 80% to the Limited
Partners on a Pro Rata Basis.
(b) Distribution of Partnership Refinancing Proceeds and
Partnership Sales Proceeds. Partnership Refinancing Proceeds and
Partnership Sales Proceeds shall be distributed to the Partners within
60 days of the Capital Transaction giving rise to such proceeds, or
earlier in the discretion of the General Partner, 20% to the General
Partner and 80% to the Limited Partners on a Pro Rata Basis.
(c) Distribution in Liquidation. Upon liquidation of the
Partnership, all of the Partnership's property shall be sold and
Profits and Losses allocated accordingly. Proceeds from the liquidation
of the Partnership shall be distributed in accordance with Article 25.
15. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
15.1 Management. The Limited Partners shall not take part in
the management of the business, nor transact any business for the Partnership,
nor shall they have power to sign for or to bind the Partnership. The General
Partner may, however, contract with one or more Limited Partners to act as the
local manager of the LithostarTM Mobile System. No Limited Partner may withdraw
from the Partnership except as expressly permitted herein.
15.2 Operation of LithostarTM Mobile System. The Limited
Partners shall not operate or utilize the LithostarTM Mobile System except
pursuant to (i) an Agreement with the Partnership; or (ii) any other arrangement
specifically approved by the General Partner.
16. LIMITED LIABILITY.
No Limited Partner shall be required to make any contribution
to the capital of the Partnership except as set forth in Article 7, nor shall
any Limited Partner in his capacity as such, be bound by, or personally liable
for, any expense, liability or obligation of the Partnership except to the
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extent of his (i) interest in the Partnership; (ii) Guaranties of Partnership
obligations; and (iii) obligation to return distributions made to him under
certain circumstances as required by the Act.
17. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS.
17.1 Transferability.
(a) The term "transfer" when used in this Agreement with
respect to a Partnership Interest includes a sale, assignment, gift,
pledge, exchange, or any other disposition.
(b) Except as otherwise provided herein, the General Partner
shall not at any time transfer or assign its interest or obligation as
General Partner, except that the General Partner may cause to be
admitted to the Partnership additional General Partners in order to
comply with Article 10.2(d).
(c) The Partnership Interest of any Limited Partner shall not
be transferred, in whole or in part, except in accordance with the
conditions and limitations set forth in Articles 17.2 or 18.
(d) The transferee of a Partnership Interest by assignment,
operation of law or otherwise, shall have only the rights, powers and
privileges enumerated in Article 17.3 or otherwise provided by law and
may not be admitted to the Partnership as a Limited Partner except as
provided in Article 17.4 or as a General Partner except as provided in
Article 17.5
(e) Notwithstanding any provision herein to the contrary, the
Partnership Agreement shall in no way restrict the issuance or
transfers of the stock of the General Partner.
17.2 Restrictions on Transfers by Limited Partners.
(a) All or part of a Partnership Interest may be transferred
by a Limited Partner only with the prior written approval of the
General Partner, which approval may be granted or denied in the sole
discretion of the General Partner. Units may only be transferred in
increments of one Unit unless all Units or portions thereof owned by a
Limited Partner are being transferred. In no event may a Partnership
Interest be transferred if such transfer would result in a default
under the Guaranties or a termination of the Partnership under Code
Section 708, nor may a Partnership Interest be transferred to a
"tax-exempt entity" (as defined in Code Section 168(h)) which would
affect the method or manner in which the Partnership may depreciate
Partnership assets.
(b) The General Partner shall not approve any transfer of a
Partnership Interest unless the proposed transferee shall have
furnished the General Partner with a sworn statement that:
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(i) proposes to acquire his Partnership Interest
as a principal, for investment and not with a view to resale
or distribution;
(ii) the proposed transferee meets such requirements
regarding sophistication, income and net worth as required by
applicable state and Federal securities laws;
(iii) the proposed transferee has met such net worth
and income suitability standards as have been established by
the General Partner;
(iv) the proposed transferee recognizes that
investment in the Partnership involves certain risks and has
taken full cognizance of and understands all of the risk
factors related to the purchase of a Partnership Interest; and
(v) the proposed transferee has met all other
requirements of the General Partner for the proposed transfer.
(c) A transfer of a Partnership Interest may be made only if,
prior to the date thereof, the Partnership upon request receives an
opinion of counsel, satisfactory in form and substance to the General
Partner, that neither the offering nor the proposed transfer will
violate any Federal or applicable state securities law or regulations
or any of the provisions of Article 17.2(b) hereof, will prevent the
Partnership from being entitled to use any method of depreciation which
the Partnership might otherwise be entitled to use, or will adversely
affect the status of the Partnership as a partnership for Federal
income tax purposes.
17.3 Rights of Transferee.
Unless admitted to the Partnership in accordance with Article
17.4, the transferee of a Partnership Interest or a part thereof or any right,
title or interest therein shall not be entitled to any of the rights, powers, or
privileges of his predecessor in interest, except that he shall be entitled to
receive and be credited or debited with his proportionate share of Partnership
income, gains, Profits, Losses, deductions, credits or Distributions.
17.4 Admission of Limited Partners.
A General Partner, or the transferee of all or part of the
Partnership Interest of either a General Partner or a Limited Partner, may be
admitted to the Partnership as a Limited Partner upon furnishing to the General
Partner all of the following:
(a) the written approval of a Majority in Interest all of the
Limited Partners except the assignor Partner, or the assignor Partner
alone, which approval may be granted or denied in the sole discretion
of such Partners or Partner (as the case may be);
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(b) the written approval of the General Partner, which
approval may be granted or denied in the sole discretion of the General
Partner;
(c) acceptance, in a form satisfactory to the General Partner,
of all the terms and conditions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
(d) a power of attorney substantially identical to that
contained in Article 38;
(e) such other documents or instruments as may be required in
order to effect his admission as a Limited Partner; and
(f) payment of such reasonable expenses as may be incurred in
connection with his admission as a Limited Partner.
17.5 Admission of General Partners.
A Limited Partner, or the transferee of all or part of the
Partnership Interest of the General Partner, may be admitted to the Partnership
as a general partner upon furnishing to the General Partner all of the
following:
(a) the written approval of both the General Partner and a
Majority in Interest of the Limited Partners, which approval may be
granted or denied in the sole discretion of the Partners;
(b) such financial statements, guarantees or other assurances
as the General Partner may require with regard to the ability of the
proposed general partner to fulfill the financial obligations of a
general partner hereunder;
(c) acceptance, in form satisfactory to the General Partner,
of all the terms and provisions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
(d) a certified copy of a resolution of its Board of Directors
(if it is a corporation) authorizing it to become a general partner
under the terms and conditions of this Agreement;
(e) a power of attorney substantially identical to that
contained in Article 38;
(f) such other documents or instruments as may be required in
order to effect its admission as a general partner; and
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(g) payment of such reasonable expenses as may be incurred in
connection with its admission as a general partner.
Notwithstanding the above, a transferee that controls or is
controlled by the General Partner or one or more of its Affiliates that receives
all or part of the Partnership Interest of the General Partner may be admitted
to the Partnership as a general partner upon complying with all the provisions
of Article 17.5 except for subparagraph 17.5(a). As long as the transferee is
controlled by the General Partner or one or more of its Affiliates, no Limited
Partner consents will be required to admit such transferee as a General Partner
to the Partnership.
17.6 Amendment of Certificate of Limited Partnership and
Qualification.
The General Partner shall take all steps necessary and
appropriate to prepare and record any amendments to the Certificate of Limited
Partnership, as may be necessary or appropriate from time to time to comply with
the requirements of the Act, including, without limitation, upon the admission
to the Partnership of any general partner pursuant to the provisions of Article
17.5, and may for this purpose exercise the power of attorney delivered to the
General Partner pursuant to Article 17.5 or 38. In addition, the General Partner
shall take all steps necessary and appropriate to prepare and record any and all
documents necessary to qualify the Partnership to do business in jurisdictions
where the Partnership is doing business, and may for this purpose exercise the
power of attorney delivered to the General Partner pursuant to Articles 17.4,
17.5 or 38.
17.7 Withdrawal of Initial Limited Partner.
Upon the date the first Limited Partner is admitted to the
Partnership in accordance with Article 11 of this Agreement, the Initial Limited
Partner shall withdraw from the Partnership, and thereupon his Capital
Contribution shall be returned and his Partnership Interest shall be reallocated
to the Limited Partners.
18. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP
INTERESTS ON CERTAIN EVENTS.
18.1 Death.
18.1.1 Upon the death of a Limited Partner, the deceased
Limited Partner's executor, administrator, or other legal or personal
representative shall give written notice of that fact to the General
Partner. In such event, the executor, administrator or other legal or
personal representative of the deceased Limited Partner shall have a
period of ninety (90) days following the date of death (the "Response
Period") within which to locate a qualified investor approved of by the
General Partner, which approval can be granted or denied in the sole
discretion of the General Partner (a "Qualified Investor"), to purchase
the entire Partnership Interest of the deceased Limited Partner. In the
event the executor, administrator or other personal or legal
representative of the deceased Limited Partner locates a Qualified
Investor who is willing to purchase the entire Partnership Interest of
the deceased Limited Partner, he
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shall give notice of that fact in writing to the General Partner, which
notice shall state the name of the proposed transferee Qualified
Investor. Provided the requirements of Articles 17.2 and 17.4 (b)
through (f) are satisfied, the executor, administrator, or other legal
or personal representative of the deceased Limited Partner may then
transfer the Partnership Interest of the deceased Limited Partner to
the Qualified Investor specified in the notice free of the purchase
options granted in Article 18.1.2. If such conditions are satisfied,
the transferee Qualified Investor shall have the rights of a transferee
Limited Partner as set forth in Article 17.3 and shall become subject
to all obligations connected with the Partnership interest transferred.
The deceased Limited Partner's Guaranty shall remain an obligation of
his estate, unless the Bank agrees to release the estate from the
Guaranty in substitution of a like Guaranty from any transferee Limited
Partner.
18.1.2 In the event the requirements of Articles 17.2 and 17.4
(b) through (f) are not satisfied with respect to a proposed transferee
Qualified Investor, or the executor, administrator or other legal or
personal representative of the deceased Limited Partner fails to locate
a Qualified Investor to purchase the deceased Limited Partner's entire
Partnership Interest within the Response Period, the General Partner
shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the deceased Limited Partner (whose executor,
administrator or other legal or personal representative shall then
become obligated to sell such Partnership Interest) at the price
determined in the manner provided in Article 18.5 of this Agreement and
on the terms and conditions provided in Article 18.6 of this Agreement.
The General Partner shall have a period of thirty (30) days following
the date of the close of the Response Period (the "Option Period")
within which to notify in writing the deceased Limited Partner's
executor, administrator or other legal or personal representative,
whether the General Partner wishes to purchase all or a portion of the
Partnership Interest of the deceased Limited Partner. If the General
Partner does not elect to purchase the entire Partnership Interest of
the deceased Limited Partner before the expiration of the Option Period
and in the manner provided herein, the portion of the Partnership
Interest not purchased shall be held by the deceased Limited Partner's
executor, administrator, or other legal representative pursuant to the
terms of this Agreement.
18.2 Bankruptcy, Insolvency or Assignment for
Benefit of Creditors of a Limited Partner.
18.2.1 In the event that an involuntary or voluntary
proceeding under the Federal Bankruptcy Code, as amended, is filed for
or against any Limited Partner, or if any Limited Partner shall make an
assignment for the benefit of his creditors, or if any Limited Partner
has a receiver or custodian appointed for his assets, or any Limited
Partner generally fails to pay his debts when due, the insolvent
Limited Partner shall give written notice to the General Partner of the
commencement of any such proceeding or the occurrence of such event
within five days of the first notice to him of such commencement or
occurrence of such event. The insolvent Limited Partner or his trustee,
custodian, receiver or representative shall have a period of
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ninety (90) days following the date of the occurrence of one of such
events (the "Response Period") within which to locate a Qualified
Investor to purchase the entire Partnership Interest of the insolvent
Limited Partner. In the event the insolvent Limited Partner or his
trustee, custodian, receiver or other legal or personal representative
locates a Qualified Investor who is willing to purchase the entire
Partnership Interest of the insolvent Limited Partner, he shall give
notice of that fact in writing to the General Partner, which notice
shall state the name of the proposed transferee Qualified Investor.
Provided the requirements of Articles 17.2 and 17.4 (b) through (f) are
satisfied, the insolvent Limited Partner or his trustee, custodian,
receiver or representative may then transfer the Partnership Interest
of the insolvent Limited Partner to the Qualified Investor specified in
the notice free of the purchase options granted in Article 18.2.2. If
such conditions are satisfied, the transferee Qualified Investor shall
have the rights of a transferee Limited Partner as set forth in Article
17.3 and shall become subject to all obligations connected with the
Partnership Interest transferred. The insolvent Limited Partner shall
remain personally liable on his Guaranty, unless the Bank agrees to
release such Limited Partner from his Guaranty in substitution of a
like Guaranty from any transferee Limited Partner.
18.2.2 In the event the requirements of Articles 17.2 and 17.4
(b) through (f) are not satisfied with respect to a proposed transferee
Qualified Investor, or the insolvent Limited Partner, his trustee,
custodian, receiver or other legal or personal representative fails to
locate a Qualified Investor to purchase the insolvent Limited Partner's
Partnership Interest within the Response Period, the General Partner
shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the insolvent Limited Partner (which insolvent
Limited Partner or his trustee, custodian, receiver or other personal
or legal representative, as the case may be, shall then become
obligated to sell such Partnership Interest) at the price determined in
the manner provided in Article 18.5 of this Agreement and on the terms
and conditions provided in Article 18.6 of this Agreement. The General
Partner shall have a period of thirty (30) days following the date of
the close of the Response Period (the "Option Period") within which to
notify in writing the insolvent Limited Partner or his trustee,
custodian, receiver, or other legal or personal representative, whether
the General Partner wishes to purchase all or a portion of the
Partnership Interest of the insolvent Limited Partner. If the General
Partner does not elect to purchase the entire Partnership Interest of
the insolvent Limited Partner before the expiration of the Option
Period and in the manner provided herein, the portion of the
Partnership Interest not purchased shall be held by the insolvent
Partner, his trustee, custodian, receiver or other legal or personal
representative pursuant to the terms of this Agreement.
18.3 Default under Guaranties. Notwithstanding any other
provision in this Article 18 to the contrary, if any of the events outlined in
Articles 18.1 or 18.2 or any other defaulting event outlined in the Guaranty
(the "Defaulting Events") should occur with respect to a Limited Partner (the
"Defaulting Limited Partner"), and the General Partner determines (in its sole
discretion) that such event may result in default and acceleration of an
obligation secured by the Guaranty unless another guarantor acceptable to the
Lender can be substituted in the place of the Defaulting Limited Partner,
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then the General Partner shall have the right to immediately take the steps as
outlined in this Article 18.3 to prevent such default. Upon the General Partner
receiving notice of a Defaulting Event as provided above, the General Partner,
in its sole discretion, shall immediately have the right to either (i) sell the
entire Partnership Interest of the Defaulting Limited Partner to an investor
approved of by the General Partner, (ii) purchase for its own account the entire
Partnership Interest of the Defaulting Limited Partner, or (iii) sell the entire
Partnership Interest of the Defaulting Limited Partner to one or more of the
other Limited Partners. The Defaulting Limited Partner shall sell his
Partnership Interest to the purchaser at the purchase price determined in the
manner as provided in Article 18.5 and on the terms and conditions as provided
in Article 18.6. The transfer of the Partnership Interest, the payment of the
purchase price, and the assumption of the Defaulting Limited Partner's
obligations under his Guaranty (as provided in Article 18.5), shall be made at
such time as determined by the General Partner in order to avoid the default and
acceleration of the obligation secured by the Guaranty. Each Limited Partner
hereby makes, constitutes and appoints the General Partner, with full power of
substitution, his true and lawful attorney-in-fact, to take such actions and
execute such documents on his behalf to effect the transfer of his Partnership
Interest as provided in this Article 18.3, in the event such Limited Partner
becomes a Defaulting Limited Partner.
18.4 Divestiture Option. If state or federal regulations or
laws are enacted or applied, or if any other legal developments occur, which, in
the opinion of the General Partner, adversely affect (or potentially adversely
affect) the operation of the Partnership or the business of the Partnership in a
manner deemed substantial by the General Partner in its sole discretion (e.g.,
exclusion from any governmental health care program or any provider ownership
prohibition), the General Partner shall promptly either, in its discretion, (i)
take the steps outlined in this Article 18.4 to divest the Limited Partners of
their Partnership Interests, or (ii) dissolve the Partnership as provided in
Article 24.1(d). If the General Partner chooses option (i), it shall deliver a
written notice to all of the Limited Partners (the "Notice of Election") and
either sell the entire Partnership Interests of all of the Limited Partners to
one or more investors selected by it (including, without limitation, Affiliates
of the General Partner), and/or purchase such Partnership Interests for its own
account. In such event, the Limited Partners shall sell their Partnership
Interests to the purchaser or purchasers at the purchase price determined in the
manner as provided in Article 18.5 and be on the terms and conditions as
provided in Article 18.6. The transfer of the Partnership Interests, the payment
of the purchase prices, and the assumption of the Limited Partners' obligations
under their respective Guaranties (as provided in Article 18.5) shall be made at
such time as determined by the General Partner to be in the best interests of
the Partnership and its Limited Partners. If the General Partner chooses option
(ii), it shall proceed with reasonable promptness to dissolve and liquidate the
Partnership and no vote of the Limited Partners shall be required in that
connection. Each Limited Partner hereby makes, constitutes and appoints the
General Partner, with full power of substitution, his true and lawful
attorney-in-fact, to take such actions and execute such documents on his behalf
to effect the transfer of his Partnership Interest or the dissolution of the
Partnership, as the case may be, as provided in this Article 18.4.
18.5 Purchase Price. The purchase price to be paid for the
Partnership Interest of any Limited Partner whose interest is being purchased
(the "Retiring Limited Partner") pursuant to the provisions of Articles 18.1.2,
18.2.2, 18.3 or 18.4 shall be an amount equal to the Retiring Limited Partner's
share of the Partnership's book value, if any, (prorated in the event that only
a portion of his Partnership Interest is being purchased) as reflected by the
Capital Account of the Retiring Limited Partner (unadjusted for any appreciation
in Partnership assets and as reduced by
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depreciation deductions claimed by the Partnership for tax purposes). The
determination of the Retiring Limited Partner's Capital Account on the Valuation
Date (as defined below) shall be made by the Partnership's firm of certified
public accountants (the "Partnership Accountant") upon a review of the
Partnership books of account, and a formal audit is expressly waived. The
statement of the Partnership Accountant with respect to the Capital Account of
the Retiring Limited Partner on the Valuation Date shall be binding and
conclusive upon the Partnership, the purchaser and the Retiring Limited Partner
and his representative. The Valuation Date shall be the last day of the month
next preceding the month in which occurs: (i) the death of a Limited Partner, in
the case of a purchase by reason of death; (ii) the bankruptcy or insolvency of
a Limited Partner, in the case of a purchase by reason of such bankruptcy or
insolvency; (iii) the notice of a Defaulting Event as provided in Article 18.3,
in the case of a purchase occurring by reason of one of such events; or (iv) the
Notice of Election as provided in Article 18.4, in the case of a purchase by
reason thereof. The purchase price shall be paid at the Closing in cash (or by
certified or cashier's check). If as of the date of the Closing the Retiring
Limited Partner still has an outstanding personal obligation under the Guaranty
(the "Obligation"), the purchaser shall assume the portion of the Obligation as
is equal to the portion of the Partnership Interest being purchased, indemnify
the Retiring Limited Partner from such portion of the Obligation, and take such
steps deemed necessary by the General Partner to formally evidence the
assumption of such portion of the Obligation, including without limitation,
executing such documents and providing such financial information to the Bank
(as the case may be) to evidence the assumption of such portion of the
Obligation, and obtain if possible, the release of the Retiring Partner from
such portion of the Obligation.
18.6 Closing.
18.6.1 Closing of Purchase and Sale. The Closing of any
purchase and sale of a Partnership Interest pursuant to Articles 18.1.2
or 18.2.2 of this Agreement shall take place at the principal office of
the Partnership, or such other place designated by the General Partner,
on the date determined as follows (the "Closing"):
(a) In the case of a purchase and sale occurring by reason of
the death of a Limited Partner as provided in Article 18.1.2 of this
Agreement, the Closing shall be held on the thirtieth day (or if such
thirtieth day is not a business day, the next business day following
the thirtieth day) next following the last to occur of:
(i) Qualification of the executor or personal
administrator of the deceased Limited Partner's estate;
(ii) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made, or
(iii) The date that coincides with the close of the
Option Period.
(b) In the case of a purchase and sale occurring by reason of
the bankruptcy or insolvency of a Limited Partner as provided in
Article 18.2.2 of this
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Agreement, the Closing shall be held on the thirtieth day (of if such
thirtieth day is not a business day, the next business day following
the thirtieth day) next following the later to occur of:
(i) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made; or
(ii) The date that coincides with the close of the
Option Period.
At the Closing, the Limited Partner whose Partnership Interest is being
purchased (the "Transferring Partner") shall concurrently with tender
and receipt of the applicable purchase price, deliver to the purchaser
duly executed instruments of transfer and assignment, assigning good
and marketable title to the portion or portions of the Transferring
Partner's entire Partnership Interest thus purchased, free and clear
from any liens or encumbrances or rights of other therein (except with
respect to liens or rights associated with the Guaranties as otherwise
provided herein).
18.6.2 Terms and Conditions of Purchase. The Partnership
Interest of a Limited Partner shall not be transferred to any Partner
unless the requirements of Articles 17.2 and 17.4 (b) through (f) are
satisfied with respect to it. The purchaser shall be liable for all
obligations and liabilities connected with that portion of the
Partnership Interest transferred to it unless otherwise agreed in
writing.
18.6.3 Percentage Interests. The Percentage Interests of each
Partner who purchases all or a portion of the Partnership Interest of a
Limited Partner pursuant to the provisions of Article 18.3, shall be
increased by the Percentage Interest represented by that portion of the
Partnership Interest purchased by such Partner.
19. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST.
19.1 The General Partner may not mortgage, pledge,
hypothecate, transfer, sell, assign or otherwise dispose of all or any part of
its interest in the Partnership, whether voluntarily, by operation of law or
otherwise (the foregoing actions being hereafter collectively referred to as
"Transfers" or singularly as a "Transfer") except as permitted by this Article.
19.2 If the General Partner makes a Transfer of its general
partner interest in the Partnership pursuant to this Article, it shall be liable
for all obligations and liabilities incurred by it as the General Partner of the
Partnership on or before the effective date of such Transfer, but shall not be
liable for any obligations or liabilities of the Partnership arising after the
effective date of the Transfer.
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19.3 No Transfer by the General Partner shall be permitted
unless:
(a) The certified public accountant for the Partnership shall
have delivered to the Partnership an opinion that the new general
partner of the Partnership has sufficient net worth (if necessary) and
meets all other published requirements of the Internal Revenue Service
necessary to assure that the Partnership will continue to be classified
as a partnership for Federal income tax purposes;
(b) Counsel for the Partnership shall have rendered an opinion
that none of the actions taken in connection with such Transfer will
cause the Partnership to be classified other than as a partnership for
Federal income tax purpose or will cause the termination or dissolution
of the Partnership and
(c) Such documents or instruments, in form and substance
satisfactory to counsel for the Partnership, shall have been executed
and delivered as may be required in the opinion of counsel for the
Partnership to effect fully any such Transfer.
20. TERMINATION OF THE SERVICES OF THE GENERAL
PARTNER.
If the General Partner shall be finally adjudged by a court of
competent jurisdiction to be liable to the Limited Partners or the Partnership
for any act of gross negligence or willful misconduct in the performance of its
duties under the terms of this Agreement, the General Partner may be removed and
another substituted with the consent of all of the Limited Partners. Such
consent shall be evidenced by a certificate of removal signed by all of the
Limited Partners. In the event of removal, the new general partner shall succeed
to all of the powers, privileges and obligations of the General Partner, and the
General Partner's interest in the Partnership shall become that of a Limited
Partner, and the General Partner shall maintain its same Percentage Interest in
the Partnership notwithstanding anything contained in the Act to the contrary.
In addition, in the event of removal, the new general partner shall take all
steps necessary and appropriate to prepare and record an amendment to the
Certificate of Limited Partnership to reflect the removal of the General Partner
and the admission of such new general partner.
21. MANAGEMENT AND OPERATION OF BUSINESS.
21.1 All decisions with respect to the management of the
business and affairs of the Partnership shall be made by the General Partner.
21.2 The General Partner shall be under no duty to devote all
of its time to the business of the Partnership, but shall devote only such time
as it deems necessary to conduct the Partnership business and to operate and
manage the Partnership in an efficient manner.
21.3 The General Partner may charge to the Partnership all
ordinary and necessary costs and expenses, direct and indirect, attributable to
the activities, conduct and management of the business of the Partnership. The
costs and expenses to be borne by the Partnership shall include, but are not
limited to, all expenditures incurred in acquiring and financing the Equipment,
legal and
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accounting fees and expenses, salaries of employees of the Partnership,
insurance premiums and interest.
21.4 In addition to, and not in limitation of, any rights and
powers covenanted by law or other provisions of this agreement, and except as
limited, restricted or prohibited by the express provisions of this Agreement,
the General Partner shall have any may exercise on behalf of the Partnership all
powers and rights necessary, proper, convenient or advisable to effectuate and
carry out the purposes, business and objectives of the Partnership. Such powers
shall include, without limitation, the following:
(a) To acquire a LithostarTM Mobile System;
(b) To acquire (i) a second LithostarTM system, or (ii) any
other assets related to the provisions of lithotripsy services
(collectively, the "Additional Assets"), at such times and at such
price and upon such terms, as the General Partner deems to be in the
best interest of the Partnership.
(c) To purchase, hold, manage, lease, license and dispose of
Partnership assets (including the LithostarTM Mobile System), including
the purchase, exchange, trade or sale of the Partnership's assets at
such price, or amount, for cash, securities or other property and upon
such terms, as the General Partner deems to be in the best interest of
the Partnership; provided, that should the Partnership assets be
exchanged or traded for securities or other property (the "Replacement
Property") the General Partner shall have the same powers with regard
to the Replacement Property as it does towards the traded property;
(d) To determine the travel itinerary and site locations for
the LithostarTM Mobile System;
(e) To borrow money for any Partnership purpose (including the
acquisition of the Additional Assets) and, if security is required
therefor, to subject to any security device any portion of the property
for the Partnership, to obtain replacements of any other security
device, to prepay, in whole or in part, refinance, increase, modify,
consolidate or extend any encumbrance or other security device;
(f) To deposit, withdraw, invest, pay, retain (including the
establishment of reserves in order to acquire the Additional Assets)
and distribute the Partnership's funds in any manner consistent with
the provisions of this Agreement;
(g) To institute and defend actions at law or in equity;
(h) To enter into and carry out contracts and agreements and
any or all documents and instruments and to do any and all such other
things as may be in furtherance of Partnership purposes or necessary or
appropriate to the conduct of the Partnership activities;
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(i) To execute, acknowledge and deliver any and all
instruments which may be deemed necessary or convenient to effect the
foregoing;
(j) To form a new limited partnership made up of qualified
investors to treat gallstone patients (if the FDA ever approves the
LithostarTM for such purpose), and to contract on behalf of the
Partnership with the new limited partnership for the use for a fee of
the LithostarTM for the treatment of the new limited partnership's
gallstone patients; and
(k) To engage or retain one or more persons to perform acts or
provide materials as may be required by the Partnership, at the
Partnership's expense, and to compensate such person or persons at a
rate to be set by the General Partner, provided that the compensation
is at the then prevailing rate for the type of services and materials
provided, or both. Any person, whether a Partner, an Affiliate of a
Partner or otherwise, including without limitation the General Partner,
may be employed or engaged by the Partnership to render services,
including, but not limited to, management services, professional
lithotripsy services, accounting services and legal services, or
provide materials; and if such person is a Partner or an Affiliate of a
Partner, he shall be entitled to, and shall be paid compensation for
said services or materials, anything in this Agreement to the contrary
notwithstanding, provided that the compensation to be received for such
services or materials is competitive in price and terms with then
prevailing rate for the type of services and/or materials provided. The
Partnership, pursuant to the terms of a Management Agreement, will
contract with the General Partner with respect to the supervision and
coordination of the management and administration of the day-to-day
operations of the LithostarTM Mobile System for a monthly fee equal to
the greater of 7.5% of Partnership Cash Flow per month or $8,000 per
month. All costs incurred by the General Partner except the costs of
employing one or more local physicians to supervise the management and
administration of the LithostarTM Mobile System, shall be paid by the
Partnership directly. The Partnership will also contract with qualified
physicians desiring to use the LithostarTM for the treatment of
patients. Owning an interest in the Partnership shall not be a
condition to using the LithostarTM. The General Partner and its
Affiliates may engage in or possess an interest in other business
ventures of any nature and description independently or with others,
including, but not limited to, the operation of a mobile lithotripsy
unit similar to the LithostarTM Mobile System, whether or not such
business ventures are in direct or indirect competition with the
Partnership, and neither the Partnership nor the Partners shall have
any right by virtue of this Agreement in and to said independent
ventures or to the income or profits derived therefrom.
21.5 In addition to other acts expressly prohibited or
restricted by this Agreement or by law, the General Partner shall have no
authority to act on behalf of the Partnership in:
(a) Doing any act in contravention of this Agreement or its
Certificate of Limited Partnership;
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(b) Doing any act which would make it impossible to carry on
the ordinary business of the Partnership;
(c) Possessing or in any manner dealing with the Partnership's
property or assigning the rights of the Partnership in the
Partnership's property for other than Partnership purposes;
(d) Admitting a person as a Limited Partner or a General
Partner except as provided in this Agreement; or
(e) Performing any act (other than an act required by this
Agreement or any act taken in good faith reliance upon counsel's
opinion) which would, at the time such act occurred, subject any
Limited Partner to liability as a general partner in any jurisdiction.
22. RESERVES.
The General Partner may cause the Partnership to create a
reserve account to be used exclusively for repairs and acquisition of Additional
Assets and for any other valid Partnership purpose. The General Partner shall,
in its sole discretion, determine the amount of payments to such reserve.
23. INDEMNIFICATION AND EXCULPATION OF THE
GENERAL PARTNER.
23.1 The General Partner is accountable to the Partnership as
a fiduciary and consequently must exercise good faith and integrity in handling
Partnership affairs. This is a rapidly developing and changing area of the law
and Limited Partners who have questions concerning the duties of the General
Partner should consult with their counsel. The General Partner and its
Affiliates shall have no liability to the Partnership which arises out of any
action or inaction of the General Partner or its Affiliates if the General
Partner or its Affiliates, in good faith, determined that such course of conduct
was in the best interest of the Partnership and such course of conduct did not
constitute gross negligence or willful misconduct of the General Partner or its
Affiliates. The General Partner and its Affiliates shall be indemnified by the
Partnership against any losses, judgments, liabilities, expenses and amounts
paid in settlement of any claims sustained by them in connection with the
Partnership, provided that the same were not the result of gross negligence or
willful misconduct on the part of the General Partner or its Affiliates.
23.2 The General Partner shall not be liable for the return of
the Capital Contributions of the Limited Partners, and upon dissolution, Limited
Partners shall look solely to the assets of the Partnership.
24. DISSOLUTION OF THE PARTNERSHIP.
24.1 The Partnership shall be dissolved and terminated and its
business wound up upon the occurrence of any one of the following events:
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(a) The expiration of its term on December 31, 2040;
(b) The filing by, on behalf of, or against the General
Partner of any petition or pleading, voluntary or involuntary, to
declare the General Partner bankrupt under any bankruptcy law or act,
or the commencement in any court of any proceeding, voluntary or
involuntary, to declare the General Partner insolvent or unable to pay
its debts, or the appointment by any court or supervisory authority of
a receiver, trustee or other custodian of the property, assets or
business of the General Partner or the assignment by it of all or any
part of its property or assets for the benefit of creditors, if said
action, proceeding or appointment is not dismissed, vacated or
otherwise terminated within ninety (90) days of its commencement;
(c) The joint determination of the General Partner and a
Majority in Interest of the Limited Partners that the Partnership
should be dissolved;
(d) The election of the General Partner to dissolve the
Partnership following the occurrence of an event described in Article
18.4;
(e) The sale, exchange or other disposition of all or
substantially all of the property of the Partnership without making
provision for the replacement thereof; and
(f) The dissolution, retirement, resignation, death,
disability or legal incapacity of a general partner, and any other
event resulting in the dissolution or termination of the Partnership
under the laws of the State of Hawaii; provided, that the events
described in Sections 425D-402(4) and (5) of the Act or any similar
provisions of any successor statute, shall not work a dissolution of
the Partnership except as expressly provided in (b) above.
24.2 Notwithstanding the provisions of Article 24.1, the
Partnership shall not be dissolved and terminated upon the retirement,
resignation, bankruptcy, assignment for the benefit of creditors, dissolution,
death, disability or legal incapacity of a general partner, and its business
shall continue pursuant to the terms and conditions of this Agreement, if any
general partner or general partners remain following such event; provided that
such remaining general partner or general partners are hereby obligated to
continue the business of the Partnership. If no general partner remains after
the occurrence of such event, the business of the Partnership shall continue
pursuant to the terms and conditions of this Agreement, if, within ninety (90)
days after the occurrence of such event, the Limited Partners unanimously agree
in writing to continue the business of the Partnership, and, if necessary, to
the appointment of one or more persons or entities to be substituted as the
general partner. In the event the Limited Partners agree to continue the
business of the Partnership, the new general partner or general partners shall
succeed to all of the powers, privileges and obligations of the General Partner,
and the General Partner's interest in the Partnership shall become a Limited
Partner's interest hereunder. Furthermore, in the event a remaining general
partner or the Limited Partners, as the case may be, agree to continue the
business of the Partnership as provided herein, the remaining general partner or
the newly appointed general partner or general partners, as the case may be,
shall take all steps necessary and appropriate to prepare and record an
amendment to the Certificate of
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Limited Partnership to reflect the continuation of the business of the
Partnership and the admission of a new general partner or general partners, if
any.
25. DISTRIBUTION UPON DISSOLUTION.
Upon the dissolution and termination of the Partnership, the
General Partner or, if there is none, a representative of the Limited Partners,
shall cause the cancellation of the Partnership's Certificate of Limited
Partnership, shall liquidate the assets of the Partnership, and shall apply and
distribute the proceeds of such liquidation in the following order of priority:
(a) First, to the payment of the debts and liabilities of
the Partnership, and the expenses of liquidation;
(b) Second, to the creation of any reserves which the General
Partner (or the representatives of the Limited Partners) may deem
reasonably necessary for the payment of any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner
arising out of or in connection with the business and operation of the
Partnership; and
(c) Third, the balance, if any, shall be distributed to the
Partners in accordance with the Partners' positive Capital Account
balances after such capital accounts are adjusted as provided by
Article 13, and any other adjustments required by the Final Treasury
Regulations under Section 704(b) of the Code. Any General Partner with
a negative Capital Account following the distribution of liquidation
proceeds or the liquidation of its interest must contribute to the
Partnership an amount equal to such negative Capital Account on or
before the end of the Partnership's taxable year (or, if later, within
ninety days after the date of liquidation). Any capital so contributed
shall be (i) distributed to those Partners with positive Capital
Accounts until such Capital Accounts are reduced to zero, and/or (ii)
used to discharge recourse liabilities.
26. BOOKS OF ACCOUNT, RECORDS AND REPORTS.
26.1 Proper and complete records and books of account shall be
kept by the General Partner in which shall be entered fully and accurately all
transactions and such other matters relating to the Partnership's business as
are usually entered into records and books of account maintained by persons
engaged in businesses of a like character. The books and records of the
Partnership shall be prepared according to the accounting method determined to
be in the best interest of the Partnership by the General Partner. The
Partnership's fiscal year shall be the calendar year. The books and records
shall at all times be maintained at the Partnership's Records Office and shall
be open to the reasonable inspection and examination of the Partners or their
duly authorized representatives during reasonable business hours.
26.2 Within ninety (90) days after the end of each Year of the
Partnership, the General Partner shall send to each person who was a Limited
Partner at any time during such year such tax information, including, without
limitation, Federal tax Schedule K-1, as shall be reasonably necessary
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for the preparation by such person of his Federal income tax return. The General
Partner will also make available to the Limited Partners any other information
required by the Act.
26.3 The General Partner shall maintain at the Partnership's
Records Office copies of the Partnership's original Certificate of Limited
Partnership and any certificate of amendment, restated certificate or
certificate of cancellation with respect thereto and such other documents as the
Act shall require. The General Partner will furnish to any Limited Partner upon
request a copy of the Partnership's original Certificate of Limited Partnership
and any certificate of amendment, restated certificate, or certificate of
cancellation, if any.
26.4 The General Partner shall, in its sole discretion, make
for the Partnership any and all elections for federal, state and local tax
purposes including, without limitation, any election, if permitted by applicable
law, to adjust the basis of the Partnership's property pursuant to Code Section
754, 734(b) and 743(b), or comparable provisions of state or local law, in
connection with transfers of interests in the Partnership and Partnership
Distributions.
26.5 The General Partner is designated as the Tax Matters
Partner (as defined in Section 6231 of the Code) and to act in any similar
capacity under state or local law, and is authorized (at the Partnership's
expense): (i) to represent the Partnership and Partners before taxing
authorities or courts of competent jurisdiction in tax matters affecting the
Partnership or Partners in their capacity as Partners; (ii) to extend the
statute of limitations for assessment of tax deficiencies against Partners with
respect to adjustments to the Partnership's federal, state or local tax returns;
(iii) to execute any agreements or other documents relating to or affecting such
tax matters, including agreements or other documents that bind the Partners with
respect to such tax matters or otherwise affect the rights of the Partnership
and Partners; and (iv) to expend Partnership funds for professional services and
costs associated therewith. The General partner is authorized and required to
notify the federal, state or local tax authorities of the appointment of a Tax
Matters Partner in the manner provided in Treasury Regulations Section
301.6231(a)(7)-IT, as modified from time to time. In its capacity as Tax Matters
Partner, the General Partner shall oversee the Partnership tax affairs in the
manner which, in its best judgment, are in the interests of the Partners.
27. NOTICES.
All notices under this Agreement shall be in writing and shall
be deemed to have been given when delivered personally, or mailed by certified
or registered mail, postage prepaid, return receipt requested. Notices to the
General Partner shall be delivered at, or mailed to, its principal office.
Notices to the Partnership shall be delivered at, or mailed to, its principal
office with a copy to each of its business offices. Notice to a Limited Partner
shall be delivered to such Limited Partner, or mailed to the last address
furnished by him for such purposes to the General Partner. Limited Partners
shall give notice of a change of address to the General Partner in the manner
provided in this Article.
28. AMENDMENTS.
Subject to the provisions of Article 29, this Agreement is
subject to amendment only by written consent of the General Partner and a
Majority in Interest of the Limited Partners; provided,
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however, the consent of the Limited Partners shall not be required if such
amendments are ministerial in nature and do not contravene the provisions of
Article 29.
29. LIMITATIONS ON AMENDMENTS.
Notwithstanding the provisions of Article 28, no amendment to
this Agreement shall:
(a) Enlarge the obligations of any Partner under this
Agreement or convert the interest in the Partnership of any Limited
Partner into the interest of a general partner or modify the limited
liability of any Limited Partner, without the consent of such Partner;
(b) Amend the provisions of Articles 13, 14, 16 and 25 without
the approval of the Partners representing two-thirds of the aggregate
Percentage Interests in the Partnership; provided, however, that the
General Partner may at any time amend such Articles without the consent
of the Limited Partners in order to permit the Partnership allocations
to be sustained for Federal income tax purposes, but only if such
amendments do not materially affect adversely the rights and
obligations of the Limited Partners, in which case such amendments may
only be made as provided in this Article 29(c); or
(c) Amend this Article 29 without the consent of all Partners.
30. MEETINGS, CONSENTS AND VOTING.
30.1 A meeting of the Partnership to consider any matter with
respect to which the Partners may vote as set forth in this Agreement may be
called by the General Partner or by Limited Partners who hold more than
twenty-five percent (25%) of the aggregate interests in the Partnership held by
all the Limited Partners. Upon receipt of a notice requesting a meeting by such
Partner or Partners and stating the purpose of the meeting, the General Partner
shall, within ten (10) days thereafter, give notice to the Partners of a meeting
of the Partnership to be held at a time and place convenient to the Limited
Partners on a date not earlier than fifteen (15) days after receipt by the
General Partner of the notice requesting a meeting. The notice of the meeting
shall set forth the time, date, location and purpose of the meeting.
30.2 Any consent of a Partner required by this Agreement may
be given as follows:
(a) By a written consent given by the consenting Partner and
received by the General Partner at or prior to the doing of the act or
thing for which the consent is solicited, or
(b) By the affirmative vote by the consenting Partner to the
doing of the act or thing for which the consent is solicited at any
meeting called pursuant to this Article to consider the doing of such
act or thing.
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30.3 When exercising voting rights expressly granted under the
Articles of this Agreement, each Partner shall have that number of votes as is
equal to the Percentage Interest of such Partner at the time of the vote,
multiplied by 100.
31. SUBMISSIONS TO THE LIMITED PARTNERS.
The General Partner shall give the Limited Partners notice of
any proposal or other matter required by any provision of this Agreement or by
law to be submitted for consideration and approval of the Limited Partners. Such
notice shall include any information required by the relevant provision or by
law.
32. ADDITIONAL DOCUMENTS.
Each party hereto agrees to execute and acknowledge all
documents and writings which the General Partner may deem necessary or expedient
in the creation of this Partnership and the achievement of its purpose.
33. SURVIVAL OF RIGHTS.
Except as herein otherwise provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their successor and assigns.
34. INTERPRETATION AND GOVERNING LAW.
When the context in which words are used in this Agreement
indicates that such is the intent, words in the singular number shall include
the plural and vise versa; in addition, the masculine gender shall include the
feminine and neuter counterparts. The Article headings or titles and the table
of contents shall not define, limit, extend or interpret the scope of this
Agreement or any particular Article. This Agreement shall be governed and
construed in accordance with the laws of the State of Hawaii without giving
effect to the conflicts of laws provisions thereof.
35. SEVERABILITY.
If any provision, sentence, phrase or word of this Agreement
or the application thereof to any person or circumstance shall be held invalid,
the remainder of this Agreement, or the application of such provision, sentence,
phrase, or word to persons or circumstances, other than those as to which it is
held invalid, shall not be affected thereby.
36. AGREEMENT IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument. In addition, this Agreement may contain more than one
counterpart of the signature page and this Agreement may be executed by the
affixing of the signatures of each of the Partners to one of such counterpart
signature pages; all of such signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.
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37. THIRD PARTIES.
The agreements, covenants and representations contained herein
are for the benefit of the parties hereto inter se and are not for the benefit
of any third parties including, without limitation, any creditors of the
Partnership.
38. POWER OF ATTORNEY.
Each Limited Partner hereby makes, constitutes and appoints
Dr. William R. Jordan, Dr. Franklin S. Clark and Dr. Dan A. Myers, severally,
with full power of substitution, his true and lawful attorneys-in-fact, for him
and in his name, place and stead and for his use and benefit to sign and
acknowledge, file and record, any amendments hereto among the Partners for the
further purpose of executing and filing on behalf of each Limited Partner, any
and all certificates of limited partnership or other documents necessary to
constitute the Partnership or to effect the continuation of the Partnership, the
admission or withdrawal of a general partner or a limited partner, the
qualification of the Partnership in a foreign jurisdiction (or amendment to such
qualification), the admission of substitute Limited Partners or the dissolution
or termination of the Partnership, provided such continuation, admission,
withdrawal, qualification, or dissolution and termination are in accordance with
the terms of this Agreement.
The foregoing power of attorney is a special power of attorney
coupled with an interest, is irrevocable and shall survive the death or legal
incapacity of each Limited Partner. It may be exercised by any one of said
attorneys by listing all of the Limited Partners executing any instrument over
the signature of the attorney-in-fact acting for all of them. The power of
attorney shall survive the delivery of an assignment by a Limited Partner of the
whole or any portion of his Unit. In those cases in which the assignee of, or
the successor to, a Limited Partner owning a Unit has been approved by the
Partners for admission to the Partnership as a substitute Limited Partner, the
power of attorney shall survive for the sole purpose of enabling the General
Partner to execute, acknowledge and file any instrument necessary to effect such
substitution.
This power of attorney shall not be affected by the subsequent
incapacity or mental incompetence of any Limited Partner.
39. ARBITRATION.
Any dispute arising out of or in connection with this
Agreement or the breach thereof shall be decided by arbitration in Honolulu,
Hawaii in accordance with the then effective commercial arbitration rules of the
American Arbitration Association, and judgment thereof may be entered in any
court having jurisdiction thereof.
40. CREDITORS.
None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Partnership.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
of Limited Partnership as of the day and year first above written.
GENERAL PARTNER:
LITHOTRIPTERS, INC., a North Carolina corporation
By: /s/ Joseph Jenkins
-----------------------------
Joseph Jenkins, M.D.,
President
ATTEST:
Anthony Rand
- --------------------------
Secretary
[CORPORATE SEAL]
INITIAL LIMITED PARTNER:
William R. Jordan
---------------------------------------
William R. Jordan, M.D.
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<PAGE>
STATE OF NORTH CAROLINA )
)
COUNTY OF CUMBERLAND )
On this 1st day of April, 1996, before me, the undersigned Notary Public in
and for the County of Cumberland in the State of North Carolina, personally came
Joseph Jenkins, M.D., who, being by me duly sworn, said that he is President of
Lithotripters, Inc., the General Partner of Pacific Medical Limited Partnership,
that the seal affixed to the foregoing instrument in writing is the corporate
seal of the corporation, and that said writing was signed, sworn to, and sealed
by him in behalf of said corporation by its authority duly given. And the said
Joseph Jenkins, M.D. further certified that the facts set forth in said writing
are true and correct, and acknowledged said instrument to be the act and deed of
said corporation.
WITNESS my hand and notarial seal.
/s/ Ricarda Kelly
-------------------------------------------
Notary Public
My commission expires:
1-8-97
- ---------------------------
STATE OF NORTH CAROLINA )
)
COUNTY OF CUMBERLAND )
I, Ricarda Kelly, a notary public, do hereby certify that William R.
Jordan, M.D., personally appeared before me this 1st day of April, 1996 and
acknowledged and swore to the due execution of the foregoing Limited Partnership
Agreement in his capacity as the initial limited partner.
/s/ Ricarda Kelly
-------------------------------------------
Notary Public
My commission expires:
1-8-97
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<PAGE>
COUNTERPART SIGNATURE PAGE
By signing this Counterpart Signature Page, the undersigned
acknowledges his or her acceptance of that certain Agreement of Limited
Partnership of Pacific Medical Limited Partnership, and his or her intention to
be legally bound thereby.
Dated this 1st day of April, 1996.
/s/ Philip J. Gallina
---------------------------------------------
Signature
Lithotripters, Inc
by Philip J. Gallina, VP and Treasurer
--------------------------------------------
Printed Name
STATE OF NORTH CAROLINA )
COUNTY OF CUMBERLAND )
BEFORE ME, the undersigned Notary Public in and for the State
and County set forth above, on the 1ST day of APRIL, 1996,
personally appeared ___________________, and, being by me first duly sworn,
stated that (s)he signed this Counterpart Signature Page for the purpose set
forth above and that the statements contained therein are true.
/s/ Ricarda Kelly
-------------------------------------------
Signature of Notary Public
Ricarda Kelly
-------------------------------------------
Printed Name of Notary
My Commission Expires:
1-8-97
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[SEAL]
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<PAGE>
SCHEDULE A
Schedule of Partnership Interests
PACIFIC MEDICAL LIMITED PARTNERSHIP
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND GUARANTIES
Cash Percentage
General Partner Contribution Interest
Lithotripters, Inc. $47,688 20%
Limited Partners
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Lithotripters, Inc. $47,250 21
Antonio Tan 10,000 4
Robert Carlile 10,000 4
Herbert Chinn 10,000 4
Rick Davis 10,000 4
Terry Yee 5,000 2
William Flanagan 2,250 1
Keith Mooney 2,500 1
Franklin Clark 2,250 1
Thomas Jordan 2,250 1
William Jordan 2,250 1
Philip Gallina 2,250 1
William Grine 2,250 1
Jack Cassell 2,500 1
Marilyn Hata 10,000 4
David Kychenbecker 10,000 4
Douglas Gary Lattimer 10,000 4
William Yarbrough 10,000 4
Dan Myers 2,250 1
Jim Brady 2,250 1
Tom Mobley 2,250 1
Timothy Quillen 2,250 1
James Monroe 2,250 1
J. Ronald Smith 2,250 1
David M Coussens 2,500 1
Denis E. Healey 2,500 1
Lewis F. Russell 2,500 1
Alan Terry 2,250 1
Anthony Rand 2,250 1
Joseph Jenkins 2,250 1
Rena Sepulveda 2,500 1
Robert McAlpine 2,250 1
Lance Templeton 2,500 1
Lelan C. Byrd 2,500 1
Donald A. Steward 2,500 1
--------- ----
TOTAL: $238,438 100%
========= ====
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
CALIFORNIA I PROSTATHERAPY LIMITED PARTNERSHIP
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
CALIFORNIA I PROSTATHERAPY LIMITED PARTNERSHIP
TABLE OF CONTENTS
Article Heading Page
1. FORMATION.................................................1
2. NAME......................................................1
3. OFFICES...................................................1
4. PURPOSE...................................................1
5. TERM......................................................2
6. CERTAIN DEFINED TERMS.....................................2
7. CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS..............5
8. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF THE LIMITED
PARTNERS.............................................6
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
GENERAL PARTNER.......................................6
10. ADMISSION OF LIMITED PARTNERS.............................7
11. CAPITAL ACCOUNTS..........................................7
12. ALLOCATIONS...............................................8
13. DISTRIBUTIONS.............................................9
14. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS...............10
15. LIMITED LIABILITY........................................10
16. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS..........10
17. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON
CERTAIN EVENTS.........................................14
<PAGE>
18. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST.....................................18
19. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER.......19
20. MANAGEMENT AND OPERATION OF BUSINESS.....................19
21. RESERVES.................................................21
22. INDEMNIFICATION AND EXCULPATION OF THE GENERAL
PARTNER................................................21
23. DISSOLUTION OF THE PARTNERSHIP...........................22
24. DISTRIBUTION UPON DISSOLUTION............................23
25. BOOKS OF ACCOUNT, RECORDS AND REPORTS....................23
26. NOTICES..................................................24
27. AMENDMENTS...............................................25
28. LIMITATIONS ON AMENDMENTS................................25
29. MEETINGS, CONSENTS AND VOTING............................25
30. SUBMISSIONS TO THE LIMITED PARTNERS......................26
31. ADDITIONAL DOCUMENTS.....................................26
32. SURVIVAL OF RIGHTS.......................................26
33. INTERPRETATION AND GOVERNING LAW.........................26
34. SEVERABILITY.............................................26
35. AGREEMENT IN COUNTERPARTS................................26
36. THIRD PARTIES............................................27
37. POWER OF ATTORNEY........................................27
38. ARBITRATION..............................................27
39. CREDITORS................................................27
Schedule A............... Schedule of Partnership Interests
<PAGE>
THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED PARTNERSHIP
AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, QUALIFIED UNDER THE GENERAL
STATUTES OF CALIFORNIA, OR REGISTERED UNDER SIMILAR LAWS OR ACTS OF OTHER STATES
IN RELIANCE UPON EXEMPTIONS UNDER SUCH LAWS.
AGREEMENT
OF LIMITED PARTNERSHIP
OF CALIFORNIA I PROSTATHERAPY
LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement") is
made as of June 12th, 1997, by and among PROSTATHERAPIES, INC., a
Delaware corporation (the "General Partner"), and the persons listed on Schedule
A attached hereto as the Limited Partners.
1. FORMATION.
The Partnership was formed pursuant to a filing in the Office
of the Secretary of State of California on March 12, 1997, a Certificate of
Limited Partnership in accordance with the provisions of the Act.
2. NAME.
2.1 The name of the Partnership is "California I
Prostatherapy Limited Partnership."
2.2 The Partnership business shall be conducted under such
names as the General Partner may from time to time deem necessary or advisable,
provided that appropriate amendments to this Agreement and all necessary filings
under applicable assumed or fictitious name statutes or the Act are first
obtained.
3. OFFICES.
3.1 The principal office of the Partnership shall be at 2008
Litho Place, Fayetteville, North Carolina 28304, or at such other place as the
General Partner may, from time to time, designate by notice to the Limited
Partners (the "Records Office").
3.2 The Partnership may have such additional offices as the
General Partner may, from time to time, deem necessary or advisable.
4. PURPOSE.
The purpose and business of the Partnership shall be: (i) to
operate one or more Prostatron(R) microwave thermotherapy devices (or any other
BPH treatment equipment) for the transurethral treatment of the symptoms of BPH
primarily in Central and Southern California, or in such
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other location(s) as the General Partner may determine, in its sole discretion,
to be in the best interests of the Partnership, (ii) to acquire and operate in
the future any other urological device or equipment that as of the date of this
Agreement either has not been invented or has not received FDA premarket
approval, as long as such device has such approval at the time it is acquired by
the Partnership; (iii) to acquire an interest in any business entity, including,
without limitation, a limited partnership, limited liability company or
corporation, that engages in any business activity described in this Article 4;
and (iv) to engage in any and all activities incidental or related to the
foregoing, upon and subject to the terms and conditions of this Agreement.
5. TERM.
The Partnership shall terminate on January 1, 2047, unless
sooner terminated as herein provided.
6. CERTAIN DEFINED TERMS.
Certain terms used in this Agreement shall have the following
meanings:
Act. The Act means the California Revised Limited Partnership
Act, as then in effect.
Affiliate. An Affiliate is (i) any person, partnership,
corporation, association or other legal entity ("person") directly or indirectly
controlling, controlled by or under common control with another person; (ii) any
person owning or controlling 10% or more of the outstanding voting interest of
such other person; (iii) any officer, director or partner of such person; and
(iv) if such other person is an officer, director or partner, any entity for
which such person acts in such capacity.
Agreement. This Agreement of Limited Partnership, as the same
may be amended from time to time.
BPH. Benign Prostatic Hyperplasia, common enlargement of the
prostate.
Capital Account. The Partnership capital account of a Partner
as computed pursuant to Article 11 of this Agreement.
Capital Contributions. All capital contributions made by a
Partner or his predecessor in interest which shall include, without limitation,
contributions made pursuant to Article 7 of this Agreement.
Capital Transaction. Any transaction which, were it to
generate proceeds, would produce Partnership Sales Proceeds or Partnership
Refinancing Proceeds.
Code. The Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent, superseding revenue laws.
Dilution Offering. As provided in Section 7.4 of this
Agreement, the future offering of additional limited partnership interests in
the Partnership by the General Partner. Any successful Dilution Offering will
proportionately reduce the Percentage Interests of the then current Limited
Partners in the Partnership.
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Domestic Proceeding. Any divorce, annulment, separation or
similar domestic proceeding between a married couple.
Equipment. The initial equipment to be acquired by the
Partnership for the operation of the Prostatron(R) Mobile System. The initial
equipment to be used in the operation of the Prostatron(R) Mobile System will
include the Trailer, a tractor truck, the Prostatron(R), an ultrasound system
and miscellaneous medical equipment and supplies.
FDA. The United States Food and Drug Administration.
General Partner. The General Partner of the Partnership,
Prostatherapies, Inc., a Delaware corporation.
Initial Limited Partner. Dan A. Myers, M.D., a resident of
North Carolina. The Initial Limited Partner is to be the only limited partner of
the Partnership until such time as the new Limited Partners are admitted to the
Partnership, at which time the Initial Limited Partner shall withdraw from the
Partnership.
Limited Partners. The Limited Partners are those investors in
the Units admitted to the Partnership and any person admitted as a Limited
Partner in accordance with the provisions of this Agreement.
Losses. The net loss (including Net Losses from Capital
Transactions) of the Partnership for each Year of the Partnership as determined
for federal income tax purposes.
Majority in Interest of the Limited Partners. The Limited
Partners who hold more than 50% of the Limited Partner Percentage Interests in
the Partnership.
Net Gains from Capital Transactions. The gains realized by the
Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which assets shall include
Code Section 1231 assets) or as a result of or upon the damage or destruction of
such capital assets.
Net Losses from Capital Transactions. The losses realized by
the Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which shall include Code
Section 1231 assets) or as a result of or upon the damage or destruction of such
capital assets.
Partners. The General Partner and the Limited Partners,
collectively, where no distinction is required by the context in which the term
is used herein.
Partnership. California I Prostatherapy Limited Partnership,
a California limited partnership.
Partnership Cash Flow. For the applicable period the excess,
if any, of (A) the sum of (i) all gross receipts from any source for such
period, other than from Partnership loans, Capital Transactions and Capital
Contributions, and (ii) any funds released by the Partnership from previously
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established reserves, over (B) the sum of (i) all cash expenses paid by the
Partnership for such period; (ii) the amount of all payments of principal on
loans to the Partnership; (iii) capital expenditures of the Partnership; and
(iv) such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities and contingencies of the Partnership; provided, however, that
the amounts referred to in (B)(i), (ii) and (iii) above shall be taken into
account only to the extent not funded by Capital Contributions, loans or paid
out of previously established reserves. Such term shall also include all other
funds deemed available for distribution and designated as "Partnership Cash
Flow" by the General Partner.
Partnership Interest. The interest of a Partner in the
Partnership as defined by the Act and this Agreement.
Partnership Refinancing Proceeds. The cash realized from the
refinancing of Partnership assets after retirement of any secured loans and less
(i) payment of all expenses relating to the transaction and (ii) establishment
of such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements, or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities or contingencies of the Partnership.
Partnership Sales Proceeds. The cash realized from the sale,
exchange, casualty or other disposition of all or a portion of Partnership
assets after the retirement of all secured loans and less (i) the payment of all
expenses related to the transaction and (ii) establishment of such reasonable
reserves as the General Partner shall deem necessary or prudent to set aside for
future repairs, improvements, or equipment replacement or additions, or to meet
working capital requirements or foreseen or unforeseen future liabilities or
contingencies of the Partnership.
Percentage Interest. The interest of each Partner in the
Partnership, to be determined initially in the case of a Limited Partner by
reference to his Unit ownership based upon the Limited Partners holding an
aggregate 80% Percentage Interest in the Partnership, with each initial Unit
sold representing an initial 0.25% interest. The General Partner initially will
own a 20% Percentage Interest in the Partnership. A Partner's Percentage
Interest may be reduced by a future Dilution Offering. The Partners' Percentage
Interests in the Partnership as of the date hereof are as set forth in Schedule
A attached hereto. Any future adjustments in the Partners' Percentage Interests,
due to future Dilution Offerings or otherwise, will be reflected by revisions to
Schedule A.
Profit. The net income of the Partnership (including Net
Gains from Capital Transactions) for each Year of the Partnership as determined
for federal income tax purposes.
Pro Rata Basis. In connection with an allocation or
distribution, an allocation or distribution in proportion to the respective
Percentage Interests of the class of Partners to which reference is made.
Prostatron(R). The Prostatron(R) microwave thermotherapy
device manufactured by EDAP Technomed and to be utilized by the Partnership for
the treatment of the symptoms of BPH.
Prostatron(R) Mobile System. The Trailer with the installed
and operational Prostatron(R) and ultrasound system, and tractor truck.
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Sales Agency Agreement. The sales agency agreement through
which MedTech Investments, Inc., an Affiliate of the General Partner and a
broker-dealer company registered with the Securities and Exchange commission and
a member of the National Association of Securities Dealers, Inc. shall offer and
sell the limited partnership interest of the Partnership pursuant to the
Summary.
Sales Commission. The $112.50 sales commission paid to
MedTech Investments, Inc. for each Unit sold.
Service. The Internal Revenue Service.
Summary. The Confidential Summary of the Offering of the
Partnership dated March 24, 1997, as amended or as supplemented.
Trailer. The new mobile trailer manufactured and upfitted by
AK Associates, Inc. to house the Prostatron(R).
Units. The 320 equal limited partner interests in the
Partnership offered pursuant to the Summary for a price per Unit of $2,600 in
cash.
Year. An annual accounting period ending on December 31 of
each year during the term of the Partnership.
7. CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS.
7.1 General Partner Contribution. On or before the date of
this Agreement, the General Partner will contribute to the capital of the
Partnership cash in an amount equal to 20% (up to $208,000) of the total cash
contributed to the Partnership by the Partners in the offering made pursuant to
the Summary.
7.2 Limited Partner Contribution. Each Limited Partner hereby
agrees to contribute and shall contribute to the capital of the Partnership on
the date of his admission to the Partnership the cash amount set forth opposite
his name on Schedule A attached hereto.
7.3 No Interest. Except as otherwise provided herein, no
interest shall be paid on any contribution to the capital of the Partnership.
7.4 Dilution Offerings. If the General Partner, in its sole
discretion, determines that it is in the best interest of the Partnership, the
General Partner may, from time to time, issue, offer and sell additional limited
partnership interests in the Partnership (a "Dilution Offering") to local
urologists who are not already Limited Partners ("Qualified Investors"). The
primary purpose of any Dilution Offering would be (i) to raise additional
capital for any legitimate Partnership purpose as set forth in Article 4, and
(ii) to assure the highest quality of patient care by admitting Qualified
Investors to the Partnership who would be dedicated and motivated as owners to
follow the Partnership's treatment protocol, and comply with its quality
assurance and outcome analysis programs. Any limited partnership interests
offered by the Partnership in a Dilution Offering shall be sold in the manner
and according to the terms prescribed in the sole discretion of the General
Partner; provided, however, that any additional limited partnership interests
offered in a Dilution Offering will be sold for a price no lower than the
highest price for which
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proportionate limited partnership interests in the Partnership have been
previously sold by the Partnership. Any sale of additional limited partnership
interests will result in the proportionate dilution of the Partnership
Percentage Interests of the existing Partners. Notwithstanding the above, in the
event of a Dilution Offering, the General Partner and/or its Affiliates may
elect, in their sole discretion, to prevent dilution of the Percentage Interests
of the General Partner and/or its Affiliates by either contributing a
proportionate amount of additional capital to the Partnership or purchasing
additional limited partnership interests in any Dilution Offering. Limited
Partners will have no right to purchase additional limited partnership interests
in any Dilution Offering. Any investor acquiring a limited partnership interest
in a Dilution Offering shall agree to be bound by the terms of this Agreement,
and shall be automatically admitted as a Limited Partner of the Partnership. Any
adjustment in the Partners' Percentage Interests resulting from a Dilution
Offering shall be set forth on Schedule A attached hereto.
8. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF THE
LIMITED PARTNERS.
The obligations of the Limited Partners to make cash Capital
Contributions hereunder are subject to the condition that the representations,
warranties, agreements and covenants of the General Partner set forth in Article
9 of this Agreement are and shall be true and correct or have been and will have
been complied with in all material respects on the date such Capital
Contributions are required to be made, except to the extent that any such
representation or warranty expressly pertains to an earlier date.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
GENERAL PARTNER.
9.1 The General Partner hereby represents and warrants to the
Limited Partners that:
(a) The Partnership is a limited partnership formed in
accordance with and validly existing under the Act and the other
applicable laws of the State of California;
(b) The interests in the Partnership of the Limited Partners
will have been duly authorized or created and validly issued and the
Limited Partners shall have no personal liability to contribute money
to the Partnership other than the amounts agreed to be contributed by
them in the manner and on the terms set forth in this Agreement,
subject, however, to such limitations as may be imposed under the Act;
(c) No material breach or default adverse to the Partnership
exists under the terms of any other material agreement affecting the
Partnership; and
(d) The General Partner is a Delaware corporation formed and
existing under the laws of the State of Delaware.
9.2 The General Partner hereby covenants to the Limited
Partners that:
(a) It will at all times act in a fiduciary manner with
respect to the Partnership and the Limited Partners;
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(b) Except as provided in Article 18, it will serve as the
General Partner of the Partnership until the Partnership is terminated
without reconstitution; and
(c) It will cause the Partnership to carry adequate public
liability, property damage and other insurance as is customary in the
business to be engaged in by the Partnership.
10. ADMISSION OF LIMITED PARTNERS.
The General Partner may permit the offer and sale of limited
partnership interests on the terms and conditions provided in the Summary or
future Dilution Offering and may admit persons subscribing for interests as
Limited Partners in the Partnership on the terms and conditions set forth in
this Article 10.
(a) The General Partner shall have approved of the admission
of said person in writing on such terms and conditions as the General
Partner shall determine;
(b) Said person shall have executed such documents or
instruments as the General Partner may deem necessary or desirable to
effect his admission as a Limited Partner;
(c) Said person shall have accepted and adopted all of the
terms and provisions of this Agreement, as then amended;
(d) Said person (if a corporation) shall deliver to the
General Partner a certified copy of a resolution of its Board of
Directors authorizing it to become a Limited Partner under the terms
and conditions of this Agreement; and
(e) Said person, upon request by the General Partner, shall
pay such reasonable expenses as may be incurred in connection with its
admission as a Limited Partner.
11. CAPITAL ACCOUNTS.
A capital account shall be established for each Partner and
shall at all times be determined and maintained as provided by the Final
Treasury Regulations under Section 704(b) of the Code, as the same may be
amended. A Partner shall not be entitled to withdraw any part of his capital
account or to receive any distribution from the Partnership, except as provided
in Articles 13 and 24.
(a) Each Partners' capital account shall be increased by:
(i) The amount of his Capital Contribution pursuant
to Article 7; and
(ii) The amount of Profits allocated to him pursuant
to Article 12; and
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(iii) The Partner's pro rata share (determined in the
same manner as such Partner's share of Profits and Losses
allocated pursuant to Article 12 hereof) of any income or gain
exempt from tax.
(b) Each Partner's capital account shall be decreased by:
(i) The amount of Losses allocated to him
pursuant to Article 12; and
(ii) The amount of Partnership Cash Flow, Partnership
Sales Proceeds and Partnership Refinancing Proceeds
distributed to him pursuant to Article 13; and
(iii) The Partner's pro rata share of any other
expenditures of the Partnership which are not deductible in
computing Partnership Profits or Losses and which are not
added to the tax basis of any Partnership property, including,
without limitation, expenditures described in Section
705(a)(2)(B) of the Code. The Partner's pro rata share of such
expenditures shall be determined in the same manner as such
Partner's share of Profits and Losses allocated pursuant to
Article 12.
12. ALLOCATIONS
(a) Profits and Losses. The Profits and Losses of the
Partnership shall be allocated among the Partners in accordance with
their respective Percentage Interests. In allocating Profits and
Losses, Net Gains and Losses from Capital Transactions (a part of
Profits and Losses), if any, shall be allocated first.
(b) Qualified Income Offset. If any Partner unexpectedly
receives any adjustment, allocation or distribution described in
Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4) through (6) which
causes or increases a deficit balance in such Partner's Capital Account
(adjusted for this purpose in the manner provided in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)), items of Partnership income
and gain shall be specially allocated to each such Partner in an amount
and manner sufficient to eliminate, to the extent required by the
Regulations, the deficit Capital Account of such Partner as quickly as
possible, provided that an allocation pursuant to this Article
12(d)(iii) shall be made if and only to the extent that such Partner
would have a deficit Capital Account after all other allocations
provided for in this Article 12(d) have been tentatively made as if
this Article 12(d)(iii) were not in the Agreement. This provision is
intended to be a "qualified income offset," as defined in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d), such Regulation being
specifically incorporated herein by reference.
(c) Sales Commission. The Sales Commission shall be allocated
to the Units which are not held by the General Partner and its
Affiliates in proportion to their respective capital contributions
represented by such Units (i.e., $112.50 in Sales Commissions per each
such Unit). The purpose of Article 12(d)(iv) is to allocate the Sales
Commission to those Partners who actually bore the burden of paying the
Sales Commission.
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(d) Allocations Between Transferor and Transferee. In the
event of the transfer (other than the pledges of the General Partner's
interest permitted by Article 18 or Permitted Pledges described in
Article 16.2(b)) of all or any part of a Partner's interest (in
accordance with the provisions of this Agreement) in the Partnership at
any time other than at the end of a Year, or the admission of a new
Partner (in accordance with the terms of this Agreement), the
transferring Partner or new Partner's share of the Partnership's
income, gain, loss, deductions and credits, as computed both for
accounting purposes and for Federal income tax purposes, shall be
allocated between the transferor Partner and the transferee Partner (or
Partners), or the new Partner and the other Partners, as the case may
be, in the same ratio as the number of days in such Year before and
after the date of the transfer or admission; provided, however, that if
there has been a sale or other disposition of the assets of the
Partnership (or any part thereof) during such Year, then the General
Partner may elect, in its sole discretion, to treat the periods before
and after the date of the transfer or admission as separate Years and
allocate the Partnership's net income, gain, net loss, deductions and
credits for each of such deemed separate Years. Notwithstanding the
foregoing, the Partnership's "allocable cash basis items," as that term
is used in Section 706(d)(2)(B) of the Code, shall be allocated as
required by Section 706(d)(2) of the Code and the regulations
thereunder.
(e) Tax Withholding. The Partnership shall be authorized to
pay, on behalf of any Partner, any amounts to any federal, state or
local taxing authority, as may be necessary for the Partnership to
comply with tax withholding provisions of the Code or the other income
tax or revenue laws of any taxing authority. To the extent the
Partnership pays any such amounts that it may be required to pay on
behalf of a Partner, such amounts shall be treated as a cash
Distribution to such Partner and shall reduce the amount otherwise
distributable to such Partner.
13. DISTRIBUTIONS.
(a) Distribution of Partnership Cash Flow. Partnership Cash
Flow shall be distributed to the Partners within 60 days after the end
of each Year, or earlier in the discretion of the General Partner, in
proportion to their respective Percentage Interests at the time of
distribution.
(b) Distribution of Partnership Refinancing Proceeds and
Partnership Sales Proceeds. Partnership Refinancing Proceeds and
Partnership Sales Proceeds shall be distributed to the Partners within
60 days of the Capital Transaction giving rise to such proceeds, or
earlier in the discretion of the General Partner, in proportion to
their respective Percentage Interests at the time of distribution.
(c) Distribution in Liquidation. Upon liquidation of the
Partnership, all of the Partnership's property shall be sold and
Profits and Losses allocated accordingly. Proceeds from the liquidation
of the Partnership shall be distributed in accordance with Article 24.
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14. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
14.1 Management. The Limited Partners shall not take part in
the management of the business, nor transact any business for the Partnership,
nor shall they have power to sign for or to bind the Partnership. The
Partnership may, however, contract with one or more Limited Partners to act as
the local Medical Director and Quality Assessment Director for the Prostatron(R)
Mobile System. No Limited Partner may withdraw from the Partnership except as
expressly permitted herein.
14.2 Operation of Prostatron(R) Mobile System. The Limited
Partners shall not operate or utilize the Prostatron(R) Mobile System or other
Partnership equipment except pursuant to (i) an Agreement with the Partnership;
or (ii) any other arrangement specifically approved by the General Partner.
14.3 Outside Activities. A Limited Partner (that is not an
Affiliate of the General Partner) shall not directly or indirectly own, lease or
sublease a Prostatron(R) (or similar equipment used for treating benign
prostatic hyperplasia) or any other therapeutic device acquired by the
Partnership. Prohibited indirect ownership of a competing device shall include
the ownership of any interest in a business venture (through stock ownership,
partnership interest ownership, or as otherwise determined in the sole
discretion of the General Partner) involving the ownership, purchase, use,
lease, sublease or operation of a Prostatron(R) (or similar equipment used for
treating BPH) or other competing device or equipment, unless the General Partner
determines that such activity by the Limited Partner is not detrimental to the
best interest of the Partnership. In the event of breach of this Article 14.3 as
determined by the General Partner, the Partnership shall be entitled to any
remedy at law or equity with respect to such breach, including, without
limitation, an injunction or suit for damages. In addition, the General Partner
shall also be entitled to enforce the purchase rights provided in Article 17.3
without effecting its other remedies as provided above.
15. LIMITED LIABILITY.
No Limited Partner shall be required to make any contribution
to the capital of the Partnership except as set forth in Article 7, nor shall
any Limited Partner in his capacity as such, be bound by, or personally liable
for, any expense, liability or obligation of the Partnership except to the
extent of his or her (i) interest in the Partnership; and (ii) obligation to
return distributions made to him or her under certain circumstances as required
by the Act.
16. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS.
16.1 Transferability.
(a) The term "transfer" when used in this Agreement with
respect to a Partnership Interest includes a sale, assignment, gift,
pledge, exchange, or any other disposition (but does not include the
issuance of new Partnership Interests pursuant to a Dilution Offering);
(b) Except as otherwise provided herein, the General Partner
shall not at any time transfer or assign its interest or obligation as
General Partner;
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(c) The Partnership Interest of any Limited Partner shall not
be transferred, in whole or in part, except in accordance with the
conditions and limitations set forth in Articles 16.2 or 17;
(d) The transferee of a Partnership Interest by assignment,
operation of law or otherwise, shall have only the rights, powers and
privileges enumerated in Article 16.3 or otherwise provided by law and
may not be admitted to the Partnership as a Limited Partner except as
provided in Article 16.4 or as a General Partner except as provided in
Article 16.5;
(e) Notwithstanding any provision herein to the contrary, the
Partnership Agreement shall in no way restrict the issuance or
transfers of stock of the General Partner; and
(f) Notwithstanding any provision herein to the contrary, the
issuance of Partnership Interests pursuant to a Dilution Offering and
the admission of new Limited Partners pursuant to a Dilution Offering
shall be governed by the provisions of Section 7.4 of this Agreement.
16.2 Restrictions on Transfers by Limited Partners.
(a) All or part of a Partnership Interest may be transferred
by a Limited Partner only with the prior written approval of the
General Partner, which approval may be granted or denied in the sole
discretion of the General Partner.
(b) The General Partner shall not approve any transfer of a
Partnership Interest, except a pledge of any Partnership Interest by
the General Partner to any bank, insurance company or other financial
institution to secure payment of indebtedness (a "Permitted Pledge"),
or otherwise unless the proposed transferee shall have furnished the
General Partner with a sworn statement that:
(i) The proposed transferee proposes to acquire his
Partnership Interest as a principal, for investment and not
with a view to resale or distribution;
(ii) The proposed transferee meets such requirements
regarding sophistication, income and net worth as required by
applicable state and Federal securities laws;
(iii) The proposed transferee has met such net worth
and income suitability standards as have been established by
the General Partner;
(iv) The proposed transferee recognizes that
investment in the Partnership involves certain risks and has
taken full cognizance of and understands all of the risk
factors related to the purchase of a Partnership Interest; and
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(v) The proposed transferee has met all other
requirements of the General Partner for the proposed transfer.
(c) Other than in the case of a Permitted Pledge, a transfer
of a Partnership Interest may be made only if, prior to the date
thereof, the Partnership upon request receives an opinion of counsel,
satisfactory in form and substance to the General Partner, that neither
the offering nor the proposed transfer will require registration under
Federal or applicable state securities laws or regulations.
16.3 Rights of Transferee.
Unless admitted to the Partnership in accordance with Article
16.4, the transferee of a Partnership Interest or a part thereof or any right,
title or interest therein shall not be entitled to any of the rights, powers, or
privileges of his predecessor in interest, except that he shall be entitled to
receive and be credited or debited with his proportionate share of Partnership
income, gains, Profits, Losses, deductions, credits or Distributions.
16.4 Admission of Limited Partners.
Except as otherwise provided in Article 17, the General
Partner, or the transferee of all or part of the Partnership Interest of either
a General Partner or a Limited Partner, may be admitted to the Partnership as a
Limited Partner upon furnishing to the General Partner all of the following:
(a) The written approval of a Majority in Interest of all of
the Limited Partners except the assignor Partner, or the assignor
Partner alone, which approval may be granted or denied in the sole
discretion of such Partners or Partner (as the case may be);
(b) The written approval of the General Partner, which
approval may be granted or denied in the sole discretion of the General
Partner;
(c) Acceptance, in a form satisfactory to the General Partner,
of all the terms and conditions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
(d) A properly executed power of attorney substantially
identical to that contained in Article 37;
(e) Such other documents or instruments as may be required in
order to effect his admission as a Limited Partner; and
(f) Payment of such reasonable expenses as may be incurred in
connection with his or her admission as a Limited Partner.
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16.5 Admission of General Partners.
A Limited Partner, or the transferee of all or part of the
Partnership Interest of the General Partner, may be admitted to the Partnership
as a general partner upon furnishing to the General Partner all of the
following:
(a) The written consent of both the General Partner and a
Majority in Interest of the Limited Partners, which consent may be
granted or denied in the sole discretion of the Partners;
(b) Such financial statements, guarantees or other assurances
as the General Partner may require with regard to the ability of the
proposed general partner to fulfill the financial obligations of a
general partner hereunder;
(c) Acceptance, in form satisfactory to the General Partner,
of all the terms and provisions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
(d) A certified copy of a resolution of its Board of Directors
(if it is a corporation) authorizing it to become a general partner
under the terms and conditions of this Agreement;
(e) A power of attorney substantially identical to that
contained in Article 37;
(f) Such other documents or instruments as may be required in
order to effect its admission as a general partner; and
(g) Payment of such reasonable expenses as may be incurred in
connection with its admission as a general partner.
Notwithstanding the above, a transferee that controls or is
controlled by the General Partner or one or more of its Affiliates that receives
all or part of the Partnership Interest of the General Partner may be admitted
to the Partnership as a general partner upon complying with all the provisions
of Article 16.5 except for subparagraph 16.5(a). As long as the transferee
either controls or is controlled by the General Partner or one or more of its
Affiliates, no Limited Partner consents will be required to admit such
transferee as a General Partner to the Partnership.
16.6 Amendment of Certificate of Limited Partnership and
Qualification.
The General Partner shall take all steps necessary and
appropriate to prepare and record any amendments to the Certificate of Limited
Partnership, as may be necessary or appropriate from time to time to comply with
the requirements of the Act, including, without limitation, upon the admission
to the Partnership of any general partner pursuant to the provisions of Article
16.5, and may for this purpose exercise the power of attorney delivered to the
General Partner pursuant to Article 16.5 or 37. In addition, the General Partner
shall take all steps necessary and appropriate to prepare and record any and all
documents necessary to qualify the Partnership to do business in jurisdictions
where the Partnership is
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doing business, and may for this purpose exercise the power of attorney
delivered to the General Partner pursuant to Articles 16.4, 16.5 or 37.
16.7 Fundamental Changes.
In the event a plan is approved by the General Partner
providing for the merger or consolidation of the Partnership with another person
or entity, or the sale of all or substantially all of the Partnership Interests,
including without limitation the exchange of Partnership Interests for equity
interests in another person or entity or for cash or other consideration or
combination thereof, then and in such event, the Limited Partners shall be
obligated to take or refrain from taking, as the case may be, such actions as
the plan may provide, including, without limitations, executing such
instruments, and providing such information as the General Partner shall
reasonably request. Any plan described in this Article 16.7 may also effect an
amendment to the Partnership Agreement or the adoption of a new partnership
agreement in connection with the merger of the Partnership with another person
or entity as provided in Section 15678.2(e) of the Act. The plan may also
provide that the General Partner and its Affiliates shall receive fees for
services rendered in connection with the operation of the Partnership or any
successor entity following the consummation of the transactions described in the
plan, and neither the Partnership nor the Partners shall have any right by
virtue of this Agreement in the income derived therefrom. Any securities or
other consideration to be distributed to the Partners pursuant to the plan shall
be distributed in the manner set forth in Article 24(c) as though the
Partnership were being liquidated. For this purpose only, the fair market value
of the securities or other consideration to be received pursuant to the plan
shall be treated as "Profits" and the capital accounts of the Partners shall be
increased in the manner provided in Article 11(a)(ii). No Partner shall be
entitled to any appraisal or similar rights in connection with a plan
contemplated by this Article 16.7.
16.8 Withdrawal of Initial Limited Partner.
Upon the date the first Limited Partner is admitted to the
Partnership in accordance with Article 10 of this Agreement, the Initial Limited
Partner shall withdraw from the Partnership, and thereupon his Capital
Contribution shall be returned and his Partnership Interest shall be reallocated
to the Limited Partners.
17. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON
CERTAIN EVENTS.
17.1 Death.
Upon the death of a Limited Partner, the deceased Limited
Partner's executor, administrator, or other legal or personal representative
shall give written notice of that fact to the General Partner. The General
Partner shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the deceased Limited Partner (whose executor,
administrator or other legal or personal representative shall then become
obligated to sell such Partnership Interest) at the price determined in the
manner provided in Article 17.6 of this Agreement and on the terms and
conditions provided in Article 17.7 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date of notice of the death of
the Limited Partner (the "Option Period") within which to notify in writing the
deceased Limited Partner's executor, administrator or other legal or personal
representative, whether the General Partner wishes to purchase all or a portion
of the Partnership Interest of the deceased
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Limited Partner. If the General Partner does not elect to purchase the entire
Partnership Interest of the deceased Limited Partner before the expiration of
the Option Period and in the manner provided herein, the portion of the
Partnership Interest not purchased shall be held by the deceased Limited
Partner's executor, administrator, or other legal representative pursuant to the
terms of this Agreement. The General Partner, in its sole discretion, may elect
to assign its rights to purchase the Partnership Interest of a deceased Limited
Partner under this Section 17.1 to the Partnership and, in such case, the
Partnership shall have the same rights as provided for the General Partner under
this Section 17.1.
17.2 Bankruptcy, Insolvency or Assignment for Benefit of
Creditors of a Limited Partner.
In the event that an involuntary or voluntary proceeding
under the Federal Bankruptcy Code, as amended, is filed for or against any
Limited Partner, or if any Limited Partner shall make an assignment for the
benefit of his creditors, or if any Limited Partner has a receiver or custodian
appointed for his assets, or any Limited Partner generally fails to pay his
debts when due, the insolvent Limited Partner shall give written notice (the
"Notice of Insolvency") to the General Partner of the commencement of any such
proceeding or the occurrence of such event within five days of the first notice
to him of such commencement or occurrence of such event. The General Partner
shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the insolvent Limited Partner (which insolvent Limited
Partner or his trustee, custodian, receiver or other personal or legal
representative, as the case may be, shall then become obligated to sell such
Partnership Interest) at the price determined in the manner provided in Article
17.6 of this Agreement and on the terms and conditions provided in Article 17.7
of this Agreement. The General Partner shall have a period of thirty (30) days
following the date of the Notice of Insolvency (the "Option Period") within
which to notify in writing the insolvent Limited Partner or his trustee,
custodian, receiver, or other legal or personal representative, whether the
General Partner wishes to purchase all or a portion of the Partnership Interest
of the insolvent Limited Partner. If the General Partner does not elect to
purchase the entire Partnership Interest of the insolvent Limited Partner before
the expiration of the Option Period and in the manner provided herein, the
portion of the Partnership Interest not purchased shall be held by the insolvent
Partner, his trustee, custodian, receiver or other legal or personal
representative pursuant to the terms of this Agreement. The General Partner, in
its sole discretion, may elect to assign its rights to purchase the Partnership
Interest of an insolvent Limited Partner under this Section 17.2 to the
Partnership and, in such case, the Partnership shall have the same rights as
provided for the General Partner under this Section 17.2.
17.3 Breach of Article 14.3.
In the event a Limited Partner (the "Defaulting Limited
Partner") breaches the provisions of Article 14.3 of this Agreement, as
determined in the sole discretion of the General Partner, the General Partner
may elect, in its sole discretion, to treat such event as a default under this
Agreement and enforce the provisions of this Article 17.3. If the General
Partner elects to enforce the provisions of this Article 17.3, the General
Partner shall give written notice of such election (the "Notice of Default") to
the Defaulting Limited Partner within 180 days of the date the General Partner
first received notice of the defaulting event. The General Partner shall have
the option to purchase at the Closing (as defined below) the Partnership
Interest of the Defaulting Limited Partner (which Defaulting Limited Partner
shall then become obligated to sell such Partnership Interest) at the price
determined in the manner provided in Article 17.6 of this Agreement and on the
terms and conditions provided in Article 17.7 of this Agreement. The General
Partner shall have a period of thirty (30) days following the date of the close
of the date of the
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Notice of Default (the "First Option Period") within which to notify in writing
the Defaulting Limited Partner, whether the General Partner wishes to purchase
all or a portion of the Partnership Interest of the Defaulting Limited Partner.
If the General Partner does not elect to purchase the entire Partnership
Interest of the Defaulting Limited Partner before the expiration of the Option
Period and in the manner provided herein, the portion of the Partnership
Interest not purchased shall be held by the Defaulting Limited Partner pursuant
to the terms of this Agreement. The General Partner, in its sole discretion, may
elect to assign its rights to purchase the Partnership Interest of a Defaulting
Limited Partner under this Section 17.3 to the Partnership and, in such case,
the Partnership shall have the same rights as provided for the General Partner
under this Section 17.3.
17.4 Domestic Proceeding. In the event that a spouse of a
Limited Partner commences against a Limited Partner, or a Limited Partner is
named in, a Domestic Proceeding, the Limited Partner shall give written notice
(the "Notice of Domestic Proceeding") to the General Partner of the commencement
of any such proceeding within five days of the first notice to him of such
commencement. The General Partner shall have the option to purchase at the
Closing (as defined below) the Partnership Interest of the Limited Partner
involved in the Domestic Proceeding (which Limited Partner shall then become
obligated to sell such Partnership Interest), at the price determined in the
manner provided in Article 17.6 of this Agreement and on the terms and
conditions provided in Article 17.7 of this Agreement.
The General Partner shall have a period of thirty (30) days following the date
of the Notice of Domestic Proceeding (the "Option Period") within which to
notify in writing the Limited Partner involved in the Domestic Proceeding,
whether the General Partner wishes to purchase all or a portion of the
Partnership Interest of such Limited Partner. If the General Partner does not
elect to purchase the Partnership Interest of the Limited Partner involved in
the Domestic Proceeding before the expiration of the Option Period and in the
manner provided herein, the portion of the Partnership Interest not purchased
shall be held by such Limited Partner pursuant to the terms of this Agreement.
The General Partner, in its sole discretion, may elect to assign its rights to
purchase the Partnership Interest of the Limited Partner involved in the
Domestic Proceeding under this Section 17.4 to the Partnership and, in such
case, the Partnership shall have the same rights as provided for the General
Partner under this Section 17.4.
17.5 Divestiture Option. If state or federal regulations or
laws are enacted or applied, or if any other legal developments occur, which, in
the opinion of the General Partner adversely affect (or potentially adversely
affect) the operation of the Partnership (e.g., the enactment or application of
prohibitory physician self-referral legislation against the Partnership or its
Partners), the General Partner shall promptly either, in its discretion, (i)
take the steps outlined in this Article 17.5 to divest the Limited Partners of
their Partnership Interests, or (ii) dissolve the Partnership as provided in
Article 23.1(d). If the General Partner chooses option (i), it shall deliver a
written notice to all of the Limited Partners (the "Notice of Election") and
purchase such Partnership Interests for its own account. The purchase price to
be paid for each Partnership Interest shall be determined in the manner as
provided in Article 17.6 and shall be on the terms and conditions as provided in
Article 17.7. The transfer of the Partnership Interests and the payment of the
purchase price (as provided in Article 17.6) shall be made at such time as
determined by the General Partner to be in the best interests of the Partnership
and its Limited Partners. Each Limited Partner hereby makes, constitutes and
appoints the General Partner, with full power of substitution, his true and
lawful attorney-in-fact, to take such actions and execute such documents on his
behalf to effect the transfer of his Partnership Interest as provided in this
Article 17.5.
17.6 Purchase Price. The purchase price to be paid for
the Partnership Interest of any Limited Partner whose interest is being
purchased pursuant to the provisions of Articles 17.1, 17.2, 17.3,
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17.4 or 17.5 (the "Retiring Limited Partner") shall be an amount equal to the
Retiring Limited Partner's share of the Partnership's book value, if any,
(prorated in the event that only a portion of his Partnership Interest is being
purchased) as reflected by the Capital Account of the Retiring Limited Partner
(unadjusted for any appreciation in Partnership assets and as reduced by
depreciation deductions claimed by the Partnership for tax purposes). The
determination of the Retiring Limited Partner's Capital Account on the Valuation
Date (as defined below) shall be made by the Partnership's internal accountant
(the "Partnership Accountant") upon a review of the Partnership books of
account, and a formal audit is expressly waived. The statement of the
Partnership Accountant with respect to the Capital Account of the Retiring
Limited Partner on the Valuation Date shall be binding and conclusive upon the
Partnership, the purchaser and the Retiring Limited Partner and his
representative. The Valuation Date shall be the last day of the month next
preceding the month in which occurs: (i) the death of a Limited Partner, in the
case of a purchase by reason of death; (ii) the bankruptcy or insolvency of a
Limited Partner, in the case of a purchase by reason of such bankruptcy or
insolvency; (iii) the Notice of Default as provided in Article 17.3 in the case
of a purchase by reason thereof; (iv) the commencement of the Domestic
Proceeding, in the case of a purchase by reason thereof; or (v) the Notice of
Election as provided in Article 17.5, in the case of a purchase by reason
thereof. Any Limited Partner whose Partnership Interest is purchased pursuant to
the provisions of Article 17.1, 17.2, 17.3, 17.4 or 17.5 shall be entitled only
to the purchase price which shall be paid at the Closing in cash (or by
certified or cashier's check) and shall not be entitled to any Partnership
distributions made after the Valuation Date. The transfer of a Partnership
Interest of a Retiring Limited Partner shall be deemed to occur as of the
Valuation Date and the Retiring Limited Partner shall have no voting or other
rights as a Limited Partner after such date. The purchaser shall be entitled to
any distributions attributable to the transferred interest after the Valuation
Date and shall have the right to deduct the amount of any such distributions
made to the Retiring Limited Partner from the purchase price.
17.7 Closing.
17.7.1 Closing of Purchase and Sale. The Closing of any
purchase and sale of a Partnership Interest pursuant to Article 17.1,
17.2, 17.3, 17.4 or 17.5 of this Agreement shall take place at the
principal office of the Partnership, or such other place designated by
the General Partner, on the date determined as follows (the "Closing"):
(a) In the case of a purchase and sale occurring by reason of
the death of a Limited Partner as provided in Article 17.1 of this
Agreement, the Closing shall be held on the thirtieth day (or if such
thirtieth day is not a business day, the next business day following
the thirtieth day) next following the last to occur of:
(i) Qualification of the executor or personal
administrator of the deceased Limited Partner's estate;
(ii) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made; or
(iii) The date that coincides with the close of the
Option Period.
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(b) In the case of a purchase and sale occurring by reason of
the occurrence of one of the events described in Article 17.2, 17.3,
17.4 or 17.5 of this Agreement, the Closing shall be held on the
thirtieth day (or if such thirtieth day is not a business day, the next
business day following the thirtieth day) next following the later to
occur of:
(i) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made; or
(ii) The date that coincides with the close of the
Option Period.
At the Closing, although not necessary to effect the transfer, the
Retiring Limited Partner shall concurrently with tender and receipt of
the applicable purchase price, deliver to the purchaser duly executed
instruments of transfer and assignment, assigning good and marketable
title to the portion or portions of the Retiring Limited Partner's
entire Partnership Interest thus purchased, free and clear from any
liens or encumbrances or rights of others therein. The parties
acknowledge that occurrence of any of the triggering events described
in Article 17.1, 17.2, 17.3, 17.4 or 17.5 and compliance with all the
Articles of this Agreement, except the execution of the transfer
documents by the Retiring Partner as provided above in this Article
17.7.1, are sufficient to effect the complete transfer of the Retiring
Limited Partner's interest and the Retiring Limited Partner shall be
deemed to consent to admission of the transferee as a substitute
Limited Partner. Notwithstanding the date of the Closing or whether a
Closing is successfully held, the transfer of a Partnership Interest of
a Retiring Limited Partner shall be deemed to occur as of the Valuation
Date as defined in Article 17.6. The deemed transfer is effective
regardless of whether the Retiring Limited Partner performs the duties
set forth in this Article 17.7.1.
17.7.2 Terms and Conditions of Purchase. The Partnership
Interest of a Limited Partner shall not be transferred to any Partner
unless the requirements of Articles 16.2 and 16.4 (b) through (f) are
satisfied with respect to it. The purchaser shall be liable for all
obligations and liabilities connected with that portion of the
Partnership Interest transferred to it unless otherwise agreed in
writing.
18. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST.
18.1 The General Partner may not mortgage, pledge,
hypothecate, transfer, sell, assign or otherwise dispose of all or any part of
its interest in the Partnership, whether voluntarily, by operation of law or
otherwise (the foregoing actions being hereafter collectively referred to as
"Transfers" or singularly as a "Transfer") except as permitted by this Article.
18.2 If the General Partner makes a Transfer (other than a
mortgage, pledge or hypothecation) of its general partner interest in the
Partnership pursuant to this Article, it shall be liable for all obligations and
liabilities incurred by it as the General Partner of the Partnership on or
before the
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effective date of such Transfer, but shall not be liable for any obligations or
liabilities of the Partnership arising after the effective date of the Transfer.
18.3 No Transfer by the General Partner shall be permitted
unless:
(a) Counsel for the Partnership shall have rendered an opinion
that none of the actions taken in connection with such Transfer will
cause the Partnership to be classified other than as a partnership for
Federal income tax purpose or will cause the termination or dissolution
of the Partnership under state law; and
(b) Such documents or instruments, in form and substance
satisfactory to counsel for the Partnership, shall have been executed
and delivered as may be required in the opinion of counsel for the
Partnership to effect fully any such Transfer.
Notwithstanding the foregoing provisions of this Article 18.3,
the General Partner may pledge its interest in the Partnership to any bank,
insurance company or other financial institution to secure payment of
indebtedness.
19. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER.
If the General Partner shall be finally adjudged by a court of
competent jurisdiction to be liable to the Limited Partners or the Partnership
for any act of gross negligence or willful misconduct in the performance of its
duties under the terms of this Agreement, the General Partner may be removed and
another substituted with the consent of all of the Limited Partners. Such
consent shall be evidenced by a certificate of removal signed by all of the
Limited Partners. In the event of removal, the new general partner shall succeed
to all of the powers, privileges and obligations of the General Partner, and the
General Partner's interest in the Partnership shall become that of a Limited
Partner, and the General Partner shall maintain its same Percentage Interest in
the Partnership notwithstanding anything contained in the Act to the contrary.
In addition, in the event of removal, the new general partner shall take all
steps necessary and appropriate to prepare and record an amendment to the
Certificate of Limited Partnership to reflect the removal of the General Partner
and the admission of such new general partner.
20. MANAGEMENT AND OPERATION OF BUSINESS.
20.1 All decisions with respect to the management of the
business and affairs of the Partnership shall be made by the General Partner.
20.2 The General Partner shall be under no duty to devote all
of its time to the business of the Partnership, but shall devote only such time
as it deems necessary to conduct the Partnership business and to operate and
manage the Partnership in an efficient manner.
20.3 The General Partner may charge to the Partnership all
ordinary and necessary costs and expenses, direct and indirect, attributable to
the activities, conduct and management of the business of the Partnership. The
costs and expenses to be borne by the Partnership shall include, but are not
limited to, all expenditures incurred in acquiring and financing the Equipment
or other Partnership property, legal and accounting fees and expenses, salaries
of employees of the Partnership, consulting and quality assurance fees paid to
independent contractors, insurance premiums and interest.
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20.4 In addition to, and not in limitation of, any rights and
powers covenanted by law or other provisions of this agreement, and except as
limited, restricted or prohibited by the express provisions of this Agreement,
the General Partner shall have and may exercise on behalf of the Partnership all
powers and rights necessary, proper, convenient or advisable to effectuate and
carry out the purposes, business and objectives of the Partnership. Such powers
shall include, without limitation, the following:
(a) To acquire a Prostatron(R) Mobile System;
(b) To acquire (i) additional Prostatron(R) Mobile Systems,
(ii) any other assets related to the provision of benign prostatic
hyperplasia treatment services, or (iii) any other assets or equipment
or an interest in another entity consistent with the purposes of the
Partnership as provided in Article 4 (collectively, the "Additional
Assets"), at such times and at such price and upon such terms, as the
General Partner deems to be in the best interest of the Partnership;
(c) To purchase, hold, manage, lease, license and dispose of
Partnership assets (including the Prostatron(R) Mobile System),
including the purchase, exchange, trade or sale of the Partnership's
assets at such price, or amount, for cash, securities or other property
and upon such terms, as the General Partner deems to be in the best
interest of the Partnership; provided, that should the Partnership
assets be exchanged or traded for securities or other property (the
"Replacement Property") the General Partner shall have the same powers
with regard to the Replacement Property as it does towards the traded
property;
(d) To exercise the option of the General Partner or the
Partnership to purchase a Limited Partner's Partnership Interest
pursuant to Article 17;
(e) To determine the travel itinerary and site locations for
the Prostatron(R) Mobile System or other Partnership technology;
(f) To borrow money for any Partnership purpose (including the
acquisition of the Additional Assets) and, if security is required
therefor, to subject to any security device any portion of the property
for the Partnership, to obtain replacements of any other security
device, to prepay, in whole or in part, refinance, increase, modify,
consolidate or extend any encumbrance or other security device;
(g) To deposit, withdraw, invest, pay, retain (including the
establishment of reserves in order to acquire the Additional Assets)
and distribute the Partnership's funds in any manner consistent with
the provisions of this Agreement;
(h) To institute and defend actions at law or in equity;
(i) To enter into and carry out contracts and agreements and
any or all documents and instruments and to do any and all such other
things as may be in furtherance of Partnership purposes or necessary or
appropriate to the conduct of the Partnership activities;
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<PAGE>
(j) To execute, acknowledge and deliver any and all
instruments which may be deemed necessary or convenient to effect the
foregoing; and
(k) To engage or retain one or more persons to perform acts or
provide materials as may be required by the Partnership, at the
Partnership's expense, and to compensate such person or persons at a
rate to be set by the General Partner, provided that the compensation
is at the then prevailing rate for the type of services and materials
provided, or both. Any person, whether a Partner, an Affiliate of a
Partner or otherwise, including without limitation the General Partner,
may be employed or engaged by the Partnership to render services and
provide materials, including, but not limited to, management services,
professional services, accounting services, quality assessment
services, legal services, marketing services, maintenance services or
provide materials; and if such person is a Partner or an Affiliate of a
Partner, he shall be entitled to, and shall be paid compensation for
said services or materials, anything in this Agreement to the contrary
notwithstanding, provided that the compensation to be received for such
services or materials is competitive in price and terms with then
prevailing rate for the type of services and/or materials provided. The
Partnership, pursuant to the terms of a Management Agreement, will
contract with Lithotripters, Inc., a North Carolina corporation and an
Affiliate of the General Partner, with respect to the supervision and
coordination of the management and administration of the day-to-day
operations of the Prostatron(R) Mobile System for a monthly fee equal
to the greater of 7.5% of Partnership Cash Flow per month or $8,000 per
month. All costs incurred by the General Partner, excluding the costs
of employing one or more local physicians to act as a Medical Director,
shall be paid by the Partnership directly. The Partnership may also
contract with qualified physicians desiring to use the Prostatron(R)
Mobile System for the treatment of patients. Owning an interest in the
Partnership shall not be a condition to using the Prostatron(R) Mobile
System. The General Partner and its Affiliates may engage in or possess
an interest in other business ventures of any nature and description
independently or with others, including, but not limited to, the
operation of a mobile benign prostatic hyperplasia treatment unit
similar to the Prostatron(R) Mobile System, whether or not such
business ventures are in direct or indirect competition with the
Partnership, and neither the Partnership nor the Partners shall have
any right by virtue of this Agreement in and to said independent
ventures or to the income or profits derived therefrom.
21. RESERVES.
The General Partner may cause the Partnership to create a
reserve account to be used exclusively for repairs and acquisition of Additional
Assets and for any other valid Partnership purpose. The General Partner shall,
in its sole discretion, determine the amount of payments to such reserve.
22. INDEMNIFICATION AND EXCULPATION OF THE
GENERAL PARTNER.
22.1 The General Partner is accountable to the Partnership as
a fiduciary and consequently must exercise good faith and integrity in handling
Partnership affairs. This is a rapidly developing and changing area of the law
and Limited Partners who have questions concerning the duties of the General
Partner should consult with their counsel. The General Partner and its
Affiliates shall have
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<PAGE>
no liability to the Partnership which arises out of any action or inaction of
the General Partner or its Affiliates if the General Partner or its Affiliates,
in good faith, determined that such course of conduct was in the best interest
of the Partnership and such course of conduct did not constitute gross
negligence or willful misconduct of the General Partner or its Affiliates. The
General Partner and its Affiliates shall be indemnified by the Partnership
against any losses, judgments, liabilities, expenses and amounts paid in
settlement of any claims sustained by them in connection with the Partnership,
provided that the same were not the result of gross negligence or willful
misconduct on the part of the General Partner or its Affiliates.
22.2 The General Partner shall not be liable for the return of
the Capital Contributions of the Limited Partners, and upon dissolution, Limited
Partners shall look solely to the assets of the Partnership.
23. DISSOLUTION OF THE PARTNERSHIP.
23.1 The Partnership shall be dissolved and terminated and its
business wound up upon the occurrence of any one of the following events:
(a) The expiration of its term on January 1, 2047;
(b) The filing by, on behalf of, or against the General
Partner of any petition or pleading, voluntary or involuntary, to
declare the General Partner bankrupt under any bankruptcy law or act,
or the commencement in any court of any proceeding, voluntary or
involuntary, to declare the General Partner insolvent or unable to pay
its debts, or the appointment by any court or supervisory authority of
a receiver, trustee or other custodian of the property, assets or
business of the General Partner or the assignment by it of all or any
part of its property or assets for the benefit of creditors, if said
action, proceeding or appointment is not dismissed, vacated or
otherwise terminated within ninety (90) days of its commencement;
(c) The determination of the General Partner that the
Partnership should be dissolved;
(d) The election of the General Partner to dissolve the
Partnership following the occurrence of an event described in Article
17.5;
(e) The sale, exchange or other disposition of all or
substantially all of the property of the Partnership without making
provision for the replacement thereof; and
(f) The dissolution, retirement, resignation, death,
disability or legal incapacity of a general partner, and any other
event resulting in the dissolution or termination of the Partnership
under the laws of the State of California.
23.2 Notwithstanding the provisions of Article 23.1, the
Partnership shall not be dissolved and terminated upon the retirement,
resignation, bankruptcy, assignment for the benefit of creditors, dissolution,
death, disability or legal incapacity of a general partner, and its business
shall continue pursuant to the terms and conditions of this Agreement, if any
general partner or general partners remain following such event; provided that
such remaining general partner or general partners are hereby obligated to
-22-
<PAGE>
continue the business of the Partnership. If no general partner remains after
the occurrence of such event, the business of the Partnership shall continue
pursuant to the terms and conditions of this Agreement, if, within ninety (90)
days after the occurrence of such event, the Limited Partners unanimously agree
in writing to continue the business of the Partnership, and, if necessary, to
the appointment of one or more persons or entities to be substituted as the
general partner. In the event the Limited Partners agree to continue the
business of the Partnership, the new general partner or general partners shall
succeed to all of the powers, privileges and obligations of the General Partner,
and the General Partner's interest in the Partnership shall become a Limited
Partner's interest hereunder. Furthermore, in the event a remaining general
partner or the Limited Partners, as the case may be, agree to continue the
business of the Partnership as provided herein, the remaining general partner or
the newly appointed general partner or general partners, as the case may be,
shall take all steps necessary and appropriate to prepare and record an
amendment to the Certificate of Limited Partnership to reflect the continuation
of the business of the Partnership and the admission of a new general partner or
general partners, if any.
24. DISTRIBUTION UPON DISSOLUTION.
Upon the dissolution and termination of the Partnership, the
General Partner or, if there is none, a representative of the Limited Partners,
shall cause the cancellation of the Partnership's Certificate of Limited
Partnership, shall liquidate the assets of the Partnership, and shall apply and
distribute the proceeds of such liquidation in the following order of priority:
(a) First, to the payment of the debts and liabilities of the
Partnership, and the expenses of liquidation;
(b) Second, to the creation of any reserves which the General
Partner (or the representatives of the Limited Partners) may deem
reasonably necessary for the payment of any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner
arising out of or in connection with the business and operation of the
Partnership; and
(c) Third, the balance, if any, shall be distributed to the
Partners in accordance with the Partners' positive Capital Account
balances after such capital accounts are adjusted as provided by
Article 13, and any other adjustments required by the Final Treasury
Regulations under Section 704(b) of the Code. Any general partner with
a negative Capital Account following the distribution of liquidation
proceeds or the liquidation of its interest must contribute to the
Partnership an amount equal to such negative Capital Account on or
before the end of the Partnership's taxable year (or, if later, within
ninety days after the date of liquidation). Any capital so contributed
shall be (i) distributed to those Partners with positive Capital
Accounts until such Capital Accounts are reduced to zero, and/or (ii)
used to discharge recourse liabilities.
25. BOOKS OF ACCOUNT, RECORDS AND REPORTS.
25.1 Proper and complete records and books of account shall be
kept by the General Partner in which shall be entered fully and accurately all
transactions and such other matters relating to the Partnership's business as
are usually entered into records and books of account maintained by persons
engaged in businesses of a like character. The books and records of the
Partnership shall be prepared
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<PAGE>
according to the accounting method determined to be in the best interest of the
Partnership by the General Partner. The Partnership's fiscal year shall be the
calendar year. The books and records shall at all times be maintained at the
Partnership's Records Office and shall be open to the reasonable inspection and
examination of the Partners or their duly authorized representatives during
reasonable business hours.
25.2 Within ninety (90) days after the end of each Year, the
General Partner shall send to each person who was a Limited Partner at any time
during such year such tax information, including, without limitation, Federal
tax Schedule K-1, as shall be reasonably necessary for the preparation by such
person of his Federal income tax return. The General Partner will also make
available to the Limited Partners any other information required by the Act.
25.3 The General Partner shall maintain at the Partnership's
Records Office copies of the Partnership's original Certificate of Limited
Partnership and any certificate of amendment, restated certificate or
certificate of cancellation with respect thereto and such other documents as the
Act shall require. The General Partner will furnish to any Limited Partner upon
request a copy of the Partnership's original Certificate of Limited Partnership
and any certificate of amendment, restated certificate, or certificate of
cancellation, if any.
25.4 The General Partner shall, in its sole discretion, make
for the Partnership any and all elections for federal, state and local tax
purposes including, without limitation, any election, if permitted by applicable
law, to adjust the basis of the Partnership's property pursuant to Code Sections
754, 734(b) and 743(b), or comparable provisions of state or local law, in
connection with transfers of interests in the Partnership and Partnership
Distributions.
25.5 The General Partner is designated as the Tax Matters
Partner (as defined in Section 6231 of the Code) and to act in any similar
capacity under state or local law, and is authorized (at the Partnership's
expense): (i) to represent the Partnership and Partners before taxing
authorities or courts of competent jurisdiction in tax matters affecting the
Partnership or Partners in their capacity as Partners; (ii) to extend the
statute of limitations for assessment of tax deficiencies against Partners with
respect to adjustments to the Partnership's federal, state or local tax returns;
(iii) to execute any agreements or other documents relating to or affecting such
tax matters, including agreements or other documents that bind the Partners with
respect to such tax matters or otherwise affect the rights of the Partnership
and Partners; and (iv) to expend Partnership funds for professional services and
costs associated therewith. The General partner is authorized and required to
notify the federal, state or local tax authorities of the appointment of a Tax
Matters Partner in the manner provided in Treasury Regulations Section
301.6231(a)(7)-IT, as modified from time to time. In its capacity as Tax Matters
Partner, the General Partner shall oversee the Partnership tax affairs in the
manner which, in its best judgment, are in the interests of the Partners.
26. NOTICES.
All notices under this Agreement shall be in writing and shall
be deemed to have been given when delivered personally, or mailed by certified
or registered mail, postage prepaid, return receipt requested. Notices to the
General Partner shall be delivered at, or mailed to, its principal office.
Notices to the Partnership shall be delivered at, or mailed to, its principal
office with a copy to each of its business offices. Notice to a Limited Partner
shall be delivered to such Limited Partner, or mailed to the last address
furnished by him for such purposes to the General Partner. Limited Partners
shall give notice of a change of address to the General Partner in the manner
provided in this Article.
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<PAGE>
27. AMENDMENTS.
Subject to the provisions of Article 28, this Agreement is
subject to amendment only by written consent of the General Partner and a
Majority in Interest of the Limited Partners; provided, however, the consent of
the Limited Partners shall not be required if such amendments are ministerial in
nature and do not contravene the provisions of Article 28.
28. LIMITATIONS ON AMENDMENTS.
Notwithstanding the provisions of Article 27, no amendment to
this Agreement shall:
(a) Enlarge the obligations of any Partner under this
Agreement or convert the interest in the Partnership of any Limited
Partner into the interest of a general partner or modify the limited
liability of any Limited Partner, without the consent of such Partner;
(b) Amend the provisions of Article 12, 13, 15 or 24 without
the approval of the General Partner and a Majority in Interest of the
Limited Partners; provided, however, that the General Partner may at
any time amend such Articles without the consent of the Limited
Partners in order to permit the Partnership allocations to be sustained
for Federal income tax purposes, but only if such amendments do not
materially affect adversely the rights and obligations of the Limited
Partners, in which case such amendments may only be made as provided in
this Article 28(c); or
(c) Amend this Article 28 without the consent of all Partners.
29. MEETINGS, CONSENTS AND VOTING.
29.1 A meeting of the Partnership to consider any matter with
respect to which the Partners may vote as set forth in this Agreement may be
called by the General Partner or by Limited Partners who hold more than
twenty-five percent (25%) of the aggregate interests in the Partnership held by
all the Limited Partners. Upon receipt of a notice requesting a meeting by such
Partner or Partners and stating the purpose of the meeting, the General Partner
shall, within ten (10) days thereafter, give notice to the Partners of a meeting
of the Partnership to be held at a time and place convenient to the Limited
Partners on a date not earlier than fifteen (15) days after receipt by the
General Partner of the notice requesting a meeting. The notice of the meeting
shall set forth the time, date, location and purpose of the meeting.
29.2 Any consent of a Partner required by this Agreement may
be given as follows:
(a) By a written consent given by the consenting Partner and
received by the General Partner at or prior to the doing of the act or
thing for which the consent is solicited, or
(b) By the affirmative vote by the consenting Partner to the
doing of the act or thing for which the consent is solicited at any
meeting called pursuant to this Article to consider the doing of such
act or thing.
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<PAGE>
29.3 When exercising voting rights expressly granted under the
Articles of this Agreement, each Partner shall have that number of votes as is
equal to the Percentage Interest of such Partner at the time of the vote,
multiplied by 100.
30. SUBMISSIONS TO THE LIMITED PARTNERS.
The General Partner shall give the Limited Partners notice of
any proposal or other matter required by any provision of this Agreement or by
law to be submitted for consideration and approval of the Limited Partners. Such
notice shall include any information required by the relevant provision or by
law.
31. ADDITIONAL DOCUMENTS.
Each party hereto agrees to execute and acknowledge all
documents and writings which the General Partner may deem necessary or expedient
in the creation of this Partnership and the achievement of its purpose.
32. SURVIVAL OF RIGHTS.
Except as herein otherwise provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their successor and assigns.
33. INTERPRETATION AND GOVERNING LAW.
When the context in which words are used in this Agreement
indicates that such is the intent, words in the singular number shall include
the plural and vise versa; in addition, the masculine gender shall include the
feminine and neuter counterparts. The Article headings or titles and the table
of contents shall not define, limit, extend or interpret the scope of this
Agreement or any particular Article. This Agreement shall be governed and
construed in accordance with the laws of the State of California without giving
effect to the conflicts of laws provisions thereof.
34. SEVERABILITY.
If any provision, sentence, phrase or word of this Agreement
or the application thereof to any person or circumstance shall be held invalid,
the remainder of this Agreement, or the application of such provision, sentence,
phrase, or word to persons or circumstances, other than those as to which it is
held invalid, shall not be affected thereby.
35. AGREEMENT IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument. In addition, this Agreement may contain more than one
counterpart of the signature page and this Agreement may be executed by the
affixing of the signatures of each of the Partners to one of such counterpart
signature pages; all of such signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.
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<PAGE>
36. THIRD PARTIES.
The agreements, covenants and representations contained herein
are for the benefit of the parties hereto inter se and are not for the benefit
of any third parties including, without limitation, any creditors of the
Partnership.
37. POWER OF ATTORNEY.
Each Limited Partner hereby makes, constitutes and appoints
Dr. Joseph Jenkins and Dr. Dan A. Myers, severally, with full power of
substitution, his true and lawful attorneys-in-fact, for him and in his name,
place and stead and for his use and benefit to sign and acknowledge, file and
record, any amendments hereto among the Partners for the further purpose of
executing and filing on behalf of each Limited Partner, any and all certificates
of limited partnership or other documents necessary to constitute the
Partnership or to effect the continuation of the Partnership, the admission or
withdrawal of a general partner or a limited partner, the qualification of the
Partnership in a foreign jurisdiction (or amendment to such qualification), the
admission of substitute Limited Partners or the dissolution or termination of
the Partnership, provided such continuation, admission, withdrawal,
qualification, or dissolution and termination are in accordance with the terms
of this Agreement.
The foregoing power of attorney is a special power of attorney
coupled with an interest, is irrevocable and shall survive the death or legal
incapacity of each Limited Partner. It may be exercised by any one of said
attorneys by listing all of the Limited Partners executing any instrument over
the signature of the attorney-in-fact acting for all of them. The power of
attorney shall survive the delivery of an assignment by a Limited Partner of the
whole or any portion of his Unit. In those cases in which the assignee of, or
the successor to, a Limited Partner owning a Unit has been approved by the
Partners for admission to the Partnership as a substitute Limited Partner, the
power of attorney shall survive for the sole purpose of enabling the General
Partner to execute, acknowledge and file any instrument necessary to effect such
substitution.
This power of attorney shall not be affected by the subsequent
incapacity or mental incompetence of any Limited Partner.
38. ARBITRATION.
Any dispute arising out of or in connection with this
Agreement or the breach thereof shall be decided by arbitration in Raleigh,
North Carolina in accordance with the then effective commercial arbitration
rules of the American Arbitration Association, and judgment thereof may be
entered in any court having jurisdiction thereof.
39. CREDITORS.
None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Partnership.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
of Limited Partnership as of the day and year first above written.
GENERAL PARTNER:
PROSTATHERAPIES, INC., a Delaware corporation
By: /s/ Dan A. Myers
-----------------------------
Dan A. Myers, M.D., President
ATTEST:
/s/ Philip J. Gallina [CORPORATE SEAL]
- ----------------------
Secretary
INITIAL LIMITED PARTNER:
/s/ Dan A. Myers
---------------------------------------
Dan A. Myers, M.D.
STATE OF NORTH CAROLINA )
)
COUNTY OF CUMBERLAND )
On this 12th day of June, 1997, before me, the
undersigned Notary Public in and for the County of Cumberland in the State of
North Carolina, personally came Dan A. Myers, M.D., who, being by me duly sworn,
said that he is President of Prostatherapies, Inc., the sole general partner of
California I Prostatherapy Limited Partnership, that the seal affixed to the
foregoing instrument in writing is the corporate seal of the corporation, and
that said writing was signed, sworn to, and sealed by him in behalf of said
corporation by its authority duly given. And the said Dan A. Myers, M.D.,
further certified that the facts set forth in said writing are true and correct,
and acknowledged said instrument to be the act and deed of said corporation.
WITNESS my hand and notarial seal.
/s/ Lou Ann Barnes
-------------------------------------------
Notary Public
My commission expires:
May 26, 2001
- ---------------------------
-28-
<PAGE>
STATE OF NORTH CAROLINA )
)
COUNTY OF CUMBERLAND )
I, Lou Ann Barnes, a notary public, do hereby
certify that Dan A. Myers, M.D. personally appeared before me this 12th day of
June, 1997 and acknowledged and swore to the due execution of the foregoing
Limited Partnership Agreement in his capacity as the initial limited partner.
/s/ Lou Ann Barnes
------------------------------------------
Notary Public
My commission expires:
May 26, 2001
- ---------------------------
-29-
<PAGE>
COUNTERPART SIGNATURE PAGE
By signing this Counterpart Signature Page, the undersigned
acknowledges his or her acceptance of that certain Agreement of Limited
Partnership of California I Prostatherapy Limited Partnership, and his or her
intention to be legally bound thereby.
Dated this 12th day of June, 1997.
/s/ Philip J. Gallina
-------------------------------------------
Signature
Philip J. Gallina, Secretary
Prostatherapies, Inc.
-------------------------------------------
Printed Name
STATE OF NORTH CAROLINA )
COUNTY OF CUMBERLAND )
BEFORE ME, the undersigned Notary Public in and for the State
and County set forth above, on the 12th day of June, 1997,
personally appeared Philip J. Gallina, and, being by me first duly sworn,
stated that (s)he signed this Counterpart Signature Page for the purpose set
forth above and that the statements contained therein are true.
/s/ Lou Ann Barnes
-------------------------------------------
Signature of Notary Public
Lou Ann Barnes
-------------------------------------------
Printed Name of Notary
My Commission Expires:
May 26, 2001
- ---------------------------
[SEAL]
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<PAGE>
SCHEDULE A
Schedule of Partnership Interests
CALIFORNIA I PROSTATHERAPY LIMITED PARTNERSHIP
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND PERCENTAGE
INTERESTS
Cash Percentage
General Partner Contribution Interest
Prostatherapies, Inc. $207,339.06 20%
2008 Litho Place
Fayetteville, NC 28304
Limited Partners
Roger N. Andrews 10,400 1
Habib Anwar 1,300 .125
Stephen Auerbach 10,400 1
Ruben Baghdassarian 5,200 .50
Alex G. Batta 2,600 .25
Theodore V. Benderev 5,200 .50
Mohamed Bidair 2,600 .25
Kenneth J. Blunt 10,400 1
William E. Bodenstab 10,400 1
Philip C. Bosch 10,400 1
Stephen S. Bridge 10,400 1
Paul A. Brower 10,400 1
Bruce W. Bucklew 10,400 1
Philip A. Butler 10,400 1
James A. Cavins 2,600 .25
Richard A. Cerruti 5,200 .50
Stuart A. Chalfin 5,200 .50
Neil O. Chamberlain 5,200 .50
Edward s. Cohen 5,200 .50
David M. Cumes 2,600 .25
Daniel J. Curhan 10,400 1
John W. Davis 10,400 1
Ganesha L. Devendra 5,200 .50
John W. Edwards 5,200 .50
Cedric B. Emery 10,400 1
John A. Emery 2,600 .25
General B. Farrow 5,200 .50
<PAGE>
Stuart L. Feldman 5,200 .50
Vincent J. Flynn 5,200 .50
Bradley L. Frasier 10,400 1
Alan M. Freedman 2,600 .25
William E. Friedel 2,600 .25
Edwin S. Gardiner 10,400 1
Franklin D. Gaylis 2,600 .25
Lawrence S. Greenberg 10,400 1
John J. Greisman 10,400 1
Lee B. Harbach 10,400 1
Harry M. Henderson 5,200 .50
William F. Hohn 10,400 1
Daniel B. Hunting 10,400 1
Lawrence W. Jones 2,600 .25
Saad Juma 2,600 .25
Ashok J. Kar 10,400 1
Jeffrey E. Kaufman 5,200 .50
Danny L. Keiller 2,600 .25
Warren O. Kessler 10,400 1
Fred Khonsari 5,200 .50
William T. Klope 2,600 .25
Alec S. Koo 2,600 .25
Alex Koper 10,400 1
Michael A. LaRocque 10,400 1
David J. Laub 2,600 .25
Huey C. Lin 5,200 .50
Morgan P. Lloyd 10,400 1
Howard D. Lowe 10,400 1
Derrick Marinelli 10,400 1
Leonard S. Marks 7,800 .75
John J. Martin 2,600 .25
Arturo G. Martinez 10,400 1
Robert H. Masters 2,600 .25
James P. Meaglia 7,800 .75
Manish Mehta 10,400 1
William G. Moseley 10,400 1
Daniel A. Nachtsheim 7,800 .75
William T. Naftel 2,600 .25
Paul Neustein 2,600 .25
Daniel S. Niku 5,200 .50
Melvyn H. Novegrod 2,600 .25
Thomas G. Ochsner 10,400 1
C. Lowell Parsons 7,800 .75
Joy G. Paul 2,600 .25
Jules M. Perley 10,400 1
<PAGE>
Cu N. Phan 2,600 .25
John R. Piconi 2,600 .25
Raymond S. Pong 5,200 .50
Prostatherapies, Inc. 58,456.25 5.875
Robert C. Pugach 2,600 .25
Joseph L. Raffel 10,400 1
Eugene C. Rajaratnam 7,800 .75
Muni Reddy 5,200 .50
Richard R. Reed 2,600 .25
Robert J. Reiner 2,600 .25
William F. Reynolds 2,600 .25
David W. Rhodes 5,200 .50
Donald B. Rhodes 10,400 1
George N. Riffle 2,600 .25
Marianne G. Rochester 10,400 1
Lewis Rubin 10,400 1
Steven M. Rudy 10,400 1
Donald E. Sawyer 3,900 .375
Robert A. Schroeder 5,200 .50
Terrence D. Schuhrke 10,400 1
Joel R. Sheiner 10,400 1
Igal Silber 10,400 1
Paul D. Silverman 5,200 .50
Robin V. Smith 10,400 1
Ronald S. Solomon 10,400 1
Max M. Stearns 2,600 .25
Marc J. Stratton 10,400 1
Roy I. Sugasawara 2,600 .25
Bradley J. Taylor 10,400 1
Bernard A. Turbow 10,400 1
Carlton T. Valvo 2,600 .25
Barton H. Wachs 2,600 .25
Arthur B. Warshawsky 10,400 1
Alan C. Weinberg 10,400 1
Alex J. Weinstein 10,400 1
Martin J. Weissman 10,400 1
Phillip G. Wise 10,400 1
Fredrick N. Wolk 2,600 .25
Alan H. Yamada 9,100 .875
Jay M. Young 10,400 1
Scott K. Yun 2,600 .25
Norman R. Zinner 2,600 .25
TOTAL $1,036,695.31 100%
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
GREAT LAKES LITHOTRIPSY LIMITED PARTNERSHIP
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
GREAT LAKES LITHOTRIPSY LIMITED PARTNERSHIP
TABLE OF CONTENTS
Article Heading Page
1. FORMATION..................................................1
2. NAME.......................................................1
3. OFFICES....................................................1
4. PURPOSE....................................................2
5. TERM.......................................................2
6. CERTAIN DEFINED TERMS......................................2
7. CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS...............6
8. GUARANTIES.................................................6
9. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF THE LIMITED
PARTNERS...................................................7
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
GENERAL PARTNER............................................7
11. ADMISSION OF LIMITED PARTNERS..............................7
12. CAPITAL ACCOUNTS...........................................8
13. ALLOCATIONS................................................9
14. DISTRIBUTIONS.............................................10
15. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS................10
16. LIMITED LIABILITY.........................................12
17. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS...........12
18. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON CERTAIN
EVENTS....................................................16
<PAGE>
19. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST........................................20
20. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER........21
21. MANAGEMENT AND OPERATION OF BUSINESS......................21
22. RESERVES..................................................24
23. INDEMNIFICATION AND EXCULPATION OF THE GENERAL
PARTNER...................................................24
24. DISSOLUTION OF THE PARTNERSHIP............................24
25. DISTRIBUTION UPON DISSOLUTION.............................26
26. BOOKS OF ACCOUNT, RECORDS AND REPORTS.....................26
27. NOTICES...................................................27
28. AMENDMENTS................................................27
29. LIMITATIONS ON AMENDMENTS.................................27
30 MEETINGS, CONSENTS AND VOTING.............................28
31. SUBMISSIONS TO THE LIMITED PARTNERS.......................28
32. ADDITIONAL DOCUMENTS......................................29
33. SURVIVAL OF RIGHTS........................................29
34. INTERPRETATION AND GOVERNING LAW..........................29
35. SEVERABILITY..............................................29
36. AGREEMENT IN COUNTERPARTS.................................29
37. THIRD PARTIES.............................................29
38. POWER OF ATTORNEY.........................................30
39. ARBITRATION...............................................30
40. CREDITORS.................................................30
Schedule A............... Schedule of Partnership Interests
<PAGE>
THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED PARTNERSHIP
AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, UNDER THE WISCONSIN SECURITIES
LAWS, AS AMENDED, OR UNDER SIMILAR LAWS OR ACTS OF OTHER STATES IN RELIANCE UPON
EXEMPTIONS UNDER SUCH LAWS.
AGREEMENT
OF LIMITED PARTNERSHIP
OF
GREAT LAKES LITHOTRIPSY
LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement") is
made as of October 21, 1997, by and among PRIME KIDNEY STONE TREATMENT,
INC., a New Jersey corporation (the "General Partner"), and the persons listed
on Schedule A attached hereto as the Limited Partners.
1. FORMATION.
The Partnership was originally formed under the name Wisconsin
Lithotripsy Limited Partnership I pursuant to a filing in the Office of the
Secretary of State of Wisconsin on or about May 14, 1997 of a Certificate of
Limited Partnership. Subsequently, the name of the Partnership was changed to
Great Lakes Lithotripsy Limited Partnership pursuant to the filing of a
Certificate of Amendment in the Office of the Secretary of State of Wisconsin on
or about May 16, 1997 in accordance with the provisions of the Act.
2. NAME.
2.1 The name of the Partnership is "Great Lakes Lithotripsy
Limited Partnership."
2.2 The Partnership business shall be conducted under such
names as the General Partner may from time to time deem necessary or advisable,
provided that appropriate amendments to this Agreement and all necessary filings
under applicable assumed or fictitious name statutes or the Act are first
obtained.
3. OFFICES.
3.1 The principal office of the Partnership shall be at 1301
Capital of Texas Highway, Suite C-300, Austin, Texas 78746, or at such other
place as the General Partner may, from time to time, designate by notice to the
Limited Partners (the "Records Office").
3.2 The Partnership may have such additional offices as the
General Partner may, from time to time, deem necessary or advisable.
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4. PURPOSE.
The purpose and business of the Partnership shall be: (i) to
operate one or more extracorporeal, shock-wave lithotripters for the treatment
of renal stones primarily in northern Indiana and Wisconsin, or in such other
location(s) as the General Partner may determine, in its sole discretion, to be
in the best interests of the Partnership, (ii) to acquire and operate in the
future any other urological device or equipment that as of the date of
acquisition by the Partnership has received FDA premarket approval; and (iii) to
engage in any and all activities incidental or related to the foregoing, upon
and subject to the terms and conditions of this Agreement.
5. TERM.
The Partnership shall terminate on May 31, 2047 unless sooner
terminated as herein provided.
6. CERTAIN DEFINED TERMS.
Certain terms used in this Agreement shall have the following
meanings:
Act. The Act means the Wisconsin Uniform Limited Partnership
Act, as then in effect.
Affiliate. An Affiliate is (i) any person, partnership,
corporation, association or other legal entity ("person") directly or indirectly
controlling, controlled by or under common control with another person; (ii) any
person owning or controlling 10% or more of the outstanding voting interest of
such other person; (iii) any officer, director or partner of such person; and
(iv) if such other person is an officer, director or partner, any entity for
which such person acts in such capacity.
Agreement. This Agreement of Limited Partnership, as the same
may be amended from time to time.
Bank. First Citizens Bank & Trust Company.
Capital Account. The Partnership capital account of a Partner
as computed pursuant to Article 11 of this Agreement.
Capital Contributions. All capital contributions made by a
Partner or his predecessor in interest which shall include, without limitation,
contributions made pursuant to Article 7 of this Agreement.
Capital Transaction. Any transaction which, were it to
generate proceeds, would produce Partnership Sales Proceeds or Partnership
Refinancing Proceeds.
Code. The Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent, superseding revenue laws.
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Dilution Offering. As provided in Section 7.4 of this
Agreement, the future offering of additional limited partnership interests in
the Partnership by the General Partner. Any successful Dilution Offering will
proportionately reduce the Percentage Interests of the then current Limited
Partners in the Partnership.
Domestic Proceeding. Any divorce, annulment, separation or
similar domestic proceeding between a married couple.
Equipment. The initial equipment to be acquired by the
Partnership for the operation of the Mobile Lithotripsy System. The initial
equipment to be used in the operation of the Mobile Lithotripsy system will
include the lithotripter, the Trailer, the Truck, and miscellaneous medical
equipment and supplies.
FDA. The United States Food and Drug Administration.
General Partner. The General Partner of the Partnership,
Prime Kidney Stone Treatment, Inc., a New Jersey corporation.
Guaranty. The Guaranty Agreement pursuant to which each
Limited Partner will guarantee a portion of the Partnership's obligation to the
Bank under the Loan. The form of the Guaranty Agreement is included in the
Subscription Packet accompanying the Memorandum.
Initial Limited Partner. Dan A. Myers, M.D., a resident of
North Carolina and an Affiliate of the General Partner. The Initial Limited
Partner is to be the only limited partner of the Part nership until such time as
the new Limited Partners are admitted to the Partnership, at which time the
Initial Limited Partner shall withdraw from the Partnership.
Limited Partners. The Limited Partners are those investors in
the Units admitted to the Partnership and any person admitted as a Limited
Partner in accordance with the provisions of this Agreement.
Loan. The loan of up to $1,056,000 from the Bank to the
Partnership. Loan proceeds will be used by the Partnership to (i) acquire an
extracorporeal shock-wave lithotripter together with options (up to $650,000),
(ii) acquire and upfit a mobile Trailer to house the lithotripter (up to
$300,000), (iii) acquire the Truck for hauling the Trailer housing the
lithotripter (up to $50,000), and (iv) pay the Wisconsin use tax on the Trailer
and the lithotripter (up to $56,000).
Losses. The net loss (including Net Losses from Capital
Transactions) of the Partnership for each Year of the Partnership as determined
for federal income tax purposes.
Majority in Interest of the Limited Partners. The Limited
Partners who hold more than 50% of the Limited Partner Percentage Interests in
the Partnership.
Memorandum. The Confidential Private Placement Memorandum of
the Partnership dated May 21, 1997, as amended or as supplemented.
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Mobile Lithotripsy System. The Trailer and Truck with the
installed and operational lithotripter.
Net Gains from Capital Transactions. The gains realized by the
Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which assets shall include
Code Section 1231 assets) or as a result of or upon the damage or destruction of
such capital assets.
Net Losses from Capital Transactions. The losses realized by
the Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which shall include Code
Section 1231 assets) or as a result of or upon the damage or destruction of such
capital assets.
Partners. The General Partner and the Limited Partners,
collectively, where no distinction is required by the context in which the term
is used herein.
Partnership. Great Lakes Lithotripsy Limited Partnership, a
Wisconsin limited partnership.
Partnership Cash Flow. For the applicable period the excess,
if any, of (A) the sum of (i) all gross receipts from any source for such
period, other than from Partnership loans, Capital Transactions and Capital
Contributions, and (ii) any funds released by the Partnership from previously
established reserves, over (B) the sum of (i) all cash expenses paid by the
Partnership for such period; (ii) the amount of all payments of principal on
loans to the Partnership; (iii) capital expenditures of the Partnership; and
(iv) such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities and contingencies of the Partnership; provided, however, that
the amounts referred to in (B)(i), (ii) and (iii) above shall be taken into
account only to the extent not funded by Capital Contributions, loans or paid
out of previously established reserves. Such term shall also include all other
funds deemed available for distribution and designated as "Partnership Cash
Flow" by the General Partner.
Partnership Interest. The interest of a Partner in the
Partnership as defined by the Act and this Agreement.
Partnership Refinancing Proceeds. The cash realized from the
refinancing of Partnership assets after retirement of any secured loans and less
(i) payment of all expenses relating to the transaction and (ii) establishment
of such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements, or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities or contingencies of the Partnership.
Partnership Sales Proceeds. The cash realized from the sale,
exchange, casualty or other disposition of all or a portion of Partnership
assets after the retirement of all secured loans and less (i) the payment of all
expenses related to the transaction and (ii) establishment of such reasonable
reserves as the General Partner shall deem necessary or prudent to set aside for
future repairs, improvements, or
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equipment replacement or additions, or to meet working capital requirements or
foreseen or unforeseen future liabilities or contingencies of the Partnership.
Percentage Interest. The interest of each Partner in the
Partnership, to be determined initially in the case of a Limited Partner by
reference to his or her Unit ownership based upon the Limited Partners holding
an aggregate 80% Percentage Interest in the Partnership, with each initial Unit
sold representing an initial 1% interest. The General Partner initially will own
a 20% Percentage Interest in the Partnership. A Partner's Percentage Interest
may be reduced by a future Dilution Offering. The Partners' Percentage Interests
in the Partnership as of the date hereof are as set forth in Schedule A attached
hereto. Any future adjustments in the Partners' Percentage Interests, due to
future Dilution Offerings or otherwise, will be reflected by revisions to
Schedule A.
PKST. Prime Kidney Stone Treatment, Inc., a New Jersey
corporation, and the sole General Partner of the Partnership.
Profit. The net income of the Partnership (including Net
Gains from Capital Transactions) for each Year of the Partnership as determined
for federal income tax purposes.
Pro Rata Basis. In connection with an allocation or
distribution, an allocation or distribution in proportion to the respective
Percentage Interests of the class of Partners to which reference is made.
Sales Agency Agreement. The sales agency agreement through
which MedTech Investments, Inc., an Affiliate of the General Partner and a
broker-dealer company registered with the Securities and Exchange commission and
a member of the National Association of Securities Dealers, Inc. shall offer and
sell the limited partnership interest of the Partnership pursuant to the
Memorandum.
Sales Commission. The $250 sales commission paid to MedTech
Investments, Inc. for each Unit sold.
Service. The Internal Revenue Service.
Trailer. The new or reconditioned mobile Trailer upfitted to
house the lithotripter.
Truck. The used tractor-trailer truck to be utilized for
hauling the Trailer.
Units. The 80 equal limited partner interests in the
Partnership offered pursuant to the Memorandum for a price per Unit of $2,500 in
cash, plus a personal guaranty of 1% of the Partnership's obligations under the
Loan (up to a $10,560 principal guaranty obligation).
Year. An annual accounting period ending on December 31 of
each year during the term of the Partnership.
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7. CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS.
7.1 General Partner Contribution. On or before the date of
this Agreement, the General Partner will contribute to the capital of the
Partnership cash in an amount equal to 20% (up to $50,000) of the total cash
contributed to the Partnership by the Partners in the offering made pursuant to
the Memorandum.
7.2 Limited Partner Contribution. Each Limited Partner hereby
agrees to contribute and shall contribute to the capital of the Partnership on
the date of his admission to the Partnership the cash amount set forth opposite
his name on Schedule A attached hereto.
7.3 No Interest. Except as otherwise provided herein, no
interest shall be paid on any contribution to the capital of the Partnership.
7.4 Dilution Offerings. If the General Partner, in its sole
discretion, determines that it is in the best interest of the Partnership, the
General Partner may, from time to time, issue, offer and sell additional limited
partnership interests in the Partnership (a "Dilution Offering") to local
urologists who are not already Limited Partners ("Qualified Investors"). The
primary purpose of any Dilution Offering would be (i) to raise additional
capital for any legitimate Partnership purpose as set forth in Article 4, and
(ii) to assure the highest quality of patient care by admitting Qualified
Investors to the Partnership who would be dedicated and motivated as owners to
follow the Partnership's treatment protocol, and comply with its quality
assurance and outcome analysis programs. Any limited partnership interests
offered by the Partnership in a Dilution Offering shall be sold in the manner
and according to the terms prescribed in the sole discretion of the General
Partner; provided, however, that any additional limited partnership interests
offered in a Dilution Offering will be sold for a price no lower than the
highest price for which proportionate limited partnership interests in the
Partnership have been previously sold by the Partnership. Any sale of additional
limited partnership interests will result in the proportionate dilution of the
Partnership Percentage Interests of the existing Partners. Notwithstanding the
above, in the event of a Dilution Offering, the General Partner and/or its
Affiliates may elect, in their sole discretion, to prevent dilution of the
Percentage Interests of the General Partner and/or its Affiliates by either
contributing a proportionate amount of additional capital to the Partnership or
purchasing additional limited partnership interests in any Dilution Offering.
Limited Partners will have no right to purchase additional limited partnership
interests in any Dilution Offering. Any investor acquiring a limited partnership
interest in a Dilution Offering shall agree to be bound by the terms of this
Agreement, and shall be automatically admitted as a Limited Partner of the
Partnership. Any adjustment in the Partners' Percentage Interests resulting from
a Dilution Offering shall be set forth on Schedule A attached hereto.
8. GUARANTIES.
Each Partner agrees to execute and deliver to the Partnership
on the date of his or her admission to the Partnership a Guaranty agreement in
the amount set forth opposite his or her name on Schedule A attached hereto.
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9. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF THE
LIMITED PARTNERS.
The obligations of the Limited Partners to make cash Capital
Contributions hereunder are subject to the condition that the representations,
warranties, agreements and covenants of the General Partner set forth in Article
10 of this Agreement are and shall be true and correct or have been and will
have been complied with in all material respects on the date such Capital
Contributions are required to be made, except to the extent that any such
representation or warranty expressly pertains to an earlier date.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
GENERAL PARTNER.
10.1 The General Partner hereby represents and warrants to the
Limited Partners that:
(a) The Partnership is a limited partnership formed in
accordance with and validly existing under the Act and the other
applicable laws of the State of Wisconsin;
(b) The interests in the Partnership of the Limited Partners
will have been duly authorized or created and validly issued and the
Limited Partners shall have no personal liability to contribute money
to the Partnership other than the amounts agreed to be contributed by
them in the manner and on the terms set forth in this Agreement,
subject, however, to such limitations as may be imposed under the Act;
(c) No material breach or default adverse to the Partnership
exists under the terms of any other material agreement affecting the
Partnership; and
(d) The General Partner is a New Jersey corporation formed and
existing under the laws of the State of New Jersey.
10.2 The General Partner hereby covenants to the Limited
Partners that:
(a) It will at all times act in a fiduciary manner with
respect to the Partnership and the Limited Partners;
(b) Except as provided in Article 19, it will serve as the
General Partner of the Partnership until the Partnership is terminated
without reconstitution; and
(c) It will cause the Partnership to carry adequate public
liability, property damage and other insurance as is customary in the
business to be engaged in by the Partnership.
11. ADMISSION OF LIMITED PARTNERS.
The General Partner may permit the offer and sale of limited
partnership interests on the terms and conditions provided in the Memorandum or
future Dilution Offering and may admit persons
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subscribing for interests as Limited Partners in the Partnership on the terms
and conditions set forth in this Article 11.
(a) The General Partner shall have approved of the admission
of said person in writing on such terms and conditions as the General
Partner shall determine;
(b) Said person shall have executed such documents or
instruments as the General Partner may deem necessary or desirable to
effect his admission as a Limited Partner;
(c) Said person shall have accepted and adopted all of the
terms and provisions of this Agreement, as then amended;
(d) Said person (if a corporation) shall deliver to the
General Partner a certified copy of a resolution of its Board of
Directors authorizing it to become a Limited Partner under the terms
and conditions of this Agreement; and
(e) Said person, upon request by the General Partner, shall
pay such reasonable expenses as may be incurred in connection with its
admission as a Limited Partner.
12. CAPITAL ACCOUNTS.
A capital account shall be established for each Partner and
shall at all times be determined and maintained as provided by the Final
Treasury Regulations under Section 704(b) of the Code, as the same may be
amended. A Partner shall not be entitled to withdraw any part of his capital
account or to receive any distribution from the Partnership, except as provided
in Articles 14 and 25.
(a) Each Partners' capital account shall be increased by:
(i) The amount of his Capital Contribution pursuant
to Article 7; and
(ii) The amount of Profits allocated to him pursuant
to Article 13; and
(iii) The Partner's pro rata share (determined in the
same manner as such Partner's share of Profits and Losses
allocated pursuant to Article 13 hereof) of any income or gain
exempt from tax.
(b) Each Partner's capital account shall be decreased by:
(i) The amount of Losses allocated to him pursuant to
Article 13; and
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(ii) The amount of Partnership Cash Flow, Partnership
Sales Proceeds and Partnership Refinancing Proceeds
distributed to him pursuant to Article 14; and
(iii) The Partner's pro rata share of any other
expenditures of the Partnership which are not deductible in
computing Partnership Profits or Losses and which are not
added to the tax basis of any Partnership property, including,
without limitation, expenditures described in Section
705(a)(2)(B) of the Code. The Partner's pro rata share of such
expenditures shall be determined in the same manner as such
Partner's share of Profits and Losses allocated pursuant to
Article 13.
13. ALLOCATIONS
(a) Profits and Losses. The Profits and Losses of the
Partnership shall be allocated among the Partners in accordance with
their respective Percentage Interests. In allocating Profits and
Losses, Net Gains and Losses from Capital Transactions (a part of
Profits and Losses), if any, shall be allocated first.
(b) Qualified Income Offset. If any Partner unexpectedly
receives any adjustment, allocation or distribution described in
Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4) through (6) which
causes or increases a deficit balance in such Partner's Capital Account
(adjusted for this purpose in the manner provided in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)), items of Partnership income
and gain shall be specially allocated to each such Partner in an amount
and manner sufficient to eliminate, to the extent required by the
Regulations, the deficit Capital Account of such Partner as quickly as
possible, provided that an allocation pursuant to this Article 13(b)
shall be made if and only to the extent that such Partner would have a
deficit Capital Account after all other allocations provided for in
this Article 13 have been tentatively made as if this Article 13(b)
were not in the Agreement. This provision is intended to be a
"qualified income offset," as defined in Treasury Regulations Section
1.704- 1(b)(2)(ii)(d), such Regulation being specifically incorporated
herein by reference.
(c) Sales Commission. The Sales Commission shall be allocated
to the Units which are not held by the General Partner and its
Affiliates in proportion to their respective capital contributions
represented by such Units (i.e., $250 in Sales Commissions per each
such Unit). The purpose of this Article 13(c) is to allocate the Sales
Commission to those Partners who actually bore the burden of paying the
Sales Commission.
(d) Allocations Between Transferor and Transferee. In the
event of the transfer (other than the pledges of the General Partner's
interest permitted by Article 19 or Permitted Pledges described in
Article 17.2(b)) of all or any part of a Partner's interest (in
accordance with the provisions of this Agreement) in the Partnership at
any time other than at the end of a Year, or the admission of a new
Partner (in accordance with the
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terms of this Agreement), the transferring Partner or new Partner's
share of the Partnership's income, gain, loss, deductions and credits,
as computed both for accounting purposes and for Federal income tax
purposes, shall be allocated between the transferor Partner and the
transferee Partner (or Partners), or the new Partner and the other
Partners, as the case may be, in the same ratio as the number of days
in such Year before and after the date of the transfer or admission;
provided, however, that if there has been a sale or other disposition
of the assets of the Partnership (or any part thereof) during such
Year, then the General Partner may elect, in its sole discretion, to
treat the periods before and after the date of the transfer or
admission as separate Years and allocate the Partnership's net income,
gain, net loss, deductions and credits for each of such deemed separate
Years. Notwithstanding the foregoing, the Partnership's "allocable cash
basis items," as that term is used in Section 706(d)(2)(B) of the Code,
shall be allocated as required by Section 706(d)(2) of the Code and the
regulations thereunder.
(e) Tax Withholding. The Partnership shall be authorized to
pay, on behalf of any Partner, any amounts to any federal, state or
local taxing authority, as may be necessary for the Partnership to
comply with tax withholding provisions of the Code or the other income
tax or revenue laws of any taxing authority. To the extent the
Partnership pays any such amounts that it may be required to pay on
behalf of a Partner, such amounts shall be treated as a cash
Distribution to such Partner and shall reduce the amount otherwise
distributable to such Partner.
14. DISTRIBUTIONS.
(a) Distribution of Partnership Cash Flow. Partnership Cash
Flow shall be distributed to the Partners within 60 days after the end
of each Year, or earlier in the discretion of the General Partner, in
proportion to their respective Percentage Interests at the time of
distribution.
(b) Distribution of Partnership Refinancing Proceeds and
Partnership Sales Proceeds. Partnership Refinancing Proceeds and
Partnership Sales Proceeds shall be distributed to the Partners within
60 days of the Capital Transaction giving rise to such proceeds, or
earlier in the discretion of the General Partner, in proportion to
their respective Percentage Interests at the time of distribution.
(c) Distribution in Liquidation. Upon liquidation of the
Partnership, all of the Partnership's property shall be sold and
Profits and Losses allocated accordingly. Proceeds from the liquidation
of the Partnership shall be distributed in accordance with Article 25.
15. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
15.1 Management. The Limited Partners shall not take part in
the management of the business, nor transact any business for the Partnership,
nor shall they have power to sign for or to bind the Partnership. The
Partnership may, however, contract with one or more Limited Partners to act as
the
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local manager of the Mobile Lithotripsy System. No Limited Partner may withdraw
from the Partnership except as expressly permitted herein.
15.2 Operation of Mobile Lithotripsy System. The Limited
Partners shall not operate or utilize the Mobile Lithotripsy System or other
Partnership equipment except pursuant to (i) an Agreement with the Partnership;
or (ii) any other arrangement specifically approved by the General Partner.
15.3 Outside Activities. The Limited Partners agree that they
owe a fiduciary duty to the Partnership and, as a consequence, each Limited
Partner (that is not an Affiliate of the General Partner) shall not directly or
indirectly own, lease or sublease a Mobile Lithotripsy System (or similar
equipment used for lithotripsy of renal stones) or any other therapeutic device
acquired by the Partnership while they are Limited Partners in the Partnership
(collectively, the "Outside Activities"). Prohibited indirect ownership of a
competing device shall include the ownership of any interest in a business
venture (through stock ownership, partnership interest ownership, or as
otherwise determined in the sole discretion of the General Partner) involving
the ownership, purchase, use, lease, sublease or operation of a Mobile
Lithotripsy System (or similar equipment used for lithotripsy of renal stones)
or other competing device or equipment, unless the General Partner determines
that such activity by the Limited Partner is not detrimental to the best
interest of the Partnership. In the event a Limited Partner elects to engage in
an Outside Activity in violation of this Article 15.3, he or she must provide
written notice of such intent to the General Partner prior to engaging in such
activity, and such election shall be deemed an election by the Limited Partner
to withdraw from the Partnership (the "Notice of Withdrawal"). If a Limited
Partner engages in an Outside Activity without first notifying the General
Partner of his or her election to do so, the Limited Partner shall be deemed to
have given a Notice of Withdrawal on the date the General Partner first becomes
aware of the Limited Partner's Outside Activity. Upon receiving a Limited
Partner's Notice of Withdrawal or equivalent thereof, the Partnership's sole
remedy shall be the purchase rights provided in Article 18.3.
15.4 Disclosure of Confidential Information. Each Limited
Partner acknowledges and agrees that his or her participation in the Partnership
under this Agreement necessarily involves his or her understanding of and access
to certain trade secrets and other confidential information pertaining to the
business of the Partnership. Accordingly, each Limited Partner agrees that at
all times during his or her participation in the Partnership as a Limited
Partner and thereafter, he or she will not, directly or indirectly, without the
express written authority of the Partnership, unless required by law or directed
by a applicable legal authority having jurisdiction over the Limited Partner,
disclose or use for the benefit of any person, corporation or other entity
(other than the Partnership), or himself or herself, (i) any trade, technical,
operational, management or other secrets, any patient or customer lists or other
confidential or secret data, or any other proprietary, confidential or secret
information of the Partnership or (ii) any confidential information concerning
any of the financial arrangements, financial positions, hospital or physician
contracts, third party payor arrangements, quality assurance and outcome
analysis programs, competitive status, customer or supplier matters, internal
organizational matters, technical abilities, or other business affairs of or
relating to the Partnership. The Limited Partners acknowledge that all of the
foregoing constitutes proprietary information, which is the exclusive property
of the Partnership. In the event of breach of this Article 15.4 as determined by
the General Partner, the Partnership shall be entitled to any remedy at law or
equity with respect to such breach, including without limitation, an injunction
or suit for damages.
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16. LIMITED LIABILITY.
No Limited Partner shall be required to make any contribution
to the capital of the Partnership except as set forth in Article 7, nor shall
any Limited Partner in his or her capacity as such, be bound by, or personally
liable for, any expense, liability or obligation of the Partnership except to
the extent of his or her (i) interest in the Partnership; (ii) Guaranties of
Partnership obligations; and (iii) obligation to return distributions made to
him or her under certain circumstances as required by the Act.
17. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS.
17.1 Transferability.
(a) The term "transfer" when used in this Agreement with
respect to a Partnership Interest includes a sale, assignment, gift,
pledge, exchange, or any other disposition (but does not include the
issuance of new Partnership Interests pursuant to a Dilution Offering);
(b) Except as otherwise provided herein, the General Partner
shall not at any time transfer or assign its interest or obligation as
General Partner;
(c) The Partnership Interest of any Limited Partner shall not
be transferred, in whole or in part, except in accordance with the
conditions and limitations set forth in Articles 17.2 or 18;
(d) The transferee of a Partnership Interest by assignment,
operation of law or otherwise, shall have only the rights, powers and
privileges enumerated in Article 17.3 or otherwise provided by law and
may not be admitted to the Partnership as a Limited Partner except as
provided in Article 17.4 or as a General Partner except as provided in
Article 17.5;
(e) Notwithstanding any provision herein to the contrary, the
Partnership Agreement shall in no way restrict the issuance or
transfers of stock of the General Partner; and
(f) Notwithstanding any provision herein to the contrary, the
issuance of Partnership Interests pursuant to a Dilution Offering and
the admission of new Limited Partners pursuant to a Dilution Offering
shall be governed by the provisions of Section 7.4 of this Agreement.
17.2 Restrictions on Transfers by Limited Partners.
(a) All or part of a Partnership Interest may be transferred
by a Limited Partner only with the prior written approval of the
General Partner, which approval may be granted or denied in the sole
discretion of the General Partner. In no event may a Partnership
Interest be transferred if such transfer would result in a default
under the Guaranties, unless otherwise agreed to in writing by the
General Partner.
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(b) The General Partner shall not approve any transfer of a
Partnership Interest, except a pledge of any Partnership Interest by
the General Partner to any bank, insurance company or other financial
institution to secure payment of indebtedness (a "Permitted Pledge"),
or otherwise unless the proposed transferee shall have furnished the
General Partner with a sworn statement that:
(i) The proposed transferee proposes to acquire his
or her Partnership Interest as a principal, for investment and
not with a view to resale or distribution;
(ii) The proposed transferee meets such requirements
regarding sophistication, income and net worth as required by
applicable state and federal securities laws;
(iii) The proposed transferee has met such net worth
and income suitability standards as have been established by
the General Partner;
(iv) The proposed transferee recognizes that
investment in the Partnership involves certain risks and has
taken full cognizance of and understands all of the risk
factors related to the purchase of a Partnership Interest; and
(v) The proposed transferee has met all other
requirements of the General Partner for the proposed transfer.
(c) Other than in the case of a Permitted Pledge, a transfer
of a Partnership Interest may be made only if, prior to the date
thereof, the Partnership upon request receives an opinion of counsel,
satisfactory in form and substance to the General Partner, that neither
the offering nor the proposed transfer will require registration under
federal or applicable state securities laws or regulations.
17.3 Rights of Transferee.
Unless admitted to the Partnership in accordance with Article
17.4, the transferee of a Partnership Interest or a part thereof or any right,
title or interest therein shall not be entitled to any of the rights, powers, or
privileges of his predecessor in interest, except that he shall be entitled to
receive and be credited or debited with his proportionate share of Partnership
income, gains, Profits, Losses, deductions, credits or Distributions.
17.4 Admission of Limited Partners.
Except as otherwise provided in Article 18, the General
Partner, or the transferee of all or part of the Partnership Interest of either
a General Partner or a Limited Partner, may be admitted to the Partnership as a
Limited Partner upon furnishing to the General Partner all of the following:
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(a) The written approval of a Majority in Interest of all of
the Limited Partners (except the assignor Partner), or the assignor
Partner alone, which approval may be granted or denied in the sole
discretion of such Partners or Partner (as the case may be);
(b) The written approval of the General Partner, which
approval may be granted or denied in the sole discretion of the General
Partner;
(c) Acceptance, in a form satisfactory to the General Partner,
of all the terms and conditions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
(d) A properly executed power of attorney substantially
identical to that contained in Article 38;
(e) Such other documents or instruments as may be required in
order to effect his or her admission as a Limited Partner; and
(f) Payment of such reasonable expenses as may be incurred in
connection with his or her admission as a Limited Partner.
17.5 Admission of General Partners.
A Limited Partner, or the transferee of all or part of the
Partnership Interest of the General Partner, may be admitted to the Partnership
as a general partner upon furnishing to the General Partner all of the
following:
(a) The written consent of both the General Partner and a
Majority in Interest of the Limited Partners, which consent may be
granted or denied in the sole discretion of the Partners;
(b) Such financial statements, guarantees or other assurances
as the General Partner may require with regard to the ability of the
proposed general partner to fulfill the financial obligations of a
general partner hereunder;
(c) Acceptance, in form satisfactory to the General Partner,
of all the terms and provisions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
(d) A certified copy of a resolution of its Board of Directors
(if it is a corporation) authorizing it to become a general partner
under the terms and conditions of this Agreement;
(e) A power of attorney substantially identical to that
contained in Article 38;
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(f) Such other documents or instruments as may be required in
order to effect its admission as a general partner; and
(g) Payment of such reasonable expenses as may be incurred in
connection with its admission as a general partner.
Notwithstanding the above, a transferee that controls or is
controlled by the General Partner or one or more of its Affiliates that receives
all or part of the Partnership Interest of the General Partner may be admitted
to the Partnership as a general partner upon complying with all the provisions
of this Article 17.5 except for subparagraph 17.5(a). As long as the transferee
either controls or is controlled by the General Partner or one or more of its
Affiliates, no Limited Partner consents will be required to admit such
transferee as a General Partner to the Partnership.
17.6 Amendment of Certificate of Limited Partnership and
Qualification.
The General Partner shall take all steps necessary and
appropriate to prepare and record any amendments to the Certificate of Limited
Partnership, as may be necessary or appropriate from time to time to comply with
the requirements of the Act, including, without limitation, upon the admission
to the Partnership of any general partner pursuant to the provisions of Article
17.5, and may for this purpose exercise the power of attorney delivered to the
General Partner pursuant to Article 17.5 or 38. In addition, the General Partner
shall take all steps necessary and appropriate to prepare and record any and all
documents necessary to qualify the Partnership to do business in jurisdictions
where the Partnership is doing business, and may for this purpose exercise the
power of attorney delivered to the General Partner pursuant to Articles 17.4,
17.5 or 38.
17.7 Fundamental Changes.
In the event a plan is approved by the General Partner
providing for the merger or consolidation of the Partnership with another person
or entity, or the sale of all or substantially all of the Partnership Interests,
including without limitation the exchange of Partnership Interests for equity
interests in another person or entity or for cash or other consideration or
combination thereof, then and in such event, the Limited Partners shall be
obligated to take or refrain from taking, as the case may be, such actions as
the plan may provide, including, without limitations, executing such
instruments, and providing such information as the General Partner shall
reasonably request. Any plan described in this Article 17.7 may also effect an
amendment to the Partnership Agreement or the adoption of a new partnership
agreement in connection with the merger of the Partnership with another person
or entity. The plan may also provide that the General Partner and its Affiliates
shall receive fees for services rendered in connection with the operation of the
Partnership or any successor entity following the consummation of the
transactions described in the plan, and neither the Partnership nor the Partners
shall have any right by virtue of this Agreement in the income derived
therefrom. Any securities or other consideration to be distributed to the
Partners pursuant to the plan shall be distributed in the manner set forth in
Article 25(c) as though the Partnership were being liquidated. For this purpose
only, the fair market value of the securities or other consideration to be
received pursuant to the plan shall be treated as "Profits" and the capital
accounts of the Partners shall be increased in the manner provided in Article
12(a)(ii). No Partner shall be entitled to any appraisal or similar rights in
connection with a plan contemplated by this Article 17.7.
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17.8 Withdrawal of Initial Limited Partner.
Upon the date the first Limited Partner is admitted to the
Partnership in accordance with Article 11 of this Agreement, the Initial Limited
Partner shall withdraw from the Partnership, and thereupon his Capital
Contribution shall be returned and his Partnership Interest shall be reallocated
to the Limited Partners.
18. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON
CERTAIN EVENTS.
18.1 Death.
Upon the death of a Limited Partner, the deceased Limited
Partner's executor, administrator, or other legal or personal representative
shall give written notice of that fact to the General Partner. The General
Partner shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the deceased Limited Partner (whose executor,
administrator or other legal or personal representative shall then become
obligated to sell such Partnership Interest) at the price determined in the
manner provided in Article 18.6 of this Agreement and on the terms and
conditions provided in Article 18.7 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date of notice of the death of
the Limited Partner (the "Option Period") within which to notify in writing the
deceased Limited Partner's executor, administrator or other legal or personal
representative, whether the General Partner wishes to purchase all or a portion
of the Partnership Interest of the deceased Limited Partner. If the General
Partner does not elect to purchase the entire Partnership Interest of the
deceased Limited Partner before the expiration of the Option Period and in the
manner provided herein, the portion of the Partnership Interest not purchased
shall be held by the deceased Limited Partner's executor, administrator, or
other legal representative pursuant to the terms of this Agreement. The General
Partner, in its sole discretion, may elect to assign its rights to purchase the
Partnership Interest of a deceased Limited Partner under this Article 18.1 to
the Partnership and, in such case, the Partnership shall have the same rights as
provided for the General Partner under this Article 18.1.
18.2 Bankruptcy, Insolvency or Assignment for Benefit of
Creditors of a Limited Partner.
In the event that an involuntary or voluntary proceeding
under the Federal Bankruptcy Code, as amended, is filed for or against any
Limited Partner, or if any Limited Partner shall make an assignment for the
benefit of his creditors, or if any Limited Partner has a receiver or custodian
appointed for his assets, or any Limited Partner generally fails to pay his
debts when due, the insolvent Limited Partner shall give written notice (the
"Notice of Insolvency") to the General Partner of the commencement of any such
proceeding or the occurrence of such event within five days of the first notice
to him of such commencement or occurrence of such event. The General Partner
shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the insolvent Limited Partner (which insolvent Limited
Partner or his trustee, custodian, receiver or other personal or legal
representative, as the case may be, shall then become obligated to sell such
Partnership Interest) at the price determined in the manner provided in Article
18.6 of this Agreement and on the terms and conditions provided in Article 18.7
of this Agreement. The General Partner shall have a period of thirty
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(30) days following the date of the Notice of Insolvency (the "Option Period")
within which to notify in writing the insolvent Limited Partner or his trustee,
custodian, receiver, or other legal or personal representative, whether the
General Partner wishes to purchase all or a portion of the Partnership Interest
of the insolvent Limited Partner. If the General Partner does not elect to
purchase the entire Partnership Interest of the insolvent Limited Partner before
the expiration of the Option Period and in the manner provided herein, the
portion of the Partnership Interest not purchased shall be held by the insolvent
Partner, his trustee, custodian, receiver or other legal or personal
representative pursuant to the terms of this Agreement. The General Partner, in
its sole discretion, may elect to assign its rights to purchase the Partnership
Interest of an insolvent Limited Partner under this Article 18.2 to the
Partnership and, in such case, the Partnership shall have the same rights as
provided for the General Partner under this Article 18.2.
18.3 Breach of Article 15.3.
In the event the General Partner (the "Defaulting Limited
Partner") either receives a Notice of Withdrawal as provided in Article 15.3 or
receives notice of breach of Article 15.3, the General Partner may elect, in its
sole discretion, to treat such event as a default under this Agreement and
enforce the provisions of this Article 18.3. If the General Partner elects to
enforce the provisions of this Article 18.3, the General Partner shall give
written notice of such election (the "Notice of Default") to the Defaulting
Limited Partner within 180 days of the date the General Partner first received
the Notice of Withdrawal or notice of the defaulting event. The General Partner
shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the Defaulting Limited Partner (which Defaulting Limited
Partner shall then become obligated to sell such Partnership Interest) at the
price determined in the manner provided in Article 18.6 of this Agreement and on
the terms and conditions provided in Article 18.7 of this Agreement. The General
Partner shall have a period of thirty (30) days following the date of the close
of the date of the Notice of Default (the "First Option Period") within which to
notify in writing the Defaulting Limited Partner, whether the General Partner
wishes to purchase all or a portion of the Partnership Interest of the
Defaulting Limited Partner. If the General Partner does not elect to purchase
the entire Partnership Interest of the Defaulting Limited Partner before the
expiration of the Option Period and in the manner provided herein, the portion
of the Partnership Interest not purchased shall be held by the Defaulting
Limited Partner pursuant to the terms of this Agreement. The General Partner, in
its sole discretion, may elect to assign its rights to purchase the Partnership
Interest of a Defaulting Limited Partner under this Article 18.3 to the
Partnership and, in such case, the Partnership shall have the same rights as
provided for the General Partner under this Article 18.3.
18.4 Domestic Proceeding.
In the event that a spouse of a Limited Partner commences
against a Limited Partner, or a Limited Partner is named in, a Domestic
Proceeding, the Limited Partner shall give written notice (the "Notice of
Domestic Proceeding") to the General Partner of the commencement of any such
proceeding within five days of the first notice to him of such commencement. The
General Partner shall have the option to purchase at the Closing (as defined
below) the Partnership Interest of the Limited Partner involved in the Domestic
Proceeding (which Limited Partner shall then become obligated to sell such
Partnership Interest), at the price determined in the manner provided in Article
18.6 of this Agreement and on the terms and conditions provided in Article 18.7
of this Agreement. The General Partner shall
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have a period of thirty (30) days following the date of the Notice of Domestic
Proceeding (the "Option Period") within which to notify in writing the Limited
Partner involved in the Domestic Proceeding, whether the General Partner wishes
to purchase all or a portion of the Partnership Interest of such Limited
Partner. If the General Partner does not elect to purchase the Partnership
Interest of the Limited Partner involved in the Domestic Proceeding before the
expiration of the Option Period and in the manner provided herein, the portion
of the Partnership Interest not purchased shall be held by such Limited Partner
pursuant to the terms of this Agreement. The General Partner, in its sole
discretion, may elect to assign its rights to purchase the Partnership Interest
of the Limited Partner involved in the Domestic Proceeding under this Article
18.4 to the Partnership and, in such case, the Partnership shall have the same
rights as provided for the General Partner under this Article 18.4.
18.5 Divestiture Option.
If state or federal regulations or laws are enacted or
applied, or if any other legal developments occur, which, in the opinion of the
General Partner adversely affect (or potentially adversely affect) the operation
of the Partnership (e.g., the enactment or application of prohibitory physician
self-referral legislation against the Partnership or its Partners), the General
Partner shall promptly either, in its discretion, (i) take the steps outlined in
this Article 18.5 to divest the Limited Partners of their Partnership Interests,
or (ii) dissolve the Partnership as provided in Article 24.1(d). If the General
Partner chooses option (i), it shall deliver a written notice to all of the
Limited Partners (the "Notice of Election") and purchase such Partnership
Interests for its own account. The purchase price to be paid for each
Partnership Interest shall be determined in the manner as provided in Article
18.6 and shall be on the terms and conditions as provided in Article 18.7. The
transfer of the Partnership Interests and the payment of the purchase price (as
provided in Article 18.6) shall be made at such time as determined by the
General Partner to be in the best interests of the Partnership and its Limited
Partners. Each Limited Partner hereby makes, constitutes and appoints the
General Partner, with full power of substitution, his true and lawful
attorney-in-fact, to take such actions and execute such documents on his behalf
to effect the transfer of his Partnership Interest as provided in this Article
18.5.
18.6 Purchase Price.
The purchase price to be paid for the Partnership Interest of
any Limited Partner whose interest is being purchased pursuant to the provisions
of Articles 18.1, 18.2, 18.3, 18.4 or 18.5 (the "Retiring Limited Partner")
shall be an amount equal to the Retiring Limited Partner's share of the
Partnership's book value, if any, (prorated in the event that only a portion of
his Partnership Interest is being purchased) as reflected by the Capital Account
of the Retiring Limited Partner (unadjusted for any appreciation in Partnership
assets and as reduced by depreciation deductions claimed by the Partnership for
tax purposes). The determination of the Retiring Limited Partner's Capital
Account on the Valuation Date (as defined below) shall be made by the
Partnership's internal accountant (the "Partnership Accountant") upon a review
of the Partnership books of account, and a formal audit is expressly waived. The
statement of the Partnership Accountant with respect to the Capital Account of
the Retiring Limited Partner on the Valuation Date shall be binding and
conclusive upon the Partnership, the purchaser and the Retiring Limited Partner
and his representative. The Valuation Date shall be the last day of the month
immediately preceding the month in which occurs: (i) the death of a Limited
Partner, in the case of a purchase by reason of death; (ii) the bankruptcy or
insolvency of a Limited Partner, in the case of a purchase by reason of such
bankruptcy or insolvency; (iii) the Notice of Default as provided in
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Article 18.3 in the case of a purchase by reason thereof; (iv) the commencement
of the Domestic Proceeding, in the case of a purchase by reason thereof; or (v)
the Notice of Election as provided in Article 18.5, in the case of a purchase by
reason thereof. Any Limited Partner whose Partnership Interest is purchased
pursuant to the provisions of Article 18.1, 18.2, 18.3, 18. or 18.5 shall be
entitled only to the purchase price which shall be paid at the Closing in cash
(or by certified or cashier's check) and shall not be entitled to any
Partnership distributions made after the Valuation Date. Any distributions
inadvertently made to a Retiring Limited Partner after the Valuation Date may be
applied in reduction of the purchase price as determined pursuant to this
Article 18.6. The transfer of a Partnership Interest of a Retiring Limited
Partner shall be deemed to occur as of the Valuation Date and the Retiring
Limited Partner shall have no voting or other rights as a Limited Partner after
such date. The purchaser shall be entitled to any distributions attributable to
the transferred interest after the Valuation Date and shall have the right to
deduct the amount of any such distributions made to the Retiring Limited Partner
from the purchase price.
18.7 Closing.
18.7.1 Closing of Purchase and Sale. The Closing of any
purchase and sale of a Partnership Interest pursuant to Article 18.1,
18.2, 18.3, 18.4 or 18.5 of this Agreement shall take place at the
principal office of the Partnership, or such other place designated by
the General Partner, on the date determined as follows (the "Closing"):
(a) In the case of a purchase and sale occurring by reason of
the death of a Limited Partner as provided in Article 18.1 of this
Agreement, the Closing shall be held on the thirtieth day (or if such
thirtieth day is not a business day, the next business day following
the thirtieth day) next following the last to occur of:
(i) Qualification of the executor or personal
administrator of the deceased Limited Partner's estate;
(ii) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made; or
(iii) The date that coincides with the close of the
Option Period.
(b) In the case of a purchase and sale occurring by reason of
the occurrence of one of the events described in Article 18.2, 18.3,
18.4 or 18.5 of this Agreement, the Closing shall be held on the
thirtieth day (or if such thirtieth day is not a business day, the next
business day following the thirtieth day) next following the later to
occur of:
(i) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made; or
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(ii) The date that coincides with the close of the
Option Period.
At the Closing, although not necessary to effect the transfer, the
Retiring Limited Partner shall concurrently with tender and receipt of
the applicable purchase price, deliver to the purchaser duly executed
instruments of transfer and assignment, assigning good and marketable
title to the portion or portions of the Retiring Limited Partner's
entire Partnership Interest thus purchased, free and clear from any
liens or encumbrances or rights of others therein. The parties
acknowledge that occurrence of any of the triggering events described
in Article 18.1, 18.2, 18.3, 18.4 or 18.5 and compliance with all the
Articles of this Agreement, except the execution of the transfer
documents by the Retiring Partner as provided above in this Article
18.7.1, are sufficient to effect the complete transfer of the Retiring
Limited Partner's interest and the Retiring Limited Partner shall be
deemed to consent to admission of the transferee as a substitute
Limited Partner. Notwithstanding the date of the Closing or whether a
Closing is successfully held, the transfer of a Partnership Interest of
a Retiring Limited Partner shall be deemed to occur as of the Valuation
Date as defined in Article 18.6. The deemed transfer is effective
regardless of whether the Retiring Limited Partner performs the duties
set forth in this Article 18.7.1.
18.7.2 Terms and Conditions of Purchase. The Partnership
Interest of a Limited Partner shall not be transferred to any Partner
unless the requirements of Articles 17.2 and 17.4 (b) through (f) are
satisfied with respect to it. The purchaser shall be liable for all
obligations and liabilities connected with that portion of the
Partnership Interest transferred to it unless otherwise agreed in
writing.
19. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST.
19.1 The General Partner may not mortgage, pledge,
hypothecate, transfer, sell, assign or otherwise dispose of all or any part of
its interest in the Partnership, whether voluntarily, by operation of law or
otherwise (the foregoing actions being hereafter collectively referred to as
"Transfers" or singularly as a "Transfer") except as permitted by this Article.
19.2 If the General Partner makes a Transfer (other than a
mortgage, pledge or hypothecation) of its general partner interest in the
Partnership pursuant to this Article, it shall be liable for all obligations and
liabilities incurred by it as the General Partner of the Partnership on or
before the effective date of such Transfer, but shall not be liable for any
obligations or liabilities of the Partnership arising after the effective date
of the Transfer.
19.3 No Transfer by the General Partner shall be permitted
unless:
(a) Counsel for the Partnership shall have rendered an opinion
that none of the actions taken in connection with such Transfer will
cause the Partnership to be classified other than as a partnership for
Federal income tax purpose or will cause the termination or dissolution
of the Partnership under state law; and
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(b) Such documents or instruments, in form and substance
satisfactory to counsel for the Partnership, shall have been executed
and delivered as may be required in the opinion of counsel for the
Partnership to effect fully any such Transfer.
Notwithstanding the foregoing provisions of this Article 19.3,
the General Partner may pledge its interest in the Partnership to any bank,
insurance company or other financial institution to secure payment of
indebtedness.
20. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER.
If the General Partner shall be finally adjudged by a court of
competent jurisdiction to be liable to the Limited Partners or the Partnership
for any act of gross negligence or willful misconduct in the performance of its
duties under the terms of this Agreement, the General Partner may be removed and
another substituted with the consent of all of the Limited Partners. Such
consent shall be evidenced by a certificate of removal signed by all of the
Limited Partners. In the event of removal, the new general partner shall succeed
to all of the powers, privileges and obligations of the General Partner, and the
General Partner's interest in the Partnership shall become that of a Limited
Partner, and the General Partner shall maintain its same Percentage Interest in
the Partnership notwithstanding anything contained in the Act to the contrary.
In addition, in the event of removal, the new general partner shall take all
steps necessary and appropriate to prepare and record an amendment to the
Certificate of Limited Partnership to reflect the removal of the General Partner
and the admission of such new general partner.
21. MANAGEMENT AND OPERATION OF BUSINESS.
21.1 All decisions with respect to the management of the
business and affairs of the Partnership shall be made by the General Partner.
21.2 The General Partner shall be under no duty to devote all
of its time to the business of the Partnership, but shall devote only such time
as it deems necessary to conduct the Partnership business and to operate and
manage the Partnership in an efficient manner.
21.3 The General Partner may charge to the Partnership all
ordinary and necessary costs and expenses, direct and indirect, attributable to
the activities, conduct and management of the business of the Partnership. The
costs and expenses to be borne by the Partnership shall include, but are not
limited to, all expenditures incurred in acquiring and financing the Equipment
or other Partnership property, legal and accounting fees and expenses, salaries
of employees of the Partnership, consulting and quality assurance fees paid to
independent contractors, insurance premiums and interest.
21.4 In addition to, and not in limitation of, any rights and
powers covenanted by law or other provisions of this agreement, and except as
limited, restricted or prohibited by the express provisions of this Agreement,
the General Partner shall have and may exercise on behalf of the Partnership all
powers and rights necessary, proper, convenient or advisable to effectuate and
carry out the purposes, business and objectives of the Partnership. Such powers
shall include, without limitation, the following:
(a) To acquire a Mobile Lithotripsy System;
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(b) To acquire on behalf of the Partnership (i) one or more
fixed-base or Mobile Lithotripsy Systems, (ii) any other assets related
to the provision of lithotripsy services, or (iii) any other assets or
equipment consistent with the purposes of the Partnership as provided
in Article 4 (collectively, the "Additional Assets"), at such times and
at such price and upon such terms, as the General Partner deems to be
in the best interest of the Partnership;
(c) To purchase, hold, manage, lease, license and dispose of
Partnership assets (including the Mobile Lithotripsy System), including
the purchase, exchange, trade or sale of the Partnership's assets at
such price, or amount, for cash, securities or other property and upon
such terms, as the General Partner deems to be in the best interest of
the Partnership; provided, that should the Partnership assets be
exchanged or traded for securities or other property (the "Replacement
Property") the General Partner shall have the same powers with regard
to the Replacement Property as it does towards the traded property;
(d) To exercise the option of the General Partner or the
Partnership to purchase a Limited Partner's Partnership Interest
pursuant to Article 18;
(e) To determine the travel itinerary and site locations for
the Mobile Lithotripsy System or other Partnership technology;
(f) To borrow money for any Partnership purpose (including the
acquisition of the Additional Assets) and, if security is required
therefor, to subject to any security device any portion of the property
for the Partnership, to obtain replacements of any other security
device, to prepay, in whole or in part, refinance, increase, modify,
consolidate or extend any encumbrance or other security device;
(g) To deposit, withdraw, invest, pay, retain (including the
establishment of reserves in order to acquire the Additional Assets)
and distribute the Partnership's funds in any manner consistent with
the provisions of this Agreement;
(h) To institute and defend actions at law or in equity;
(i) To enter into and carry out contracts and agreements and
any or all documents and instruments and to do any and all such other
things as may be in furtherance of Partnership purposes or necessary or
appropriate to the conduct of the Partnership activities;
(j) To execute, acknowledge and deliver any and all
instruments which may be deemed necessary or convenient to effect the
foregoing; and
(k) To engage or retain one or more persons to perform acts or
provide materials as may be required by the Partnership, at the
Partnership's expense, and to compensate such person or persons at a
rate to be set by the General Partner, provided that the compensation
is at the then prevailing rate for the type of services and materials
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provided, or both. Any person, whether a Partner, an Affiliate of a
Partner or otherwise, including without limitation the General Partner,
may be employed or engaged by the Partnership to render services and
provide materials, including, but not limited to, management services,
professional services, accounting services, quality assessment
services, legal services, marketing services, maintenance services or
provide materials; and if such person is a Partner or an Affiliate of a
Partner, he shall be entitled to, and shall be paid compensation for
said services or materials, anything in this Agreement to the contrary
notwithstanding, provided that the compensation to be received for such
services or materials is competitive in price and terms with then
prevailing rate for the type of services and/or materials provided. The
Partnership, pursuant to the terms of a Management Agreement, will
contract with the General Partner, with respect to the supervision and
coordination of the management and administration of the day-to-day
operations of the Mobile Lithotripsy System for a monthly fee equal to
the greater of 7.5% of Partnership Cash Flow per month or $8,000 per
month. All costs incurred by the General Partner, excluding the costs
of employing one or more local physicians to act as a Medical Director,
shall be paid by the Partnership directly. The Partnership may also
contract with qualified physicians desiring to use the Mobile
Lithotripsy System for the treatment of patients. Owning an interest in
the Partnership shall not be a condition to using the Mobile
Lithotripsy System. The General Partner and its Affiliates may engage
in or possess an interest in other business ventures of any nature and
description independently or with others, including, but not limited
to, the operation of a mobile lithotripsy unit similar to the Mobile
Lithotripsy System, whether or not such business ventures are in direct
or indirect competition with the Partnership, and neither the
Partnership nor the Partners shall have any right by virtue of this
Agreement in and to said independent ventures or to the income or
profits derived therefrom. Notwithstanding the above, if the General
Partner, in its sole discretion, elects to cause the Partnership to
provide services in the State of Illinois, the General Partner may
determine, in its sole discretion, the terms and conditions that the
Partnership will contract with PKST regarding the provision of
lithotripsy services to hospitals already contracting with PKST, and
shall determine the fee or other remuneration payable to or retained by
PKST.
21.5 In addition to other acts expressly prohibited or
restricted by this Agreement or by law, the General Partner shall have no
authority to act on behalf of the Partnership in:
(a) Doing any act in contravention of this Agreement or the
Partnership's Certificate of Limited Partnership;
(b) Doing any act which would make it impossible to carry on
the ordinary business of the Partnership;
(c) Confessing a judgment against the Partnership in
connection with any threatened or pending legal action;
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(d) Possessing or in any manner dealing with the Partnership's
property or assigning the rights of the Partnership in the
Partnership's property for other than Partnership purposes;
(e) Admitting a person as a Limited Partner or a General
Partner except as provided in this Agreement; or
(f) Performing any act (other than an act required by this
Agreement or any act taken in good faith reliance upon counsel's
opinion) which would, at the time such act occurred, subject any
Limited Partner to liability as a general partner in any jurisdiction.
22. RESERVES.
The General Partner may cause the Partnership to create a
reserve account to be used exclusively for repairs and acquisition of Additional
Assets and for any other valid Partnership purpose. The General Partner shall,
in its sole discretion, determine the amount of payments to such reserve.
23. INDEMNIFICATION AND EXCULPATION OF THE GENERAL
PARTNER.
23.1 The General Partner is accountable to the Partnership as
a fiduciary and consequently must exercise good faith and integrity in handling
Partnership affairs. The General Partner and its Affiliates shall have no
liability to the Partnership which arises out of any action or inaction of the
General Partner or its Affiliates if the General Partner or its Affiliates, in
good faith, determined that such course of conduct was in the best interest of
the Partnership and such course of conduct did not constitute gross negligence
or willful misconduct of the General Partner or its Affiliates. The General
Partner and its Affiliates shall be indemnified by the Partnership against any
losses, judgments, liabilities, expenses and amounts paid in settlement of any
claims sustained by them in connection with the Partnership, provided that the
same were not the result of gross negligence or willful misconduct on the part
of the General Partner or its Affiliates.
23.2 The General Partner shall not be liable for the return of
the Capital Contributions of the Limited Partners, and upon dissolution, Limited
Partners shall look solely to the assets of the Partnership.
24. DISSOLUTION OF THE PARTNERSHIP.
24.1 The Partnership shall be dissolved and terminated and its
business wound up upon the occurrence of any one of the following events:
(a) The expiration of its term on May 31, 2047;
(b) The filing by, on behalf of, or against the General
Partner of any petition or pleading, voluntary or involuntary, to
declare the General Partner bankrupt under any bankruptcy law or act,
or the commencement in any court of any proceeding, voluntary
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<PAGE>
or involuntary, to declare the General Partner insolvent or unable to
pay its debts, or the appointment by any court or supervisory authority
of a receiver, trustee or other custodian of the property, assets or
business of the General Partner or the assignment by it of all or any
part of its property or assets for the benefit of creditors, if said
action, proceeding or appointment is not dismissed, vacated or
otherwise terminated within ninety (90) days of its commencement;
(c) The determination of the General Partner that the
Partnership should be dissolved;
(d) The approval of a plan by the General Partner providing
for the merger, consolidation or sale of Partnership Interests as
described in Article 17.7;
(e) The election of the General Partner to dissolve the
Partnership following the occurrence of an event described in Article
18.5;
(f) The sale, exchange or other disposition of all or
substantially all of the property of the Partnership without making
provision for the replacement thereof; and
(g) The dissolution, retirement, resignation, death,
disability or legal incapacity of a general partner, and any other
event resulting in the dissolution or termination of the Partnership
under the laws of the State of Wisconsin.
24.2 Notwithstanding the provisions of Article 24.1, the
Partnership shall not be dissolved and terminated upon the retirement,
resignation, bankruptcy, assignment for the benefit of creditors, dissolution,
death, disability or legal incapacity of a general partner, and its business
shall continue pursuant to the terms and conditions of this Agreement, if any
general partner or general partners remain following such event; provided that
such remaining general partner or general partners are hereby obligated to
continue the business of the Partnership. If no general partner remains after
the occurrence of such event, the business of the Partnership shall continue
pursuant to the terms and conditions of this Agreement, if, within ninety (90)
days after the occurrence of such event, a Majority in Interest of the Limited
Partners agree in writing to continue the business of the Partnership, and, if
necessary, to the appointment of one or more persons or entities to be
substituted as the general partner. In the event the Limited Partners agree to
continue the business of the Partnership, the new general partner or general
partners shall succeed to all of the powers, privileges and obligations of the
General Partner, and the General Partner's interest in the Partnership shall
become a Limited Partner's interest hereunder. Furthermore, in the event a
remaining general partner or the Limited Partners, as the case may be, agree to
continue the business of the Partnership as provided herein, the remaining
general partner or the newly appointed general partner or general partners, as
the case may be, shall take all steps necessary and appropriate to prepare and
record an amendment to the Certificate of Limited Partnership to reflect the
continuation of the business of the Partnership and the admission of a new
general partner or general partners, if any.
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25. DISTRIBUTION UPON DISSOLUTION.
Upon the dissolution and termination of the Partnership, the
General Partner or, if there is none, a representative of the Limited Partners,
shall cause the cancellation of the Partnership's Certificate of Limited
Partnership, shall liquidate the assets of the Partnership, and shall apply and
distribute the proceeds of such liquidation in the following order of priority:
(a) First, to the payment of the debts and liabilities of
the Partnership, and the expenses of liquidation;
(b) Second, to the creation of any reserves which the General
Partner (or the representatives of the Limited Partners) may deem
reasonably necessary for the payment of any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner
arising out of or in connection with the business and operation of the
Partnership; and
(c) Third, the balance, if any, shall be distributed to the
Partners in accordance with the Partners' positive Capital Account
balances after such capital accounts are adjusted as provided by
Article 13, and any other adjustments required by the Final Treasury
Regulations under Section 704(b) of the Code. Any general partner with
a negative Capital Account following the distribution of liquidation
proceeds or the liquidation of its interest must contribute to the
Partnership an amount equal to such negative Capital Account on or
before the end of the Partnership's taxable year (or, if later, within
ninety days after the date of liquidation). Any capital so contributed
shall be (i) distributed to those Partners with positive Capital
Accounts until such Capital Accounts are reduced to zero, and/or (ii)
used to discharge recourse liabilities.
26. BOOKS OF ACCOUNT, RECORDS AND REPORTS.
26.1 Proper and complete records and books of account shall be
kept by the General Partner in which shall be entered fully and accurately all
transactions and such other matters relating to the Partnership's business as
are usually entered into records and books of account maintained by persons
engaged in businesses of a like character. The books and records of the
Partnership shall be prepared according to the accounting method determined by
the General Partner. The Partnership's fiscal year shall be the calendar year.
The books and records shall at all times be maintained at the Partnership's
Records Office and shall be open to the reasonable inspection and examination of
the Partners or their duly authorized representatives during reasonable business
hours.
26.2 Within ninety (90) days after the end of each Year, the
General Partner shall send to each person who was a Limited Partner at any time
during such year such tax information, including, without limitation, Federal
tax Schedule K-1, as shall be reasonably necessary for the preparation by such
person of his Federal income tax return. The General Partner will also make
available to the Limited Partners any other information required by the Act.
26.3 The General Partner shall maintain at the Partnership's
Records Office copies of the Partnership's original Certificate of Limited
Partnership and any certificate of amendment, restated
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certificate or certificate of cancellation with respect thereto and such other
documents as the Act shall require. The General Partner will furnish to any
Limited Partner upon request a copy of the Partnership's original Certificate of
Limited Partnership and any certificate of amendment, restated certificate, or
certificate of cancellation, if any.
26.4 The General Partner shall, in its sole discretion, make
for the Partnership any and all elections for federal, state and local tax
purposes including, without limitation, any election, if permitted by applicable
law, to adjust the basis of the Partnership's property pursuant to Code Sections
754, 734(b) and 743(b), or comparable provisions of state or local law, in
connection with transfers of interests in the Partnership and Partnership
Distributions.
26.5 The General Partner is designated as the Tax Matters
Partner (as defined in Section 6231 of the Code) and to act in any similar
capacity under state or local law, and is authorized (at the Partnership's
expense): (i) to represent the Partnership and Partners before taxing
authorities or courts of competent jurisdiction in tax matters affecting the
Partnership or Partners in their capacity as Partners; (ii) to extend the
statute of limitations for assessment of tax deficiencies against Partners with
respect to adjustments to the Partnership's federal, state or local tax returns;
(iii) to execute any agreements or other documents relating to or affecting such
tax matters, including agreements or other documents that bind the Partners with
respect to such tax matters or otherwise affect the rights of the Partnership
and Partners; and (iv) to expend Partnership funds for professional services and
costs associated therewith. The General partner is authorized and required to
notify the federal, state or local tax authorities of the appointment of a Tax
Matters Partner in the manner provided in Treasury Regulations Section
301.6231(a)(7)-IT, as modified from time to time. In its capacity as Tax Matters
Partner, the General Partner shall oversee the Partnership tax affairs in the
manner which, in its best judgment, are in the interests of the Partners.
27. NOTICES.
All notices under this Agreement shall be in writing and shall
be deemed to have been given when delivered personally, or mailed by certified
or registered mail, postage prepaid, return receipt requested. Notices to the
General Partner shall be delivered at, or mailed to, its principal office.
Notices to the Partnership shall be delivered at, or mailed to, its principal
office with a copy to each of its business offices. Notice to a Limited Partner
shall be delivered to such Limited Partner, or mailed to the last address
furnished by him for such purposes to the General Partner. Limited Partners
shall give notice of a change of address to the General Partner in the manner
provided in this Article.
28. AMENDMENTS.
Subject to the provisions of Article 29, this Agreement is
subject to amendment only by written consent of the General Partner and a
Majority in Interest of the Limited Partners; provided, however, the consent of
the Limited Partners shall not be required if such amendments are ministerial in
nature and do not contravene the provisions of Article 29.
29. LIMITATIONS ON AMENDMENTS.
Notwithstanding the provisions of Article 28, no amendment to
this Agreement shall:
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(a) Enlarge the obligations of any Partner under this
Agreement or convert the interest in the Partnership of any Limited
Partner into the interest of a general partner or modify the limited
liability of any Limited Partner, without the consent of such Partner;
(b) Amend the provisions of Article 13, 14, 16 or 25 without
the approval of the General Partner and a Majority in Interest of the
Limited Partners; provided, however, that the General Partner may at
any time amend such Articles without the consent of the Limited
Partners in order to permit the Partnership allocations to be sustained
for Federal income tax purposes, but only if such amendments do not
materially affect adversely the rights and obligations of the Limited
Partners, in which case such amendments may only be made as provided in
this Article 29(b); or
(c) Amend this Article 29 without the consent of all Partners.
30 MEETINGS, CONSENTS AND VOTING.
30.1 A meeting of the Partnership to consider any matter with
respect to which the Partners may vote as set forth in this Agreement may be
called by the General Partner or by Limited Partners who hold more than
twenty-five percent (25%) of the aggregate interests in the Partnership held by
all the Limited Partners. Upon receipt of a notice requesting a meeting by such
Partner or Partners and stating the purpose of the meeting, the General Partner
shall, within ten (10) days thereafter, give notice to the Partners of a meeting
of the Partnership to be held at a time and place convenient to the Limited
Partners on a date not earlier than fifteen (15) days after receipt by the
General Partner of the notice requesting a meeting. The notice of the meeting
shall set forth the time, date, location and purpose of the meeting.
30.2 Any consent of a Partner required by this Agreement may
be given as follows:
(a) By a written consent given by the consenting Partner and
received by the General Partner at or prior to the doing of the act or
thing for which the consent is solicited, or
(b) By the affirmative vote by the consenting Partner to the
doing of the act or thing for which the consent is solicited at any
meeting called pursuant to this Article to consider the doing of such
act or thing.
30.3 When exercising voting rights expressly granted under the
Articles of this Agreement, each Partner shall have that number of votes as is
equal to the Percentage Interest of such Partner at the time of the vote,
multiplied by 100.
31. SUBMISSIONS TO THE LIMITED PARTNERS.
The General Partner shall give the Limited Partners notice of
any proposal or other matter required by any provision of this Agreement or by
law to be submitted for consideration and approval
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<PAGE>
of the Limited Partners. Such notice shall include any information required by
the relevant provision or by law.
32. ADDITIONAL DOCUMENTS.
Each party hereto agrees to execute and acknowledge all
documents and writings which the General Partner may deem necessary or expedient
in the creation of this Partnership and the achievement of its purpose.
33. SURVIVAL OF RIGHTS.
Except as herein otherwise provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their successor and assigns.
34. INTERPRETATION AND GOVERNING LAW.
When the context in which words are used in this Agreement
indicates that such is the intent, words in the singular number shall include
the plural and vise versa; in addition, the masculine gender shall include the
feminine and neuter counterparts. The Article headings or titles and the table
of contents shall not define, limit, extend or interpret the scope of this
Agreement or any particular Article. This Agreement shall be governed and
construed in accordance with the laws of the State of Wisconsin without giving
effect to the conflicts of laws provisions thereof.
35. SEVERABILITY.
If any provision, sentence, phrase or word of this Agreement
or the application thereof to any person or circumstance shall be held invalid,
the remainder of this Agreement, or the application of such provision, sentence,
phrase, or word to persons or circumstances, other than those as to which it is
held invalid, shall not be affected thereby.
36. AGREEMENT IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument. In addition, this Agreement may contain more than one
counterpart of the signature page and this Agreement may be executed by the
affixing of the signatures of each of the Partners to one of such counterpart
signature pages; all of such signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.
37. THIRD PARTIES.
The agreements, covenants and representations contained herein
are for the benefit of the parties hereto inter se and are not for the benefit
of any third parties including, without limitation, any creditors of the
Partnership.
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<PAGE>
38. POWER OF ATTORNEY.
Each Limited Partner hereby makes, constitutes and appoints
Michael Madler and Philip Gallina, severally, with full power of substitution,
his true and lawful attorneys-in-fact, for him and in his name, place and stead
and for his use and benefit to sign and acknowledge, file and record, any
amendments hereto among the Partners for the further purpose of executing and
filing on behalf of each Limited Partner, any and all certificates of limited
partnership or other documents necessary to constitute the Partnership or to
effect the continuation of the Partnership, the admission or withdrawal of a
general partner or a limited partner, the qualification of the Partnership in a
foreign jurisdiction (or amendment to such qualification), the admission of
substitute Limited Partners or the dissolution or termination of the
Partnership, provided such continuation, admission, withdrawal, qualification,
or dissolution and termination are in accordance with the terms of this
Agreement.
The foregoing power of attorney is a special power of attorney
coupled with an interest, is irrevocable and shall survive the death or legal
incapacity of each Limited Partner. It may be exercised by any one of said
attorneys by listing all of the Limited Partners executing any instrument over
the signature of the attorney-in-fact acting for all of them. The power of
attorney shall survive the delivery of an assignment by a Limited Partner of the
whole or any portion of his Unit. In those cases in which the assignee of, or
the successor to, a Limited Partner owning a Unit has been approved by the
Partners for admission to the Partnership as a substitute Limited Partner, the
power of attorney shall survive for the sole purpose of enabling the General
Partner to execute, acknowledge and file any instrument necessary to effect such
substitution.
This power of attorney shall not be affected by the subsequent
incapacity or mental incompetence of any Limited Partner.
39. ARBITRATION.
Any dispute arising out of or in connection with this
Agreement or the breach thereof shall be decided by arbitration in Raleigh,
North Carolina in accordance with the then effective commercial arbitration
rules of the American Arbitration Association, and judgment thereof may be
entered in any court having jurisdiction thereof.
40. CREDITORS.
None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Partnership.
[The remainder of this page is intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
of Limited Partnership as of the day and year first above written.
GENERAL PARTNER:
PRIME KIDNEY STONE TREATMENT, INC.,
a New Jersey corporation
By: /s/ Philip J. Gallina
------------------------------
Philip J. Gallina, Vice President
ATTEST:
/s/ Louis Mestier
__________________ [CORPORATE SEAL]
Secretary
[CORPORATE SEAL]
INITIAL LIMITED PARTNER:
/s/ Dan A. Myers
---------------------------------------
Dan A. Myers, M.D.
STATE OF TEXAS )
)
COUNTY OF TRAVIS )
On this 21st day of October, 1997, before me, the
undersigned Notary Public in and for the County of Travis in the State of Texas,
personally came Michael Madler, who, being by me duly sworn, said that he is
President of Prime Kidney Stone Treatment, Inc., the sole general partner of
Great Lakes Lithotripsy Limited Partnership, that the seal affixed to the
foregoing instrument in writing is the corporate seal of the corporation, and
that said writing was signed, sworn to, and sealed by him in behalf of said
corporation by its authority duly given. And the said Michael Madler, further
certified that the facts set forth in said writing are true and correct, and
acknowledged said instrument to be the act and deed of said corporation.
WITNESS my hand and notarial seal.
/s/ Lou Ann Barnes
------------------------------------------
Notary Public
My commission expires:
May 26, 2001
- ---------------------------
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<PAGE>
STATE OF NORTH CAROLINA )
)
COUNTY OF CUMBERLAND )
I, Lou Ann Barnes, a notary public, do hereby
certify that Dan A. Myers, M.D. personally appeared before me this 21st day of
October, 1997 and acknowledged and swore to the due execution of the foregoing
Limited Partnership Agreement in his capacity as the initial limited partner.
/s/ Lou Ann Barnes
------------------------------------------
Notary Public
My commission expires:
May 26, 2001
- ---------------------------
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<PAGE>
COUNTERPART SIGNATURE PAGE
By signing this Counterpart Signature Page, the undersigned
acknowledges his or her acceptance of that certain Agreement of Limited
Partnership of Great Lakes Lithotripsy Limited Partnership, and his or her
intention to be legally bound thereby.
Dated this _________ day of ___________________, 1997.
-------------------------------------------
Signature
-------------------------------------------
Printed Name
STATE OF _______________ )
)
COUNTY OF _____________ )
BEFORE ME, the undersigned Notary Public in and for the State
and County set forth above, on the _______ day of __________________, 1997,
personally appeared ___________________, and, being by me first duly sworn,
stated that (s)he signed this Counterpart Signature Page for the purpose set
forth above and that the statements contained therein are true.
-------------------------------------------
Signature of Notary Public
-------------------------------------------
Printed Name of Notary
My Commission Expires:
- ---------------------------
[SEAL]
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<PAGE>
SCHEDULE A
Schedule of Partnership Interests
GREAT LAKES LITHOTRIPSY LIMITED PARTNERSHIP
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP, GUARANTIES
AND PERCENTAGE INTERESTS
Cash Percentage
General Partner Contribution Guaranty(1) Interest
Prime Kidney Stone Treatment, Inc. $50,000 $211,200 20%
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Limited Partners
Omar Atassi 10,000 42,240 4%
Mark Beard 10,000 42,240 4%
James Cauley 10,000 42,240 4%
Mark Chelsky 10,000 42,240 4%
Frank Chybowski 10,000 42,240 4%
Daniel Degroot 2,500 10,560 1%
Doug DeWire 5,000 21,120 2%
William Dougherty 2,500 10,560 1%
Thomas Ferber 10,000 42,240 4%
Dirk Fisher 10,000 42,240 4%
John Fuller 10,000 42,240 4%
John Herman 10,000 42,240 4%
Christopher Kearn 10,000 42,240 4%
Timothy Kennedy 10,000 42,240 4%
Scott Kolbeck 10,000 42,240 4%
Myron Marlett 10,000 42,240 4%
Neil Mittleberg 10,000 42,240 4%
Bruce Neal 5,000 21,120 2%
William Roberts 5,000 21,120 2%
Peter Slocum 10,000 42,240 4%
Arthur Sonneland 10,000 42,240 4%
Richard Windsor 10,000 42,240 4%
Robert Vlach 10,000 42,240 4%
----- ------ ---
TOTAL: $250,000 $1,056,000 100%
====== ======= =====
(1) Represents the principal portion of each Partner's guaranty obligation,
as each Partner's obligation under the Guaranty includes not only
principal, but also (as provided in the Guaranty) accrued and unpaid
interest, late payment penalties and all costs incurred by the Bank in
collecting any defaulted obligations. The principal amount of the loan
is up to $1,056,000. The General Partner will guarantee 20% of the Loan
(up to a $211,200 principal guaranty) as provided in the Memorandum.
The Limited Partners will guarantee 1% of the loan (up to a $10,560
principal guaranty) for each unit purchased as provided in the
Memorandum.
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VI, L.P.
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VI, L.P.
TABLE OF CONTENTS
Article Heading Page
1. FORMATION.................................................1
2. NAME......................................................1
3. OFFICES...................................................1
4. PURPOSE...................................................2
5. TERM......................................................2
6. CERTAIN DEFINED TERMS.....................................2
7. CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS..............6
8. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF THE LIMITED
PARTNERS..................................................6
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
GENERAL PARTNER...........................................7
10. ADMISSION OF LIMITED PARTNERS.............................7
11. CAPITAL ACCOUNTS..........................................8
12. ALLOCATIONS...............................................9
13. DISTRIBUTIONS............................................10
14. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS...............10
15. LIMITED LIABILITY........................................12
16. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS..........12
17. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON CERTAIN
EVENTS...................................................16
<PAGE>
18. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST.......................................20
19. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER.......21
20. MANAGEMENT AND OPERATION OF BUSINESS.....................21
21. RESERVES.................................................24
22. INDEMNIFICATION AND EXCULPATION OF THE GENERAL PARTNER
........................................................24
23. DISSOLUTION OF THE PARTNERSHIP...........................25
24. DISTRIBUTION UPON DISSOLUTION............................26
25. BOOKS OF ACCOUNT, RECORDS AND REPORTS....................26
26. NOTICES..................................................27
27. AMENDMENTS...............................................28
28. LIMITATIONS ON AMENDMENTS................................28
29. MEETINGS, CONSENTS AND VOTING............................28
30. SUBMISSIONS TO THE LIMITED PARTNERS......................29
31. ADDITIONAL DOCUMENTS.....................................29
32. SURVIVAL OF RIGHTS.......................................29
33. INTERPRETATION AND GOVERNING LAW.........................29
34. SEVERABILITY.............................................29
35. AGREEMENT IN COUNTERPARTS................................29
36. THIRD PARTIES............................................30
37. POWER OF ATTORNEY........................................30
38. ARBITRATION..............................................30
39. CREDITORS................................................31
Schedule A............... Schedule of Partnership Interests
<PAGE>
THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED PARTNERSHIP
AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, UNDER THE TEXAS SECURITIES ACT, AS
AMENDED, OR UNDER SIMILAR LAWS OR ACTS OF OTHER STATES IN RELIANCE UPON
EXEMPTIONS UNDER SUCH LAWS.
AGREEMENT
OF LIMITED PARTNERSHIP
OF
TEXAS LITHOTRIPSY
LIMITED PARTNERSHIP VI, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement") is
made as of May 23, 1997, by and among LITHOTRIPTERS, INC., a North
Carolina corporation (the "General Partner"), and the persons listed on Schedule
A attached hereto as the Limited Partners.
1. FORMATION.
The Partnership was formed pursuant to a filing in the Office
of the Secretary of State of Texas on or about April 21, 1997 of a Certificate
of Limited Partnership in accordance with the provisions of the Act.
2. NAME.
2.1 The name of the Partnership is "Texas Lithotripsy
Limited Partnership VI, L.P."
2.2 The Partnership business shall be conducted under such
names as the General Partner may from time to time deem necessary or advisable,
provided that appropriate amendments to this Agreement and all necessary filings
under applicable assumed or fictitious name statutes or the Act are first
obtained.
3. OFFICES.
3.1 The principal office of the Partnership shall be at 2008
Litho Place, Fayetteville, North Carolina 28304, or at such other place as the
General Partner may, from time to time, designate by notice to the Limited
Partners (the "Records Office").
3.2 The Partnership may have such additional offices as the
General Partner may, from time to time, deem necessary or advisable.
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<PAGE>
4. PURPOSE.
The purpose and business of the Partnership shall be: (i) to
acquire and hold an interest (the "Venture Interest") in Texas Lithotripsy Joint
Venture, L.L.C., a limited liability company to be formed under the laws of the
State of Texas (the "Venture") and in all respects to act as a venturer in the
Venture, (ii) to operate a Lithostar(TM) extracorporeal, shock-wave lithotripter
for the treatment of renal stones primarily in the Austin and Round Rock areas
of Texas, or in such other location(s) as the General Partner may determine, in
its sole discretion, to be in the best interests of the Partnership, (iii) to
acquire and operate in the future any other urological device or equipment that
as of the date of acquisition by the Partnership has received FDA premarket
approval; (iv) to acquire an interest in any business entity, including, without
limitation, a limited partnership, limited liability company or corporation,
that engages in any business activity described in this Article 4; and (v) to
engage in any and all activities incidental or related to the foregoing, upon
and subject to the terms and conditions of this Agreement.
5. TERM.
The Partnership shall terminate on January 1, 2047, unless
sooner terminated as herein provided.
6. CERTAIN DEFINED TERMS.
Certain terms used in this Agreement shall have the following
meanings:
Act. The Act means the Texas Revised Limited Partnership Act,
as then in effect.
Affiliate. An Affiliate is (i) any person, partnership,
corporation, association or other legal entity ("person") directly or indirectly
controlling, controlled by or under common control with another person; (ii) any
person owning or controlling 10% or more of the outstanding voting interest of
such other person; (iii) any officer, director or partner of such person; and
(iv) if such other person is an officer, director or partner, any entity for
which such person acts in such capacity.
Agreement. This Agreement of Limited Partnership, as the same
may be amended from time to time.
Calumet Coach. The self-propelled mobile vehicle manufactured
by the Calumet Coach Company and which houses the Lithostar(TM).
Capital Account. The Partnership capital account of a Partner
as computed pursuant to Article 11 of this Agreement.
Capital Contributions. All capital contributions made by a
Partner or his predecessor in interest which shall include, without limitation,
contributions made pursuant to Article 7 of this Agreement.
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<PAGE>
Capital Transaction. Any transaction which, were it to
generate proceeds, would produce Partnership Sales Proceeds or Partnership
Refinancing Proceeds.
Code. The Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent, superseding revenue laws.
Dilution Offering. As provided in Section 7.4 of this
Agreement, the future offering of additional limited partnership interests in
the Partnership by the General Partner. Any successful Dilution Offering will
proportionately reduce the Percentage Interests of the then current Limited
Partners in the Partnership.
Domestic Proceeding. Any divorce, annulment, separation or
similar domestic proceeding between a married couple.
Equipment. The equipment used in the operation of the
Lithostar(TM) Mobile System which includes the Calumet Coach, the Lithostar(TM),
and miscellaneous medical equipment and supplies.
Expense-Sharing Agreement. The agreement between the
Partnership and Texas III whereby the Partnership and Texas III will share the
maintenance, repair and operating expenses associated with the operation of the
Lithostar(TM) Mobile System.
FDA. The United States Food and Drug Administration.
General Partner. The General Partner of the Partnership,
Lithotripters, Inc., a North Carolina corporation.
Initial Limited Partner. Dan A. Myers, M.D., a resident of
North Carolina and an Affiliate of the General Partner. The Initial Limited
Partner is to be the only limited partner of the Part nership until such time as
the new Limited Partners are admitted to the Partnership, at which time the
Initial Limited Partner shall withdraw from the Partnership.
Limited Partners. The Limited Partners are those investors in
the Units admitted to the Partnership and any person admitted as a Limited
Partner in accordance with the provisions of this Agreement.
Lithostar(TM). The Lithostar(TM) model extra corporeal shock
wave lithotripter manufactured by Siemens and to be acquired by the Venture from
Texas III pursuant to the terms of the Venture Agreement.
Lithostar(TM) Mobile System. The Coach with the installed and
operational Lithostar(TM).
Losses. The net loss (including Net Losses from Capital
Transactions) of the Partnership for each Year of the Partnership as determined
for federal income tax purposes.
Majority in Interest of the Limited Partners. The Limited
Partners who hold more than 50% of the Limited Partner Percentage Interests in
the Partnership.
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Memorandum. The Confidential Private Placement Memorandum of
the Partnership dated May 22, 1997, as amended or as supplemented.
Net Gains from Capital Transactions. The gains realized by the
Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which assets shall include
Code Section 1231 assets) or as a result of or upon the damage or destruction of
such capital assets.
Net Losses from Capital Transactions. The losses realized by
the Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which shall include Code
Section 1231 assets) or as a result of or upon the damage or destruction of such
capital assets.
Partners. The General Partner and the Limited Partners,
collectively, where no distinction is required by the context in which the term
is used herein.
Partnership. Texas Lithotripsy Limited Partnership VI, L.P.,
a Texas limited partnership.
Partnership Cash Flow. For the applicable period the excess,
if any, of (A) the sum of (i) all gross receipts from any source for such
period, other than from Partnership loans, Capital Transactions and Capital
Contributions, and (ii) any funds released by the Partnership from previously
established reserves, over (B) the sum of (i) all cash expenses paid by the
Partnership for such period; (ii) the amount of all payments of principal on
loans to the Partnership; (iii) capital expenditures of the Partnership; and
(iv) such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities and contingencies of the Partnership; provided, however, that
the amounts referred to in (B)(i), (ii) and (iii) above shall be taken into
account only to the extent not funded by Capital Contributions, loans or paid
out of previously established reserves. Such term shall also include all other
funds deemed available for distribution and designated as "Partnership Cash
Flow" by the General Partner.
Partnership Interest. The interest of a Partner in the
Partnership as defined by the Act and this Agreement.
Partnership Refinancing Proceeds. The cash realized from the
refinancing of Partnership assets after retirement of any secured loans and less
(i) payment of all expenses relating to the transaction and (ii) establishment
of such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements, or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities or contingencies of the Partnership.
Partnership Sales Proceeds. The cash realized from the sale,
exchange, casualty or other disposition of all or a portion of Partnership
assets after the retirement of all secured loans and less (i) the payment of all
expenses related to the transaction and (ii) establishment of such reasonable
reserves as the General Partner shall deem necessary or prudent to set aside for
future repairs, improvements, or equipment replacement or additions, or to meet
working capital requirements or foreseen or unforeseen future liabilities or
contingencies of the Partnership.
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Percentage Interest. The interest of each Partner in the
Partnership, to be determined initially in the case of a Limited Partner by
reference to his Unit ownership based upon the Limited Partners holding an
aggregate 80% Percentage Interest in the Partnership, with each initial Unit
sold representing an initial 0.5% interest. The General Partner initially will
own a 20% Percentage Interest in the Partnership. A Partner's Percentage
Interest may be reduced by a future Dilution Offering. The Partners' Percentage
Interests in the Partnership as of the date hereof are as set forth in Schedule
A attached hereto. Any future adjustments in the Partners' Percentage Interests,
due to future Dilution Offerings or otherwise, will be reflected by revisions to
Schedule A.
Profit. The net income of the Partnership (including Net
Gains from Capital Transactions) for each Year of the Partnership as determined
for federal income tax purposes.
Pro Rata Basis. In connection with an allocation or
distribution, an allocation or distribution in proportion to the respective
Percentage Interests of the class of Partners to which reference is made.
Sales Agency Agreement. The sales agency agreement through
which MedTech Investments, Inc., an Affiliate of the General Partner and a
broker-dealer company registered with the Securities and Exchange commission and
a member of the National Association of Securities Dealers, Inc. shall offer and
sell the limited partnership interest of the Partnership pursuant to the
Memorandum.
Sales Commission. The $100 sales commission paid to MedTech
Investments, Inc. for each Unit sold.
Service. The Internal Revenue Service.
Texas III. Texas Lithotripsy Limited Partnership III L.P., a
Texas limited partnership organized and operated by its general partner, Pacific
Lithotripsy, a North Carolina general partnership.
Units. The 160 equal limited partner interests in the
Partnership offered pursuant to the Memorandum for a price per Unit of $2,275 in
cash.
Venture. Texas Lithotripsy Joint Venture, L.L.C., a limited
liability company to be formed under the laws of the State of Texas by the
Partnership and Texas III pursuant to the Venture Agreement. The Venture will
own the Lithostar(TM) Mobile System.
Venture Agreement. The limited liability company regulations
to be executed by the Partnership and Texas III pursuant to which they will form
and operate the Venture.
Venture Interest. The interest of the Partnership in the
Venture as defined by the Venture Agreement.
Year. An annual accounting period ending on December 31 of
each year during the term of the Partnership.
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7. CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS.
7.1 General Partner Contribution. On or before the date of
this Agreement, the General Partner will contribute to the capital of the
Partnership cash in an amount equal to 20% (up to $91,000) of the total cash
contributed to the Partnership by the Partners in the offering made pursuant to
the Memorandum.
7.2 Limited Partner Contribution. Each Limited Partner hereby
agrees to contribute and shall contribute to the capital of the Partnership on
the date of his admission to the Partnership the cash amount set forth opposite
his name on Schedule A attached hereto.
7.3 No Interest. Except as otherwise provided herein, no
interest shall be paid on any contribution to the capital of the Partnership.
7.4 Dilution Offerings. If the General Partner, in its sole
discretion, determines that it is in the best interest of the Partnership, the
General Partner may, from time to time, issue, offer and sell additional limited
partnership interests in the Partnership (a "Dilution Offering") to local
urologists who are not already Limited Partners ("Qualified Investors"). The
primary purpose of any Dilution Offering would be (i) to raise additional
capital for any legitimate Partnership purpose as set forth in Article 4, and
(ii) to assure the highest quality of patient care by admitting Qualified
Investors to the Partnership who would be dedicated and motivated as owners to
follow the Partnership's treatment protocol, and comply with its quality
assurance and outcome analysis programs. Any limited partnership interests
offered by the Partnership in a Dilution Offering shall be sold in the manner
and according to the terms prescribed in the sole discretion of the General
Partner; provided, however, that any additional limited partnership interests
offered in a Dilution Offering will be sold for a price no lower than the
highest price for which proportionate limited partnership interests in the
Partnership have been previously sold by the Partnership. Any sale of additional
limited partnership interests will result in the proportionate dilution of the
Partnership Percentage Interests of the existing Partners. Notwithstanding the
above, in the event of a Dilution Offering, the General Partner and/or its
Affiliates may elect, in their sole discretion, to prevent dilution of the
Percentage Interests of the General Partner and/or its Affiliates by either
contributing a proportionate amount of additional capital to the Partnership or
purchasing additional limited partnership interests in any Dilution Offering.
Limited Partners will have no right to purchase additional limited partnership
interests in any Dilution Offering. Any investor acquiring a limited partnership
interest in a Dilution Offering shall agree to be bound by the terms of this
Agreement, and shall be automatically admitted as a Limited Partner of the
Partnership. Any adjustment in the Partners' Percentage Interests resulting from
a Dilution Offering shall be set forth on Schedule A attached hereto.
8. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF THE
LIMITED PARTNERS.
The obligations of the Limited Partners to make cash Capital
Contributions hereunder are subject to the condition that the representations,
warranties, agreements and covenants of the General Partner set forth in Article
9 of this Agreement are and shall be true and correct or have been and will have
been complied with in all material respects on the date such Capital
Contributions are required to
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be made, except to the extent that any such representation or warranty expressly
pertains to an earlier date.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
GENERAL PARTNER.
9.1 The General Partner hereby represents and warrants to the
Limited Partners that:
(a) The Partnership is a limited partnership formed in
accordance with and validly existing under the Act and the other
applicable laws of the State of Texas;
(b) The interests in the Partnership of the Limited Partners
will have been duly authorized or created and validly issued and the
Limited Partners shall have no personal liability to contribute money
to the Partnership other than the amounts agreed to be contributed by
them in the manner and on the terms set forth in this Agreement,
subject, however, to such limitations as may be imposed under the Act;
(c) No material breach or default adverse to the Partnership
exists under the terms of any other material agreement affecting the
Partnership; and
(d) The General Partner is a North Carolina corporation formed
and existing under the laws of the State of North Carolina.
9.2 The General Partner hereby covenants to the Limited
Partners that:
(a) It will at all times act in a fiduciary manner with
respect to the Partnership and the Limited Partners;
(b) Except as provided in Article 18, it will serve as the
General Partner of the Partnership until the Partnership is terminated
without reconstitution; and
(c) It will cause the Partnership to carry adequate public
liability, property damage and other insurance as is customary in the
business to be engaged in by the Partnership.
10. ADMISSION OF LIMITED PARTNERS.
The General Partner may permit the offer and sale of limited
partnership interests on the terms and conditions provided in the Memorandum or
future Dilution Offering and may admit persons subscribing for interests as
Limited Partners in the Partnership on the terms and conditions set forth in
this Article 10.
(a) The General Partner shall have approved of the admission
of said person in writing on such terms and conditions as the General
Partner shall determine;
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(b) Said person shall have executed such documents or
instruments as the General Partner may deem necessary or desirable to
effect his admission as a Limited Partner;
(c) Said person shall have accepted and adopted all of the
terms and provisions of this Agreement, as then amended;
(d) Said person (if a corporation) shall deliver to the
General Partner a certified copy of a resolution of its Board of
Directors authorizing it to become a Limited Partner under the terms
and conditions of this Agreement; and
(e) Said person, upon request by the General Partner, shall
pay such reasonable expenses as may be incurred in connection with its
admission as a Limited Partner.
11. CAPITAL ACCOUNTS.
A capital account shall be established for each Partner and
shall at all times be determined and maintained as provided by the Final
Treasury Regulations under Section 704(b) of the Code, as the same may be
amended. A Partner shall not be entitled to withdraw any part of his capital
account or to receive any distribution from the Partnership, except as provided
in Articles 13 and 24.
(a) Each Partners' capital account shall be increased by:
(i) The amount of his Capital Contribution
pursuant to Article 7; and
(ii) The amount of Profits allocated to him
pursuant to Article 12; and
(iii) The Partner's pro rata share (determined in the
same manner as such Partner's share of Profits and Losses
allocated pursuant to Article 12 hereof) of any income or gain
exempt from tax.
(b) Each Partner's capital account shall be decreased by:
(i) The amount of Losses allocated to him
pursuant to Article 12; and
(ii) The amount of Partnership Cash Flow, Partnership
Sales Proceeds and Partnership Refinancing Proceeds
distributed to him pursuant to Article 13; and
(iii) The Partner's pro rata share of any other
expenditures of the Partnership which are not deductible in
computing Partnership Profits or Losses and which are not
added to the tax basis of any
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Partnership property, including, without limitation,
expenditures described in Section 705(a)(2)(B) of the Code.
The Partner's pro rata share of such expenditures shall be
determined in the same manner as such Partner's share of
Profits and Losses allocated pursuant to Article 12.
12. ALLOCATIONS
(a) Profits and Losses. The Profits and Losses of the
Partnership shall be allocated among the Partners in accordance with
their respective Percentage Interests. In allocating Profits and
Losses, Net Gains and Losses from Capital Transactions (a part of
Profits and Losses), if any, shall be allocated first.
(b) Qualified Income Offset. If any Partner unexpectedly
receives any adjustment, allocation or distribution described in
Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4) through (6) which
causes or increases a deficit balance in such Partner's Capital Account
(adjusted for this purpose in the manner provided in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)), items of Partnership income
and gain shall be specially allocated to each such Partner in an amount
and manner sufficient to eliminate, to the extent required by the
Regulations, the deficit Capital Account of such Partner as quickly as
possible, provided that an allocation pursuant to this Article
12(d)(iii) shall be made if and only to the extent that such Partner
would have a deficit Capital Account after all other allocations
provided for in this Article 12(d) have been tentatively made as if
this Article 12(d)(iii) were not in the Agreement. This provision is
intended to be a "qualified income offset," as defined in Treasury
Regulations Section 1.704- 1(b)(2)(ii)(d), such Regulation being
specifically incorporated herein by reference.
(c) Sales Commission. The Sales Commission shall be allocated
to the Units which are not held by the General Partner and its
Affiliates in proportion to their respective capital contributions
represented by such Units (i.e., $100 in Sales Commissions per each
such Unit). The purpose of Article 12(d)(iv) is to allocate the Sales
Commission to those Partners who actually bore the burden of paying the
Sales Commission.
(d) Allocations Between Transferor and Transferee. In the
event of the transfer (other than the pledges of the General Partner's
interest permitted by Article 18 or Permitted Pledges described in
Article 16.2(b)) of all or any part of a Partner's interest (in
accordance with the provisions of this Agreement) in the Partnership at
any time other than at the end of a Year, or the admission of a new
Partner (in accordance with the terms of this Agreement), the
transferring Partner or new Partner's share of the Partnership's
income, gain, loss, deductions and credits, as computed both for
accounting purposes and for Federal income tax purposes, shall be
allocated between the transferor Partner and the transferee Partner (or
Partners), or the new Partner and the other Partners, as the case may
be, in the same ratio as the number of days in such Year before and
after the date of the transfer or admission; provided, however, that if
there has been a sale or other disposition of the assets of the
Partnership (or any part thereof) during such Year,
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then the General Partner may elect, in its sole discretion, to treat
the periods before and after the date of the transfer or admission as
separate Years and allocate the Partnership's net income, gain, net
loss, deductions and credits for each of such deemed separate Years.
Notwithstanding the foregoing, the Partnership's "allocable cash basis
items," as that term is used in Section 706(d)(2)(B) of the Code, shall
be allocated as required by Section 706(d)(2) of the Code and the
regulations thereunder.
(e) Tax Withholding. The Partnership shall be authorized to
pay, on behalf of any Partner, any amounts to any federal, state or
local taxing authority, as may be necessary for the Partnership to
comply with tax withholding provisions of the Code or the other income
tax or revenue laws of any taxing authority. To the extent the
Partnership pays any such amounts that it may be required to pay on
behalf of a Partner, such amounts shall be treated as a cash
Distribution to such Partner and shall reduce the amount otherwise
distributable to such Partner.
(f) For the purposes of the allocations as provided in this
Article 12, all allocations of income, gains, losses and deductions
allocated from the Venture to the Partnership shall maintain the same
character at the Partnership level as such allocations had at the
Venture level.
13. DISTRIBUTIONS.
(a) Distribution of Partnership Cash Flow. Partnership Cash
Flow shall be distributed to the Partners within 60 days after the end
of each Year, or earlier in the discretion of the General Partner, in
proportion to their respective Percentage Interests at the time of
distribution.
(b) Distribution of Partnership Refinancing Proceeds and
Partnership Sales Proceeds. Partnership Refinancing Proceeds and
Partnership Sales Proceeds shall be distributed to the Partners within
60 days of the Capital Transaction giving rise to such proceeds, or
earlier in the discretion of the General Partner, in proportion to
their respective Percentage Interests at the time of distribution.
(c) Distribution in Liquidation. Upon liquidation of the
Partnership, all of the Partnership's property shall be sold and
Profits and Losses allocated accordingly. Proceeds from the liquidation
of the Partnership shall be distributed in accordance with Article 24.
(d) For the purposes of the distributions as provided in this
Article 13, all distributions allocated from the Venture to the
Partnership shall maintain the same character at the Partnership level
as such distributions had at the Venture level.
14. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
14.1 Management. The Limited Partners shall not take part in
the management of the business, nor transact any business for the Partnership,
nor shall they have power to sign for or to bind
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the Partnership. The Partnership may, however, contract with one or more Limited
Partners to act as the local manager of the Lithostar(TM) Mobile System. No
Limited Partner may withdraw from the Partnership except as expressly permitted
herein.
14.2 Operation of Lithostar(R) Mobile System. The Limited
Partners shall not operate or utilize the Lithostar(TM) Mobile System or other
Partnership equipment except pursuant to (i) an Agreement with the Partnership;
or (ii) any other arrangement specifically approved by the General Partner.
14.3 Outside Activities. The Limited Partners agree that they
owe a fiduciary duty to the Partnership and, as a consequence, each Limited
Partner (that is not an Affiliate of the General Partner) shall not directly or
indirectly own, lease or sublease a Mobile Lithotripsy System (or similar
equipment used for lithotripsy of renal stones) or any other therapeutic device
acquired by the Partnership while they are Limited Partners in the Partnership
(collectively, the "Outside Activities"). Prohibited indirect ownership of a
competing device shall include the ownership of any interest in a business
venture (through stock ownership, partnership interest ownership, or as
otherwise determined in the sole discretion of the General Partner) involving
the ownership, purchase, use, lease, sublease or operation of a Mobile
Lithotripsy System (or similar equipment used for lithotripsy of renal stones)
or other competing device or equipment, unless the General Partner determines
that such activity by the Limited Partner is not detrimental to the best
interest of the Partnership. In the event a Limited Partner elects to engage in
an Outside Activity in violation of this Article 15.3, he or she must provide
written notice of such intent to the General Partner prior to engaging in such
activity, and such election shall be deemed an election by the Limited Partner
to withdraw from the Partnership (the "Notice of Withdrawal"). If a Limited
Partner engages in an Outside Activity without first notifying the General
Partner of his or her election to do so, the Limited Partner shall be deemed to
have given a Notice of Withdrawal on the date the General Partner first becomes
aware of the Limited Partner's Outside Activity. Upon receiving a Limited
Partner's Notice of Withdrawal or equivalent thereof, the Partnership's sole
remedy shall be the purchase rights provided in Article 17.3.
14.4 Disclosure of Confidential Information. Each Limited
Partner acknowledges and agrees that his or her participation in the Partnership
under this Agreement necessarily involves his or her understanding of and access
to certain trade secrets and other confidential information pertaining to the
business of the Partnership. Accordingly, each Limited Partner agrees that at
all times during his or her participation in the Partnership as a Limited
Partner and thereafter, he or she will not, directly or indirectly, without the
express written authority of the Partnership, unless required by law or directed
by a applicable legal authority having jurisdiction over the Limited Partner,
disclose or use for the benefit of any person, corporation or other entity
(other than the Partnership), or himself or herself, (i) any trade, technical,
operational, management or other secrets, any patient or customer lists or other
confidential or secret data, or any other proprietary, confidential or secret
information of the Partnership or (ii) any confidential information concerning
any of the financial arrangements, financial positions, hospital or physician
contracts, third party payor arrangements, quality assurance and outcome
analysis programs, competitive status, customer or supplier matters, internal
organizational matters, technical abilities, or other business affairs of or
relating to the Partnership. The Limited Partners acknowledge that all of the
foregoing constitutes proprietary information, which is the exclusive property
of the Partnership. In the event of breach of this Article 14.4 as determined by
the General Partner, the Partnership shall be entitled
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to any remedy at law or equity with respect to such breach, including without
limitation, an injunction or suit for damages.
15. LIMITED LIABILITY.
No Limited Partner shall be required to make any contribution
to the capital of the Partnership except as set forth in Article 7, nor shall
any Limited Partner in his capacity as such, be bound by, or personally liable
for, any expense, liability or obligation of the Partnership except to the
extent of his or her (i) interest in the Partnership; and (ii) obligation to
return distributions made to him or her under certain circumstances as required
by the Act.
16. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS.
16.1 Transferability.
(a) The term "transfer" when used in this Agreement with
respect to a Partnership Interest includes a sale, assignment, gift,
pledge, exchange, or any other disposition (but does not include the
issuance of new Partnership Interests pursuant to a Dilution Offering);
(b) Except as otherwise provided herein, the General Partner
shall not at any time transfer or assign its interest or obligation as
General Partner;
(c) The Partnership Interest of any Limited Partner shall not
be transferred, in whole or in part, except in accordance with the
conditions and limitations set forth in Articles 16.2 or 17;
(d) The transferee of a Partnership Interest by assignment,
operation of law or otherwise, shall have only the rights, powers and
privileges enumerated in Article 16.3 or otherwise provided by law and
may not be admitted to the Partnership as a Limited Partner except as
provided in Article 16.4 or as a General Partner except as provided in
Article 16.5;
(e) Notwithstanding any provision herein to the contrary, the
Partnership Agreement shall in no way restrict the issuance or
transfers of stock of the General Partner; and
(f) Notwithstanding any provision herein to the contrary, the
issuance of Partnership Interests pursuant to a Dilution Offering and
the admission of new Limited Partners pursuant to a Dilution Offering
shall be governed by the provisions of Section 7.4 of this Agreement.
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16.2 Restrictions on Transfers by Limited Partners.
(a) All or part of a Partnership Interest may be transferred
by a Limited Partner only with the prior written approval of the
General Partner, which approval may be granted or denied in the sole
discretion of the General Partner.
(b) The General Partner shall not approve any transfer of a
Partnership Interest, except a pledge of any Partnership Interest by
the General Partner to any bank, insurance company or other financial
institution to secure payment of indebtedness (a "Permitted Pledge"),
or otherwise unless the proposed transferee shall have furnished the
General Partner with a sworn statement that:
(i) The proposed transferee proposes to acquire his
Partnership Interest as a principal, for investment and not
with a view to resale or distribution;
(ii) The proposed transferee meets such requirements
regarding sophistication, income and net worth as required by
applicable state and Federal securities laws;
(iii) The proposed transferee has met such net worth
and income suitability standards as have been established by
the General Partner;
(iv) The proposed transferee recognizes that
investment in the Partnership involves certain risks and has
taken full cognizance of and understands all of the risk
factors related to the purchase of a Partnership Interest; and
(v) The proposed transferee has met all other
requirements of the General Partner for the proposed transfer.
(c) Other than in the case of a Permitted Pledge, a transfer
of a Partnership Interest may be made only if, prior to the date
thereof, the Partnership upon request receives an opinion of counsel,
satisfactory in form and substance to the General Partner, that neither
the offering nor the proposed transfer will require registration under
Federal or applicable state securities laws or regulations.
16.3 Rights of Transferee.
Unless admitted to the Partnership in accordance with Article
16.4, the transferee of a Partnership Interest or a part thereof or any right,
title or interest therein shall not be entitled to any of the rights, powers, or
privileges of his predecessor in interest, except that he shall be entitled to
receive and be credited or debited with his proportionate share of Partnership
income, gains, Profits, Losses, deductions, credits or Distributions.
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16.4 Admission of Limited Partners.
Except as otherwise provided in Article 17, the General
Partner, or the transferee of all or part of the Partnership Interest of either
a General Partner or a Limited Partner, may be admitted to the Partnership as a
Limited Partner upon furnishing to the General Partner all of the following:
(a) The written approval of a Majority in Interest of all of
the Limited Partners (except the assignor Partner), or the assignor
Partner alone, which approval may be granted or denied in the sole
discretion of such Partners or Partner (as the case may be);
(b) The written approval of the General Partner, which
approval may be granted or denied in the sole discretion of the General
Partner;
(c) Acceptance, in a form satisfactory to the General Partner,
of all the terms and conditions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
(d) A properly executed power of attorney substantially
identical to that contained in Article 37;
(e) Such other documents or instruments as may be required in
order to effect his or her admission as a Limited Partner; and
(f) Payment of such reasonable expenses as may be incurred in
connection with his or her admission as a Limited Partner.
16.5 Admission of General Partners.
A Limited Partner, or the transferee of all or part of the
Partnership Interest of the General Partner, may be admitted to the Partnership
as a general partner upon furnishing to the General Partner all of the
following:
(a) The written consent of both the General Partner and a
Majority in Interest of the Limited Partners, which consent may be
granted or denied in the sole discretion of the Partners;
(b) Such financial statements, guarantees or other assurances
as the General Partner may require with regard to the ability of the
proposed general partner to fulfill the financial obligations of a
general partner hereunder;
(c) Acceptance, in form satisfactory to the General Partner,
of all the terms and provisions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
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(d) A certified copy of a resolution of its Board of Directors
(if it is a corporation) authorizing it to become a general partner
under the terms and conditions of this Agreement;
(e) A power of attorney substantially identical to that
contained in Article 37;
(f) Such other documents or instruments as may be required in
order to effect its admission as a general partner; and
(g) Payment of such reasonable expenses as may be incurred in
connection with its admission as a general partner.
Notwithstanding the above, a transferee that controls or is
controlled by the General Partner or one or more of its Affiliates that receives
all or part of the Partnership Interest of the General Partner may be admitted
to the Partnership as a general partner upon complying with all the provisions
of Article 16.5 except for subparagraph 16.5(a). As long as the transferee
either controls or is controlled by the General Partner or one or more of its
Affiliates, no Limited Partner consents will be required to admit such
transferee as a General Partner to the Partnership.
16.6 Amendment of Certificate of Limited Partnership and
Qualification.
The General Partner shall take all steps necessary and
appropriate to prepare and record any amendments to the Certificate of Limited
Partnership, as may be necessary or appropriate from time to time to comply with
the requirements of the Act, including, without limitation, upon the admission
to the Partnership of any general partner pursuant to the provisions of Article
16.5, and may for this purpose exercise the power of attorney delivered to the
General Partner pursuant to Article 16.5 or 37. In addition, the General Partner
shall take all steps necessary and appropriate to prepare and record any and all
documents necessary to qualify the Partnership to do business in jurisdictions
where the Partnership is doing business, and may for this purpose exercise the
power of attorney delivered to the General Partner pursuant to Articles 16.4,
16.5 or 37.
16.7 Fundamental Changes.
In the event a plan is approved by the General Partner
providing for the merger or consolidation of the Partnership with another person
or entity, or the sale of all or substantially all of the Partnership Interests,
including without limitation the exchange of Partnership Interests for equity
interests in another person or entity or for cash or other consideration or
combination thereof, then and in such event, the Limited Partners shall be
obligated to take or refrain from taking, as the case may be, such actions as
the plan may provide, including, without limitations, executing such
instruments, and providing such information as the General Partner shall
reasonably request. Any plan described in this Article 16.7 may also effect an
amendment to the Partnership Agreement or the adoption of a new partnership
agreement in connection with the merger of the Partnership with another person
or entity as provided in Section 2.11 of the Act. The plan may also provide that
the General Partner and its Affiliates shall receive fees for services rendered
in connection with the operation of the Partnership or any successor entity
following the consummation of the transactions described in the plan, and
neither the
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Partnership nor the Partners shall have any right by virtue of this Agreement in
the income derived therefrom. Any securities or other consideration to be
distributed to the Partners pursuant to the plan shall be distributed in the
manner set forth in Article 24(c) as though the Partnership were being
liquidated. For this purpose only, the fair market value of the securities or
other consideration to be received pursuant to the plan shall be treated as
"Profits" and the capital accounts of the Partners shall be increased in the
manner provided in Article 11(a)(ii). No Partner shall be entitled to any
appraisal or similar rights in connection with a plan contemplated by this
Article 16.7.
16.8 Withdrawal of Initial Limited Partner.
Upon the date the first Limited Partner is admitted to the
Partnership in accordance with Article 10 of this Agreement, the Initial Limited
Partner shall withdraw from the Partnership, and thereupon his Capital
Contribution shall be returned and his Partnership Interest shall be reallocated
to the Limited Partners.
17. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON
CERTAIN EVENTS.
17.1 Death.
Upon the death of a Limited Partner, the deceased Limited
Partner's executor, administrator, or other legal or personal representative
shall give written notice of that fact to the General Partner. The General
Partner shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the deceased Limited Partner (whose executor,
administrator or other legal or personal representative shall then become
obligated to sell such Partnership Interest) at the price determined in the
manner provided in Article 17.6 of this Agreement and on the terms and
conditions provided in Article 17.7 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date of notice of the death of
the Limited Partner (the "Option Period") within which to notify in writing the
deceased Limited Partner's executor, administrator or other legal or personal
representative, whether the General Partner wishes to purchase all or a portion
of the Partnership Interest of the deceased Limited Partner. If the General
Partner does not elect to purchase the entire Partnership Interest of the
deceased Limited Partner before the expiration of the Option Period and in the
manner provided herein, the portion of the Partnership Interest not purchased
shall be held by the deceased Limited Partner's executor, administrator, or
other legal representative pursuant to the terms of this Agreement. The General
Partner, in its sole discretion, may elect to assign its rights to purchase the
Partnership Interest of a deceased Limited Partner under this Section 17.1 to
the Partnership and, in such case, the Partnership shall have the same rights as
provided for the General Partner under this Section 17.1.
17.2 Bankruptcy, Insolvency or Assignment for Benefit of
Creditors of a Limited Partner.
In the event that an involuntary or voluntary proceeding
under the Federal Bankruptcy Code, as amended, is filed for or against any
Limited Partner, or if any Limited Partner shall make an assignment for the
benefit of his creditors, or if any Limited Partner has a receiver or custodian
appointed for his assets, or any Limited Partner generally fails to pay his
debts when due, the insolvent Limited
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Partner shall give written notice (the "Notice of Insolvency") to the General
Partner of the commencement of any such proceeding or the occurrence of such
event within five days of the first notice to him of such commencement or
occurrence of such event. The General Partner shall have the option to purchase
at the Closing (as defined below) the Partnership Interest of the insolvent
Limited Partner (which insolvent Limited Partner or his trustee, custodian,
receiver or other personal or legal representative, as the case may be, shall
then become obligated to sell such Partnership Interest) at the price determined
in the manner provided in Article 17.6 of this Agreement and on the terms and
conditions provided in Article 17.7 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date of the Notice of Insolvency
(the "Option Period") within which to notify in writing the insolvent Limited
Partner or his trustee, custodian, receiver, or other legal or personal
representative, whether the General Partner wishes to purchase all or a portion
of the Partnership Interest of the insolvent Limited Partner. If the General
Partner does not elect to purchase the entire Partnership Interest of the
insolvent Limited Partner before the expiration of the Option Period and in the
manner provided herein, the portion of the Partnership Interest not purchased
shall be held by the insolvent Partner, his trustee, custodian, receiver or
other legal or personal representative pursuant to the terms of this Agreement.
The General Partner, in its sole discretion, may elect to assign its rights to
purchase the Partnership Interest of an insolvent Limited Partner under this
Section 17.2 to the Partnership and, in such case, the Partnership shall have
the same rights as provided for the General Partner under this Section 17.2.
17.3 Breach of Article 14.3.
In the event the General Partner (the "Defaulting Limited
Partner") either receives a Notice of Withdrawal as provided in Article 14.3 or
receives notice of breach of Article 14.3, the General Partner may elect, in its
sole discretion, to treat such event as a default under this Agreement and
enforce the provisions of this Article 17.3. If the General Partner elects to
enforce the provisions of this Article 17.3, the General Partner shall give
written notice of such election (the "Notice of Default") to the Defaulting
Limited Partner within 180 days of the date the General Partner first received
the Notice of Default or notice of the defaulting event. The General Partner
shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the Defaulting Limited Partner (which Defaulting Limited
Partner shall then become obligated to sell such Partnership Interest) at the
price determined in the manner provided in Article 17.6 of this Agreement and on
the terms and conditions provided in Article 17.7 of this Agreement. The General
Partner shall have a period of thirty (30) days following the date of the close
of the date of the Notice of Default (the "First Option Period") within which to
notify in writing the Defaulting Limited Partner, whether the General Partner
wishes to purchase all or a portion of the Partnership Interest of the
Defaulting Limited Partner. If the General Partner does not elect to purchase
the entire Partnership Interest of the Defaulting Limited Partner before the
expiration of the Option Period and in the manner provided herein, the portion
of the Partnership Interest not purchased shall be held by the Defaulting
Limited Partner pursuant to the terms of this Agreement. The General Partner, in
its sole discretion, may elect to assign its rights to purchase the Partnership
Interest of a Defaulting Limited Partner under this Section 17.3 to the
Partnership and, in such case, the Partnership shall have the same rights as
provided for the General Partner under this Section 17.3.
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17.4 Domestic Proceeding.
In the event that a spouse of a Limited Partner commences
against a Limited Partner, or a Limited Partner is named in, a Domestic
Proceeding, the Limited Partner shall give written notice (the "Notice of
Domestic Proceeding") to the General Partner of the commencement of any such
proceeding within five days of the first notice to him of such commencement. The
General Partner shall have the option to purchase at the Closing (as defined
below) the Partnership Interest of the Limited Partner involved in the Domestic
Proceeding (which Limited Partner shall then become obligated to sell such
Partnership Interest), at the price determined in the manner provided in Article
17.6 of this Agreement and on the terms and conditions provided in Article 17.7
of this Agreement. The General Partner shall have a period of thirty (30) days
following the date of the Notice of Domestic Proceeding (the "Option Period")
within which to notify in writing the Limited Partner involved in the Domestic
Proceeding, whether the General Partner wishes to purchase all or a portion of
the Partnership Interest of such Limited Partner. If the General Partner does
not elect to purchase the Partnership Interest of the Limited Partner involved
in the Domestic Proceeding before the expiration of the Option Period and in the
manner provided herein, the portion of the Partnership Interest not purchased
shall be held by such Limited Partner pursuant to the terms of this Agreement.
The General Partner, in its sole discretion, may elect to assign its rights to
purchase the Partnership Interest of the Limited Partner involved in the
Domestic Proceeding under this Section 17.4 to the Partnership and, in such
case, the Partnership shall have the same rights as provided for the General
Partner under this Section 17.4.
17.5 Divestiture Option.
If state or federal regulations or laws are enacted or
applied, or if any other legal developments occur, which, in the opinion of the
General Partner adversely affect (or potentially adversely affect) the operation
of the Partnership (e.g., the enactment or application of prohibitory physician
self-referral legislation against the Partnership or its Partners), the General
Partner shall promptly either, in its discretion, (i) take the steps outlined in
this Article 17.5 to divest the Limited Partners of their Partnership Interests,
or (ii) dissolve the Partnership as provided in Article 23.1(d). If the General
Partner chooses option (i), it shall deliver a written notice to all of the
Limited Partners (the "Notice of Election") and purchase such Partnership
Interests for its own account. The purchase price to be paid for each
Partnership Interest shall be determined in the manner as provided in Article
17.6 and shall be on the terms and conditions as provided in Article 17.7. The
transfer of the Partnership Interests and the payment of the purchase price (as
provided in Article 17.6) shall be made at such time as determined by the
General Partner to be in the best interests of the Partnership and its Limited
Partners. Each Limited Partner hereby makes, constitutes and appoints the
General Partner, with full power of substitution, his true and lawful
attorney-in-fact, to take such actions and execute such documents on his behalf
to effect the transfer of his Partnership Interest as provided in this Article
17.5.
17.6 Purchase Price.
The purchase price to be paid for the Partnership Interest of
any Limited Partner whose interest is being purchased pursuant to the provisions
of Articles 17.1, 17.2, 17.3, 17.4 or 17.5 (the "Retiring Limited Partner")
shall be an amount equal to the Retiring Limited Partner's share of the
Partnership's book value, if any, (prorated in the event that only a portion of
his Partnership Interest is being purchased) as reflected by the Capital Account
of the Retiring Limited Partner (unadjusted for any
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appreciation in Partnership assets and as reduced by depreciation deductions
claimed by the Partnership for tax purposes). The determination of the Retiring
Limited Partner's Capital Account on the Valuation Date (as defined below) shall
be made by the Partnership's internal accountant (the "Partnership Accountant")
upon a review of the Partnership books of account, and a formal audit is
expressly waived. The statement of the Partnership Accountant with respect to
the Capital Account of the Retiring Limited Partner on the Valuation Date shall
be binding and conclusive upon the Partnership, the purchaser and the Retiring
Limited Partner and his representative. The Valuation Date shall be the last day
of the month immediately preceding the month in which occurs: (i) the death of a
Limited Partner, in the case of a purchase by reason of death; (ii) the
bankruptcy or insolvency of a Limited Partner, in the case of a purchase by
reason of such bankruptcy or insolvency; (iii) the Notice of Default as provided
in Article 17.3 in the case of a purchase by reason thereof; (iv) the
commencement of the Domestic Proceeding, in the case of a purchase by reason
thereof; or (v) the Notice of Election as provided in Article 17.5, in the case
of a purchase by reason thereof. Any Limited Partner whose Partnership Interest
is purchased pursuant to the provisions of Article 17.1, 17.2, 17.3, 17.4 or
17.5 shall be entitled only to the purchase price which shall be paid at the
Closing in cash (or by certified or cashier's check) and shall not be entitled
to any Partnership distributions made after the Valuation Date. Any
distributions inadvertently made to a Retiring Limited Partner after the
Valuation Date may be applied in reduction of the purchase price as determined
pursuant to this Article 17.6. The transfer of a Partnership Interest of a
Retiring Limited Partner shall be deemed to occur as of the Valuation Date and
the Retiring Limited Partner shall have no voting or other rights as a Limited
Partner after such date. The purchaser shall be entitled to any distributions
attributable to the transferred interest after the Valuation Date and shall have
the right to deduct the amount of any such distributions made to the Retiring
Limited Partner from the purchase price.
17.7 Closing.
17.7.1 Closing of Purchase and Sale. The Closing of any
purchase and sale of a Partnership Interest pursuant to Article 17.1,
17.2, 17.3, 17.4 or 17.5 of this Agreement shall take place at the
principal office of the Partnership, or such other place designated by
the General Partner, on the date determined as follows (the "Closing"):
(a) In the case of a purchase and sale occurring by reason of
the death of a Limited Partner as provided in Article 17.1 of this
Agreement, the Closing shall be held on the thirtieth day (or if such
thirtieth day is not a business day, the next business day following
the thirtieth day) next following the last to occur of:
(i) Qualification of the executor or personal
administrator of the deceased Limited Partner's estate;
(ii) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made; or
(iii) The date that coincides with the close of the
Option Period.
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(b) In the case of a purchase and sale occurring by reason of
the occurrence of one of the events described in Article 17.2, 17.3,
17.4 or 17.5 of this Agreement, the Closing shall be held on the
thirtieth day (or if such thirtieth day is not a business day, the next
business day following the thirtieth day) next following the later to
occur of:
(i) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made; or
(ii) The date that coincides with the close of the
Option Period.
At the Closing, although not necessary to effect the transfer, the
Retiring Limited Partner shall concurrently with tender and receipt of
the applicable purchase price, deliver to the purchaser duly executed
instruments of transfer and assignment, assigning good and marketable
title to the portion or portions of the Retiring Limited Partner's
entire Partnership Interest thus purchased, free and clear from any
liens or encumbrances or rights of others therein. The parties
acknowledge that occurrence of any of the triggering events described
in Article 17.1, 17.2, 17.3, 17.4 or 17.5 and compliance with all the
Articles of this Agreement, except the execution of the transfer
documents by the Retiring Partner as provided above in this Article
17.7.1, are sufficient to effect the complete transfer of the Retiring
Limited Partner's interest and the Retiring Limited Partner shall be
deemed to consent to admission of the transferee as a substitute
Limited Partner. Notwithstanding the date of the Closing or whether a
Closing is successfully held, the transfer of a Partnership Interest of
a Retiring Limited Partner shall be deemed to occur as of the Valuation
Date as defined in Article 17.6. The deemed transfer is effective
regardless of whether the Retiring Limited Partner performs the duties
set forth in this Article 17.7.1.
17.7.2 Terms and Conditions of Purchase. The Partnership
Interest of a Limited Partner shall not be transferred to any Partner
unless the requirements of Articles 16.2 and 16.4 (b) through (f) are
satisfied with respect to it. The purchaser shall be liable for all
obligations and liabilities connected with that portion of the
Partnership Interest transferred to it unless otherwise agreed in
writing.
18. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST.
18.1 The General Partner may not mortgage, pledge,
hypothecate, transfer, sell, assign or otherwise dispose of all or any part of
its interest in the Partnership, whether voluntarily, by operation of law or
otherwise (the foregoing actions being hereafter collectively referred to as
"Transfers" or singularly as a "Transfer") except as permitted by this Article.
18.2 If the General Partner makes a Transfer (other than a
mortgage, pledge or hypothecation) of its general partner interest in the
Partnership pursuant to this Article, it shall be liable for all obligations and
liabilities incurred by it as the General Partner of the Partnership on or
before the
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effective date of such Transfer, but shall not be liable for any obligations or
liabilities of the Partnership arising after the effective date of the Transfer.
18.3 No Transfer by the General Partner shall be permitted
unless:
(a) Counsel for the Partnership shall have rendered an opinion
that none of the actions taken in connection with such Transfer will
cause the Partnership to be classified other than as a partnership for
Federal income tax purpose or will cause the termination or dissolution
of the Partnership under state law; and
(b) Such documents or instruments, in form and substance
satisfactory to counsel for the Partnership, shall have been executed
and delivered as may be required in the opinion of counsel for the
Partnership to effect fully any such Transfer.
Notwithstanding the foregoing provisions of this Article 18.3,
the General Partner may pledge its interest in the Partnership to any bank,
insurance company or other financial institution to secure payment of
indebtedness.
19. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER.
If the General Partner shall be finally adjudged by a court of
competent jurisdiction to be liable to the Limited Partners or the Partnership
for any act of gross negligence or willful misconduct in the performance of its
duties under the terms of this Agreement, the General Partner may be removed and
another substituted with the consent of all of the Limited Partners. Such
consent shall be evidenced by a certificate of removal signed by all of the
Limited Partners. In the event of removal, the new general partner shall succeed
to all of the powers, privileges and obligations of the General Partner, and the
General Partner's interest in the Partnership shall become that of a Limited
Partner, and the General Partner shall maintain its same Percentage Interest in
the Partnership notwithstanding anything contained in the Act to the contrary.
In addition, in the event of removal, the new general partner shall take all
steps necessary and appropriate to prepare and record an amendment to the
Certificate of Limited Partnership to reflect the removal of the General Partner
and the admission of such new general partner.
20. MANAGEMENT AND OPERATION OF BUSINESS.
20.1 All decisions with respect to the management of the
business and affairs of the Partnership shall be made by the General Partner.
20.2 The General Partner shall be under no duty to devote all
of its time to the business of the Partnership, but shall devote only such time
as it deems necessary to conduct the Partnership business and to operate and
manage the Partnership in an efficient manner.
20.3 The General Partner may charge to the Partnership all
ordinary and necessary costs and expenses, direct and indirect, attributable to
the activities, conduct and management of the business of the Partnership. The
costs and expenses to be borne by the Partnership shall include, but are not
limited to, all expenditures incurred in acquiring and financing the Equipment
or other Partnership
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property, legal and accounting fees and expenses, salaries of employees of the
Partnership, consulting and quality assurance fees paid to independent
contractors, insurance premiums and interest.
20.4 In addition to, and not in limitation of, any rights and
powers covenanted by law or other provisions of this agreement, and except as
limited, restricted or prohibited by the express provisions of this Agreement,
the General Partner shall have and may exercise on behalf of the Partnership all
powers and rights necessary, proper, convenient or advisable to effectuate and
carry out the purposes, business and objectives of the Partnership. Such powers
shall include, without limitation, the following:
(a) To acquire the Venture Interest and execute and deliver
the Venture Agreement and the Expense-Sharing Agreement;
(b) To acquire on behalf of the Partnership and/or the Venture
(i) one or more fixed-base or mobile lithotripsy systems, (ii) any
other assets related to the provision of lithotripsy services, or (iii)
any other assets or equipment or an interest in another entity
consistent with the purposes of the Partnership as provided in Article
4 (collectively, the "Additional Assets"), at such times and at such
price and upon such terms, as the General Partner deems to be in the
best interest of the Partnership;
(c) To purchase, hold, manage, lease, license and dispose of
Partnership assets (including the Venture Interest), including the
purchase, exchange, trade or sale of the Partnership's assets at such
price, or amount, for cash, securities or other property and upon such
terms, as the General Partner deems to be in the best interest of the
Partnership; provided, that should the Partnership assets be exchanged
or traded for securities or other property (the "Replacement Property")
the General Partner shall have the same powers with regard to the
Replacement Property as it does towards the traded property;
(d) To exercise the option of the General Partner or the
Partnership to purchase a Limited Partner's Partnership Interest
pursuant to Article 17;
(e) To determine the travel itinerary and site locations for
the Lithostar(TM) Mobile System or other Partnership technology;
(f) To borrow money for any Partnership or Venture purpose
(including the acquisition of the Additional Assets) and, if security
is required therefor, to subject to any security device any portion of
the property for the Partnership, to obtain replacements of any other
security device, to prepay, in whole or in part, refinance, increase,
modify, consolidate or extend any encumbrance or other security device;
(g) To deposit, withdraw, invest, pay, retain (including the
establishment of reserves in order to acquire the Additional Assets)
and distribute the Partnership's funds in any manner consistent with
the provisions of this Agreement;
(h) To institute and defend actions at law or in equity;
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(i) To enter into and carry out contracts and agreements and
any or all documents and instruments and to do any and all such other
things as may be in furtherance of Partnership purposes or necessary or
appropriate to the conduct of the Partnership activities;
(j) To execute, acknowledge and deliver any and all
instruments which may be deemed necessary or convenient to effect the
foregoing;
(k) To form a new limited partnership made up of qualified
investors to treat gallstone patients (if the FDA approves the
Lithostar(TM) for such purpose), and to contract on behalf of the
Partnership, the Venture and/or Texas III with the new limited
partnership for the use for a fee of the Lithostar(TM) for the
treatment of the new limited partnership's gallstone patients; and
(l) To engage or retain one or more persons to perform acts or
provide materials as may be required by the Partnership, at the
Partnership's expense, and to compensate such person or persons at a
rate to be set by the General Partner, provided that the compensation
is at the then prevailing rate for the type of services and materials
provided, or both. Any person, whether a Partner, an Affiliate of a
Partner or otherwise, including without limitation the General Partner,
may be employed or engaged by the Partnership to render services and
provide materials, including, but not limited to, management services,
professional services, accounting services, quality assessment
services, legal services, marketing services, maintenance services or
provide materials; and if such person is a Partner or an Affiliate of a
Partner, he shall be entitled to, and shall be paid compensation for
said services or materials, anything in this Agreement to the contrary
notwithstanding, provided that the compensation to be received for such
services or materials is competitive in price and terms with then
prevailing rate for the type of services and/or materials provided. The
Partnership, pursuant to the terms of a Management Agreement, will
contract with the General Partner, with respect to the supervision and
coordination of the management and administration of the day-to-day
operations of the Lithostar(TM) Mobile System for a monthly fee equal
to the greater of 7.5% of Partnership Cash Flow per month or $6,400 per
month. All costs incurred by the General Partner, excluding the costs
of employing one or more local physicians to act as a Medical Director,
shall be paid by the Partnership directly. The Partnership may also
contract with qualified physicians desiring to use the Lithostar(TM)
Mobile System for the treatment of patients. Owning an interest in the
Partnership shall not be a condition to using the Lithostar(TM) Mobile
System. The General Partner and its Affiliates may engage in or possess
an interest in other business ventures of any nature and description
independently or with others, including, but not limited to, the
operation of a mobile lithotripsy unit similar to the Lithostar(TM)
Mobile System, whether or not such business ventures are in direct or
indirect competition with the Partnership, and neither the Partnership
nor the Partners shall have any right by virtue of this Agreement in
and to said independent ventures or to the income or profits derived
therefrom.
20.5 In addition to other acts expressly prohibited or
restricted by this Agreement or by law, the General Partner shall have no
authority to act on behalf of the Partnership in:
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(a) Doing any act in contravention of this Agreement or
the Partnership's Certificate of Limited Partnership;
(b) Doing any act which would make it impossible to carry on
the ordinary business of the Partnership;
(c) Confessing a judgment against the Partnership in
connection with any threatened or pending legal action;
(d) Possessing or in any manner dealing with the Partnership's
property or assigning the rights of the Partnership in the
Partnership's property for other than Partnership purposes;
(e) Admitting a person as a Limited Partner or a General
Partner except as provided in this Agreement; or
(f) Performing any act (other than an act required by this
Agreement or any act taken in good faith reliance upon counsel's
opinion) which would, at the time such act occurred, subject any
Limited Partner to liability as a general partner in any jurisdiction.
21. RESERVES.
The General Partner may cause the Partnership to create a
reserve account to be used exclusively for repairs and acquisition of Additional
Assets and for any other valid Partnership purpose. The General Partner shall,
in its sole discretion, determine the amount of payments to such reserve.
22. INDEMNIFICATION AND EXCULPATION OF THE
GENERAL PARTNER.
22.1 The General Partner is accountable to the Partnership as
a fiduciary and consequently must exercise good faith and integrity in handling
Partnership affairs. The General Partner and its Affiliates shall have no
liability to the Partnership which arises out of any action or inaction of the
General Partner or its Affiliates if the General Partner or its Affiliates, in
good faith, determined that such course of conduct was in the best interest of
the Partnership and such course of conduct did not constitute gross negligence
or willful misconduct of the General Partner or its Affiliates. The General
Partner and its Affiliates shall be indemnified by the Partnership against any
losses, judgments, liabilities, expenses and amounts paid in settlement of any
claims sustained by them in connection with the Partnership, provided that the
same were not the result of gross negligence or willful misconduct on the part
of the General Partner or its Affiliates.
22.2 The General Partner shall not be liable for the return of
the Capital Contributions of the Limited Partners, and upon dissolution, Limited
Partners shall look solely to the assets of the Partnership.
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23. DISSOLUTION OF THE PARTNERSHIP.
23.1 The Partnership shall be dissolved and terminated and its
business wound up upon the occurrence of any one of the following events:
(a) The expiration of its term on January 1, 2047;
(b) The filing by, on behalf of, or against the General
Partner of any petition or pleading, voluntary or involuntary, to
declare the General Partner bankrupt under any bankruptcy law or act,
or the commencement in any court of any proceeding, voluntary or
involuntary, to declare the General Partner insolvent or unable to pay
its debts, or the appointment by any court or supervisory authority of
a receiver, trustee or other custodian of the property, assets or
business of the General Partner or the assignment by it of all or any
part of its property or assets for the benefit of creditors, if said
action, proceeding or appointment is not dismissed, vacated or
otherwise terminated within ninety (90) days of its commencement;
(c) The determination of the General Partner that the
Partnership should be dissolved;
(d) The approval of a plan by the General Partner providing
for the merger, consolidation or sale of Partnership Interests as
described in Article 16.7;
(e) The election of the General Partner to dissolve the
Partnership following the occurrence of an event described in Article
17.5;
(f) The sale, exchange or other disposition of all or
substantially all of the property of the Partnership without making
provision for the replacement thereof; and
(g) The dissolution, retirement, resignation, death,
disability or legal incapacity of a general partner, and any other
event resulting in the dissolution or termination of the Partnership
under the laws of the State of Texas.
23.2 Notwithstanding the provisions of Article 23.1, the
Partnership shall not be dissolved and terminated upon the retirement,
resignation, bankruptcy, assignment for the benefit of creditors, dissolution,
death, disability or legal incapacity of a general partner, and its business
shall continue pursuant to the terms and conditions of this Agreement, if any
general partner or general partners remain following such event; provided that
such remaining general partner or general partners are hereby obligated to
continue the business of the Partnership. If no general partner remains after
the occurrence of such event, the business of the Partnership shall continue
pursuant to the terms and conditions of this Agreement, if, within ninety (90)
days after the occurrence of such event, a Majority in Interest of the Limited
Partners agree in writing to continue the business of the Partnership, and, if
necessary, to the appointment of one or more persons or entities to be
substituted as the general partner. In the event the Limited Partners agree to
continue the business of the Partnership, the new general partner or general
partners shall succeed to all of the powers, privileges and obligations of the
General Partner, and the General Partner's interest in the Partnership shall
become a Limited Partner's interest
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hereunder. Furthermore, in the event a remaining general partner or the Limited
Partners, as the case may be, agree to continue the business of the Partnership
as provided herein, the remaining general partner or the newly appointed general
partner or general partners, as the case may be, shall take all steps necessary
and appropriate to prepare and record an amendment to the Certificate of Limited
Partnership to reflect the continuation of the business of the Partnership and
the admission of a new general partner or general partners, if any.
24. DISTRIBUTION UPON DISSOLUTION.
Upon the dissolution and termination of the Partnership, the
General Partner or, if there is none, a representative of the Limited Partners,
shall cause the cancellation of the Partnership's Certificate of Limited
Partnership, shall liquidate the assets of the Partnership, and shall apply and
distribute the proceeds of such liquidation in the following order of priority:
(a) First, to the payment of the debts and liabilities of the
Partnership, and the expenses of liquidation;
(b) Second, to the creation of any reserves which the General
Partner (or the representatives of the Limited Partners) may deem
reasonably necessary for the payment of any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner
arising out of or in connection with the business and operation of the
Partnership; and
(c) Third, the balance, if any, shall be distributed to the
Partners in accordance with the Partners' positive Capital Account
balances after such capital accounts are adjusted as provided by
Article 12, and any other adjustments required by the Final Treasury
Regulations under Section 704(b) of the Code. Any general partner with
a negative Capital Account following the distribution of liquidation
proceeds or the liquidation of its interest must contribute to the
Partnership an amount equal to such negative Capital Account on or
before the end of the Partnership's taxable year (or, if later, within
ninety days after the date of liquidation). Any capital so contributed
shall be (i) distributed to those Partners with positive Capital
Accounts until such Capital Accounts are reduced to zero, and/or (ii)
used to discharge recourse liabilities.
25. BOOKS OF ACCOUNT, RECORDS AND REPORTS.
25.1 Proper and complete records and books of account shall be
kept by the General Partner in which shall be entered fully and accurately all
transactions and such other matters relating to the Partnership's business as
are usually entered into records and books of account maintained by persons
engaged in businesses of a like character. The books and records of the
Partnership shall be prepared according to the accounting method determined by
the General Partner. The Partnership's fiscal year shall be the calendar year.
The books and records shall at all times be maintained at the Partnership's
Records Office and shall be open to the reasonable inspection and examination of
the Partners or their duly authorized representatives during reasonable business
hours.
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25.2 Within ninety (90) days after the end of each Year, the
General Partner shall send to each person who was a Limited Partner at any time
during such year such tax information, including, without limitation, Federal
tax Schedule K-1, as shall be reasonably necessary for the preparation by such
person of his Federal income tax return. The General Partner will also make
available to the Limited Partners any other information required by the Act.
25.3 The General Partner shall maintain at the Partnership's
Records Office copies of the Partnership's original Certificate of Limited
Partnership and any certificate of amendment, restated certificate or
certificate of cancellation with respect thereto and such other documents as the
Act shall require. The General Partner will furnish to any Limited Partner upon
request a copy of the Partnership's original Certificate of Limited Partnership
and any certificate of amendment, restated certificate, or certificate of
cancellation, if any.
25.4 The General Partner shall, in its sole discretion, make
for the Partnership any and all elections for federal, state and local tax
purposes including, without limitation, any election, if permitted by applicable
law, to adjust the basis of the Partnership's property pursuant to Code Sections
754, 734(b) and 743(b), or comparable provisions of state or local law, in
connection with transfers of interests in the Partnership and Partnership
Distributions.
25.5 The General Partner is designated as the Tax Matters
Partner (as defined in Section 6231 of the Code) and to act in any similar
capacity under state or local law, and is authorized (at the Partnership's
expense): (i) to represent the Partnership and Partners before taxing
authorities or courts of competent jurisdiction in tax matters affecting the
Partnership or Partners in their capacity as Partners; (ii) to extend the
statute of limitations for assessment of tax deficiencies against Partners with
respect to adjustments to the Partnership's federal, state or local tax returns;
(iii) to execute any agreements or other documents relating to or affecting such
tax matters, including agreements or other documents that bind the Partners with
respect to such tax matters or otherwise affect the rights of the Partnership
and Partners; and (iv) to expend Partnership funds for professional services and
costs associated therewith. The General partner is authorized and required to
notify the federal, state or local tax authorities of the appointment of a Tax
Matters Partner in the manner provided in Treasury Regulations Section
301.6231(a)(7)-IT, as modified from time to time. In its capacity as Tax Matters
Partner, the General Partner shall oversee the Partnership tax affairs in the
manner which, in its best judgment, are in the interests of the Partners.
26. NOTICES.
All notices under this Agreement shall be in writing and shall
be deemed to have been given when delivered personally, or mailed by certified
or registered mail, postage prepaid, return receipt requested. Notices to the
General Partner shall be delivered at, or mailed to, its principal office.
Notices to the Partnership shall be delivered at, or mailed to, its principal
office with a copy to each of its business offices. Notice to a Limited Partner
shall be delivered to such Limited Partner, or mailed to the last address
furnished by him for such purposes to the General Partner. Limited Partners
shall give notice of a change of address to the General Partner in the manner
provided in this Article.
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<PAGE>
27. AMENDMENTS.
Subject to the provisions of Article 28, this Agreement is
subject to amendment only by written consent of the General Partner and a
Majority in Interest of the Limited Partners; provided, however, the consent of
the Limited Partners shall not be required if such amendments are ministerial in
nature and do not contravene the provisions of Article 28.
28. LIMITATIONS ON AMENDMENTS.
Notwithstanding the provisions of Article 27, no amendment to
this Agreement shall:
(a) Enlarge the obligations of any Partner under this
Agreement or convert the interest in the Partnership of any Limited
Partner into the interest of a general partner or modify the limited
liability of any Limited Partner, without the consent of such Partner;
(b) Amend the provisions of Article 12, 13, 15 or 24 without
the approval of the General Partner and a Majority in Interest of the
Limited Partners; provided, however, that the General Partner may at
any time amend such Articles without the consent of the Limited
Partners in order to permit the Partnership allocations to be sustained
for Federal income tax purposes, but only if such amendments do not
materially affect adversely the rights and obligations of the Limited
Partners, in which case such amendments may only be made as provided in
this Article 28(b); or
(c) Amend this Article 28 without the consent of all Partners.
29. MEETINGS, CONSENTS AND VOTING.
29.1 A meeting of the Partnership to consider any matter with
respect to which the Partners may vote as set forth in this Agreement may be
called by the General Partner or by Limited Partners who hold more than
twenty-five percent (25%) of the aggregate interests in the Partnership held by
all the Limited Partners. Upon receipt of a notice requesting a meeting by such
Partner or Partners and stating the purpose of the meeting, the General Partner
shall, within ten (10) days thereafter, give notice to the Partners of a meeting
of the Partnership to be held at a time and place convenient to the Limited
Partners on a date not earlier than fifteen (15) days after receipt by the
General Partner of the notice requesting a meeting. The notice of the meeting
shall set forth the time, date, location and purpose of the meeting.
29.2 Any consent of a Partner required by this Agreement may
be given as follows:
(a) By a written consent given by the consenting Partner and
received by the General Partner at or prior to the doing of the act or
thing for which the consent is solicited, or
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<PAGE>
(b) By the affirmative vote by the consenting Partner to the
doing of the act or thing for which the consent is solicited at any
meeting called pursuant to this Article to consider the doing of such
act or thing.
29.3 When exercising voting rights expressly granted under the
Articles of this Agreement, each Partner shall have that number of votes as is
equal to the Percentage Interest of such Partner at the time of the vote,
multiplied by 100.
30. SUBMISSIONS TO THE LIMITED PARTNERS.
The General Partner shall give the Limited Partners notice of
any proposal or other matter required by any provision of this Agreement or by
law to be submitted for consideration and approval of the Limited Partners. Such
notice shall include any information required by the relevant provision or by
law.
31. ADDITIONAL DOCUMENTS.
Each party hereto agrees to execute and acknowledge all
documents and writings which the General Partner may deem necessary or expedient
in the creation of this Partnership and the achievement of its purpose.
32. SURVIVAL OF RIGHTS.
Except as herein otherwise provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their successor and assigns.
33. INTERPRETATION AND GOVERNING LAW.
When the context in which words are used in this Agreement
indicates that such is the intent, words in the singular number shall include
the plural and vise versa; in addition, the masculine gender shall include the
feminine and neuter counterparts. The Article headings or titles and the table
of contents shall not define, limit, extend or interpret the scope of this
Agreement or any particular Article. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas without giving
effect to the conflicts of laws provisions thereof.
34. SEVERABILITY.
If any provision, sentence, phrase or word of this Agreement
or the application thereof to any person or circumstance shall be held invalid,
the remainder of this Agreement, or the application of such provision, sentence,
phrase, or word to persons or circumstances, other than those as to which it is
held invalid, shall not be affected thereby.
35. AGREEMENT IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument. In addition, this Agreement
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<PAGE>
may contain more than one counterpart of the signature page and this Agreement
may be executed by the affixing of the signatures of each of the Partners to one
of such counterpart signature pages; all of such signature pages shall be read
as though one, and they shall have the same force and effect as though all of
the signers had signed a single signature page.
36. THIRD PARTIES.
The agreements, covenants and representations contained herein
are for the benefit of the parties hereto inter se and are not for the benefit
of any third parties including, without limitation, any creditors of the
Partnership.
37. POWER OF ATTORNEY.
Each Limited Partner hereby makes, constitutes and appoints
Dr. Joseph Jenkins and Dr. Dan A. Myers, severally, with full power of
substitution, his true and lawful attorneys-in-fact, for him and in his name,
place and stead and for his use and benefit to sign and acknowledge, file and
record, any amendments hereto among the Partners for the further purpose of
executing and filing on behalf of each Limited Partner, any and all certificates
of limited partnership or other documents necessary to constitute the
Partnership or to effect the continuation of the Partnership, the admission or
withdrawal of a general partner or a limited partner, the qualification of the
Partnership in a foreign jurisdiction (or amendment to such qualification), the
admission of substitute Limited Partners or the dissolution or termination of
the Partnership, provided such continuation, admission, withdrawal,
qualification, or dissolution and termination are in accordance with the terms
of this Agreement.
The foregoing power of attorney is a special power of attorney
coupled with an interest, is irrevocable and shall survive the death or legal
incapacity of each Limited Partner. It may be exercised by any one of said
attorneys by listing all of the Limited Partners executing any instrument over
the signature of the attorney-in-fact acting for all of them. The power of
attorney shall survive the delivery of an assignment by a Limited Partner of the
whole or any portion of his Unit. In those cases in which the assignee of, or
the successor to, a Limited Partner owning a Unit has been approved by the
Partners for admission to the Partnership as a substitute Limited Partner, the
power of attorney shall survive for the sole purpose of enabling the General
Partner to execute, acknowledge and file any instrument necessary to effect such
substitution.
This power of attorney shall not be affected by the subsequent
incapacity or mental incompetence of any Limited Partner.
38. ARBITRATION.
Any dispute arising out of or in connection with this
Agreement or the breach thereof shall be decided by arbitration in Austin, Texas
in accordance with the then effective commercial arbitration rules of the
American Arbitration Association, and judgment thereof may be entered in any
court having jurisdiction thereof.
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<PAGE>
39. CREDITORS.
None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Partnership.
[The remainder of this page is intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
of Limited Partnership as of the day and year first above written.
GENERAL PARTNER:
LITHOTRIPTERS, INC., a North Carolina corporation
By: /s/ Joseph Jenkins
-------------------------------
Joseph Jenkins, M.D., President
ATTEST:
/s/ Philip J. Gallina
_________________________ [CORPORATE SEAL]
Secretary
[CORPORATE SEAL]
INITIAL LIMITED PARTNER:
/s/ Dan Myers
---------------------------------------
Dan A. Myers, M.D.
STATE OF NORTH CAROLINA )
)
COUNTY OF CUMBERLAND )
On this 18th day of August, 1997, before me, the
undersigned Notary Public in and for the County of Cumberland in the State of
North Carolina, personally came Joseph Jenkins, M.D., who, being by me duly
sworn, said that he is President of Lithotripters, Inc., the sole general
partner of Texas Lithotripsy Limited Partnership VI, L.P., that the seal affixed
to the foregoing instrument in writing is the corporate seal of the corporation,
and that said writing was signed, sworn to, and sealed by him in behalf of said
corporation by its authority duly given. And the said Joseph Jenkins, M.D.,
further certified that the facts set forth in said writing are true and correct,
and acknowledged said instrument to be the act and deed of said corporation.
WITNESS my hand and notarial seal.
/s/ Ricarda Kelly
-------------------------------------------
Notary Public
My commission expires:
Jan. 8, 2002
- ---------------------------
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<PAGE>
STATE OF NORTH CAROLINA )
)
COUNTY OF CUMBERLAND )
I, Ricarda Kelly , a notary public, do hereby
certify that Dan A. Myers, M.D. personally appeared before me this 18th day of
August, 1997 and acknowledged and swore to the due execution of the foregoing
Limited Partnership Agreement in his capacity as the initial limited partner.
/s/ Ricarda Kelly
-------------------------------------------
Notary Public
My commission expires:
January 8, 2002
- ---------------------------
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<PAGE>
COUNTERPART SIGNATURE PAGE
By signing this Counterpart Signature Page, the undersigned
acknowledges his or her acceptance of that certain Agreement of Limited
Partnership of Texas Lithotripsy Limited Partnership VI, L.P., and his or her
intention to be legally bound thereby.
Dated this 18th day of August, 1997.
/s/ Dan A. Myers
------------------------------------------
Signature
Dan A. Myers
------------------------------------------
Printed Name
STATE OF NORTH CAROLINA )
COUNTY OF CUMBERLAND )
BEFORE ME, the undersigned Notary Public in and for the State
and County set forth above, on the 18TH day of August, 1997,
personally appeared Dan A. Myers, and, being by me first duly sworn,
stated that (s)he signed this Counterpart Signature Page for the purpose set
forth above and that the statements contained therein are true.
/s/ Ricarda Kelly
-------------------------------------------
Signature of Notary Public
Ricarda Kelly
-------------------------------------------
Printed Name of Notary
My Commission Expires:
Jan. 8, 2002
- ---------------------------
[SEAL]
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<PAGE>
SCHEDULE A
Schedule of Partnership Interests
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VI, L.P.
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND PERCENTAGE INTERESTS
Cash Percentage
General Partner Contribution Interest
Lithotripters, Inc. $ 90,275 20%
2008 Litho Place
Fayetteville, NC 28304
Limited Partners
----------------
Paul Brower 9,100 2
George Decherd 2,275 .50
David Friedberg 18,200 4
John Jaderlund 9,100 2
Lithotripters, Inc 63,075 14.50
Jeffrey Miller 13,650 3
Shaun Maloney 13,650 3
Jan Ogletree 9,100 2
David Phillips 9,100 2
Larry Phillips 9,100 2
Steven Pickett 13,650 3
Texas III 182,000 40
John Williamson 9,100 2
TOTAL: $ 451,375 100 %
======= ======
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
NORTH CAROLINA PROSTATHERAPY LIMITED PARTNERSHIP I
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
NORTH CAROLINA PROSTATHERAPY LIMITED PARTNERSHIP I
TABLE OF CONTENTS
Article Heading Page
1. FORMATION..................................................1
2. NAME.......................................................1
3. OFFICES....................................................1
4. PURPOSE....................................................1
5. TERM.......................................................2
6. CERTAIN DEFINED TERMS......................................2
7. CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS...............6
8. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF THE LIMITED
PARTNERS...................................................6
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
GENERAL PARTNER............................................7
10. ADMISSION OF LIMITED PARTNERS..............................7
11. CAPITAL ACCOUNTS...........................................8
12. ALLOCATIONS................................................9
13. DISTRIBUTIONS.............................................10
14. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS................10
15. LIMITED LIABILITY.........................................12
16. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS...........12
17. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON CERTAIN
EVENTS....................................................16
<PAGE>
18. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST........................................22
19. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER........22
20. MANAGEMENT AND OPERATION OF BUSINESS......................23
21. RESERVES..................................................25
22. INDEMNIFICATION AND EXCULPATION OF THE GENERAL PARTNER....26
23. DISSOLUTION OF THE PARTNERSHIP............................26
24. DISTRIBUTION UPON DISSOLUTION.............................27
25. BOOKS OF ACCOUNT, RECORDS AND REPORTS.....................28
26. NOTICES...................................................29
27. AMENDMENTS................................................29
28. LIMITATIONS ON AMENDMENTS.................................29
29. MEETINGS, CONSENTS AND VOTING.............................30
30. SUBMISSIONS TO THE LIMITED PARTNERS.......................30
31. ADDITIONAL DOCUMENTS......................................30
32. SURVIVAL OF RIGHTS........................................30
33. INTERPRETATION AND GOVERNING LAW..........................31
34. SEVERABILITY..............................................31
35. AGREEMENT IN COUNTERPARTS.................................31
36. THIRD PARTIES.............................................31
37. POWER OF ATTORNEY.........................................31
38. ARBITRATION...............................................32
39. CREDITORS.................................................32
Schedule A............... Schedule of Partnership Interests
<PAGE>
THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED PARTNERSHIP
AGREEMENT HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, QUALIFIED UNDER THE NORTH CAROLINA
SECURITIES ACT OR THE LAWS OF NORTH CAROLINA, OR REGISTERED UNDER SIMILAR LAWS
OR ACTS OF OTHER STATES IN RELIANCE UPON EXEMPTIONS UNDER SUCH LAWS.
AGREEMENT
OF LIMITED PARTNERSHIP
OF NORTH CAROLINA PROSTATHERAPY
LIMITED PARTNERSHIP I
THIS AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement") is
made as of August 14, 1997, by and among PROSTATHERAPIES, INC., a
Delaware corporation (the "General Partner"), and the parties listed on Schedule
A attached hereto as the Limited Partners.
1. FORMATION.
The Partnership was formed pursuant to a filing in the Office
of the Secretary of State of North Carolina on June 6, 1997, a Certificate of
Limited Partnership in accordance with the provisions of the Act.
2. NAME.
2.1 The name of the Partnership is "North Carolina
Prostatherapy Limited Partnership I."
2.2 The Partnership business shall be conducted under such
names as the General Partner may from time to time deem necessary or advisable,
provided that appropriate amendments to this Agreement and all necessary filings
under applicable assumed or fictitious name statutes or the Act are first
obtained.
3. OFFICES.
3.1 The principal office of the Partnership shall be at 2008
Litho Place, Fayetteville, North Carolina 28304, or at such other place as the
General Partner may, from time to time, designate by notice to the Limited
Partners (the "Records Office").
3.2 The Partnership may have such additional offices as the
General Partner may, from time to time, deem necessary or advisable.
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<PAGE>
4. PURPOSE.
The purpose and business of the Partnership shall be: (i) to
operate one or more Prostatron(R) microwave thermotherapy devices (or any other
BPH treatment equipment) for the transurethral treatment of the symptoms of BPH
in various locations in eastern North Carolina or in such other location(s) as
the General Partner may determine, in its sole discretion, to be in the best
interests of the Partnership, (ii) to acquire and operate in the future any
other urological device or equipment that as of the date of this Agreement
either has not been invented or has not received FDA premarket approval, as long
as such device has such approval at the time it is acquired by the Partnership;
(iii) to acquire an interest in any business entity, including, without
limitation, a limited partnership, limited liability company or corporation,
that engages in any business activity described in this Article 4; and (iv) to
engage in any and all activities incidental or related to the foregoing, upon
and subject to the terms and conditions of this Agreement.
5. TERM.
The Partnership shall terminate on June 30, 2047, unless
sooner terminated as herein provided.
6. CERTAIN DEFINED TERMS.
Certain terms used in this Agreement shall have the following
meanings:
Act. The Act means the North Carolina Revised Uniform Limited
Partnership Act, as then in effect.
Affiliate. An Affiliate is (i) any person, partnership,
corporation, association or other legal entity ("person") directly or indirectly
controlling, controlled by or under common control with another person; (ii) any
person owning or controlling 10% or more of the outstanding voting interest of
such other person; (iii) any officer, director or partner of such person; and
(iv) if such other person is an officer, director or partner, any entity for
which such person acts in such capacity.
Agreement. This Agreement of Limited Partnership, as the same
may be amended from time to time.
BPH. Benign Prostatic Hyperplasia, common enlargement of the
prostate.
Capital Account. The Partnership capital account of a Partner
as computed pursuant to Article 11 of this Agreement.
Capital Contributions. All capital contributions made by a
Partner or his predecessor in interest which shall include, without limitation,
contributions made pursuant to Article 7 of this Agreement.
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<PAGE>
Capital Transaction. Any transaction which, were it to
generate proceeds, would produce Partnership Sales Proceeds or Partnership
Refinancing Proceeds.
Carolina Lithotripsy. Carolina Lithotripsy, a North Carolina
limited partnership. Carolina Lithotripsy initially is the holder of a Majority
in Interest of the Limited Partner interests in the Partnership.
Class A Units. The 200 equal limited partnership interests in
the Partnership offered pursuant to the Summary for a price per Unit of
$2,487.50 in cash.
Class B. Units. The 120 equal limited partnership interests
in the Partnership offered pursuant to the Summary for a price per Unit of
$2,600 in cash.
Code. The Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent, superseding revenue laws.
Dilution Offering. As provided in Section 7.4 of this
Agreement, the future offering of additional limited partnership interests in
the Partnership by the General Partner. Except as otherwise provided in Section
7.4, any successful Dilution Offering will proportionately reduce the Percentage
Interests of the then current Partners in the Partnership.
Domestic Proceeding. Any divorce, annulment, separation or
similar domestic proceeding between a married couple.
Equipment. The initial equipment to be acquired by the
Partnership for the operation of the Prostatron(R) Mobile System. The initial
equipment to be used in the operation of the Prostatron(R) Mobile System will
include the Trailer, a tractor truck, the Prostatron(R), an ultrasound system
and miscellaneous medical equipment and supplies.
FDA. The United States Food and Drug Administration.
General Partner. The General Partner of the Partnership,
Prostatherapies, Inc., a Delaware corporation and wholly owned subsidiary of
Prime.
Initial Limited Partner. Dan A. Myers, M.D., a resident of
North Carolina. The Initial Limited Partner is to be the only limited partner of
the Partnership until such time as the new Limited Partners are admitted to the
Partnership, at which time the Initial Limited Partner shall withdraw from the
Partnership.
Limited Partners. The Limited Partners are those investors in
the Units admitted to the Partnership and any person admitted as a Limited
Partner in accordance with the provisions of this Agreement.
Losses. The net loss (including Net Losses from Capital
Transactions) of the Partnership for each Year of the Partnership as determined
for federal income tax purposes.
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Majority in Interest of the Limited Partners. The Limited
Partners who hold more than 50% of the Limited Partner Percentage Interests in
the Partnership.
Net Gains from Capital Transactions. The gains realized by the
Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which assets shall include
Code Section 1231 assets) or as a result of or upon the damage or destruction of
such capital assets.
Net Losses from Capital Transactions. The losses realized by
the Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the Partnership (which shall include Code
Section 1231 assets) or as a result of or upon the damage or destruction of such
capital assets.
Partners. The General Partner and the Limited Partners,
collectively, where no distinction is required by the context in which the
term is used herein.
Partnership. North Carolina Prostatherapy Limited
Partnership I, a North Carolina limited partnership.
Partnership Cash Flow. For the applicable period the excess,
if any, of (A) the sum of (i) all gross receipts from any source for such
period, other than from Partnership loans, Capital Transactions and Capital
Contributions, and (ii) any funds released by the Partnership from previously
established reserves, over (B) the sum of (i) all cash expenses paid by the
Partnership for such period; (ii) the amount of all payments of principal on
loans to the Partnership; (iii) capital expenditures of the Partnership; and
(iv) such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities and contingencies of the Partnership; provided, however, that
the amounts referred to in (B)(i), (ii) and (iii) above shall be taken into
account only to the extent not funded by Capital Contributions, loans or paid
out of previously established reserves. Such term shall also include all other
funds deemed available for distribution and designated as "Partnership Cash
Flow" by the General Partner.
Partnership Interest. The interest of a Partner in the
Partnership as defined by the Act and this Agreement.
Partnership Refinancing Proceeds. The cash realized from the
refinancing of Partnership assets after retirement of any secured loans and less
(i) payment of all expenses relating to the transaction and (ii) establishment
of such reasonable reserves as the General Partner shall deem necessary or
prudent to set aside for future repairs, improvements, or equipment replacement
or additions, or to meet working capital requirements or foreseen or unforeseen
future liabilities or contingencies of the Partnership.
Partnership Sales Proceeds. The cash realized from the sale,
exchange, casualty or other disposition of all or a portion of Partnership
assets after the retirement of all secured loans and less (i) the payment of all
expenses related to the transaction and (ii) establishment of such reasonable
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<PAGE>
reserves as the General Partner shall deem necessary or prudent to set aside for
future repairs, improvements, or equipment replacement or additions, or to meet
working capital requirements or foreseen or unforeseen future liabilities or
contingencies of the Partnership.
Percentage Interest. The interest of each Partner in the
Partnership, to be determined initially in the case of a Limited Partner by
reference to his or her Unit ownership based upon the Limited Partners holding
an aggregate 80% Percentage Interest in the Partnership, with each initial Unit
sold representing an initial 0.25% interest. The General Partner initially will
own a 20% Percentage Interest in the Partnership. A Partner's Percentage
Interest may be reduced by a future Dilution Offering. The Partners' Percentage
Interests in the Partnership as of the date hereof are as set forth in Schedule
A attached hereto. Any future adjustments in the Partners' Percentage Interests,
due to future Dilution Offerings or otherwise, will be reflected by revisions to
Schedule A.
Prime. Prime Medical Services, Inc., a Delaware corporation.
Prime owns all the capital stock of the General Partner and Lithotripters,
Inc., the management agent.
Profit. The net income of the Partnership (including Net
Gains from Capital Transactions) for each Year of the Partnership as determined
for federal income tax purposes.
Pro Rata Basis. In connection with an allocation or
distribution, an allocation or distribution in proportion to the respective
Percentage Interests of the class of Partners to which reference is made.
Prostatron(R). The Prostatron(R) microwave thermotherapy
device manufactured by EDAP Technomed, Inc., a Delaware corporation, and to be
utilized by the Partnership for the treatment of the symptoms of BPH.
Prostatron(R) Mobile System. The Trailer and tractor truck
with the installed and operational Prostatron(R) and ultrasound system.
Related Parties. Carolina Lithotripsy, the General Partner
and their Affiliates and designees.
Sales Agency Agreement. The sales agency agreement through
which MedTech Investments, Inc., an Affiliate of the General Partner and a
broker-dealer company registered with the Securities and Exchange commission and
a member of the National Association of Securities Dealers, Inc. shall offer and
sell the limited partnership interest of the Partnership pursuant to the
Summary.
Sales Commission. The $112.50 sales commission paid to
MedTech Investments, Inc. for each Class B Unit sold to parties other than
Related Parties.
Service. The Internal Revenue Service.
Summary. The Confidential Summary of the Offering of the
Partnership dated June 18, 1997, including all Appendices thereto, and as
amended or as supplemented.
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<PAGE>
Trailer. The new mobile trailer manufactured and upfitted by
AK Associates, Inc. to house the Prostatron(R).
Units. The 200 Class A and the 120 Class B Units,
collectively, where no distinction is required by the context in which the term
is used herein.
Year. An annual accounting period ending on December 31 of
each year during the term of the Partnership.
7. CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS.
7.1 General Partner Contribution. On or before the date of
this Agreement, the General Partner will contribute to the capital of the
Partnership cash in an amount equal to 20% (up to $202,375) of the total cash
contributed to the Partnership by the Partners in the offering made pursuant to
the Summary.
7.2 Limited Partner Contribution. Each Limited Partner hereby
agrees to contribute and shall contribute to the capital of the Partnership on
the date of his admission to the Partnership the cash amount set forth opposite
his name on Schedule A attached hereto.
7.3 No Interest. Except as otherwise provided herein, no
interest shall be paid on any contribution to the capital of the Partnership.
7.4 Dilution Offerings. As provided in Article 20.5(a), if the
General Partner and a Majority in Interest of the Limited Partners determine
that it is in the best interest of the Partnership, the General Partner may,
from time to time, issue, offer and sell additional limited partnership
interests in the Partnership (a "Dilution Offering") to local urologists who are
not already Limited Partners ("Qualified Investors"). The primary purpose of any
Dilution Offering would be (i) to raise additional capital for any legitimate
Partnership purpose as set forth in Article 4, and (ii) to assure the highest
quality of patient care by admitting Qualified Investors to the Partnership who
would be dedicated and motivated as owners to follow the Partnership's treatment
protocol, and comply with its quality assurance and outcome analysis programs.
Any limited partnership interests offered by the Partnership in a Dilution
Offering shall be sold in the manner and according to the terms prescribed in
the sole discretion of the General Partner; provided, however, that any
additional limited partnership interests offered in a Dilution Offering will be
sold for a price no lower than the highest price for which proportionate limited
partnership interests in the Partnership have been previously sold by the
Partnership. Any sale of additional limited partnership interests will result in
the proportionate dilution of the Partnership Percentage Interests of the
existing Partners. Notwithstanding the above, in the event of a Dilution
Offering, the General Partner, Carolina Lithotripsy and Related Parties may
elect, in their sole discretion, to prevent dilution of their respective
Percentage Interests by either contributing a proportionate amount of additional
capital to the Partnership or purchasing additional limited partnership
interests in any Dilution Offering. Any other Limited Partners will have no
right to purchase additional limited partnership interests in any Dilution
Offering. Any investor acquiring a limited partnership interest in a Dilution
Offering shall agree to be bound by the terms of this Agreement, and shall be
automatically admitted as a Limited Partner of the Partnership notwithstanding
any other provisions in
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this Agreement to the contrary. Any adjustment in the Partners' Percentage
Interests resulting from a Dilution Offering shall be set forth on Schedule A
attached hereto.
8. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF THE
LIMITED PARTNERS.
The obligations of the Limited Partners to make cash Capital
Contributions hereunder are subject to the condition that the representations,
warranties, agreements and covenants of the General Partner set forth in Article
9 of this Agreement are and shall be true and correct or have been and will have
been complied with in all material respects on the date such Capital
Contributions are required to be made, except to the extent that any such
representation or warranty expressly pertains to an earlier date.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
GENERAL PARTNER.
9.1 The General Partner hereby represents and warrants to the
Limited Partners that:
(a) The Partnership is a limited partnership formed in
accordance with and validly existing under the Act and the other
applicable laws of the State of North Carolina;
(b) The interests in the Partnership of the Limited Partners
will have been duly authorized or created and validly issued and the
Limited Partners shall have no personal liability to contribute money
to the Partnership other than the amounts agreed to be contributed by
them in the manner and on the terms set forth in this Agreement,
subject, however, to such limitations as may be imposed under the Act;
(c) No material breach or default adverse to the Partnership
exists under the terms of any other material agreement affecting the
Partnership; and
(d) The General Partner is a Delaware corporation formed and
existing under the laws of the State of Delaware.
9.2 The General Partner hereby covenants to the Limited
Partners that:
(a) It will at all times act in a fiduciary manner with
respect to the Partnership and the Limited Partners;
(b) Except as provided in Articles 18 and 19, it will serve as
the General Partner of the Partnership until the Partnership is
terminated without reconstitution; and
(c) It will cause the Partnership to carry adequate public
liability, property damage and other insurance as is customary in the
business to be engaged in by the Partnership.
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10. ADMISSION OF LIMITED PARTNERS.
The General Partner may permit the offer and sale of limited
partnership interests on the terms and conditions provided in the Summary or
future Dilution Offerings and may admit persons subscribing for interests as
Limited Partners in the Partnership on the terms and conditions set forth in
this Article 10.
(a) The General Partner shall have approved of the admission
of said person in writing on such terms and conditions as the General
Partner shall determine;
(b) Said person shall have executed such documents or
instruments as the General Partner may deem necessary or desirable to
effect his admission as a Limited Partner;
(c) Said person shall have accepted and adopted all of the
terms and provisions of this Agreement, as then amended;
(d) Said person (if a corporation) shall deliver to the
General Partner a certified copy of a resolution of its Board of
Directors authorizing it to become a Limited Partner under the terms
and conditions of this Agreement; and
(e) Said person, upon request by the General Partner, shall
pay such reasonable expenses as may be incurred in connection with its
admission as a Limited Partner.
11. CAPITAL ACCOUNTS.
A capital account shall be established for each Partner and
shall at all times be determined and maintained as provided by the Final
Treasury Regulations under Section 704(b) of the Code, as the same may be
amended. A Partner shall not be entitled to withdraw any part of his capital
account or to receive any distribution from the Partnership, except as provided
in Articles 13 and 24.
(a) Each Partners' capital account shall be increased by:
(i) The amount of his Capital Contribution
pursuant to Article 7; and
(ii) The amount of Profits allocated to him
pursuant to Article 12; and
(iii) The Partner's pro rata share (determined in the
same manner as such Partner's share of Profits and Losses
allocated pursuant to Article 12 hereof) of any income or gain
exempt from tax.
(b) Each Partner's capital account shall be decreased by:
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(i) The amount of Losses allocated to him
pursuant to Article 12; and
(ii) The amount of Partnership Cash Flow, Partnership
Sales Proceeds and Partnership Refinancing Proceeds
distributed to him pursuant to Article 13; and
(iii) The Partner's pro rata share of any other
expenditures of the Partnership which are not deductible in
computing Partnership Profits or Losses and which are not
added to the tax basis of any Partnership property, including,
without limitation, expenditures described in Section
705(a)(2)(B) of the Code. The Partner's pro rata share of such
expenditures shall be determined in the same manner as such
Partner's share of Profits and Losses allocated pursuant to
Article 12.
12. ALLOCATIONS
(a) Profits and Losses. The Profits and Losses of the
Partnership shall be allocated among the Partners in accordance with
their respective Percentage Interests. In allocating Profits and
Losses, Net Gains and Losses from Capital Transactions (a part of
Profits and Losses), if any, shall be allocated first.
(b) Qualified Income Offset. If any Partner unexpectedly
receives any adjustment, allocation or distribution described in
Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4) through (6) which
causes or increases a deficit balance in such Partner's Capital Account
(adjusted for this purpose in the manner provided in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)), items of Partnership income
and gain shall be specially allocated to each such Partner in an amount
and manner sufficient to eliminate, to the extent required by the
Regulations, the deficit Capital Account of such Partner as quickly as
possible, provided that an allocation pursuant to this Article
12(d)(iii) shall be made if and only to the extent that such Partner
would have a deficit Capital Account after all other allocations
provided for in this Article 12(d) have been tentatively made as if
this Article 12(d)(iii) were not in the Agreement. This provision is
intended to be a "qualified income offset," as defined in Treasury
Regulations Section 1.704- 1(b)(2)(ii)(d), such Regulation being
specifically incorporated herein by reference.
(c) Sales Commission. The Sales Commission shall be allocated
to the Limited Partners holding Class B Units to the extent such
Limited Partners paid the Sales Commission, and in proportion to their
respective capital contributions represented by such Units (i.e.,
$112,50 in Sales Commissions per each Class B Unit). The purpose of
this Article 12(c) is to allocate the Sales Commission to those
Partners who actually bore the burden of paying the Sales Commission.
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(d) Allocations Between Transferor and Transferee. In the
event of the transfer (other than the pledges of the General Partner's
interest permitted by Article 18 or Permitted Pledges described in
Article 16.2(b)) of all or any part of a Partner's interest (in
accordance with the provisions of this Agreement) in the Partnership at
any time other than at the end of a Year, or the admission of a new
Partner (in accordance with the terms of this Agreement), the
transferring Partner or new Partner's share of the Partnership's
income, gain, loss, deductions and credits, as computed both for
accounting purposes and for Federal income tax purposes, shall be
allocated between the transferor Partner and the transferee Partner (or
Partners), or the new Partner and the other Partners, as the case may
be, in the same ratio as the number of days in such Year before and
after the date of the transfer or admission; provided, however, that if
there has been a sale or other disposition of the assets of the
Partnership (or any part thereof) during such Year, then the General
Partner may elect, in its sole discretion, to treat the periods before
and after the date of the transfer or admission as separate Years and
allocate the Partnership's net income, gain, net loss, deductions and
credits for each of such deemed separate Years. Notwithstanding the
foregoing, the Partnership's "allocable cash basis items," as that term
is used in Section 706(d)(2)(B) of the Code, shall be allocated as
required by Section 706(d)(2) of the Code and the regulations
thereunder.
(e) Tax Withholding. The Partnership shall be authorized to
pay, on behalf of any Partner, any amounts to any federal, state or
local taxing authority, as may be necessary for the Partnership to
comply with tax withholding provisions of the Code or the other income
tax or revenue laws of any taxing authority. To the extent the
Partnership pays any such amounts that it may be required to pay on
behalf of a Partner, such amounts shall be treated as a cash
Distribution to such Partner and shall reduce the amount otherwise
distributable to such Partner.
13. DISTRIBUTIONS.
(a) Distribution of Partnership Cash Flow. Partnership Cash
Flow shall be distributed to the Partners within 60 days after the end
of each Year, or earlier in the discretion of the General Partner, in
proportion to their respective Percentage Interests at the time of
distribution.
(b) Distribution of Partnership Refinancing Proceeds and
Partnership Sales Proceeds. Partnership Refinancing Proceeds and
Partnership Sales Proceeds shall be distributed to the Partners within
60 days of the Capital Transaction giving rise to such proceeds, or
earlier in the discretion of the General Partner, in proportion to
their respective Percentage Interests at the time of distribution.
(c) Distribution in Liquidation. Upon liquidation of the
Partnership, all of the Partnership's property shall be sold and
Profits and Losses allocated accordingly. Proceeds from the liquidation
of the Partnership shall be distributed in accordance with Article 24.
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14. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
14.1 Management. The Limited Partners shall not take part in
the management of the business, nor transact any business for the Partnership,
nor shall they have power to sign for or to bind the Partnership. The
Partnership may, however, contract with one or more Limited Partners to act as
the local Medical Director and Quality Assessment Director for the Prostatron(R)
Mobile System. No Limited Partner may withdraw from the Partnership except as
expressly permitted herein.
14.2 Operation of Prostatron(R) Mobile System. The Limited
Partners shall not operate or utilize the Prostatron(R) Mobile System or other
Partnership equipment except pursuant to (i) an Agreement with the Partnership;
or (ii) any other arrangement specifically approved by the General Partner.
14.3 Outside Activities. The Limited Partners agree that they
owe fiduciary duties to the Partnership and, as a consequence, each Limited
Partner (that is not the General Partner or an Affiliate of the General Partner)
agrees that he or she shall not engage in "Outside Activities" while he or she
is a Limited Partner in the Partnership. The phrase "Outside Activities" means
directly or indirectly owning, leasing or subleasing a Prostatron(R) (or any
similar equipment or competing devices used for treating BPH) or any other
therapeutic equipment acquired by the Partnership. Prohibited indirect ownership
shall include the ownership of any interest in a business venture (through stock
ownership, partnership interest ownership, or as otherwise determined in good
faith by the General Partner) involving the ownership, purchase, lease, sublease
or operation of a Prostatron(R) (or similar equipment or competing devices used
for treating BPH), or other competing device or equipment, unless the General
Partner determines that such activity by the Limited Partners is not detrimental
to the best interests of the Partnership .
Upon the termination or transfer of a Limited Partner's
interest in the Partnership for any reason, including a transfer pursuant to
Article 17.3 hereof, the withdrawing Limited Partner shall not, for a period of
two (2) years following the date of the withdrawal, engage in any Outside
Activities in any "Market Area" in which the Partnership is transacting business
or within the prior twelve months has transacted business (the "Restricted
Facilities"). For the purposes of this Article 14.3, the term "Market Area"
shall mean (i) the area within a ten mile radius of any Restricted Facility, but
if such area is determined by a court of competent jurisdiction to be too broad,
then it shall mean (ii) the area within a five mile radius of any Restricted
Facility, but if such area is determined by a court of competent jurisdiction to
be too broad then it shall mean (iii) the area within a two mile radius of any
Restricted Facility.
In the event a Limited Partner wishes and intends to engage in
an Outside Activity in a Market Area, he or she must provide written notice of
such intent to the General Partner prior to engaging in the Outside Activity.
The written notice shall be deemed an election by the Limited Partner to
withdraw from the Partnership (the "Notice of Withdrawal"), and shall give the
General Partner the purchase rights as provided Article 17.3 hereof. After the
Notice of Withdrawal, the former Limited Partner may engage in an Outside
Activity in the Market Area only after waiting the period of two years specified
in this Article 14.3. In the event of breach of the waiting period, the
Partnership shall be
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entitled to any remedy at law or equity with respect to such breach, including
without limitation an injunction or suit for damages.
If a Limited Partner during his or her participation in the
Partnership engages in an Outside Activity in a Market Area without first
notifying the General Partner in violation of this Article 14.3, the Limited
Partner shall be deemed to have given a Notice of Withdrawal on the date the
General Partner first becomes aware of the Limited Partner's Outside Activity in
the Market Area. Upon receiving a Limited Partner's Notice of Withdrawal or
equivalent thereof, the Partnership may invoke the purchase rights provided in
Article 17.3 and shall be entitled to any other remedy at law or equity
including without limitation an injunction or suit for damages.
14.4 Disclosure of Confidential Information. Each Limited
Partner acknowledges and agrees that his or her participation in the Partnership
under this Agreement necessarily involves his or her understanding of and access
to certain trade secrets and other confidential information pertaining to the
business of the Partnership. Accordingly, each Limited Partner (other than the
General Partner and its Affiliates that may also hold Limited Partner interests)
agrees that at all times during his or her participation in the Partnership as a
Limited Partner and thereafter, he or she will not, directly or indirectly,
without the express written authority of the Partnership, unless required by law
or directed by a applicable legal authority having jurisdiction over the Limited
Partner, disclose or use for the benefit of any person, corporation or other
entity (other than the Partnership), or himself or herself, (i) any trade,
technical, operational, management or other secrets, any patient or customer
lists or other confidential or secret data, or any other proprietary,
confidential or secret information of the Partnership or (ii) any confidential
information concerning any of the financial arrangements, financial positions,
hospital or physician contracts, third party payor arrangements, quality
assurance and outcome analysis programs, competitive status, customer or
supplier matters, internal organizational matters, technical abilities, or other
business affairs of or relating to the Partnership. The Limited Partners (other
than the General Partner and its Affiliates that may also hold Limited Partner
interests) acknowledge that all of the foregoing constitutes proprietary
information, which is the exclusive property of the Partnership. In the event of
breach of this Article 14.4 as determined by the General Partner, the
Partnership shall be entitled to any remedy at law or equity with respect to
such breach, including without limitation, an injunction or suit for damages.
15. LIMITED LIABILITY.
No Limited Partner shall be required to make any contribution
to the capital of the Partnership except as set forth in Article 7, nor shall
any Limited Partner in his capacity as such, be bound by, or personally liable
for, any expense, liability or obligation of the Partnership except to the
extent of his or her (i) interest in the Partnership; and (ii) obligation to
return distributions made to him or her under certain circumstances as required
by the Act.
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16. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS.
16.1 Transferability.
(a) The term "transfer" when used in this Agreement with
respect to a Partnership Interest includes a sale, assignment, gift,
pledge, exchange, or any other disposition (but does not include the
issuance of new Partnership Interests pursuant to a Dilution Offering);
(b) Except as otherwise provided herein, the General Partner
shall not at any time transfer or assign its interest or obligation as
General Partner;
(c) The Partnership Interest of any Limited Partner shall not
be transferred, in whole or in part, except in accordance with the
conditions and limitations set forth in Articles 16.2 or 17;
(d) The transferee of a Partnership Interest by assignment,
operation of law or otherwise, shall have only the rights, powers and
privileges enumerated in Article 16.3 or otherwise provided by law and
may not be admitted to the Partnership as a Limited Partner except as
provided in Articles 7.4 and 16.4 or as a General Partner except as
provided in Article 16.5;
(e) Notwithstanding any provision herein to the contrary, the
Partnership Agreement shall in no way restrict the issuance or
transfers of stock of the General Partner; and
(f) Notwithstanding any provision herein to the contrary, the
issuance of Partnership Interests pursuant to a Dilution Offering and
the admission of new Limited Partners pursuant to a Dilution Offering
shall be governed by the provisions of Section 7.4 of this Agreement.
16.2 Restrictions on Transfers by Limited Partners.
(a) All or part of a Partnership Interest may be transferred
by a Limited Partner only with the prior written approval of the
General Partner, which approval may be granted or denied in its sole
discretion
(b) The General Partner shall not approve any transfer of a
Partnership Interest, except a pledge of any Partnership Interest by
the General Partner to any bank, insurance company or other financial
institution to secure payment of indebtedness (a "Permitted Pledge"),
or otherwise unless the proposed transferee shall have furnished the
General Partner with a sworn statement that:
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(i) The proposed transferee proposes to acquire his
Partnership Interest as a principal, for investment and not
with a view to resale or distribution;
(ii) The proposed transferee meets such requirements
regarding sophistication, income and net worth as required by
applicable state and Federal securities laws;
(iii) The proposed transferee has met such net worth
and income suitability standards as have been established by
the General Partner;
(iv) The proposed transferee recognizes that
investment in the Partnership involves certain risks and has
taken full cognizance of and understands all of the risk
factors related to the purchase of a Partnership Interest; and
(v) The proposed transferee has met all other
requirements of the General Partner for the proposed transfer.
(c) Other than in the case of a Permitted Pledge, a transfer
of a Partnership Interest may be made only if, prior to the date
thereof, the Partnership upon request receives an opinion of counsel,
satisfactory in form and substance to the General Partner, that neither
the offering nor the proposed transfer will require registration under
Federal or applicable state securities laws or regulations.
16.3 Rights of Transferee.
Unless admitted to the Partnership in accordance with Article
16.4, the transferee of a Partnership Interest or a part thereof or any right,
title or interest therein shall not be entitled to any of the rights, powers, or
privileges of his predecessor in interest, except that he shall be entitled to
receive and be credited or debited with his proportionate share of Partnership
income, gains, Profits, Losses, deductions, credits or Distributions.
16.4 Admission of Limited Partners.
Except as otherwise provided in Articles 7.4 and 17, the
General Partner, or the transferee of all or part of the Partnership Interest of
either a General Partner or a Limited Partner, may be admitted to the
Partnership as a Limited Partner upon furnishing to the General Partner all of
the following:
(a) The written approval of a Majority in Interest of all of
the Limited Partners (except the assignor Partner), or the assignor
Partner alone, which approval may be granted or denied in the sole
discretion of such Partners or Partner (as the case may be);
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(b) The written approval of the General Partner, which
approval may be granted or denied in the sole discretion of the General
Partner;
(c) Acceptance, in a form satisfactory to the General Partner,
of all the terms and conditions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
(d) A properly executed power of attorney substantially
identical to that contained in Article 37;
(e) Such other documents or instruments as may be required in
order to effect his or her admission as a Limited Partner; and
(f) Payment of such reasonable expenses as may be incurred in
connection with his or her admission as a Limited Partner.
16.5 Admission of General Partners.
A Limited Partner, or the transferee of all or part of the
Partnership Interest of the General Partner, may be admitted to the Partnership
as a general partner upon furnishing to the General Partner all of the
following:
(a) The written consent of both the General Partner and a
Majority in Interest of the Limited Partners, which consent may be
granted or denied in the sole discretion of the Partners;
(b) Such financial statements, guarantees or other assurances
as the General Partner may require with regard to the ability of the
proposed general partner to fulfill the financial obligations of a
general partner hereunder;
(c) Acceptance, in form satisfactory to the General Partner,
of all the terms and provisions of this Agreement and any other
documents required in connection with the operation of the Partnership
pursuant to the terms of this Agreement;
(d) A certified copy of a resolution of its Board of Directors
(if it is a corporation) authorizing it to become a general partner
under the terms and conditions of this Agreement;
(e) A power of attorney substantially identical to that
contained in Article 37;
(f) Such other documents or instruments as may be required in
order to effect its admission as a general partner; and
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(g) Payment of such reasonable expenses as may be incurred in
connection with its admission as a general partner.
Notwithstanding the above, a transferee that controls or is
controlled by the General Partner or one or more of its Affiliates that receives
all or part of the Partnership Interest of the General Partner may be admitted
to the Partnership as a general partner upon complying with all the provisions
of Article 16.5 except for subparagraph 16.5(a). As long as the transferee
either controls or is controlled by the General Partner or one or more of its
Affiliates, no Limited Partner consents will be required to admit such
transferee as a General Partner to the Partnership.
16.6 Amendment of Certificate of Limited Partnership and
Qualification.
The General Partner shall take all steps necessary and
appropriate to prepare and record any amendments to the Certificate of Limited
Partnership, as may be necessary or appropriate from time to time to comply with
the requirements of the Act, including, without limitation, upon the admission
to the Partnership of any general partner pursuant to the provisions of Article
16.5, and may for this purpose exercise the power of attorney delivered to the
General Partner pursuant to Article 16.5 or 37. In addition, the General Partner
shall take all steps necessary and appropriate to prepare and record any and all
documents necessary to qualify the Partnership to do business in jurisdictions
where the Partnership is doing business, and may for this purpose exercise the
power of attorney delivered to the General Partner pursuant to Articles 16.4,
16.5 or 37.
16.7 Fundamental Changes.
As provided in Article 20.5(b), if the General Partner and a
Majority in Interest of the Limited Partners approve a plan providing for the
merger or consolidation of the Partnership with another person or entity, or the
sale of all or substantially all of the Partnership Interests, including without
limitation the exchange of Partnership Interests for equity interests in another
person or entity or for cash or other consideration or combination thereof, then
and in such event, the Limited Partners shall be obligated to take or refrain
from taking, as the case may be, such actions as the plan may provide,
including, without limitations, executing such instruments, and providing such
information as the General Partner shall reasonably request. Any plan described
in this Article 16.7 may also effect an amendment to the Partnership Agreement
or the adoption of a new partnership agreement in connection with the merger of
the Partnership with another person or entity. The plan may also provide that
the General Partner and its Affiliates shall receive fees for services rendered
in connection with the operation of the Partnership or any successor entity
following the consummation of the transactions described in the plan, and
neither the Partnership nor the Partners shall have any right by virtue of this
Agreement in the income derived therefrom. Any securities or other consideration
to be distributed to the Partners pursuant to the plan shall be distributed in
the manner set forth in Article 24(c) as though the Partnership were being
liquidated. For this purpose only, the fair market value of the securities or
other consideration to be received pursuant to the plan shall be treated as
"Profits" and the capital accounts of the Partners shall be increased in the
manner provided in Article 11(a)(ii). No Partner shall be entitled to any
appraisal or similar rights in connection with a plan contemplated by this
Article 16.7.
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16.8 Withdrawal of Initial Limited Partner.
Upon the date the first Limited Partner is admitted to the
Partnership in accordance with Article 10 of this Agreement, the Initial Limited
Partner shall withdraw from the Partnership, and thereupon his Capital
Contribution shall be returned and his Partnership Interest shall be reallocated
to the Limited Partners.
17. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON
CERTAIN EVENTS.
17.1 Death.
Upon the death of a Limited Partner, the deceased Limited
Partner's executor, administrator, or other legal or personal representative
shall give written notice of that fact to the General Partner. The General
Partner shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the deceased Limited Partner (whose executor,
administrator or other legal or personal representative shall then become
obligated to sell such Partnership Interest) at the price determined in the
manner provided in Article 17.8 of this Agreement and on the terms and
conditions provided in Article 17.9 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date it first received notice of
the death of the Limited Partner (the "Option Period") within which to notify in
writing the deceased Limited Partner's executor, administrator or other legal or
personal representative, whether the General Partner wishes to purchase all or a
portion of the Partnership Interest of the deceased Limited Partner. If the
General Partner does not elect to purchase the entire Partnership Interest of
the deceased Limited Partner before the expiration of the Option Period and in
the manner provided herein, the portion of the Partnership Interest not
purchased shall be held by the deceased Limited Partner's executor,
administrator, or other legal representative pursuant to the terms of this
Agreement. The General Partner, in its sole discretion, may elect to assign its
rights to purchase the Partnership Interest of a deceased Limited Partner under
this Section 17.1 to the Partnership and, in such case, the Partnership shall
have the same rights as provided for the General Partner under this Section
17.1.
17.2 Bankruptcy, Insolvency or Assignment for Benefit of
Creditors of a Limited Partner.
In the event that an involuntary or voluntary proceeding
under the Federal Bankruptcy Code, as amended, is filed for or against any
Limited Partner, or if any Limited Partner shall make an assignment for the
benefit of his creditors, or if any Limited Partner has a receiver or custodian
appointed for his assets, or any Limited Partner generally fails to pay his
debts when due, the insolvent Limited Partner shall give written notice (the
"Notice of Insolvency") to the General Partner of the commencement of any such
proceeding or the occurrence of such event within five days of the first notice
to him of such commencement or occurrence of such event. The General Partner
shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of the insolvent Limited Partner (which insolvent Limited
Partner or his trustee, custodian, receiver or other personal or legal
representative, as the case may be, shall then become obligated to sell such
Partnership Interest) at the price determined in the manner provided in Article
17.8 of this Agreement and on the terms and
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conditions provided in Article 17.9 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date of either the Notice of
Insolvency, or if such formal notice is not given, the date the General Partner
first becomes aware of the financial condition of the Limited Partner as
outlined in this Article 17.2 (the "Option Period"), within which to notify in
writing the insolvent Limited Partner or his trustee, custodian, receiver, or
other legal or personal representative, whether the General Partner wishes to
purchase all or a portion of the Partnership Interest of the insolvent Limited
Partner. If the General Partner does not elect to purchase the entire
Partnership Interest of the insolvent Limited Partner before the expiration of
the Option Period and in the manner provided herein, the portion of the
Partnership Interest not purchased shall be held by the insolvent Partner, his
trustee, custodian, receiver or other legal or personal representative pursuant
to the terms of this Agreement. The General Partner, in its sole discretion, may
elect to assign its rights to purchase the Partnership Interest of an insolvent
Limited Partner under this Section 17.2 to the Partnership and, in such case,
the Partnership shall have the same rights as provided for the General Partner
under this Section 17.2.
17.3 Breach of Article 14.3.
In the event the General Partner either receives a Notice of
Withdrawal as provided in Article 14.3 or receives notice of breach of Article
14.3 by a Limited Partner (the "Defaulting Limited Partner"), the General
Partner may elect, in its sole discretion, to treat such event as a default
under this Agreement and enforce the provisions of this Article 17.3. If the
General Partner elects to enforce the provisions of this Article 17.3, the
General Partner shall give written notice of such election (the "Notice of
Default") to the Defaulting Limited Partner within 180 days of the date the
General Partner first received notice of the defaulting event. Upon giving the
Notice of Default, the General Partner shall have the option to purchase at the
Closing (as defined below) the Partnership Interest of the Defaulting Limited
Partner (which Defaulting Limited Partner shall then become obligated to sell
such Partnership Interest) at the price determined in the manner provided in
Article 17.8 of this Agreement and on the terms and conditions provided in
Article 17.9 of this Agreement. The General Partner shall have a period of
thirty (30) days following the date of the Notice of Default (the "First Option
Period") within which to notify in writing the Defaulting Limited Partner,
whether the General Partner wishes to purchase all or a portion of the
Partnership Interest of the Defaulting Limited Partner. If the General Partner
does not elect to purchase the entire Partnership Interest of the Defaulting
Limited Partner before the expiration of the Option Period and in the manner
provided herein, the portion of the Partnership Interest not purchased shall be
held by the Defaulting Limited Partner pursuant to the terms of this Agreement.
The General Partner, in its sole discretion, may elect to assign its rights to
purchase the Partnership Interest of a Defaulting Limited Partner under this
Section 17.3 to the Partnership and, in such case, the Partnership shall have
the same rights as provided for the General Partner under this Section 17.3.
17.4 Domestic Proceeding.
In the event that a spouse of a Limited Partner commences
against a Limited Partner, or a Limited Partner is named in, a Domestic
Proceeding, the Limited Partner shall give written notice (the "Notice of
Domestic Proceeding") to the General Partner of the commencement of any such
proceeding within five days of the first notice to him of such commencement. The
General Partner shall have the option to purchase at the Closing (as defined
below) the Partnership Interest of the Limited
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Partner involved in the Domestic Proceeding (which Limited Partner shall then
become obligated to sell such Partnership Interest), at the price determined in
the manner provided in Article 17.8 of this Agreement and on the terms and
conditions provided in Article 17.9 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date of either the Notice of
Domestic Proceeding or if such formal notice is not given, the date the General
Partner is first aware of the domestic circumstances of the Limited Partner as
provided in this Article 17.4 (the "Option Period"), within which to notify in
writing the Limited Partner involved in the Domestic Proceeding, whether the
General Partner wishes to purchase all or a portion of the Partnership Interest
of such Limited Partner. If the General Partner does not elect to purchase the
Partnership Interest of the Limited Partner involved in the Domestic Proceeding
before the expiration of the Option Period and in the manner provided herein,
the portion of the Partnership Interest not purchased shall be held by such
Limited Partner pursuant to the terms of this Agreement. The General Partner, in
its sole discretion, may elect to assign its rights to purchase the Partnership
Interest of the Limited Partner involved in the Domestic Proceeding under this
Section 17.4 to the Partnership and, in such case, the Partnership shall have
the same rights as provided for the General Partner under this Section 17.4.
17.5 Divestiture Option.
If state or federal regulations or laws are enacted or
applied, or if any other legal developments occur, which, in the opinion of the
General Partner adversely affect (or potentially adversely affect) the operation
of the Partnership (e.g., the enactment or application of prohibitory physician
self-referral legislation against the Partnership or its Partners), the General
Partner shall promptly either, in its discretion, (i) take the steps outlined in
this Article 17.5 to divest the Limited Partners of their Partnership Interests,
or (ii) dissolve the Partnership as provided in Article 23.1(e). If the General
Partner chooses option (i), it shall deliver a written notice to all of the
Limited Partners (the "Notice of Election") and purchase such Partnership
Interests for its own account. The purchase price to be paid for each
Partnership Interest shall be determined in the manner as provided in Article
17.8 and shall be on the terms and conditions as provided in Article 17.9. The
transfer of the Partnership Interests and the payment of the purchase price (as
provided in Article 17.8) shall be made at such time as determined by the
General Partner to be in the best interests of the Partnership and its Limited
Partners. Each Limited Partner hereby makes, constitutes and appoints the
General Partner, with full power of substitution, his true and lawful
attorney-in-fact, to take such actions and execute such documents on his behalf
to effect the transfer of his Partnership Interest as provided in this Article
17.5.
17.6 Dissolution of Carolina Lithotripsy.
Upon the voluntary or involuntary dissolution of Carolina
Lithotripsy, Carolina Lithotripsy's general partner or, if there is none, a
representative of its limited partners shall give written notice of the fact
(the "Notice of Dissolution") to the General Partner. The General Partner shall
have the option to purchase at the Closing (as defined below) the Partnership
Interest of Carolina Lithotripsy (whose general partner or other representative
shall then become obligated to sell such Partnership Interest) at the price
determined in the manner provided in Article 17.8 of this Agreement and on the
terms and conditions provided in Article 17.9 of this Agreement. The General
Partner shall have a period of thirty (30) days following the date of either the
Notice of Dissolution of Carolina Lithotripsy or if such formal notice is not
given, the date the General Partner is first aware of the dissolution (the
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"Option Period"), within which to notify in writing Carolina Lithotripsy's
general partner or other representative, whether the General Partner wishes to
purchase all or a portion of the Partnership Interest of Carolina Lithotripsy.
If the General Partner does not elect to purchase the entire Partnership
Interest of Carolina Lithotripsy before the expiration of the Option Period and
in the manner provided herein, the portion of the Partnership Interest not
purchased shall be held by the successors in interest to Carolina Lithotripsy
upon dissolution pursuant to the terms of this Agreement. The General Partner,
in its sole discretion, may elect to assign its rights to purchase the
Partnership Interest of Carolina Lithotripsy under this Section 17.6 to the
Partnership and, in such case, the Partnership shall have the same rights as
provided for the General Partner under this Section 17.6.
17.7 Regulatory Action Regarding Carolina Lithotripsy.
In the event Carolina Lithotripsy is conclusively determined
by a court of competent jurisdiction or state or federal authority to have
violated any law or regulation, and such action is determined by the General
Partner to effect the Partnership's participation under the Medicare or Medicaid
programs, or otherwise adversely effects the material interests of the
Partnership, the General Partner may elect to treat such action as a defaulting
event by Carolina Lithotripsy (the "Defaulting Event"). If the General Partner
elects to enforce the provisions of this Article 17.7, the General Partner shall
give written notice of such election (the "Default Notice") to Carolina
Lithotripsy within ninety days of the date the General Partner first received
notice of the Defaulting Event. Upon giving the Default Notice, the General
Partner shall have the option to purchase at the Closing (as defined below) the
Partnership Interest of Carolina Lithotripsy (in which event Carolina
Lithotripsy's general partner or other representative, as the case may be, shall
then become obligated to sell such Partnership Interest) at the price determined
in the manner provided in Article 17.8 of this Agreement and on the terms and
conditions provided in Article 17.9 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date of the Default Notice (the
"Option Period") within which to notify Carolina Lithotripsy in writing whether
the General Partner wishes to purchase all or a portion of the Partnership
Interest of Carolina Lithotripsy. If the General Partner does not elect to
purchase the entire Partnership Interest of Carolina Lithotripsy before the
expiration of the Option Period and in the manner provided herein, the portion
of the Partnership Interest not purchased shall be held by Carolina Lithotripsy
pursuant to the terms of this Agreement. The General Partner, in its sole
discretion, may elect to assign its rights to purchase the Partnership Interest
of Carolina Lithotripsy under this Section 17.7 to the Partnership and, in such
case, the Partnership shall have the same rights as provided for the General
Partner under Section 17.7.
17.8 Purchase Price.
The purchase price to be paid for the Partnership Interest of
any Limited Partner whose interest is being purchased pursuant to the provisions
of Articles 17.1, 17.2, 17.3, 17.4, 17.5, 17.6 or 17.7 (the "Retiring Limited
Partner") shall be an amount equal to the Retiring Limited Partner's share of
the Partnership's book value, if any, (prorated in the event that only a portion
of his Partnership Interest is being purchased) as reflected by the Capital
Account of the Retiring Limited Partner (unadjusted for any appreciation in
Partnership assets and as reduced by depreciation deductions claimed by the
Partnership for tax purposes). The determination of the Retiring Limited
Partner's Capital Account on the Valuation Date (as defined below) shall be made
by the Partnership's internal accountant (the "Partnership
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Accountant") upon a review of the Partnership books of account, and a formal
audit is expressly waived. The statement of the Partnership Accountant with
respect to the Capital Account of the Retiring Limited Partner on the Valuation
Date shall be binding and conclusive upon the Partnership, the purchaser and the
Retiring Limited Partner and his representative. The Valuation Date shall be the
last day of the month immediately preceding the month in which occurs: (i) the
death of a Limited Partner, in the case of a purchase by reason of death; (ii)
the bankruptcy or insolvency of a Limited Partner, in the case of a purchase by
reason of such bankruptcy or insolvency; (iii) the Notice of Withdrawal or
breach of Article 14.3 as provided in Article 17.3 in the case of a purchase by
reason thereof; (iv) the commencement of the Domestic Proceeding, in the case of
a purchase by reason thereof; (v) the Notice of Election as provided in Article
17.5; (vi) the date of dissolution as provided in Article 17.6; or (vii) the
Default Notice as provided in Article 17.7, in the case of a purchase by reason
thereof. Any Limited Partner whose Partnership Interest is purchased pursuant to
the provisions of Article 17.1, 17.2, 17.3, 17.4, 17.5, 17.6 or 17.7 shall be
entitled only to the purchase price which shall be paid at the Closing in cash
(or by certified or cashier's check) and shall not be entitled to any
Partnership distributions made after the Valuation Date. The transfer of a
Partnership Interest of a Retiring Limited Partner shall be deemed to occur as
of the Valuation Date and the Retiring Limited Partner shall have no voting or
other rights as a Limited Partner after such date. The purchaser shall be
entitled to any distributions attributable to the transferred interest after the
Valuation Date and shall have the right to deduct the amount of any such
distributions made to the Retiring Limited Partner after the Valuation Date from
the purchase price.
17.9 Closing.
17.9.1 Closing of Purchase and Sale. The Closing of any
purchase and sale of a Partnership Interest pursuant to Article 17.1,
17.2, 17.3, 17.4, 17.5, 17.6 or 17.7 of this Agreement shall take place
at the principal office of the Partnership, or such other place
designated by the General Partner, on the date determined as follows
(the "Closing"):
(a) In the case of a purchase and sale occurring by reason of
the death of a Limited Partner as provided in Article 17.1 of this
Agreement, the Closing shall be held on the thirtieth day (or if such
thirtieth day is not a business day, the next business day following
the thirtieth day) next following the last to occur of:
(i) Qualification of the executor or personal
administrator of the deceased Limited Partner's estate;
(ii) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made; or
(iii) The date that coincides with the close of the
Option Period.
(b) In the case of a purchase and sale occurring by reason of
the occurrence of one of the events described in Article 17.2, 17.3,
17.4, 17.5, 17.6 or 17.7 of this
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Agreement, the Closing shall be held on the thirtieth day (or if such
thirtieth day is not a business day, the next business day following
the thirtieth day) next following the later to occur of:
(i) The date on which any necessary determination of
the purchase price of the Partnership Interest to be purchased
has been made; or
(ii) The date that coincides with the close of the
Option Period.
At the Closing, although not necessary to effect the transfer, the
Retiring Limited Partner shall concurrently with tender and receipt of
the applicable purchase price, deliver to the purchaser duly executed
instruments of transfer and assignment, assigning good and marketable
title to the portion or portions of the Retiring Limited Partner's
entire Partnership Interest thus purchased, free and clear from any
liens or encumbrances or rights of others therein. The parties
acknowledge that occurrence of any of the triggering events described
in Article 17.1, 17.2, 17.3, 17.4, 17.5, 17.6 or 17.7 and compliance
with all the Articles of this Agreement, except the execution of the
transfer documents by the Retiring Partner as provided above in this
Article 17.9.1, are sufficient to effect the complete transfer of the
Retiring Limited Partner's interest and the Retiring Limited Partner
shall be deemed to consent to admission of the transferee as a
substitute Limited Partner. Notwithstanding the date of the Closing or
whether a Closing is successfully held, the transfer of a Partnership
Interest of a Retiring Limited Partner shall be deemed to occur as of
the Valuation Date as defined in Article 17.8. The deemed transfer is
effective regardless of whether the Retiring Limited Partner performs
the duties set forth in this Article 17.9.1.
17.9.2 Terms and Conditions of Purchase. The Partnership
Interest of a Limited Partner shall not be transferred to any Partner
unless the requirements of Articles 16.2 and 16.4 (b) through (f) are
satisfied with respect to it. The purchaser shall be liable for all
obligations and liabilities connected with that portion of the
Partnership Interest transferred to it unless otherwise agreed in
writing.
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18. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
PARTNER'S INTEREST.
18.1 The General Partner may not mortgage, pledge,
hypothecate, transfer, sell, assign or otherwise dispose of all or any part of
its interest in the Partnership, whether voluntarily, by operation of law or
otherwise (the foregoing actions being hereafter collectively referred to as
"Transfers" or singularly as a "Transfer") except as permitted by this Article.
18.2 If the General Partner makes a Transfer (other than a
mortgage, pledge or hypothecation) of its general partner interest in the
Partnership pursuant to this Article, it shall be liable for all obligations and
liabilities incurred by it as the General Partner of the Partnership on or
before the effective date of such Transfer, but shall not be liable for any
obligations or liabilities of the Partnership arising after the effective date
of the Transfer.
18.3 No Transfer by the General Partner shall be permitted
unless:
(a) Counsel for the Partnership shall have rendered an opinion
that none of the actions taken in connection with such Transfer will
cause the Partnership to be classified other than as a partnership for
Federal income tax purpose or will cause the termination or dissolution
of the Partnership under state law; and
(b) Such documents or instruments, in form and substance
satisfactory to counsel for the Partnership, shall have been executed
and delivered as may be required in the opinion of counsel for the
Partnership to effect fully any such Transfer.
Notwithstanding the foregoing provisions of this Article 18.3,
the General Partner may pledge its interest in the Partnership to any bank,
insurance company or other financial institution to secure payment of
indebtedness.
19. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER.
The General Partner shall be removed and another designated
and substituted upon (i) the election and consent of a Majority in Interest of
the Limited Partners upon the General Partner being adjudged by a court of
competent jurisdiction to be liable to the Limited Partners or the Partnership
for any act of gross negligence or willful misconduct in the performance of its
duties under the terms of this Agreement, or (ii) the election and consent of
the Limited Partners representing 80% of the aggregate limited partner interests
in the Partnership. Such consent shall be evidenced by a certificate of removal
signed by the Limited Partners constituting the requisite percentage of
partnership interests necessary for removal under either proviso (i) or (ii) of
the preceding sentence. In the event of removal, the new general partner shall
succeed to all of the powers, privileges and obligations of the General Partner,
and the General Partner's interest in the Partnership shall become that of a
Limited Partner, and the General Partner shall maintain its same Percentage
Interest in the Partnership notwithstanding anything contained in the Act to the
contrary. In addition, in the event of removal, the new general partner shall
take all steps necessary and appropriate to prepare and record an amendment to
the Certificate of Limited Partnership to reflect the removal of the General
Partner and the admission of such new general partner.
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20. MANAGEMENT AND OPERATION OF BUSINESS.
20.1 All decisions with respect to the management of the
business and affairs of the Partnership shall be made by the General Partner.
20.2 The General Partner shall be under no duty to devote all
of its time to the business of the Partnership, but shall devote only such time
as it deems necessary to conduct the Partnership business and to operate and
manage the Partnership in an efficient manner.
20.3 The General Partner may charge to the Partnership all
ordinary and necessary costs and expenses, direct and indirect, attributable to
the activities, conduct and management of the business of the Partnership. The
costs and expenses to be borne by the Partnership shall include, but are not
limited to, all expenditures incurred in acquiring and financing the Equipment
or other Partnership property, legal and accounting fees and expenses, salaries
of employees of the Partnership, consulting and quality assurance fees paid to
independent contractors, insurance premiums and interest.
20.4 In addition to, and not in limitation of, any rights and
powers covenanted by law or other provisions of this agreement, and except as
limited, restricted or prohibited by the express provisions of this Agreement,
the General Partner shall have and may exercise on behalf of the Partnership all
powers and rights necessary, proper, convenient or advisable to effectuate and
carry out the purposes, business and objectives of the Partnership. Such powers
shall include, without limitation, the following:
(a) To acquire the initial Prostatron(R) Mobile System;
(b) To exercise the option of the General Partner or the
Partnership to purchase a Limited Partner's Partnership Interest
pursuant to Article 17;
(c) To determine the travel itinerary and site locations for
the Prostatron(R) Mobile System or other Partnership technology;
(d) To borrow money for any Partnership purpose (including the
acquisition of the Additional Assets) and, if security is required
therefor, to subject to any security device any portion of the property
for the Partnership, to obtain replacements of any other security
device, to prepay, in whole or in part, refinance, increase, modify,
consolidate or extend any encumbrance or other security device;
(e) To deposit, withdraw, invest, pay, retain (including the
establishment of reserves in order to acquire the Additional Assets)
and distribute the Partnership's funds in any manner consistent with
the provisions of this Agreement;
(f) To institute and defend actions at law or in equity;
(g) To enter into and carry out contracts and agreements and
any or all documents and instruments and to do any and all such other
things as may be in
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furtherance of Partnership purposes or necessary or appropriate to the
conduct of the Partnership activities;
(h) To execute, acknowledge and deliver any and all
instruments which may be deemed necessary or convenient to effect the
foregoing; and
(i) To engage or retain one or more persons to perform acts or
provide materials as may be required by the Partnership, at the
Partnership's expense, and to compensate such person or persons at a
rate to be set by the General Partner, provided that the compensation
is at the then prevailing rate for the type of services and materials
provided, or both. Any person, whether a Partner, an Affiliate of a
Partner or otherwise, including without limitation the General Partner,
may be employed or engaged by the Partnership to render services and
provide materials, including, but not limited to, management services,
professional services, accounting services, quality assessment
services, legal services, marketing services, maintenance services or
provide materials; and if such person is a Partner or an Affiliate of a
Partner, he shall be entitled to, and shall be paid compensation for
said services or materials, anything in this Agreement to the contrary
notwithstanding, provided that the compensation to be received for such
services or materials is competitive in price and terms with then
prevailing rate for the type of services and/or materials provided. The
Partnership, pursuant to the terms of a Management Agreement, will
contract with Lithotripters, Inc., a North Carolina corporation and an
Affiliate of the General Partner, with respect to the supervision and
coordination of the management and administration of the day-to-day
operations of the Prostatron(R) Mobile System for a monthly fee equal
to the greater of 7.5% of Partnership Cash Flow per month or $8,000 per
month. All costs incurred by Lithotripters, Inc. in performing its
duties as management agent shall be paid by the Partnership directly.
The Partnership may also contract with qualified physicians desiring to
use the Prostatron(R) Mobile System for the treatment of patients.
Owning an interest in the Partnership shall not be a condition to using
the Prostatron(R) Mobile System. The General Partner and its Affiliates
may engage in or possess an interest in other business ventures of any
nature and description independently or with others, including, but not
limited to, the operation of a mobile benign prostatic hyperplasia
treatment unit similar to the Prostatron(R) Mobile System, whether or
not such business ventures are in direct or indirect competition with
the Partnership, and neither the Partnership nor the Partners shall
have any right by virtue of this Agreement in and to said independent
ventures or to the income or profits derived therefrom.
20.5 Notwithstanding the provisions of Article 20.4 above, the
General Partner shall have the authority to take the following actions only if
it first receives the prior written consent of a Majority in Interest of the
Limited Partners:
(a) Offer and sell additional limited partnership interests in
the Partnership pursuant to a Dilution Offering as described in Article
7.4 hereof;
(b) Institute and carry out any plan providing for the merger,
consolidation or sale of Partnership Interests or any other actions
outlined in Article 16.7 hereof;
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(c) Voluntarily dissolve the Partnership as provided in
Article 23 hereof;
(d) Acquire (i) additional Prostatron(R) Mobile Systems, (ii)
any other assets related to the provision of benign prostatic
hyperplasia treatment services, or (iii) any other assets or equipment
or an interest in another entity consistent with the purposes of the
Partnership as provided in Article 4 (collectively, the "Additional
Assets") other than in the ordinary course of business; or
(e) Purchase, hold, manage, lease, license and dispose of
Partnership assets (including the Prostatron(R) Mobile System), other
than in the ordinary course of business.
20.6 Notwithstanding the provisions of Articles 20.4 and 20.5,
and in addition to other acts expressly prohibited or restricted by this
Agreement or by law, the General Partner shall have no authority to act on
behalf of the Partnership in:
(a) Doing any act in contravention of this Agreement or the
Partnership's Certificate of Limited Partnership;
(b) Doing any act which would make it impossible to carry on
the ordinary business of the Partnership;
(c) Confessing a judgment against the Partnership in
connection with any threatened or pending legal action;
(d) Possessing or in any manner dealing with the Partnership's
property or assigning the rights of the Partnership in the
Partnership's property for other than Partnership purposes;
(e) Admitting a person as a Limited Partner or a General
Partner except as provided in this Agreement; or
(f) Performing any act (other than an act required by this
Agreement or any act taken in good faith reliance upon counsel's
opinion) which would, at the time such act occurred, subject any
Limited Partner to liability as a general partner in any jurisdiction.
21. RESERVES.
Subject to the consent requirements of Article 20.5, the
General Partner may cause the Partnership to create a reserve account to be used
exclusively for repairs and acquisition of Additional Assets and for any other
valid Partnership purpose. The Partners, in accordance with the provisions of
Article 20.5(d), shall determine the amount of payments to such reserve.
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22. INDEMNIFICATION AND EXCULPATION OF THE GENERAL PARTNER.
22.1 The General Partner is accountable to the Partnership as
a fiduciary and consequently must exercise good faith and integrity in handling
Partnership affairs. This is a rapidly developing and changing area of the law
and Limited Partners who have questions concerning the duties of the General
Partner should consult with their counsel. The General Partner and its
Affiliates shall have no liability to the Partnership which arises out of any
action or inaction of the General Partner or its Affiliates if the General
Partner or its Affiliates, in good faith, determined that such course of conduct
was in the best interest of the Partnership and such course of conduct did not
constitute gross negligence or willful misconduct of the General Partner or its
Affiliates. The General Partner and its Affiliates shall be indemnified by the
Partnership against any losses, judgments, liabilities, expenses and amounts
paid in settlement of any claims sustained by them in connection with the
Partnership, provided that the same were not the result of gross negligence or
willful misconduct on the part of the General Partner or its Affiliates.
22.2 The General Partner shall not be liable for the return of
the Capital Contributions of the Limited Partners, and upon dissolution, Limited
Partners shall look solely to the assets of the Partnership.
23. DISSOLUTION OF THE PARTNERSHIP.
23.1 The Partnership shall be dissolved and terminated and its
business wound up upon the occurrence of any one of the following events:
(a) The expiration of its term on June 30, 2047;
(b) The filing by, on behalf of, or against the General
Partner of any petition or pleading, voluntary or involuntary, to
declare the General Partner bankrupt under any bankruptcy law or act,
or the commencement in any court of any proceeding, voluntary or
involuntary, to declare the General Partner insolvent or unable to pay
its debts, or the appointment by any court or supervisory authority of
a receiver, trustee or other custodian of the property, assets or
business of the General Partner or the assignment by it of all or any
part of its property or assets for the benefit of creditors, if said
action, proceeding or appointment is not dismissed, vacated or
otherwise terminated within ninety (90) days of its commencement;
(c) The determination of the Partners in accordance with
Article 20.5(c) that the Partnership should be dissolved;
(d) The approval of a plan by the Partners, in accordance with
Article 20.5(b), providing for the merger, consolidation or sale of
Partnership Interests or other action as described in Article 16.7.
(e) The election of the General Partner to dissolve the
Partnership following the occurrence of an event described in Article
17.5;
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(f) The sale, exchange or other disposition of all or
substantially all of the property of the Partnership without making
provision for the replacement thereof; and
(g) The dissolution, retirement, resignation, death,
disability or legal incapacity of a general partner, and any other
event resulting in the dissolution or termination of the Partnership
under the laws of the State of North Carolina.
23.2 Notwithstanding the provisions of Article 23.1, the
Partnership shall not be dissolved and terminated upon the retirement,
resignation, bankruptcy, assignment for the benefit of creditors, dissolution,
death, disability or legal incapacity of a general partner, and its business
shall continue pursuant to the terms and conditions of this Agreement, if any
general partner or general partners remain following such event; provided that
such remaining general partner or general partners are hereby obligated to
continue the business of the Partnership. If no general partner remains after
the occurrence of such event, the business of the Partnership shall continue
pursuant to the terms and conditions of this Agreement, if, within ninety (90)
days after the occurrence of such event, a Majority in Interest of the Limited
Partners agree in writing to continue the business of the Partnership, and, if
necessary, to the appointment of one or more persons or entities to be
substituted as the general partner. In the event the Limited Partners agree to
continue the business of the Partnership, the new general partner or general
partners shall succeed to all of the powers, privileges and obligations of the
General Partner, and the General Partner's interest in the Partnership shall
become a Limited Partner's interest hereunder. Furthermore, in the event a
remaining general partner or the Limited Partners, as the case may be, agree to
continue the business of the Partnership as provided herein, the remaining
general partner or the newly appointed general partner or general partners, as
the case may be, shall take all steps necessary and appropriate to prepare and
record an amendment to the Certificate of Limited Partnership to reflect the
continuation of the business of the Partnership and the admission of a new
general partner or general partners, if any.
24. DISTRIBUTION UPON DISSOLUTION.
Upon the dissolution and termination of the Partnership, the
General Partner or, if there is none, a representative of the Limited Partners,
shall cause the cancellation of the Partnership's Certificate of Limited
Partnership, shall liquidate the assets of the Partnership, and shall apply and
distribute the proceeds of such liquidation in the following order of priority:
(a) First, to the payment of the debts and liabilities of the
Partnership, and the expenses of liquidation;
(b) Second, to the creation of any reserves which the General
Partner (or the representatives of the Limited Partners) may deem
reasonably necessary for the payment of any contingent or unforeseen
liabilities or obligations of the Partnership or of the General Partner
arising out of or in connection with the business and operation of the
Partnership; and
(c) Third, the balance, if any, shall be distributed to the
Partners in accordance with the Partners' positive Capital Account
balances after such capital accounts are adjusted as provided by
Article 13, and any other adjustments required by
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the Final Treasury Regulations under Section 704(b) of the Code. Any
general partner with a negative Capital Account following the
distribution of liquidation proceeds or the liquidation of its interest
must contribute to the Partnership an amount equal to such negative
Capital Account on or before the end of the Partnership's taxable year
(or, if later, within ninety days after the date of liquidation). Any
capital so contributed shall be (i) distributed to those Partners with
positive Capital Accounts until such Capital Accounts are reduced to
zero, and/or (ii) used to discharge recourse liabilities.
25. BOOKS OF ACCOUNT, RECORDS AND REPORTS.
25.1 Proper and complete records and books of account shall be
kept by the General Partner in which shall be entered fully and accurately all
transactions and such other matters relating to the Partnership's business as
are usually entered into records and books of account maintained by persons
engaged in businesses of a like character. The books and records of the
Partnership shall be prepared according to the accounting method determined by
the General Partner. The Partnership's fiscal year shall be the calendar year.
The books and records shall at all times be maintained at the Partnership's
Records Office and shall be open to the reasonable inspection and examination of
the Partners or their duly authorized representatives during reasonable business
hours.
25.2 Within ninety (90) days after the end of each Year, the
General Partner shall send to each person who was a Limited Partner at any time
during such year such tax information, including, without limitation, Federal
tax Schedule K-1, as shall be reasonably necessary for the preparation by such
person of his Federal income tax return. The General Partner will also make
available to the Limited Partners any other information required by the Act.
25.3 The General Partner shall maintain at the Partnership's
Records Office copies of the Partnership's original Certificate of Limited
Partnership and any certificate of amendment, restated certificate or
certificate of cancellation with respect thereto and such other documents as the
Act shall require. The General Partner will furnish to any Limited Partner upon
request a copy of the Partnership's original Certificate of Limited Partnership
and any certificate of amendment, restated certificate, or certificate of
cancellation, if any.
25.4 The General Partner shall, in its sole discretion, make
for the Partnership any and all elections for federal, state and local tax
purposes including, without limitation, any election, if permitted by applicable
law, to adjust the basis of the Partnership's property pursuant to Code Sections
754, 734(b) and 743(b), or comparable provisions of state or local law, in
connection with transfers of interests in the Partnership and Partnership
Distributions.
25.5 The General Partner is designated as the Tax Matters
Partner (as defined in Section 6231 of the Code) and to act in any similar
capacity under state or local law, and is authorized (at the Partnership's
expense): (i) to represent the Partnership and Partners before taxing
authorities or courts of competent jurisdiction in tax matters affecting the
Partnership or Partners in their capacity as Partners; (ii) to extend the
statute of limitations for assessment of tax deficiencies against Partners with
respect to adjustments to the Partnership's federal, state or local tax returns;
(iii) to execute any agreements or other documents relating to or affecting such
tax matters, including agreements or other documents that bind the Partners with
respect to such tax matters or otherwise affect the rights of the
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Partnership and Partners; and (iv) to expend Partnership funds for professional
services and costs associated therewith. The General partner is authorized and
required to notify the federal, state or local tax authorities of the
appointment of a Tax Matters Partner in the manner provided in Treasury
Regulations Section 301.6231(a)(7)-IT, as modified from time to time. In its
capacity as Tax Matters Partner, the General Partner shall oversee the
Partnership tax affairs in the manner which, in its best judgment, are in the
interests of the Partners.
26. NOTICES.
All notices under this Agreement shall be in writing and shall
be deemed to have been given when delivered personally, or mailed by certified
or registered mail, postage prepaid, return receipt requested. Notices to the
General Partner shall be delivered at, or mailed to, its principal office.
Notices to the Partnership shall be delivered at, or mailed to, its principal
office with a copy to each of its business offices. Notice to a Limited Partner
shall be delivered to such Limited Partner, or mailed to the last address
furnished by him for such purposes to the General Partner. Limited Partners
shall give notice of a change of address to the General Partner in the manner
provided in this Article.
27. AMENDMENTS.
Subject to the provisions of Article 28, this Agreement is
subject to amendment only by written consent of the General Partner and a
Majority in Interest of the Limited Partners; provided, however, the consent of
the Limited Partners shall not be required if such amendments are ministerial in
nature and do not contravene the provisions of Article 28.
28. LIMITATIONS ON AMENDMENTS.
Notwithstanding the provisions of Article 27, no amendment to
this Agreement shall:
(a) Enlarge the obligations of any Partner under this
Agreement or convert the interest in the Partnership of any Limited
Partner into the interest of a general partner or modify the limited
liability of any Limited Partner, without the consent of such Partner;
(b) Amend the provisions of Article 11, 12, 13 or 24 without
the approval of the General Partner and a Majority in Interest of the
Limited Partners; provided, however, that the General Partner may at
any time amend such Articles without the consent of the Limited
Partners in order to permit the Partnership allocations to be sustained
for Federal income tax purposes, but only if such amendments do not
materially affect adversely the rights and obligations of the Limited
Partners, in which case such amendments may only be made as provided in
this Article 28(b); or
(c) Amend this Article 28 without the consent of all Partners.
-30-
<PAGE>
29. MEETINGS, CONSENTS AND VOTING.
29.1 A meeting of the Partnership to consider any matter with
respect to which the Partners may vote as set forth in this Agreement may be
called by the General Partner or by Limited Partners who hold more than
twenty-five percent (25%) of the aggregate interests in the Partnership held by
all the Limited Partners. Upon receipt of a notice requesting a meeting by such
Partner or Partners and stating the purpose of the meeting, the General Partner
shall, within ten (10) days thereafter, give notice to the Partners of a meeting
of the Partnership to be held at a time and place convenient to the Limited
Partners on a date not earlier than fifteen (15) days after receipt by the
General Partner of the notice requesting a meeting. The notice of the meeting
shall set forth the time, date, location and purpose of the meeting.
29.2 Any consent of a Partner required by this Agreement may
be given as follows:
(a) By a written consent given by the consenting Partner and
received by the General Partner at or prior to the doing of the act or
thing for which the consent is solicited, or
(b) By the affirmative vote by the consenting Partner to the
doing of the act or thing for which the consent is solicited at any
meeting called pursuant to this Article to consider the doing of such
act or thing.
29.3 When exercising voting rights expressly granted under the
Articles of this Agreement, each Partner shall have that number of votes as is
equal to the Percentage Interest of such Partner at the time of the vote,
multiplied by 100.
30. SUBMISSIONS TO THE LIMITED PARTNERS.
The General Partner shall give the Limited Partners notice of
any proposal or other matter required by any provision of this Agreement or by
law to be submitted for consideration and approval of the Limited Partners. Such
notice shall include any information required by the relevant provision or by
law.
31. ADDITIONAL DOCUMENTS.
Each party hereto agrees to execute and acknowledge all
documents and writings which the General Partner may deem necessary or expedient
in the creation of this Partnership and the achievement of its purpose.
32. SURVIVAL OF RIGHTS.
Except as herein otherwise provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their successor and assigns.
-31-
<PAGE>
33. INTERPRETATION AND GOVERNING LAW.
When the context in which words are used in this Agreement
indicates that such is the intent, words in the singular number shall include
the plural and vise versa; in addition, the masculine gender shall include the
feminine and neuter counterparts. The Article headings or titles and the table
of contents shall not define, limit, extend or interpret the scope of this
Agreement or any particular Article. This Agreement shall be governed and
construed in accordance with the laws of the State of North Carolina without
giving effect to the conflicts of laws provisions thereof.
34. SEVERABILITY.
If any provision, sentence, phrase or word of this Agreement
or the application thereof to any person or circumstance shall be held invalid,
the remainder of this Agreement, or the application of such provision, sentence,
phrase, or word to persons or circumstances, other than those as to which it is
held invalid, shall not be affected thereby.
35. AGREEMENT IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument. In addition, this Agreement may contain more than one
counterpart of the signature page and this Agreement may be executed by the
affixing of the signatures of each of the Partners to one of such counterpart
signature pages; all of such signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.
36. THIRD PARTIES.
The agreements, covenants and representations contained herein
are for the benefit of the parties hereto inter se and are not for the benefit
of any third parties including, without limitation, any creditors of the
Partnership.
37. POWER OF ATTORNEY.
Each Limited Partner hereby makes, constitutes and appoints
Dr. Joseph Jenkins and Dr. Dan A. Myers, severally, with full power of
substitution, his true and lawful attorneys-in-fact, for him and in his name,
place and stead and for his use and benefit to sign and acknowledge, file and
record, any amendments hereto among the Partners for the further purpose of
executing and filing on behalf of each Limited Partner, any and all certificates
of limited partnership or other documents necessary to constitute the
Partnership or to effect the continuation of the Partnership, the admission or
withdrawal of a general partner or a limited partner, the qualification of the
Partnership in a foreign jurisdiction (or amendment to such qualification), the
admission of substitute Limited Partners or the dissolution or termination of
the Partnership, provided such continuation, admission, withdrawal,
qualification, or dissolution and termination are in accordance with the terms
of this Agreement.
The foregoing power of attorney is a special power of attorney
coupled with an interest, is irrevocable and shall survive the death or legal
incapacity of each Limited Partner. It may be exercised
-32-
<PAGE>
by any one of said attorneys by listing all of the Limited Partners executing
any instrument over the signature of the attorney-in-fact acting for all of
them. The power of attorney shall survive the delivery of an assignment by a
Limited Partner of the whole or any portion of his Unit. In those cases in which
the assignee of, or the successor to, a Limited Partner owning a Unit has been
approved by the Partners for admission to the Partnership as a substitute
Limited Partner, the power of attorney shall survive for the sole purpose of
enabling the General Partner to execute, acknowledge and file any instrument
necessary to effect such substitution.
This power of attorney shall not be affected by the subsequent
incapacity or mental incompetence of any Limited Partner.
38. ARBITRATION.
Any dispute arising out of or in connection with this
Agreement or the breach thereof shall be decided by arbitration in Raleigh,
North Carolina in accordance with the then effective commercial arbitration
rules of the American Arbitration Association, and judgment thereof may be
entered in any court having jurisdiction thereof.
39. CREDITORS.
None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Partnership.
-33-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
of Limited Partnership as of the day and year first above written.
GENERAL PARTNER:
PROSTATHERAPIES, INC., a Delaware corporation
By: /s/ Dan A. Myers
--------------------
Dan A. Myers, M.D., President
ATTEST:
Philip J. Gallina
- ------------------- [CORPORATE SEAL]
Secretary
INITIAL LIMITED PARTNER:
/s/ Dan A. Myers
---------------------------------------
Dan A. Myers, M.D.
STATE OF NORTH CAROLINA )
)
COUNTY OF CUMBERLAND )
On this 14th day of August, 1997, before me, the
undersigned Notary Public in and for the County of Cumberland in the State of
North Carolina, personally came Dan A. Myers, M.D., who, being by me duly sworn,
said that he is President of Prostatherapies, Inc., the sole general partner of
North Carolina Prostatherapy Limited Partnership I, that the seal affixed to the
foregoing instrument in writing is the corporate seal of the corporation, and
that said writing was signed, sworn to, and sealed by him in behalf of said
corporation by its authority duly given. And the said Dan A. Myers, M.D.,
further certified that the facts set forth in said writing are true and correct,
and acknowledged said instrument to be the act and deed of said corporation.
WITNESS my hand and notarial seal.
/s/ Ricarda Kelly
------------------------------------------
Notary Public
My commission expires:
January 8, 2002
- ---------------------------
-34-
<PAGE>
STATE OF NORTH CAROLINA )
)
COUNTY OF CUMBERLAND )
I, Ricarda Kelly, a notary public, do hereby
certify that Dan A. Myers, M.D. personally appeared before me this 14th day of
August, 1997 and acknowledged and swore to the due execution of the foregoing
Limited Partnership Agreement in his capacity as the initial limited partner.
/s/ Ricarda Kelly
-------------------------------------------
Notary Public
My commission expires:
January 8, 2002
- ---------------------------
-35-
<PAGE>
COUNTERPART SIGNATURE PAGE
By signing this Counterpart Signature Page, the undersigned
acknowledges his or her acceptance of that certain Agreement of Limited
Partnership of North Carolina Prostatherapy Limited Partnership I, and his or
her intention to be legally bound thereby.
Dated this _________ day of ___________________, 1997.
-------------------------------------------
Signature
-------------------------------------------
Printed Name
STATE OF _______________ )
)
COUNTY OF _____________ )
BEFORE ME, the undersigned Notary Public in and for the State
and County set forth above, on the _______ day of __________________, 1997,
personally appeared ___________________, and, being by me first duly sworn,
stated that (s)he signed this Counterpart Signature Page for the purpose set
forth above and that the statements contained therein are true.
-------------------------------------------
Signature of Notary Public
-------------------------------------------
Printed Name of Notary
My Commission Expires:
- ---------------------------
[SEAL]
-36-
<PAGE>
SCHEDULE A
Schedule of Partnership Interests
NORTH CAROLINA PROSTATHERAPY LIMITED PARTNERSHIP I
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND PERCENTAGE INTERESTS
Cash Percentage
General Partner Contribution Interest
Prostatherapies, Inc. $200,856.25 20%
2008 Litho Place
Fayetteville, NC 28304
Limited Partners
Preston Bradshaw 2,600.00 .250
Carolina Lithotripsy 564,662.50 56.750
Michael Crawford 2,600.00 .250
G. Mark Doyle 7,800.00 .750
Richard Gavigan 5,200.00 .500
Benjamin Hines 5,200.00 .500
Edward Janosko 5,200.00 .500
Clifford Johnson 6500.00 .625
John Kaspar 2,600.00 .250
Art Klose 10,400.00 1.000
John Lasater 10,400.00 1.000
C. Rodney Lenahan 10,400.00 1.000
Robert Lippitt 10,400.00 1.000
Michael Lobos 5,200.00 .500
John Lovett 10,400.00 1.000
Louis Marchetti 10,400.00 1.000
George Mozingo 5,200.00 .500
Gregory Murphy 5,200.00 .500
Richard Mynatt 13,000.00 1.250
Robert Nichols 5,200.00 .500
Prostatherapies, Inc. 67,162.50 6.750
James Rounder 2,600.00 .250
John Seddon 5,200.00 .500
Kasturi Shanker 3,900.00 .375
Bernard Stanfield 2,600.00 .250
Thomas Stewart 10,400.00 1.000
William Turner 5,200.00 .500
David Varney 5,200.00 .500
Edward Whitesides 2,600.00 .250
TOTAL: $ 1,004,281.25 100 %
============== ======
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF PRIME MEDICAL SERVICES, INC.
AS OF MARCH 20, 1998
EXHIBIT 21.1
Name of Subsidiary State of Incorporation
------------------- --------------------
Prime Medical Operating, Inc. Delaware
Prime Management, Inc. Nevada
Prime Cardiac Rehabilitation Services, Inc. Delaware
Prime Diagnostic Services, Inc. Delaware
Prime Lithotripsy Services, Inc. New York
Prime Kidney Stone Treatment, Inc. New Jersey
Prime Diagnostic Corp. of Florida Delaware
Prime Lithotripter Operations, Inc. New York
Prime Practice Management, Inc. New York
Texas Litho, Inc. Delaware
R.R. Litho, Inc. Delaware
Ohio Litho, Inc. Delaware
Alabama Renal Stone Institute, Inc. Alabama
Sun Medical Technologies, Inc. California
Sun Acquisition, Inc. California
Lithotripters, Inc. North Carolina
FastStart, Inc. North Carolina
National Lithotripters Association, Inc. North Carolina
Prostatherapies, Inc Delaware
MedTech Investments, Inc. North Carolina
Executive Medical Enterprises, Inc. Delaware
INDEPENDENT AUDITORS' CONSENT
----------------------------------------------------
We consent to incorporation by reference in the registration statements
(No. 33- 70478) on Form S-8 and (No. 333-12893) on Form S-3 of Prime Medical
Services, Inc. of our report dated February 27, 1998, except Note N, to which
the date is March 27, 1998, relating to the consolidated balance sheets of Prime
Medical Services, Inc. and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1997,
which report appears in the Annual Report on Form 10-K of Prime Medical
Services, Inc. for the year ended December 31, 1997.
/s/ KPMG Peat Marwick, LLP
- --------------------------
Austin, Texas
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1997 Form 10-K and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-mos 12-mos
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 23,770 20,096
<SECURITIES> 0 0
<RECEIVABLES> 19,387 16,346
<ALLOWANCES> 811 335
<INVENTORY> 0 0
<CURRENT-ASSETS> 47,542 40,073
<PP&E> 27,225 22,452
<DEPRECIATION> 7,518 7,122
<TOTAL-ASSETS> 225,826 197,753
<CURRENT-LIABILITIES> 37,383 31,555
<BONDS> 0 0
0 0
0 0
<COMMON> 193 191
<OTHER-SE> 91,871 76,236
<TOTAL-LIABILITY-AND-EQUITY> 225,826 197,753
<SALES> 0 0
<TOTAL-REVENUES> 95,979 72,404
<CGS> 0 0
<TOTAL-COSTS> 33,285 24,799
<OTHER-EXPENSES> 9,911 7,455
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,477 5,977
<INCOME-PRETAX> 20,651 10,957
<INCOME-TAX> 5,795 1,996
<INCOME-CONTINUING> 14,856 8,961
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,856 8,961
<EPS-PRIMARY> 0.77 0.51
<EPS-DILUTED> 0.76 0.49
<FN>
NOTE: Due to the change in computing EPS per FASB No. 128, the tags per the
FDS schedule will correspond to FASB No. 128 as follows:
FDS tag FASB No. 128
EPS - Primary EPS - Basic
EPS - Diluted EPS - Diluted
In addition, the EPS amounts for the year ended December 31, 1996 presented
above have been restated to reflect the changes promulgated by FASB No. 128.
No other amounts for 1996 presented above have been restated.
</FN>
</TABLE>
