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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, 1999
[ ] 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
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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 15, 2000: $140,420,073
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 15, 2000
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Common Stock, $.01 par value 16,398,467
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the Registrant's definitive proxy material for the
2000 annual meeting of shareholders are incorporated by reference into Part III
of the Form 10-K.
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PRIME MEDICAL SERVICES, INC.,
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
PART I
ITEM 1. BUSINESS
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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 65 lithotripters of which 59 are mobile and six are fixed site.
The Company's lithotripters performed approximately 38,000 procedures in the
United States in 1999 through a network of approximately 450 hospitals and
surgery centers in 34 states.
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 160,000 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 1999, the Company completed 13 acquisitions involving
58 lithotripters. Since 1992, the Company has substantially divested its
original non-lithotripsy businesses.
During 1997 the Company acquired a 75% interest in a manufacturing
company which provides manufacturing services, and installation, refurbishment
and repair of major medical equipment for mobile medical services providers. The
primary intention of this acquisition was to provide vertical integration with
the lithotripsy business. However, the non-lithotripsy business of the
manufacturing segment has continued to increase. In addition to manufacturing
services for lithotripsy trailers, the manufacturing segment also provides
manufacturing services for magnetic resonance imaging ("MRI") trailers and
cardiac catheterization lab trailers.
During 1999 the Company completed two acquisitions in the rapidly
growing field of refractive vision correction (RVC). These two acquisitions
included six laser vision correction facilities which performed approximately
19,000 procedures during 1999. These facilities provide laser vision correction
of common refractive vision disorders such as myopia (nearsightedness),
hyperopia (farsightedness) and astigmatism.
There are currently two procedures that use the excimer laser ("laser")
to correct vision disorders: Laser in-situ Keratomileusis ("LASIK") and
Photorefractive Keratectomy ("PRK"). LASIK is an outpatient procedure that
accounts for nearly 90% of laser procedures done today. In LASIK, an ophthalmic
surgeon uses a special knife called a microkeratome to peal back the top layers
of the cornea and ablates the underlying corneal tissue with the laser before
replacing the corneal layer. LASIK has three key advantages over PRK
(photorefractive keratectomy) where the laser is used without creating the
corneal flap: less pain, shorter recovery time, and fewer visual side effects.
Patients' enthusiasm and word-of-mouth referrals for the procedure have been an
important part of LASIK's rapid adoption.
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The Company has three reportable segments: lithotripsy, manufacturing
and RVC. Other operating segments, which do not meet the qualitative thresholds
for reportable segments, include prostatherapy services. See Note N to the
consolidated financial statements for segment disclosures.
Lithotripsy Segment Overview
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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 45 to 64 years of age. During 1999
the Company received approximately 79% of its revenues from the lithotripsy
segment.
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 two basic
types of lithotripsy treatment currently available: electromagnetic and
spark-gap. 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 51
electromagnetic machines and 14 spark-gap machines.
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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.
Manufacturing Segment Overview
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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 $1.1 million, which was paid in February 1999.
Certain members of AK management own the remaining 25% of AK. During 1998 AK
became certified by General Electric Company ("GE") to provide trailers for MRI
equipment, and during 1999 AK became certified by two additional companies to
provide trailers for their equipment. These certifications have resulted in
increased revenues in the manufacturing segment. The Company received
approximately 16 % of its revenues from the manufacturing segment in 1999.
RVC Segment Overview
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During 1999, the Company entered into the RVC field through two
acquisitions. Effective September 1, 1999, the Company acquired a 60% interest
in two refractive surgery centers, owned and operated by Barnet Dulaney Eye
Center, for approximately $8.8 million in cash, a warrant to purchase 29,000
shares of Company common stock and a contingent earn-out obligation to be paid
at the end of the first year of operations after acquisition. Also effective
September 1, 1999, the Company acquired, through a majority owned subsidiary,
60% of the outstanding stock of Horizon Vision Centers, Inc. ("Horizon") for
approximately $10.9 million in cash. Horizon operates four refractive surgery
centers. The Company received approximately 3% of its revenue from the RVC
segment in 1999.
Refractive Disorders
The primary function of the human eye is to focus light. The eye works
much like a camera; light rays enter the eye through the cornea, which provides
most of the focusing power. Light then travels through the lens where it is
fine-tuned to focus properly on the retina. The retina, located at the back of
the eye, acts like the film in the camera, changing light into electric impulses
that are carried by the optic nerve to the brain. To see clearly, light must be
focused precisely on the retina. The amount of refraction required to properly
focus images depends on the curvature of the cornea and the size of the eye. If
the curvature is not correct, the cornea cannot properly focus the light passing
through it onto the retina, and the viewer will see a blurred image. Refractive
disorders, such as myopia, hyperopia and astigmatism, result from an inability
of the cornea and the lens to focus images on the retina properly.
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Laser Vision Correction Procedures
In both PRK and LASIK the physician assesses the corneal correction
required and programs the laser. Using a specially developed algorithm, the
laser's software calculates the optimal number of pulses needed to achieve the
corneal correction. Both PRK and LASIK are performed on an outpatient basis
without general anesthesia, using only topical anesthetic eye drops. The eye
drops eliminate the reflex to blink, while an eyelid holder is inserted to
prevent blinking. The patient reclines in a chair, with his or her eye focused
on a target, and the surgeon positions the patient's cornea for the procedure.
The surgeon uses a foot pedal to apply the laser beam, which emits a rapid
succession of laser pulses. The actual laser treatment takes 15 to 90 seconds to
perform and the entire procedure, from set-up to completion, takes 10 to 15
minutes.
Prostatherapy Segment Overview
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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 three
mobile thermotherapy devices servicing hospitals and surgery centers in eastern
North Carolina and southern California. The Company is monitoring the success of
its thermotherapy operations and may expand such operations in the future. The
Company received approximately 2% of its revenues from the prostatherapy segment
in 1999.
Potential Liabilities-Insurance
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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
$50,000 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.
Government Regulation and Supervision
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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
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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 all of its prostatherapy services
(and the corresponding arrangements between such partnerships and other entities
and the treating physicians who own interests therein and who use the
lithotripsy and prostatherapy 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. Physicians are investors in 51 of the Company's 65
lithotripsy operations, all of the three Company affiliates engaged in
thermotherapy services and each of the Company's six refractive vision
correction facilities. The Company lithotripsy and thermotherapy affiliates with
physician-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. Prior to the publication of the Proposed Stark Regulations
described below, the Company interpreted Stark II consistently with the informal
view of the General Counsel for Health and 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
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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 and senior subordinated notes, impair the
Company's relationship with physicians 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 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 physicians 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 the Company's 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
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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 and thermotherapy facilities 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 and
thermotherapy equipment are subject to safety regulation by the U.S. Department
of Transportation and the states in which the Company conducts its mobile
lithotripsy and thermotherapy 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.
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 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
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The Company purchases its equipment, and maintenance is generally
provided pursuant to service contracts with the manufacturer or other service
companies. The cost of a new lithotripter ranges from $400,000 to $600,000. For
mobile lithotripsy and thermotherapy, 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. The cost of the laser equipment utilized in RVC ranges
from $300,000 to $500,000. The cost of new prostatherapy equipment ranges from
$200,000 to $400,000.
Employees
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As of March 15, 2000, the Company employed approximately 301 full-time
employees and approximately 72 part-time employees.
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Competition
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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. The Company also competes with three
public companies, all of which are also manufacturers of lithotripsy equipment,
which may create different incentives for such providers 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.
The Company's manufacturing segment competes with at least three
privately held, national companies. The primary competitive factors are price
and quality, including product manufacturing differences. Additionally, two of
the three largest competitors are certified to provide GE trailers. The Company
believes it manufactures a high quality product at a competitive price.
The RVC market is fragmented and competitive. The Company competes with
several national, public companies as well as individual ophthalmologists,
hospitals and smaller service companies. The principal methods for competition
are pricing and quality issues. The larger competitors are primarily focused on
pricing, while the smaller competitors compete using both pricing and quality
issues. While there are lower cost competitors in the geographic areas where the
Company currently has operations, the Company believes it provides a higher
quality service for a competitive price.
ITEM 2. PROPERTIES
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The Company's principal executive office is located in Austin, Texas in
an office building owned by American Physicians Service Group, Inc. ("APS"). The
Company pays APS approximately $10,000 per month, which includes rental payment
for approximately 6,700 square feet of office space, reception and telephone
services, and certain other services and facilities. The office space lease
expires in December 2002.
The Company leases approximately 11,000 square feet of office space in
Fayetteville, North Carolina under two leases expiring in 2001. The current
monthly lease amount is approximately $10,000.
The Company's manufacturing subsidiary owns a building containing
approximately 78,000 square feet of manufacturing and office space in Harvey,
Illinois.
ITEM 3. LEGAL PROCEEDINGS
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The Company is involved in various claims and legal actions that have
arisen in the ordinary course of business. Management believes that any
liabilities arising from these actions will not have a material adverse effect
on the financial condition, results of operations or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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NONE.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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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, 1999 and 1998 (NASDAQ Symbol "PMSI").
1999 1998
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High Low High Low
First Quarter $ 8.44 $ 7.13 $13.38 $9.88
Second Quarter $ 7.56 $ 6.75 $12.06 $8.62
Third Quarter $ 9.75 $ 7.44 $ 9.06 $7.00
Fourth Quarter $10.63 $ 8.13 $ 8.00 $6.88
On March 15, 2000, the Company had approximately 627 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 and terms of senior subordinated notes 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 relevant.
ITEM 6. SELECTED FINANCIAL DATA
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<TABLE>
<S> <C> <C> <C> <C> <C>
(In thousands, except
per share data) Years Ended December 31
-----------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Revenues:
Lithotripsy $89,180 $92,053 $93,113 $71,602 $22,153
Other 22,994 12,583 2,866 802 1,042
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Total $112,174 $104,636 $95,979 $72,404 $23,195
======== ======== ======== ======== ========
Income:
Net income $15,039 $10,794 $14,856 $8,961 $7,204
======= ======= ======= ====== ======
Diluted earnings per share $0.88 $0.57 $0.76 $0.49 $0.48
===== ===== ===== ===== =====
Dividends per share None None None None None
Total assets $246,826 $240,198 $224,905 $201,175 $77,627
======== ======== ======== ======== =======
Long-term obligations $103,797 $100,987 $71,198 $70,910 $22,323
======== ======== ======= ======= =======
</TABLE>
10
<PAGE>
Quarterly Data March 31 June 30 Sept 30 Dec 31
-------- -------- -------- --------
1999
Revenues $25,382 $28,608 $30,632 $27,552
Net income $3,162 $4,302 $4,339 $3,236
Per share amounts (basic):
Net income $0.18 $0.25 $0.26 $0.20
Weighted average shares
outstanding 17,387 17,098 16,818 16,553
Per share amounts (diluted):
Net income $0.18 $0.25 $0.26 $0.19
Weighted average shares
outstanding 17,495 17,196 17,000 16,788
1998
Revenues $22,795 $25,029 $28,936 $27,876
Net income (loss) $(1,168) $3,517 $3,941 $4,505
Per share amounts (basic):
Net income $(0.06) $0.18 $0.21 $0.25
Weighted average shares
outstanding 19,313 19,088 18,437 17,781
Per share amounts (diluted):
Net income ($0.06) $0.18 $0.21 $0.25
Weighted average shares
outstanding 19,313 19,223 18,561 17,890
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS OF THE COMPANY
------------------------------------
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 expectations, 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.
11
<PAGE>
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, 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 prove
to be accurate.
Year ended December 31, 1999 compared to the year ended December 31, 1998
- -------------------------------------------------------------------------
Total revenues increased $7,538,000 (7%) as compared to the same period
in 1998. Revenues from lithotripter operations decreased by $2,873,000 (3%)
primarily due to renegotiation of contracts which resulted in a larger number of
contracts providing for per diem pricing, and contracts lost due to non-renewal
and competition. Despite the lithotripsy revenue declines, lithotripsy procedure
volume was constant from 1998 to 1999, which the Company believes is indicative
of its market share preservation. Manufacturing revenue increased by $6,461,000
(58%) due to increased sales of MRI trailers as well as the Company's expansion
into manufacturing and sales of cardiac catheterization lab trailers. During
1998 the manufacturing facility became certified by GE to provide trailers for
MRI equipment. RVC revenues were $3,414,000 in 1999 and included fee revenue of
$3,004,000 and equity income of $410,000. The refractive operations were
acquired during the third quarter of 1999. Prostatherapy revenues increased
$627,000 (52%) as1999 revenues included a full year of operations for three
entities, while 1998 revenues included a full year of operations for one entity
and a partial year of operations for two entities.
Costs of services and general and administrative expenses (excluding
depreciation and amortization) increased from 38% to 40% of revenues and
increased $5,466,000 (14%) in absolute terms, compared to the same period in
1998. Cost of services associated with lithotripter operations increased
$327,000 (1%) in absolute terms and from 25% to 26% of lithotripter revenues.
Cost of services associated with manufacturing increased $3,676,000 (40%) due to
the increase in sales. Cost of services associated with RVC was $1,954,000,
which represents approximately 4 months of operations. Cost of services
associated with prostatherapy increased $482,000 due to increased operations.
Corporate expenses decreased from 5% to 4% of revenues and increased $101,000
(2%) in absolute terms, as the Company was able to successfully grow without
proportionately adding overhead.
Other deductions decreased $4,318,000 from 1998 to 1999. This decrease
is attributable to a decrease in loan fees and stock offering costs of
$4,412,000 due to costs recognized in 1998 of $4,978,000 associated with the
$100 million senior subordinated notes offering and the $50 million increase in
the senior revolving credit facility, partially offset by 1999 expenses of
$566,000 related to a restructuring of the Company's $100 million senior
revolving credit facility. Also contributing to the decrease in other deductions
was income recognition in 1999 of $1,140,000 due to the release of a contractual
obligation related to a management incentive compensation program accrued at
December 31, 1998. These decreases were partially offset by an increase in
interest expense of $939,000, primarily due to the $100 million debt offering
which closed in March 1998.
12
<PAGE>
Minority interest in consolidated income decreased $282,000 in 1999 as
compared to 1998 primarily due to the decline in lithotripsy revenue discussed
above in certain of the Company's subsidiaries. Earnings before interest, taxes,
depreciation, and amortization (EBITDA) attributable to minority interests was
$28,554,000 for the year ended December 31, 1999 compared to $28,077,000 for the
same period in 1998. EBITDA is not intended to represent net income or cash
flows from operating activities in accordance with generally accepted accounting
principles and should not be considered a measure of the Company's profitability
or liquidity.
Income tax expense for 1999 increased $2,055,000 over 1998 primarily
due to the increase in pretax income.
Year ended December 31, 1998 compared to the year ended December 31, 1997
- -------------------------------------------------------------------------
Total revenues increased $8,657,000 (9%) as compared to the same period
in 1997. Revenues from lithotripter operations decreased by $1,060,000 (1%)
primarily due to a decline in average reimbursement per procedure. Manufacturing
revenue increased by $8,708,000 (369%) due to the fact that the 1998 revenues
were for the full year while 1997 revenues were for four months of operations.
The Company acquired the trailer manufacturer in September 1997. Prostatherapy
revenues rose $1,207,000 due to the fact that 1998 revenues were for the full
year for one entity and a partial year for another entity, while 1997 revenues
included one entity which began operations in the fourth quarter. Other revenues
decreased $198,000 primarily due to four discontinued/sold cardiac centers.
Costs of services and general and administrative expenses (excluding
depreciation and amortization) increased from 35% to 38% of revenues and
increased $6,188,000 (19%) in absolute terms, compared to the same period in
1997. Cost of services associated with lithotripter operations decreased
$2,707,000 (11%) in absolute terms and from 27% to 25% of lithotripter revenues.
Cost of services associated with manufacturing increased $7,461,000 (428%) due
to full year of operations in 1998 while 1997 costs represent four months of
operations. Cost of services associated with prostatherapy increased $803,000
due to a full year of operations for the first time in 1998. Other cost of
services decreased $229,000 (48%) primarily due to four discontinued/sold
cardiac centers. Corporate expenses decreased from 6% to 5% of revenues, as the
Company was able to successfully grow without proportionately adding overhead.
Corporate expenses decreased $757,000 (13%) primarily due to a consolidation of
corporate functions.
Other deductions increased $4,635,000 primarily due to (i) the increase
of $4,618,000 for the write-off of fees paid to lenders to obtain financing, and
(ii) an increase in interest expense of $992,000 due to an increase in new
borrowings in March 1998 related to the $100 million senior subordinated notes
offering. The increased deductions were offset partially by an increase in
interest income of $677,000.
Minority interest in consolidated income decreased $251,000 primarily
due to the decline in revenue discussed above in certain of the Company's
subsidiaries. EBITDA attributable to minority interests was $28,077,000 for the
year ended December 31, 1998 compared to $28,591,000 for the same period in
1997.
Income tax expense for 1998 increased $1,582,000 over 1997, despite the
12% reduction in pretax earnings over the same period as the 1997 provision
included the effect of a reduction in the Company's valuation allowance related
to net operating loss carryforwards.
Liquidity and Capital Resources
Cash and cash equivalents were $20,064,000 and $40,146,000 at December
31, 1999 and 1998, respectively. 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, 1999
and 1998, the Company's subsidiaries distributed cash of approximately
$27,180,000 and $25,799,000, respectively, to minority interest holders.
13
<PAGE>
Cash provided by operations was $35,744,000 for the year ended December
31, 1999 and $45,551,000 for the year ended December 31, 1998. From 1998 to 1999
fee and other revenue collected increased by $9,602,000 and was offset by the
increase in cash paid to employees, suppliers of goods and others of
$12,396,000. These fluctuations are attributable to increased operations as well
as the timing of accounts receivable collections and accounts payable and
accrued expense payments. An increase in interest payments of $2,092,000 was due
to the $100 million of senior subordinated notes issued in March 1998, resulting
in a partial year of interest payments on this debt in 1998 versus a full year
of interest payments on this debt in 1999. Taxes paid increased $790,000 from
1998 to 1999 due to higher income tax expense during 1999. Additionally, the
Company purchased investments in a trading portfolio of $9,222,000 during 1999,
partially offset by proceeds from sales and maturities of $5,003,000.
Cash used by investing activities for the year ended December 31, 1999,
was $26,241,000 primarily due to $23,580,000 used in two refractive acquisitions
and one lithotripter acquisition as well as payments of earnouts related to
prior year acquisitions. Purchases of equipment and leasehold improvements of
$5,790,000 were partially offset by $2,352,000 in distributions from
investments. Cash used by investing activities for the year ended December 31,
1998, was $2,142,000 primarily due to $5,213,000 for the purchase of equipment
and leasehold improvements, partially offset by $2,532,000 in distributions from
investments.
Cash used in financing activities for the year ended December 31, 1999,
was $29,585,000, which was primarily due to distributions to minority interests
of $27,180,000 and purchases of treasury stock of $8,382,000 partially offset by
net borrowings of $3,181,000 and contributions of $2,636,000 received from
holders of minority interests related to expansion of existing partnerships and
new partnership formations. Cash used in financing activities for the year ended
December 31, 1998, was $27,033,000, primarily due to distributions to minority
interests of $25,799,000, purchases of treasury stock of $16,439,000 and debt
issuance costs of $4,417,000, partially offset by net borrowings of $19,541,000.
The Company's credit facility as of December 31, 1999 is comprised of a
revolving line of credit. The revolving line of credit has a borrowing limit of
$100 million, none of which was drawn at December 31, 1999 and March 15, 2000.
Subsequent to December 31, 1999 the Company completed a restructuring of its
revolving line of credit to enable the Company to draw on the revolver for RVC
acquisitions. The restructuring splits the revolver into two facilities of
$14,000,000 for refractive acquisitions by certain subsidiaries and the
remaining $86,000,000 for lithotripsy, manufacturing, refractive and
prostatherapy acquisitions as well as for working capital. 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 million was used to repay all outstanding
indebtedness under the Company's bank facility, with the remainder used for
general corporate purposes, including acquisitions. In connection therewith, the
Company recorded a charge to earnings in 1998 of approximately $4.4 million for
debt issuance costs associated with the Notes. The Notes bear interest at 8.75%
and interest is payable semi-annually on April 1st and October 1st. Principal is
due April 2008.
The Company intends to increase the number of its lithotripsy
operations primarily through acquisitions and the number of its RVC operations
through both acquisitions and development. The Company intends to fund the
purchase price for future acquisitions and developments using borrowings under
its senior credit facility and cash flow from operations. In addition, the
Company may use shares of its common stock in such acquisitions where
appropriate.
14
<PAGE>
During 1998, the Company announced a stock repurchase program of up to
$25.0 million of common stock. In February 2000 the Company announced an
increase in the authorized repurchase amount from $25.0 million to $35.0
million. 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 has purchased 2,968,800 shares of stock for a total of $25,572,000 as of
March 15, 2000.
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.
Inflation
- ---------
The operations of the Company are not significantly affected by
inflation because the Company is not required 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.
ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------- ----------------------------------------------------------
Interest Rate Risk:
The Company has long-term debt (including current portion) totaling
$105,560,000, of which $100.8 million has a fixed rate of interest of 8.75%,
$126,000 has fixed rates of 6% to 9% and $162,000 does not bear any interest.
The remaining $4,464,000 bears interest at the prime rate. The Company is
exposed to some market risk due to the floating interest rate on the $4,464,000.
The Company makes monthly or quarterly payments of principal and interest on the
$4,464,000. An increase in interest rates of 1.5% would result in a $67,000
annual increase in interest expense on this existing principal balance.
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.
15
<PAGE>
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 2000 annual meeting
of shareholders, except for the information regarding executive officers of the
Company, which is presented below. The information required by this item
contained in such definitive proxy material is incorporated herein by reference.
As of March 15, 2000, the executive officers of the Company are as follows:
Name Age Position
- ---- --- --------
Kenneth S. Shifrin 50 Chairman of the Board
Joseph Jenkins, M.D., J.D. 52 President, Chief Executive Officer and
Director
Brad A. Hummel 43 Executive Vice President and Chief
Operating Officer
Cheryl L. Williams 48 Chief Financial Officer, Senior Vice
President-Finance and Secretary
Teena E. Belcik 37 Vice President and Treasurer
John R. Hedrick 47 Senior Vice President of Development
Stan Johnson 46 Vice President
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. Mr. Shifrin is a member of the World Presidents' Organization.
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. Hummel has been the Executive Vice President and Chief Operating Officer of
the Company since October 1999. Prior to joining the Company, Mr. Hummel was
with Diagnostic Health Services, Inc. ("DHS") since 1984, most recently serving
as the President and Chief Executive Officer, and as a member of the Board of
Directors. The Company believes that DHS filed for Chapter 11 reorganization on
or about March 20, 2000. From 1981 to 1984, Mr. Hummel was an associate with
Covert, Crispin and Murray, a Washington, D.C. and London-based management
consulting firm. Mr. Hummel also serves as a member of APS's Board of Directors.
Ms. Williams has been Chief Financial Officer, Senior 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.
16
<PAGE>
Ms. Belcik has been Vice President and Treasurer since October 1999. Ms. Belcik
served various positions with Bank of America, N.A. since 1994 and was most
recently a Senior Vice President in the Health Care Banking Group. Previously,
Ms. Belcik taught at Valdosta State University, was a financial consultant, and
held several positions with Chase Bank's Corporate Banking Group.
Mr. Hedrick has been the Senior Vice President of Development since September
1999. Mr. Hedrick was with a subsidiary of American Physicians Service Group,
Inc. ("APS") since 1997 serving as Senior Vice President. From 1988 to 1997 Mr.
Hedrick's experience included providing merger and acquisition advisory services
to privately held healthcare entities, including ophthalmology, and the practice
of law.
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.
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 2000 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 2000 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 2000 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.
(b) Reports on Form 8-K.
-------------------
None.
17
<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* Third Amendment to the Prime Medical Services, Inc. 1993 Stock
Option Plan. (13)
10.5 Rights Agreement dated October 18, 1993 between the Company and
American Stock Transfer and Trust Company. (3)
10.6 Form of Indemnification Agreement dated October 11, 1993
between the Company and certain of its officers and directors. (3)
10.7 Partnership Agreement of Metro Atlanta Stonebusters, G.P. (5)
10.8 Management Agreement dated July 28, 1994 between the Alabama Renal
Stone Institute, Inc. and Alabama Kidney Stone Foundation, Inc. (6)
10.9 Asset Purchase Agreement dated July 21, 1999 among Prime Lithotripsy
Services, Inc., Reston Hospital Lithotripter Joint Venture, Reston
Lithotripsy Associates, Inc., Columbia Arlington Healthcare System,
L.L.C. and Robert Ball, M.D. (15)
10.10 Not used
10.11 Not used
10.12 Not used
10.13 Not used
10.14 Amended and Restated Joint Venture Agreement dated April 1989,
between Prime Diagnostic Imaging Services, Inc. and The Shasta
Diagnostic Imaging Medical Group. (4)
10.15 Agreement of Limited Partnership of Mobile Kidney Stone Centers of
California III, L.P. (15)
10.16 Amendments to First Amended and Restated Agreement of Limited
Partnership of Ohio Mobile Lithotripter, Ltd. (15)
10.17 Second Amendment to Agreement of Limited Partnership of Pacific
Medical Limited Partnership (15)
18
<PAGE>
10.18 Amendments to Agreement of Limited Partnership of Texas Lithotripsy
Limited Partnership VII, L.P. (15)
10.19 Fourth Amendment to Agreement of Limited Partnership of San Diego
Lithotripters Limited Partnership (15)
10.20 Amendment to Agreement of Limited Partnership of Fayetteville
Lithotripters Limited Partnership - Virginia I (15)
10.21 Amendments to Agreement of Limited Partnership of Fayetteville
Lithotripters Limited Partnership - South Carolina II (15)
10.22 Amendment to Agreement of Limited Partnership of Fayetteville
Lithotripters Limited Partnership - Utah I (15)
10.23 Third Amendment to Agreement of Limited Partnership of Florida
Lithotripters Limited Partnership I (15)
10.24 Fourth Amendment to Agreement of Limited Partnership of Indiana
Lithotripters Limited Partnership I (15)
10.25 Sixth Amendment to Agreement of Limited Partnership of Texas
Lithotripsy Limited Partnership III, L.P. (15)
10.26 Agreement of Limited Partnership of Mobile Kidney Stone Centers of
California II, L.P. (15)
10.27 Fourth Amendment to Agreement of Limited Partnership of Louisiana
Lithotripsy Investment Limited Partnership (15)
10.28 Operating Agreement for Southern California Stone Center, L.L.C. (9)
10.29 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)
10.30 Agreement of Limited Partnership of Texas I Prostatherapy Limited
Partnership (15)
10.31 Not used
10.32 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)
10.33 Stock Purchase Agreement dated June 1, 1997 between Sun Medical
Technologies, Inc. and Executive Medical Enterprises, Inc. (12)
10.34 Contribution Agreement dated October 8, 1997 between Prime Medical
Services, Inc. and AK Associates. (12)
10.35 Confidential Assignment Summary for Pacific Medical Limited
Partnership. (14)
10.36 Limited Partnership Agreement for Texas Lithotripsy VII, L.P. (14)
19
<PAGE>
10.37 Agreement and Plan of Merger of Texas Lithotripsy Limited
Partnership II, L.P., Texas Lithotripsy Limited Partnership IV, L.P.
and Texas ESWL/Laser Lithotripter, Ltd. (14)
10.38 Limited Partnership Agreement for Big Sky Urological Limited
Partnership. (14)
10.39 Operating Agreement for Kentucky I Lithotripsy, LLC. (14)
10.40 Confidential Private Placement Memorandum for Tennessee Valley
Lithotripter Limited Partnership. (14)
10.41 Confidential Private Placement Memorandum for Fayetteville
Lithotripters Limited Partnership - Arkansas I. (14)
10.42 Confidential Private Placement Memorandum for Texas Lithotripsy
Limited Partnership I, L.P. (14)
10.43 Operating Agreement for Washington Urological Services, LLC. (14)
10.44* Amended and Restated 1993 Stock Option Plan, as amended June 10,
1998. (10)
10.45 Agreement of Limited Partnership of Wyoming Urological Services,
L.P. (14)
10.46 Indenture Agreement dated March 27, 1998 between Prime Medical
Services, Inc. and State Street Bank and Trust Company of Missouri,
N.A. (8)
10.47 Loan Agreement dated January 31, 2000 for $14,000,000 Advancing Term
Loan between Prime Refractive Management, L.L.C., Bank of America,
N.A. as Administrative Agent, Bank Boston, N.A. as Documentation
Agent and the Lenders Named Therein (15)
10.48 Fourth Amended and Restated Loan Agreement dated January 31, 2000
for $86,000,000 Revolving Credit Loan between Prime Medical Services
Inc., Bank of America, N.A. as Administrative Agent, BankBoston,
N.A. as Documentation Agent and the Lenders Named Therein (15)
10.49 Pledge and Security Agreements dated January 31, 2000 relating to
$14,000,000 Advancing Term Loan and $86,000,000 Revolving Credit
Loan (15)
10.50 Borrower Security Agreements dated January 31, 2000 relating to
$14,000,000 Advancing Term Loan and $86,000,000 Revolving Credit
Loan (15)
10.51 Guarantor Security Agreements dated January 31, 2000 relating to
$14,000,000 Advancing Term Loan and $86,000,000 Revolving Credit
Loan (15)
10.52 Guarantor Copyright Security Agreements dated January 31, 2000
relating to $14,000,000 Advancing Term Loan and $86,000,000
Revolving Credit Loan (15)
10.53 Guaranty Agreements dated January 31, 2000 relating to $14,000,000
Advancing Term Loan and $86,000,000 Revolving Credit Loan (15)
10.54 Note dated January 31, 2000 in the amount of $1,050,000 between
Prime Refractive Management and Guaranty Federal Bank, F.S.B. (15)
20
<PAGE>
10.55 Note dated January 31, 2000 in the amount of $1,575,000 between
Prime Refractive Management and Fleet National Bank (15)
10.56 Note dated January 31, 2000 in the amount of $3,150,000 between
Prime Refractive Management and BankBoston, N.A. (15)
10.57 Note dated January 31, 2000 in the amount of $4,725,000 between
Prime Refractive Management and Bank of America, N.A. (15)
10.58 Note dated January 31, 2000 in the amount of $2,100,000 between
Prime Refractive Management and Bank One, Texas, N.A. (15)
10.59 Note dated January 31, 2000 in the amount of $12,900,000 between
Prime Medical Services, Inc. and Bank One, Texas, N.A. (15)
10.60 Note dated January 31, 2000 in the amount of $8,600,000 between
Prime Medical Services, Inc. and LaSalle Bank, National
Association (15)
10.61 Note dated January 31, 2000 in the amount of $8,600,000 between
Prime Medical Services, Inc. and Cooperative Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York
Branch (15)
10.62 Note dated January 31, 2000 in the amount of $8,600,000 between
Prime Medical Services, Inc. and Credit Lyonnais New York
Branch (15)
10.63 Note dated January 31, 2000 in the amount of $5,375,000 between
Prime Medical Services, Inc. and Fleet National Bank (15)
10.64 Note dated January 31, 2000 in the amount of $8,600,000 between
Prime Medical Services, Inc. and Imperial Bank(15)
10.65 Note dated January 31, 2000 in the amount of $6,450,000 between
Prime Medical Services, Inc. and Guaranty Federal Bank, F.S.B. (15)
10.66 Note dated January 31, 2000 in the amount of $16,125,000 between
Prime Medical Services, Inc. and Bank of America, N.A. (15)
10.67 Note dated January 31, 2000 in the amount of $10,750,000 between
Prime Medical Services, Inc. and BankBoston, N.A. (15)
10.68 Note dated January 31, 2000 in the amount of $1,400,000 between
Prime Refractive Management and LaSalle Bank, National
Association (15)
10.69 Not used
10.70 Contribution Agreement dated September 1, 1999 and First Amendment
dated January 31, 2000 among Barnet Dulaney Eye Center, P.L.L.C.,
David Dulaney, M.D., Ronald W. Barnet, M.D., Mark Rosenberg,
Prime Medical Services Inc., Prime Medical Operating Inc., LASIK
Investors, L.L.C., Prime/BDR Acquisition, L.L.C. and Prime/BDEC
Acquisition, L.L.C. (15)
21
<PAGE>
10.71 Loan Agreement dated September 1, 1999 between Prime Medical
Operating, Inc. and Prime/BDR Acquisition, L.L.C. (15)
10.72 Limited Liability Company Agreement of Prime/BDR Acquisition,
L.L.C. (15)
10.73 Limited Liability Company Agreement of Prime/BDEC Acquisition,
L.L.C. (15)
10.74 Non-Competition Agreements dated September 1, 1999 between Robert
B. Pinkert, O.D. and Scott A. Perkins, M.D. for the benefit of Prime
Medical Services Inc., Prime Medical Operating, Inc., Prime/BDR
Acquisition, L.L.C., Prime/BDEC Acquisition, L.L.C., Barnet Dulaney
Eye Center, P.L.L.C., LASIK Investors, L.L.C., Ronald W. Barnet,
M.D., David D. Dulaney, M.D., and Mark Rosenberg (15)
10.75 Promissory Note dated September 1, 1999 from Prime/BDR Acquisition,
L.L.C., to Prime Medical Operating, Inc. (15)
10.76 Collocation Agreement dated September 1, 1999 by and between Barnet
Dulaney Eye Center, P.L.L.C. and Prime/BDR Acquisition, L.L.C. (15)
10.77 Membership Interest Transfer Restriction Agreement dated
September 1, 1999 (15)
10.78 Assignment and Security Agreement dated September 1, 1999 between
Prime Medical Operating, Inc. and LASIK Investors, L.L.C. (15)
10.79 Promissory Note dated September 1, 1999 from Prime/BDR Acquisition,
L.L.C., to Prime Medical Operating, Inc. (15)
10.80 Loan Agreement dated January 31, 2000 between Prime Refractive,
L.L.C. and Prime Refractive Management, L.L.C. (15)
10.81 Promissory Note dated January 31, 2000 between Prime Refractive,
L.L.C. and Prime Refractive Management, L.L.C. (15)
10.82 Assignment and Security Agreement dated January 31, 2000 between
Prime Refractive Management, L.L.C. and LASIK Investors, L.L.C. (15)
10.83 Limited Liability Company Agreement dated September 1, 1999 of Prime
Refractive, L.L.C. (15)
10.84 Stock Purchase Agreements dated September 1, 1999 relating to the
acquisition of Horizon Vison Center, Inc. (15)
10.85 Assignment and Security Agreements relating to the acquisition of
Horizon Vison Center, Inc. (15)
10.86 Exclusive Use Agreements relating to the acquisition of Horizon
Vison Center, Inc. (15)
10.87 Amended and Restated Bylaws for the regulation of Horizon Vison
Centers, Inc. (15)
10.88 Assignment and Security Agreement by and between Prime Medical
Operating, Inc. and Prime/BDR Acquisition, L.L.C. (15)
12 Computation of ratio of earnings to fixed charges. (15)
21.1 List of subsidiaries of the Company. (15)
23.1 Independent Auditors' Consent of KPMG LLP. (15)
27 Financial Data Schedule (15)
--------------
* Executive compensation plans and arrangements.
22
<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) Not used.
(8) Filed as an Exhibit to the Quarterly Report on Form 10-Q for the period
ended June 30, 1998
(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 Registration Statement on Form S-8 (Registration
No. 333-62245) of the Company and incorporated herein by reference.
(11) Not used.
(12) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for
the year ended December 31, 1997.
(13) Filed as an Exhibit to the Quarterly Report on Form 10-Q for the period
ended September 30, 1998.
(14) Filed as an Exhibit to the Annual Report on Form 10-K of the Company for
the year ended December 31, 1998.
(15) Filed herewith.
23
<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, 2000
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, 2000
By: /s/ Cheryl L. Williams
----------------------
Cheryl L. Williams
Senior Vice President of Finance, Secretary
and Chief Financial Officer (Principal
Financial and Accounting Officer)
Date: March 30, 2000
24
<PAGE>
By: /s/ Joseph Jenkins
----------------------
Joseph Jenkins, M.D., President,
Chief Executive Officer and Director
Date: March 30, 2000
By: /s/ John McEntire
----------------------
John McEntire, Director
Date: March 30, 2000
By: /s/ William A. Searles
----------------------
William A. Searles, Director
Date: March 30, 2000
By: /s/ Michael Spalding
----------------------
Michael Spalding, M.D., Director
Date: March 30, 2000
By: /s/ James M. Usdan
----------------------
James M. Usdan, Director
Date: March 30, 2000
25
<PAGE>
APPENDIX A
INDEX
Page
Independent Auditors' Report A-2
Consolidated Financial Statements:
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997. A-3
Consolidated Balance Sheets at December 31, 1999 and 1998. A-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 1998 and 1997. A-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997. A-7
Notes to Consolidated Financial Statements. A-10
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, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.
/s/:KPMG LLP
Austin, Texas
March 6, 2000
A-2
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data)
<TABLE>
<S> <C> <C> <C>
Years Ended December 31,
1999 1998 1997
Revenue:
Lithotripsy:
Fee revenues $ 80,880 $ 83,879 $ 84,537
Management fees 5,719 5,284 6,237
Equity income 2,581 2,890 2,339
-------- -------- --------
89,180 92,053 93,113
Manufacturing 17,527 11,066 2,358
Refractive 3,414 - -
Prostatherapy 1,834 1,207 -
Other 219 310 508
-------- -------- --------
Total revenue 112,174 104,636 95,979
-------- -------- --------
Cost of services and general and administrative expenses:
Lithotripsy 23,001 22,674 25,381
Manufacturing 12,880 9,204 1,743
Refractive 1,954 - -
Prostatherapy 1,285 803 -
Other 165 249 478
Corporate 5,027 4,926 5,683
Nonrecurring development, impairment
and other costs, net 627 1,617 -
-------- -------- --------
44,939 39,473 33,285
Depreciation and amortization 10,848 10,476 9,911
-------- -------- --------
Total operating expenses 55,787 49,949 43,196
-------- -------- --------
Operating income 56,387 54,687 52,783
Other income (deductions):
Interest and dividends 1,505 1,417 740
Interest expense (9,408) (8,469) (7,477)
Loan fees and stock offering costs (566) (4,978) (360)
Release of contractual obligation 1,140 - -
Other, net (79) 304 6
-------- -------- --------
(7,408) (11,726) (7,091)
-------- -------- --------
Income before provision for income taxes
and minority interest 48,979 42,961 45,692
Minority interest in consolidated income 24,508 24,790 25,041
Provision for income taxes 9,432 7,377 5,795
-------- -------- --------
Net income $ 15,039 $ 10,794 $ 14,856
======== ======== ========
Basic earnings per share:
Net income $ 0.89 $ 0.58 $ 0.77
======== ======== ========
Weighted average shares outstanding 16,958 18,650 19,275
======== ======== ========
Diluted earnings per share:
Net income $ 0.88 $ 0.57 $ 0.76
======== ======== ========
Weighted average shares outstanding 17,114 18,783 19,461
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
A-3
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<S> <C> <C>
December 31,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $20,064 $40,146
Investments 4,120 -
Accounts receivable, less allowance for doubtful
accounts of $224 in 1999 and $966 in 1998 23,273 21,400
Other receivables 3,491 2,693
Deferred income taxes 1,066 2,330
Prepaid expenses and other current assets 2,322 949
Inventory 3,676 1,825
-------- --------
Total current assets 58,012 69,343
-------- --------
Property and equipment:
Equipment, furniture and fixtures 42,128 34,485
Building and leasehold improvements 2,092 2,073
-------- --------
44,220 36,558
Less accumulated depreciation and
amortization (25,567) (18,471)
-------- --------
Property and equipment, net 18,653 18,087
-------- --------
Other investments 18,963 11,026
Goodwill, at cost, net of amortization 149,088 140,863
Other noncurrent assets 2,110 879
-------- --------
$246,826 $240,198
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
A-4
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
($ in thousands, except share data)
<TABLE>
<S> <C> <C>
December 31,
1999 1998
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 1,763 $ 890
Accounts payable 3,290 5,287
Accrued distributions to minority interests 8,332 8,951
Accrued expenses 7,108 12,051
-------- --------
Total current liabilities 20,493 27,179
Long-term debt, net of current portion 103,797 100,987
Deferred income taxes 6,400 4,789
-------- --------
Total liabilities 130,690 132,955
Minority interest 19,454 17,493
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none outstanding - -
Common stock, $0.01 par value, 40,000,000 shares
authorized; 19,367,267 issued in 1999 and
19,350,267 isssued in 1998 194 194
Capital in excess of par value 87,655 87,380
Accumulated earnings 33,654 18,615
Treasury stock, at cost, 2,875,300 shares in 1999
and 1,845,200 shares in 1998 (24,821) (16,439)
-------- --------
Total stockholders' equity 96,682 89,750
-------- --------
$246,826 $240,198
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
A-5
<PAGE>
PRIME MEDICAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1999, 1998 and 1997
($ in thousands, except share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Capital in Accumulated
Issued Common Stock Excess of Earnings Treasury Stock
Shares Amount Par Value (Deficit) Shares Amount Total
---------- ------ ---------- -------- ---------- --------- --------
Balance, January 1, 1997 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
Net income for the year - - - 10,794 - - 10,794
Tax benefits on exercised warrants - - 3,096 - - - 3,096
Exercise of stock options
including tax benefit of
$140 on non-qualifying
exercises 44,000 1 234 - - - 235
Purchase of treasury stock - - - - (1,845,200) (16,439) (16,439)
---------- ------ ---------- -------- ---------- --------- --------
Balance, December 31, 1998 19,350,267 194 87,380 18,615 (1,845,200) (16,439) 89,750
Net income of the year - - - 15,039 - - 15,039
Issuance of put options - - 73 - - - 73
Issuance of warrants - - 97 - - - 97
Exercise of stock options
including tax benefit of
$18 on non-qualifying
exercises 17,000 - 105 - - - 105
Purchase of treasury stock - - - - (1,030,100) (8,382) (8,382)
---------- ------ ---------- -------- ---------- --------- --------
Balance, December 31, 1999 19,367,267 $ 194 $ 87,655 $ 33,654 (2,875,300) $ (24,821) $ 96,682
========== ====== ========== ======== ========== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
A-6
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<S> <C> <C> <C>
Years Ended December 31,
1999 1998 1997
------------ ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected $ 108,251 $ 98,649 $ 90,924
Cash paid to employees, suppliers
of goods and others (52,144) (39,748) (31,685)
Purchases of investments (9,222) - -
Proceeds from sales and maturities of investments 5,003 - -
Interest received 1,505 1,417 739
Interest paid (9,353) (7,261) (7,521)
Taxes paid (8,296) (7,506) (764)
------------ ----------- ------------
Net cash provided by operating activities 35,744 45,551 51,693
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equity investments and entities (23,580) - (20,217)
Purchases of equipment and leasehold
improvements (5,790) (5,213) (4,546)
Proceeds from sales of equipment 207 224 30
Distributions from investments 2,352 2,532 1,690
Other 570 315 94
------------ ----------- ------------
Net cash used in investing activities (26,241) (2,142) (22,949)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable, exclusive of interest (1,403) (80,484) (50,328)
Borrowings on notes payable 4,584 100,025 51,201
Distributions to minority interest (27,180) (25,799) (28,667)
Debt issuance costs - (4,417) -
Contributions by minority interest 2,636 72 2,381
Exercise and issuance of stock options 160 9 343
Purchase of treasury stock (8,382) (16,439) -
------------ ----------- ------------
Net cash used in financing activities (29,585) (27,033) (25,070)
------------ ----------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (20,082) 16,376 3,674
Cash and cash equivalents, beginning of period 40,146 23,770 20,096
------------ ----------- ------------
Cash and cash equivalents, end of period $ 20,064 $ 40,146 $ 23,770
============ =========== ============
</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,
1999 1998 1997
------------ ------------ ------------
Reconciliation of net income to net cash provided by
operating activities:
Net income $ 15,039 $ 10,794 $ 14,856
Adjustments to reconcile net income to cash provided
by operating activities:
Minority interest in consolidated income 24,508 24,790 25,041
Depreciation and amortization 10,848 10,476 9,911
Provision for uncollectible accounts 702 252 427
Equity in earnings of affiliates (2,802) (2,890) (2,339)
Debt issuance costs - 4,417 -
Provision for deferred income taxes 2,875 (442) 68
Write down of equipment 1,149 - -
Settlement of contingent liability (500) - -
Release of contractual liability (1,140) - -
Other (66) (100) 1,159
Changes in operating assets and liabilities,
net of effect of purchase transactions:
Investments (4,120) - -
Accounts receivable (1,851) (3,186) (3,156)
Other receivables (1,424) (910) 754
Other assets (2,585) (1,244) (602)
Accounts payable (2,665) 822 934
Accrued expenses (2,224) 2,772 4,640
------------ ------------ ------------
Total adjustments 20,705 34,757 36,837
------------ ------------ ------------
Net cash provided by operating activities $ 35,744 $ 45,551 $ 51,693
============ ============ ============
</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,
1999 1998 1997
----------- ------------ ------------
SUPPEMENTAL INFORMATION OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
At December 31, 1999, the Company had accrued distributions payable to
minority interests. The effect of this transaction was as follows:
Current liabilities increased by $ 8,332
Minority interest decreased by 8,332
In 1999, the Company acquired, through a majority owned subsidiary 60% of the
outstanding stock of Horizon Vision Centers. This transaction is discussed
further in Note D. The acquired assets and liabilities were as follows:
Current assets increased by 710
Noncurrent assets increased by 3,057
Goodwill increased by 9,174
Current liabilities increased by 1,489
Noncurrent liabilities increased by 413
Minority interest increased by 910
At December 31, 1998, the Company had accrued distributions payable to
minority interests. The effect of this transaction was as follows:
Current liabilities increased by $ 8,951
Minority interest decreased by 8,951
In 1998, the Company recognized tax benefits associated with warrants
previously exercised. The effect of this was as follows:
Current liabilities decreased by 1,512
Noncurrent liabilities decreased by 1,584
Stockholders' equity increased by 3,096
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:
Noncurrent assets increased by 4,041
Goodwill increased by 15,836
Current liabilities increased by 1,343
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
</TABLE>
See accompanying notes to consolidated financial statements.
A-9
<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 for
lithotripsy, refractive and prostatherapy operations. The Company
provides its services in 34 states. The Company also manufactures
trailers for major medical equipment manufacturers and mobile medical
service providers. References to the Company are to Prime and its
controlled and affiliated entities.
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 have 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, 1999, the Company had recognized approximately
$675,000 in undistributed earnings using the equity method. This amount
represents undistributed earnings from entities, in which the Company owns 50%
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.
Investments
The Company classifies its investments in debt securities as trading securities
in accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities. Trading
securities are reported at fair value, with unrealized gains and losses included
in earnings. The change in net unrealized holding gain or loss on trading
securities for the year ended December 31, 1999 was not material.
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 three 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-10
<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 using the straight-line basis over a period not to exceed twenty five
years for the refractive segment and forty years for the lithotripsy segment.
Accumulated amortization at December 31, 1999 and 1998 is $18,155,000 and
$13,807,000, 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 discounted cash flows and carrying value of the goodwill.
Revenue Recognition
Revenues generated from management services and the manufacture of trailers 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.
Major Customers and Credit Concentrations
A significant portion of the Company's manufacturing revenues are from four
customers. For the years ended December 31, 1999 and 1998, sales to these four
customers accounted for 71% of each year's manufacturing revenues.
Concentrations of credit risk with respect to receivables are limited due to the
wide variety of customers, as well as their dispersion across many geographic
areas. Other than as disclosed below, the Company does not consider itself to
have any significant concentrations of credit risk. At December 31, 1999,
approximately 14% of accounts receivable relate to units operating in Texas, 8%
relate to units located in Louisiana, and 12% relate to units located in
California. At December 31, 1998, approximately 17% of accounts receivable
relate to units operating in Texas, 11% relate to units located in Louisiana,
and 10% relate to units located in California.
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.
A-11
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
Inventory
Inventory is stated at the lower of cost or market. Cost is determined using the
average cost method. Certain components that meet the Company's manufacturing
requirements are only available from a limited number of suppliers. The
inability to obtain components as required or to develop alternative sources, if
and as required in the future, could result in delays or reduction in product
shipments, which in turn could have a material adverse effect on the Company's
manufacturing business, financial condition and results of operations.
Stock-Based Compensation
Upon adoption of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation ("Statement 123"), in 1996, 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).
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.
A-12
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reclassification
Certain reclassifications have been made to amounts presented in previous years
to be consistent with the 1999 presentation.
Earnings Per Share
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 warrants.
A reconciliation of such earnings per share data is as follows:
(In thousands, except per share data)
Net Per Share
For the year ended December 31, 1999 Income Shares Amounts
- ------------------------------------ ------- ------ -------
Basic $15,039 16,958 $0.89
=======
Effect of dilutive securities:
Options - 156
------- ------
Diluted $15,039 17,114 $0.88
======= ====== =======
For the year ended December 31, 1998
- ------------------------------------
Basic $10,794 18,650 $0.58
=======
Effect of dilutive securities:
Options - 133
------- ------
Diluted $10,794 18,783 $0.57
======= ====== =======
For the year ended December 31, 1997
- ------------------------------------
Basic $14,856 19,275 $0.77
=======
Effect of dilutive securities:
Options - 186
------- ------
Diluted $14,856 19,461 $0.76
======= ====== =======
Unexercised employee stock options and warrants to purchase 1,247,000, 1,708,000
and 841,000 shares of Prime common stock as of December 31, 1999, 1998 and 1997,
respectively, were not included in the computations of diluted EPS because the
option exercise prices were greater than the average market price of Prime's
common stock during the respective periods.
A-13
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C. INVESTMENTS
Barnet Dulaney Eye Center
Effective September 1, 1999 the Company purchased a 60% interest in two laser
(refractive) surgery centers operated by Barnet Dulaney Eye Center for
approximately $8,807,000 in cash and a warrant to purchase 29,000 shares of
Company common stock, plus a contingent earn-out obligation to be paid at the
end of the first year of operations after the acquisition. The contingent
earn-out obligation is based on the operating performance of one of the two
surgery centers during the first year of operations after the acquisition. This
investment is accounted for using the equity method.
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.
Ohio and Louisiana Partnerships
In December 1994, the Company acquired all of the common stock of two
corporations. Each corporation is the general partner and holds an approximate
20% interest in a limited partnership which operates a mobile lithotripter. Ohio
Mobile Lithotripter, Ltd. operates a mobile lithotripter in Ohio. Arklatx Mobile
Lithotripter, L.P. operates a mobile lithotripter in Louisiana. These
investments are accounted for using the equity method.
American Physicians Service Group, Inc.
At December 31, 1999 and 1998, the Company owned 1,000 shares of common stock,
representing less than 1%, of the outstanding common stock of American
Physicians Service Group, Inc. (APS). APS owned approximately 14% and 18% of the
outstanding common stock of the Company at December 31, 1999 and 1998,
respectively. Two of the Company's six board members are also on the board of
APS.
The Company occupies approximately 6,700 square feet of office space owned by
APS. The Company also shares certain personnel with APS. The monthly rent and
personnel cost is approximately $10,000. The Company purchased treasury stock
shares through APS Financial Services, Inc. (a wholly owned subsidiary of APS).
For the years ended December 31, 1999 and 1998, the Company paid commissions of
approximately $25,000 and $100,000, respectively, to acquire 420,100 and
1,845,000 shares, respectively, which management believes was competitive with
commissions charges by other firms offering such services.
A-14
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. ACQUISITIONS
Effective September 1, 1999 the Company acquired, through a majority owned
acquisition subsidiary, 60% of the outstanding stock of Horizon Vision Centers,
Inc. (Horizon). Horizon operates four laser (refractive) surgery centers in
California. The Company paid approximately $10,866,000 in cash for this
acquisition and has accounted for the transaction using the purchase method of
accounting.
Unaudited proforma combined income data for the years ended December 31, 1999
and 1998 of the Company, the Horizon acquisition discussed above and the equity
investment acquisition of the Barnet Dulaney Eye Center's refractive surgery
centers assuming they were effective January 1, 1998 is as follows:
($ in thousands, except per share data)
1999 1998
-------- --------
Total revenues $121,710 $111,545
Total expenses $105,989 $100,522
-------- --------
Net income $15,721 $11,023
======== ========
Diluted earnings per share $0.92 $0.59
======== ========
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 of $1,050,000 which was accrued at December 31, 1998
and paid in the first quarter of 1999. This transaction was accounted for using
the purchase method of accounting.
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. Contingent consideration of $400,000 was
paid in 1998, $843,000 was accrued at December 31, 1998 and paid in the first
quarter of 1999, and $54,000 was accrued December 31, 1999. 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 $10,510,000 in cash. These transactions were accounted
for using the purchase method of accounting.
A-15
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments (Statement 107), requires that the Company
disclose estimated fair values for its financial instruments as of December 31,
1999 and 1998. The carrying amounts and fair values of the Company's significant
financial instruments are as follows:
1999 1998
------------------ ------------------
Carrying Fair Carrying Fair
($in thousands) Amount Value Amount Value
------- ------- ------- -------
Financial assets:
Cash $20,064 $20,064 $40,146 $40,146
Investments 4,120 4,120 - -
Accounts receivable 23,273 23,273 21,400 21,400
Other receivables 3,491 3,491 2,693 2,693
Financial liabilities:
Debt 105,560 97,560 101,877 92,603
Accounts payable 3,290 3,290 5,287 5,287
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.
Investments
The carrying value of investments approximates fair value as they are reported
based on quoted market rates.
Accounts Receivable and Other Receivables
The carrying value of these receivables approximates the fair value due to their
short-term nature and historical collectibility.
Debt
The fair value at December 31, 1999 and 1998 for the $100 million fixed rate
senior subordinated notes was valued using the market rate of 10.2% and 10.456%,
respectively. The carrying value of the debt bearing interest at prime rate
approximates fair value.
Accounts Payable
The carrying value of the payables approximates fair value due to the short-term
nature of the obligation.
A-16
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Limitations
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. Fair value
estimates are based on existing on balance sheet financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments. Other
significant assets and liabilities that are not considered financial assets or
liabilities include deferred tax assets and liabilities, property and equipment,
equity investment in partnerships, goodwill, other noncurrent assets and accrued
expenses. In addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the aforementioned estimates.
F. ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
($ in thousands) 1999 1998
------- -------
Legal fees $291 $1,280
Accrued group insurance costs 193 206
Compensation and payroll
related expense 1,393 2,958
Taxes, other than income taxes 343 1,301
Accrued interest 2,247 2,192
Income taxes payable (receivable) (146) 1,229
Deferred payments for acquisitions 54 1,950
Other 2,733 935
------- -------
$7,108 $12,051
======= =======
A-17
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. INDEBTEDNESS
Long-term debt is as follows:
($ in thousands) December 31,
1999 1998
-------- --------
Interest Rates Maturities
8.75% 2000-2008 $100,808 $100,000
Prime 2000-2003 4,464 1,715
None 2000-2006 162 162
6%-9% 2000-2004 126 -
-------- --------
$105,560 $101,877
Less current portion of
long-term debt 1,763 890
-------- --------
$103,797 $100,987
======== ========
In March 1998, the Company completed an offering of an aggregate $100 million of
unsecured senior subordinated notes (the "Notes") due 2008. The issue price of
the notes was 99.50 with an 8.75% coupon. Interest is payable semi-annually on
April 1 and October 1, beginning October 1, 1998. The financing costs associated
with this offering totaling $4,418,000 were expensed during 1998 in the
accompanying consolidated statements of income. A portion of the proceeds from
the offering were used to pay off the Company's $77 million of term loans under
its existing credit facility.
The Note Indenture restricts, among other things, the ability of the Company and
its Restricted Subsidiaries to incur additional indebtedness and issue preferred
stock, enter into sale and leaseback transactions, incur liens, pay dividends or
make certain other restricted payments, apply net proceeds from certain asset
sales, enter into certain transactions with affiliates, merge or consolidate
with any other person, sell stock of subsidiaries and assign, transfer, lease,
convey or otherwise dispose of substantially all of the assets of the Company.
During 1998, the Company amended its syndicated bank facility from $135 million
to $100 million. The facility consists of a $100 million revolving credit
facility bearing interest of LIBOR + 1 to 2%, maturing in April 2003. At
December 31, 1999, the entire $100 million revolving credit facility was
undrawn. At December 31, 1999, interest on the Company's bank facility was
7.385%. The assets of the Company and the stock of its subsidiaries
collateralize the bank facility.
The stated principal repayments for all indebtedness as of December 31, 1999 are
payable as follows:
($ in thousands)
2000 $1,763
2001 1,845
2002 1,363
2003 280
2004 178
Thereafter 100,131
A-18
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H. COSTS OF SERVICES AND GENERAL AND ADMINISTRATIVE EXPENSES
Costs of services and general and administrative expenses consist of the
following:
Years Ended December 31,
1999 1998 1997
($ in thousands) ------- ------- -------
Salaries, wages and benefits $16,230 $16,294 $15,779
Other costs of services 7,789 7,136 7,569
General and administrative 5,770 3,225 3,595
Legal and professional 2,167 2,551 2,064
Manufacturing costs 11,902 8,294 1,394
Other 1,081 1,973 2,884
------- ------- -------
$44,939 $39,473 $33,285
======= ======= =======
I. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions that have arisen in
the ordinary course of business. Management believes that any liabilities
arising from these actions will not have a material adverse effect on the
financial condition, results of operations or cash flows of the Company.
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, 1999, the
Company had 255 employees enrolled in the plan. The plan provides
non-contributory coverage for employees and contributory coverage for
dependents. The Company's contributions totaled $966,000, $623,000 and $351,000,
in 1999, 1998 and 1997 respectively.
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.
A-19
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. COMMON STOCK OPTIONS (continued)
In June 1997, the Company adopted an amendment to the 1993 Stock Option Plan
that authorized an additional 500,000 shares. In June 1998, the Company adopted
an amendment to the 1993 Stock Option Plan that authorized an additional 750,000
shares.
A summary of the Company's stock option activity, and related information for
the years ended December 31, follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
-------------------------- -------------------------- --------------------------
Options Weighted-Average Options Weighted-Average Options Weighted-Average
(000) Exercise Price (000) Exercise Price (000) Exercise Price
Outstanding-beginning
of year 1,892 $10.10 1,394 $11.04 1,228 $8.99
Granted 695 7.56 825 8.63 428 11.94
Exercised (17) 5.10 (44) 3.73 (227) 1.51
Forfeited (276) 12.20 (283) 12.58 (35) 12.19
------ ------ ------ ------ ------ ------
Outstanding-end of year 2,294 $9.10 1,892 $10.10 1,394 $11.04
====== ====== ====== ====== ====== ======
Exercisable at end of year 1,137 $9.89 806 $10.74 466 $8.21
Weighted-average fair
value of options
granted during the year $2.96 - $3.40 - $5.21 -
</TABLE>
The following table summarizes the Company's outstanding options at December 31,
1999:
<TABLE>
<S> <C> <C> <C> <C> <C>
Outstanding Options Exercisable Options
----------------------- -------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Options Contractual Exercise Options Exercise
Range of Exercise Prices (000) Life Price (000) Price
- ------------------------ ------ ----------- -------- ------ --------
$0.25 - $4.12 151 0.4 years $0.37 151 $0.37
$4.13 - $8.25 963 4.0 years 7.35 193 7.43
$8.26 - $12.37 625 4.3 years 9.80 312 10.15
$12.38 - $16.50 555 2.2 years 13.79 481 13.70
------ ------
Total 2,294 1,137
====== ======
</TABLE>
Proforma 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 1999,
1998 and 1997, respectively: risk-free interest rates of 6.5%, 5.2% and 6.2%;
dividend yields of 0%, 0% and 0%; volatility factors of the expected market
price of the Company's common stock of .44, .42 and .46; and a weighted-average
expected life of the option of 4 years.
A-20
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. COMMON STOCK OPTIONS (continued)
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 proforma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. The Company's proforma
information follows (in thousands except for earnings per share information):
1999 1998 1997
------- ------- -------
Pro forma net income $11,960 $7,817 $12,448
Pro forma earning per share:
Basic $0.71 $0.42 $0.65
Diluted $0.70 $0.42 $0.64
K. LONG-LIVED ASSETS TO BE DISPOSED OF
In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, equipment which management has both the ability and intent to
remove from service is reported in the financial statements at the lower of
carrying amount or fair value less costs to sell. During 1999 the Company
approved the removal from service of five lithotripter units. Three of these
units were removed from service by the end of 1999 and the remaining two will be
removed from service within the first quarter of 2000. These assets are held by
the lithotripsy segment. The customers of these units are or will be serviced by
other equipment. A loss of approximately $1.1 million was recognized on the
write-down to fair value less costs to sell in the caption "nonrecurring
development, impairment and other costs, net" of the accompanying statement of
income. The minority interest portion of this loss was approximately $600,000.
L. INCOME TAXES
The Company files a consolidated tax return with its wholly owned subsidiaries.
A substantial portion of consolidated income is not taxed at the corporate level
as it represents income from partnerships. Accordingly, only the portion of
income from these partnerships attributable to the Company's ownership interests
is included in taxable income in the consolidated tax return and financial
statements. The minority interest portion of this income is the responsibility
of the individual partners.
A-21
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
L. INCOME TAXES (continued)
Income tax expense consists of the following:
Years Ended December 31,
1999 1998 1997
($ in thousands) ------- ------- -------
Federal:
Current $5,490 $6,404 $4,369
Deferred 2,875 (442) 68
State 1,067 1,415 1,358
------- ------- -------
$9,432 $7,377 $5,795
======= ======= =======
A reconciliation of expected income tax (computed by applying the United States
statutory income tax rate of 35% to earnings before income taxes) to total
income tax expense in the accompanying consolidated statements of income
follows:
Years Ended December 31,
1999 1998 1997
($ in thousands) ------- ------- -------
Expected federal income tax $8,565 $6,360 $7,228
Change in beginning of year
valuation allowance - - (2,399)
State taxes 1,067 1,415 1,358
Other (200) (398) (392)
------- ------- -------
$9,432 $7,377 $5,795
======= ======= =======
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1999 and
1998 are presented below:
($ in thousands) 1999 1998
------- -------
Deferred tax assets:
Capitalized costs $1,948 $2,381
Loan origination fees amortizable
for tax purposes 949 1,267
Accounts receivable, principally due
to allowance for doubtful accounts 73 248
Accrued expenses deductible for tax
purposes when paid 994 2,082
------- -------
Total gross deferred tax assets 3,964 5,978
Less valuation allowance - -
------- -------
Net deferred tax assets 3,964 5,978
------- -------
A-22
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
L. INCOME TAXES (continued)
($ in thousands) 1999 1998
------- -------
Deferred tax liabilities:
Property and equipment, principally due
to differences in depreciation $ (99) $ (166)
Investments in affiliated entities,
principally due to undistributed
income (2,329) (2,703)
Intangible assets, principally due to
differences in amortization periods
for tax purposes (6,870) (5,568)
------- -------
Total gross deferred tax liability (9,298) (8,437)
------- -------
Net deferred tax liability $(5,334) $(2,459)
======= =======
There is no valuation allowance for deferred tax assets at December 31, 1999 and
1998. A decrease of $2,399,000 in 1997, primarily due to utilization of net
operating loss carryforwards was recorded in 1997.
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 at December 31, 1999.
M. RELATED PARTY TRANSACTIONS
See Note C for related party transactions involving investments in affiliates.
N. SEGMENT REPORTING
The Company has three reportable segments: lithotripsy, manufacturing and
refractive. The lithotripsy segment 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. The manufacturing segment provides manufacturing
services and installation, upgrade, refurbishment and repair of major medical
equipment for mobile medical service providers. The refractive segment, which is
new in 1999, provides services related to the operations of refractive vision
correction centers. Other operating segments which do not meet the quantitative
thresholds for reportable segments include prostatherapy services.
A-23
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
N. SEGMENT REPORTING (continued)
The accounting policies of the segments are the same as those described in Note
B, the summary of significant accounting policies. The Company measures
performance based on the pretax income or loss after consideration of minority
interests from its operating segments, which do not include unallocated
corporate general and administrative expenses and corporate interest income and
expense. Additionally, certain consolidated entities that are reported as
"corporate" own and operate lithotripsy equipment. The revenue and depreciation
expense related to this equipment is included in the lithotripsy segment.
However, the equipment is included in corporate assets.
The Company's segments are divisions that offer different services, and require
different technology and marketing approaches. The majority of the lithotripsy
segment is comprised of acquired entities, as are the manufacturing and
refractive segments. The prostatherapy segment was developed internally. The
presentation of segments for 1998 and 1997, which included two segments for
medical and manufacturing, have been recast to conform to the Company's
operating segments for 1999.
All of the Company's revenues are earned in the United States and long-lived
assets are located in the United States. The Company does not have any major
customers who account for more than 10% of its revenues.
A-24
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
N. SEGMENT REPORTING (continued)
($ in thousands)
Lithotripsy Manufacturing Refractive Other
----------- ------------- ---------- -----
1999
- ----
Revenue from
external customers $89,180 $17,527 $3,414 $2,053
Intersegment revenues - 243 - -
Interest income 341 - - 4
Interest expense 269 98 457 -
Depreciation and
amortization 9,754 264 363 336
Segment profit 32,115 3,430 450 337
Segment assets 195,012 13,122 23,254 3,021
Investment in
equity method
investees 8,814 - 9,375 -
Capital expenditures 4,367 161 548 298
1998
- ----
Revenue from
external customers $92,053 $11,066 - $1,517
Intersegment revenues - 255 - -
Interest income 444 - - 3
Interest expense 235 38 - -
Depreciation and
amortization 9,899 223 - 252
Segment profit 35,484 1,142 - 209
Segment assets 203,653 9,916 - 2,628
Investment in
equity method
investees 10,696 - - -
Capital expenditures 2,770 1,580 - 787
A-25
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
N. SEGMENT REPORTING (continued)
($ in thousands)
Lithotripsy Manufacturing Refractive Other
----------- ------------- ---------- -----
1997
- ----
Revenue from
external customers $93,113 $2,358 - $508
Intersegment revenues - 185 - -
Interest income 536 - - 24
Interest expense 314 - - -
Depreciation and
amortization 9,793 18 - 75
Segment profit 33,187 403 - 92
Segment assets 211,282 6,223 - 2,216
Investment in
equity method
investees 10,658 - - -
Capital expenditures 3,741 23 - 732
The following is a reconciliation of revenues per above to the consolidated
revenues per the consolidated statements of income:
1999 1998 1997
($ in thousands) -------- -------- --------
Total revenues for reportable segments $110,364 $103,374 $95,656
Other segment 2,053 1,517 508
Elimination of intersegment revenues (243) (255) (185)
-------- -------- --------
Total consolidated revenues $112,174 $104,636 $95,979
======== ======== ========
A-26
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
N. SEGMENT REPORTING (continued)
The following is a reconciliation of profit per above to income before taxes per
the consolidated statements of income:
1999 1998 1997
($ in thousands) ------- ------- -------
Total profit for reportable segments $35,995 $36,626 $33,590
Other segment 337 209 92
Unallocated corporate expenses:
General and administrative (5,027) (4,926) (5,683)
Net interest expense (7,424) (7,226) (6,983)
Loan fees and stock offering costs (566) (4,978) (360)
Nonrecurring development and other costs 475 (1,617) -
Release of contractual obligation 1,140 - -
Other, net (459) 83 (5)
------- ------- -------
Unallocated corporate expenses total (11,861) (18,664) (13,031)
------- ------- -------
Income before income taxes $24,471 $18,171 $20,651
======= ======= =======
The following is a reconciliation of segment assets per above to the
consolidated assets per the consolidated balance sheets:
1999 1998 1997
($ in thousands) -------- -------- --------
Total assets for reportable segments $231,388 $213,569 $217,505
Other segment 3,021 2,628 2,216
Unallocated corporate assets 12,417 24,001 5,184
-------- -------- --------
Consolidated total $246,826 $240,198 $224,905
======== ======== ========
A-27
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
N. SEGMENT REPORTING (continued)
The reconciliation of the other significant items to the amounts reported in the
consolidated financial statements is as follows:
Eliminating
($ in thousands) Segments Corporate Entries Consolidated
-------- --------- ------- ------------
1999
Interest income $345 $1,250 $(90) $1,505
Interest expense 824 8,674 (90) 9,408
Depreciation and
amortization 10,717 131 - 10,848
Capital expenditures 5,374 416 - 5,790
1998
Interest income $447 $1,007 $(37) $1,417
Interest expense 273 8,233 (37) 8,469
Depreciation and
amortization 10,374 102 - 10,476
Capital expenditures 5,137 76 - 5,213
1997
Interest income $560 $180 - $740
Interest expense 314 7,163 - 7,477
Depreciation and
amortization 9,886 25 - 9,911
Capital expenditures 4,496 50 - 4,546
The amounts in 1999, 1998 and 1997 for interest income and expense, depreciation
and amortization and capital expenditures represent amounts recorded by the
operations of the Company's corporate functions, which have not been allocated
to the segments.
O. CONDENSED FINANCIAL INFORMATION REGARDING GUARANTOR SUBSIDIARIES
Condensed consolidating financial information regarding the Company, Guarantor
Subsidiaries and non-guarantor subsidiaries as of December 31, 1999 and 1998 and
for each of the years in the three-year period ended December 31, 1999 is
presented below for purposes of complying with the reporting requirements of the
Guarantor Subsidiaries. Separate financial statements and other disclosures
concerning each Guarantor Subsidiary have not been presented because management
has determined that such information is not material to investors. The Guarantor
Subsidiaries are wholly-owned subsidiaries of the Company who have fully and
unconditionally guaranteed the Notes described in Note G.
A-28
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income
Year Ended December 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
-------------- -------------- -------------- -------------- --------------
Revenue:
Lithotripsy:
Fee revenues $ - $ 20,303 $ 60,577 $ - $ 80,880
Management fees - 3,304 2,415 - 5,719
Equity income 32,763 18,799 - (48,981) 2,581
-------------- -------------- -------------- -------------- --------------
32,763 42,406 62,992 (48,981) 89,180
Manufacturing - - 17,527 - 17,527
Refractive 346 410 3,004 (346) 3,414
Prostatherapy - - 1,834 - 1,834
Other - 219 - - 219
-------------- -------------- -------------- -------------- --------------
Total revenue 33,109 43,035 85,357 (49,327) 112,174
-------------- -------------- -------------- -------------- --------------
Cost of services and general and
administrative expenses:
Lithotripsy - 1,995 21,006 - 23,001
Manufacturing - - 12,880 - 12,880
Refractive - - 1,954 - 1,954
Prostatherapy - (198) 1,483 - 1,285
Other - 165 - - 165
Corporate 248 4,779 - - 5,027
Nonrecurring development,
impairment and other costs, net (570) 173 1,024 - 627
-------------- -------------- -------------- -------------- --------------
(322) 6,914 38,347 - 44,939
Depreciation and amortization 5 5,216 5,627 - 10,848
-------------- -------------- -------------- -------------- --------------
Total operating expenses (317) 12,130 43,974 - 55,787
-------------- -------------- -------------- -------------- --------------
Operating income 33,426 30,905 41,383 (49,327) 56,387
-------------- -------------- -------------- -------------- --------------
Other income (deductions):
Interest income 749 510 246 - 1,505
Interest expense (9,111) 438 (735) - (9,408)
Loan fees and stock offering costs (492) (74) - - (566)
Release of contractual obligation - 1,140 - - 1,140
Other, net (662) 522 61 - (79)
-------------- -------------- -------------- -------------- --------------
Total other income (deductions) (9,516) 2,536 (428) - (7,408)
-------------- -------------- -------------- -------------- --------------
Income before provision for income
taxes and minority interest 23,910 33,441 40,955 (49,327) 48,979
Minority interest in consolidated income - - - 24,508 24,508
Provision for income taxes 8,871 332 229 - 9,432
-------------- -------------- -------------- -------------- --------------
Net income $ 15,039 $ 33,109 $ 40,726 $ (73,835) $ 15,039
============== ============== ============== ============== ==============
</TABLE>
A-29
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income
Year Ended December 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- ------------- -------------- -------------- --------------
Revenue:
Lithotripsy:
Fee revenues $ - $ 22,487 $ 61,392 $ - $ 83,879
Management fees - 3,126 2,158 - 5,284
Equity income 30,952 20,077 - (48,139) 2,890
-------------- -------------- -------------- -------------- --------------
30,952 45,690 63,550 (48,139) 92,053
Manufacturing - - 11,066 - 11,066
Prostatherapy - - 1,207 - 1,207
Other - 310 - - 310
-------------- -------------- -------------- -------------- --------------
Total revenue 30,952 46,000 75,823 (48,139) 104,636
-------------- -------------- -------------- -------------- --------------
Cost of services and general and
administrative expenses:
Lithotripsy - 3,977 18,697 - 22,674
Manufacturing - - 9,204 - 9,204
Prostatherapy - - 803 - 803
Other - 249 - - 249
Corporate 203 4,723 - - 4,926
Nonrecurring development,
impairment and other costs, net 1,617 - - - 1,617
-------------- -------------- -------------- -------------- --------------
1,820 8,949 28,704 - 39,473
Depreciation and amortization 7 5,221 5,248 - 10,476
-------------- -------------- -------------- -------------- --------------
Total operating expenses 1,827 14,170 33,952 - 49,949
-------------- -------------- -------------- -------------- --------------
Operating income 29,125 31,830 41,871 (48,139) 54,687
-------------- -------------- -------------- -------------- --------------
Other income (deductions):
Interest income 735 305 377 - 1,417
Interest expense (8,234) (44) (191) - (8,469)
Loan fees and stock offering costs (4,978) - - - (4,978)
Other, net (39) 331 12 - 304
-------------- -------------- -------------- -------------- --------------
Total other income (deductions) (12,516) 592 198 - (11,726)
-------------- -------------- -------------- -------------- --------------
Income before provision for income
taxes and minority interest 16,609 32,422 42,069 (48,139) 42,961
Minority interest in consolidated income - - - 24,790 24,790
Provision for income taxes 5,815 1,470 92 - 7,377
-------------- -------------- -------------- -------------- --------------
Net income $ 10,794 $ 30,952 $ 41,977 $ (72,929) $ 10,794
============== ============== ============== ============== ==============
</TABLE>
A-30
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income
Year Ended December 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- -------------- -------------- -------------- --------------
Revenue:
Lithotripsy:
Fee revenues $ - $ 20,863 $ 63,674 $ - $ 84,537
Management fees - 3,978 2,259 - 6,237
Equity income 27,386 18,587 - (43,634) 2,339
-------------- -------------- -------------- -------------- --------------
27,386 43,428 65,933 (43,634) 93,113
Manufacturing - - 2,358 - 2,358
Other - 508 - - 508
-------------- -------------- -------------- -------------- --------------
Total revenue 27,386 43,936 68,291 (43,634) 95,979
-------------- -------------- -------------- -------------- --------------
Cost of services and general and
administrative expenses:
Lithotripsy - 4,646 20,735 - 25,381
Manufacturing - - 1,743 - 1,743
Other - 478 - - 478
Corporate 567 5,116 - - 5,683
-------------- -------------- -------------- -------------- --------------
567 10,240 22,478 - 33,285
Depreciation and amortization 7 5,157 4,747 - 9,911
-------------- -------------- -------------- -------------- --------------
Total operating expenses 574 15,397 27,225 - 43,196
-------------- -------------- -------------- -------------- --------------
Operating income 26,812 28,539 41,066 (43,634) 52,783
-------------- -------------- -------------- -------------- --------------
Other income (deductions):
Interest income - 309 431 - 740
Interest expense (7,160) (52) (265) - (7,477)
Loan fees and stock offering costs (360) - - - (360)
Other, net - (128) 134 - 6
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
Total other income (deductions) (7,520) 129 300 - (7,091)
-------------- -------------- -------------- -------------- --------------
Income before provision for income
taxes and minority interest 19,292 28,668 41,366 (43,634) 45,692
Minority interest in consolidated income - - - 25,041 25,041
Provision for income taxes 4,436 1,282 77 - 5,795
-------------- -------------- -------------- -------------- --------------
Net income $ 14,856 $ 27,386 $ 41,289 $ (68,675) $ 14,856
============== ============== ============== ============== ==============
</TABLE>
A-31
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet
December 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- ------------- -------------- -------------- -------------
ASSETS
Current assets:
Cash $ 2,043 $ 2,682 $ 15,339 $ - $ 20,064
Investments 4,120 - - - 4,120
Accounts receivable, net - 3,069 20,204 - 23,273
Other receivables 291 1,689 1,511 - 3,491
Deferred income taxes 94 972 - - 1,066
Prepaid expenses and other current assets 14 1,195 1,113 - 2,322
Inventory - - 3,676 3,676
-------------- -------------- -------------- -------------- -------------
Total current assets 6,562 9,607 41,843 - 58,012
Property and equipment:
Equipment, furniture and fixtures - 5,549 36,579 - 42,128
Building and leasehold improvements - 498 1,594 - 2,092
-------------- -------------- -------------- -------------- -------------
- 6,047 38,173 - 44,220
Less accumulated depreciation
and amortization - (4,514) (21,053) - (25,567)
-------------- -------------- -------------- -------------- -------------
Property and equipment, net - 1,533 17,120 - 18,653
Investment in subsidiaries
and other investments 196,347 50,721 - (228,105) 18,963
Goodwill, at cost, net of amortization - 139,989 9,099 - 149,088
Other noncurrent assets 281 643 1,186 - 2,110
-------------- -------------- -------------- -------------- -------------
$ 203,190 $ 202,493 $ 69,248 $ (228,105) $ 246,826
============== ============== ============== ============== =============
LIABILITIES
Current liabilities:
Current portion of long-term debt $ - $ - $ 1,763 $ - $ 1,763
Accounts payable 70 1,256 1,964 - 3,290
Accrued expenses 3,524 1,242 10,674 - 15,440
-------------- -------------- -------------- -------------- -------------
Total current liabilities 3,594 2,498 14,401 - 20,493
Long-term debt, net of current portion 100,000 162 3,635 - 103,797
Deferred income taxes 2,914 3,486 - - 6,400
-------------- -------------- -------------- -------------- -------------
Total liabilities 106,508 6,146 18,036 - 130,690
Minority interest - - - 19,454 19,454
STOCKHOLDERS' EQUITY
Common stock 194 - - - 194
Capital in excess of par value 87,655 - - - 87,655
Accumulated earnings 33,654 - - - 33,654
Treasury stock (24,821) - - - (24,821)
Subsidiary net equity - 196,347 51,212 (247,559) -
-------------- -------------- -------------- -------------- -------------
Total stockholders' equity 96,682 196,347 51,212 (247,559) 96,682
-------------- -------------- -------------- -------------- -------------
-------------- -------------- -------------- -------------- -------------
$ 203,190 $ 202,493 $ 69,248 $ (228,105) $ 246,826
============== ============== ============== ============== =============
</TABLE>
A-32
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet
December 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- ------------- -------------- -------------- -------------
ASSETS
Current assets:
Cash $ 15,798 $ 7,585 $ 16,763 $ - $ 40,146
Accounts receivable, net - 3,319 18,081 - 21,400
Other receivables - 2,693 - - 2,693
Deferred income taxes 1,603 727 - - 2,330
Prepaid expenses and other current assets - 456 493 - 949
Inventory - - 1,825 1,825
-------------- -------------- -------------- -------------- -------------
Total current assets 17,401 14,780 37,162 - 69,343
Property and equipment:
Equipment, furniture and fixtures - 5,301 29,184 - 34,485
Building and leasehold improvements - 491 1,582 - 2,073
-------------- -------------- -------------- -------------- -------------
- 5,792 30,766 - 36,558
Less accumulated depreciation
and amortization - (4,485) (13,986) - (18,471)
-------------- -------------- -------------- -------------- -------------
Property and equipment, net - 1,307 16,780 - 18,087
Investment in subsidiaries
and other investments 178,611 28,038 - (195,623) 11,026
Goodwill, at cost, net of amortization - 140,863 - - 140,863
Other noncurrent assets 105 488 286 - 879
-------------- -------------- -------------- -------------- -------------
$ 196,117 $ 185,476 $ 54,228 $ (195,623) $ 240,198
============== ============== ============== ============== =============
LIABILITIES
Current liabilities:
Current portion of long-term debt $ - $ - $ 890 $ - $ 890
Accounts payable 1,501 1,254 2,532 - 5,287
Accrued expenses 3,563 1,929 15,510 - 21,002
-------------- -------------- -------------- -------------- -------------
Total current liabilities 5,064 3,183 18,932 - 27,179
Long-term debt, net of current portion 100,000 162 825 - 100,987
Deferred income taxes 1,303 3,486 - - 4,789
-------------- -------------- -------------- -------------- -------------
Total liabilities 106,367 6,831 19,757 - 132,955
Minority interest - - - 17,493 17,493
STOCKHOLDERS' EQUITY
Common stock 194 - - - 194
Capital in excess of par value 87,380 - - - 87,380
Accumulated earnings 18,615 - - - 18,615
Treasury stock (16,439) - - - (16,439)
Subsidiary net equity - 178,645 34,471 (213,116) -
-------------- -------------- -------------- -------------- -------------
Total stockholders' equity 89,750 178,645 34,471 (213,116) 89,750
-------------- -------------- -------------- -------------- -------------
-------------- -------------- -------------- -------------- -------------
$ 196,117 $ 185,476 $ 54,228 $ (195,623) $ 240,198
============== ============== ============== ============== =============
</TABLE>
A-33
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
December 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- ------------- ------------- -------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net cash provided by (used in)
operating activities $ (20,940) $ 5,205 $ 51,479 $ - $ 35,744
-------------- -------------- ------------- -------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of investments and entities - (13,451) (10,129) - (23,580)
Purchases of equipment and leasehold
improvements - (1,193) (4,597) - (5,790)
Proceeds from sales of equipment - 167 40 - 207
Distributions from subsidiaries 15,407 17,424 - (32,831) -
Investments - 2,352 - - 2,352
Other - - 570 - 570
-------------- -------------- ------------- -------------- --------------
Net cash provided by (used in)
investing activities 15,407 5,299 (14,116) (32,831) (26,241)
-------------- -------------- ------------- -------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on notes payable exclusive of
interest - - (1,403) - (1,403)
Borrowings on notes payable - - 4,584 - 4,584
Distributions to minority interest - - - (27,180) (27,180)
Contributions by minority interest - - 2,636 - 2,636
Exercise and issuance of stock options 160 - - - 160
Purchase of treasury stock (8,382) - - - (8,382)
Distributions to equity owners - (15,407) (44,604) 60,011 -
-------------- -------------- ------------- -------------- --------------
Net cash provided by (used in)
financing activities (8,222) (15,407) (38,787) 32,831 (29,585)
-------------- -------------- ------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (13,755) (4,903) (1,424) - (20,082)
Cash and cash equivalents, beginning of period 15,798 7,585 16,763 - 40,146
-------------- -------------- ------------- -------------- --------------
Cash and cash equivalents, end of period $ 2,043 $ 2,682 $ 15,339 $ - $ 20,064
============== ============== ============= ============== ==============
</TABLE>
A-34
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
December 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- ------------- ------------- -------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net cash provided by (used in)
operating activities $ (10,215) $ 9,608 $ 46,158 $ - $ 45,551
-------------- -------------- ------------- -------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of equipment and leasehold
improvements - (2,000) (3,213) - (5,213)
Proceeds from sales of equipment - 179 45 - 224
Distributions from subsidiaries 26,228 16,665 - (42,893) -
Investments (408) 2,940 - - 2,532
Other 22 166 127 - 315
-------------- -------------- ------------- -------------- --------------
Net cash provided by (used in)
investing activities 25,842 17,950 (3,041) (42,893) (2,142)
-------------- -------------- ------------- -------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on notes payable exclusive of
interest (79,000) (5) (1,479) - (80,484)
Borrowings on notes payable 100,000 - 25 - 100,025
Distributions to minority interest - - - (25,799) (25,799)
Debt issuance costs (4,417) - - - (4,417)
Contributions by minority interest - - 72 - 72
Exercise and issuance of stock options 9 - - - 9
Purchase of treasury stock (16,439) - - - (16,439)
Distributions to equity owners - (26,228) (42,464) 68,692 -
-------------- -------------- ------------- -------------- --------------
Net cash provided by (used in)
financing activities 153 (26,233) (43,846) 42,893 (27,033)
-------------- -------------- ------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 15,780 1,325 (729) - 16,376
Cash and cash equivalents, beginning of period 18 6,260 17,492 - 23,770
-------------- -------------- ------------- -------------- --------------
Cash and cash equivalents, end of period $ 15,798 $ 7,585 $ 16,763 $ - $ 40,146
============== ============== ============= ============== ==============
</TABLE>
A-35
<PAGE>
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
December 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C>
Prime Medical Guarantor Non-Guarantor Eliminating Consolidated
($ in thousands) Services, Inc. Subsidiaries Subsidiaries Entries Total
--------------- ------------- -------------- -------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net cash provided by (used in)
operating activities $ (9,441) $ 14,879 $ 46,255 $ - $ 51,693
-------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of lithotripter entities - (20,217) - - (20,217)
Purchases of equipment and leasehold
improvements - (1,516) (3,030) - (4,546)
Proceeds from sales of equipment - 30 - - 30
Distributions from subsidiaries 6,865 16,667 - (23,532) -
Investments - 1,690 - - 1,690
Other - 94 - - 94
-------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
investing activities 6,865 (3,252) (3,030) (23,532) (22,949)
-------------- -------------- -------------- -------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on notes payable exclusive of
interest (47,750) (1,100) (1,478) - (50,328)
Borrowings on notes payable 50,000 - 1,201 - 51,201
Distributions to minority interest - - - (28,667) (28,667)
Contributions by minority interest - - 2,381 - 2,381
Exercise and issuance of stock options 343 - - - 343
Distributions to equity owners - (6,865) (45,334) 52,199 -
-------------- -------------- -------------- -------------- --------------
Net cash provided by (used in)
financing activities 2,593 (7,965) (43,230) 23,532 (25,070)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 17 3,662 (5) - 3,674
Cash and cash equivalents, beginning of period 1 2,598 17,497 - 20,096
-------------- -------------- -------------- -------------- --------------
Cash and cash equivalents, end of period $ 18 $ 6,260 $ 17,492 $ - $ 23,770
============== ============== ============== ============== ==============
</TABLE>
A-36
<PAGE>
ASSET PURCHASE AGREEMENT
Among
PRIME LITHOTRIPSY SERVICES, INC.
as Buyer,
RESTON HOSPITAL LITHOTRIPTER JOINT VENTURE
as Seller,
RESTON LITHOTRIPSY ASSOCIATES, INC.
COLUMBIA ARLINGTON HEALTHCARE SYSTEM, L.L.C.
and
ROBERT BALL, M.D.
Dated July 21, 1999
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of the
21 day of July, 1999 ("Effective Date"), between and among PRIME LITHOTRIPSY
SERVICES, INC., a New York corporation ("Buyer"), RESTON HOSPITAL LITHOTRIPTER
JOINT VENTURE, a Virginia general partnership ("Seller"), RESTON LITHOTRIPSY
ASSOCIATES, INC., a Virginia corporation and partner in Seller ("RLA"), COLUMBIA
ARLINGTON HEALTHCARE SYSTEM, L.L.C., a Virginia limited liability company and
partner in Seller ("CAHS"), and Robert Ball, M.D., an individual residing in the
Commonwealth of Virginia and partner in Seller ("ROBERT BALL, M.D.").
Preliminary Statements
Seller owns a Dornier Model HMT 482L Extracorporeal Shockwave Renal
Lithotripter, serial number 293, ("Lithotripter"), leases the Lithotripter for
use to others, and provides related services to others.
Buyer desires to purchase from Seller and Seller desires to sell to
Buyer the Lithotripter.
RLA, CAHS and ROBERT BALL, M.D. are the only partners of Seller, and each
joins in the execution of this Agreement for the purposes set forth herein.
Statement of Agreement
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for other valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties intending to be legally bound
hereby, agree as follows:
ARTICLE I.
SALE AND PURCHASE OF ASSETS
On the terms and subject to the conditions contained in this Agreement,
at the Closing (as hereinafter defined), Seller hereby agrees to sell, convey,
assign and transfer to Buyer, and Buyer agrees to purchase from Seller, the
assets of Seller set forth below, free and clear of any indebtedness, liens,
encumbrances or claims by any person or entity. The assets of Seller to be
purchased by Buyer pursuant to this Agreement shall be collectively referred to
herein as the "Assets," and are as follows:
a. Property and Equipment. Lithotripter, operating manuals and the trailer.
b. Goodwill. The goodwill and business reputation related to Seller's
business as of the Closing Date.
ARTICLE II.
WARRANTIES, REPRESENTATIONS AND
COVENANTS OF SELLER, RLA, CAHS AND ROBERT BALL, M.D.
Each of the parties hereto other than Buyer (collectively, the "Control
Parties") hereby represents and warrants to Buyer as follows. If a particular
representation and warranty is expressly stated below to be made, in whole or in
part, about the "Control Parties," each Control Party will be deemed to be
making that representation and warranty only about itself. Representations and
warranties expressly about the "Seller" will be deemed to be made jointly and
severally by Seller and each of the other Control Parties. Otherwise, each
Control Party (severally, and not jointly) is making each of the representations
and warranties in this Article II as to all matters stated therein (including
without limitation paragraph h of this Article II). Any reference in this
Agreement to the "actual knowledge" of Seller shall be defined as the actual
knowledge of Robert Ball, M.D., William A. Adams and A. Daniel Laurent, M.D. Any
reference in this Agreement to the "actual knowledge" of a particular Control
Party shall be defined (i) in the case of ROBERT BALL, M.D., as the actual
knowledge of Robert Ball, M.D.; (ii) in the case of CAHS, as the actual
knowledge of William A. Adams; and (iii) in the case of RLA, as the actual
knowledge of A. Daniel Laurent, M.D.
a. Existence and Power. Seller is a general partnership duly
organized, validly existing and in good standing under the laws of the State of
Virginia and has all requisite power to own and operate its business as now
conducted and as proposed to be conducted, and to enter into and perform the
terms of this Agreement. RLA represents that it is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation, and has all requisite corporate power to enter into and perform
the terms of this Agreement. CAHS represents that it is a limited liability
company duly organized, validly existing and in good standing under the laws of
the Commonwealth of Virginia, and has all requisite limited liability company
power to enter into and perform the terms of this Agreement. ROBERT BALL, M.D.,
represents that he is an individual residing in the Commonwealth of Virginia and
possesses all necessary power to enter into and perform the terms of this
Agreement.
b. Corporate Action. The execution, delivery and performance
of this Agreement and each other agreement, document, instrument or certificate
required to be executed by Seller or any other Control Party in connection
herewith (collectively, including this Agreement, the "Transaction Documents"),
are authorized by (as applicable) Seller's or such other Control Party's
respective shareholders, members, directors, governors, partners, managers or
other persons having a right to direct its affairs, and no further action or
consent is needed by or from Seller or such other Control Party to make any of
the Transaction Documents valid and binding upon Seller or such other Control
Party in accordance with its terms. Except with respect to Buyer, each of the
Transaction Documents has been, or prior to Closing will be, duly and validly
executed and delivered by Seller and/or the other Control Parties (if a party
thereto) and constitutes a valid and binding obligation of Seller and/or the
other Control Parties, enforceable against each of them in accordance with its
terms.
c. Consents and Approvals. No action, consent, or approval of, or filing
with, any governmental authority is required by Seller or any of the other
Control Parties in connection with the execution, delivery or performance of any
of the Transaction Documents.
d. Title to Assets. Seller represents that it holds good and
marketable record and beneficial title and ownership to all of the Assets, free
and clear of any lien, security interest, encumbrance or claim and that the
Lithotripter and the trailer are in reasonably good operating condition.
Furthermore, Seller represents that, except for personnel and Permits (defined
below), all the assets of Seller used in connection with the operation of
Seller's business as it is presently conducted, are included in the Assets to be
acquired by Buyer pursuant to this Agreement.
e. Licenses and Permits. Schedule II(e) lists, to the best of
Seller's actual knowledge, all third party and federal, state, county and local
governmental licenses, certificates and permits held by Seller and required in
connection with Seller's business activities or Seller's operation or use of the
Assets (the "Permits"). These Permits are not assignable and will not be
transferred to Buyer at the Closing. Seller represents that it is in compliance
with the terms and conditions of the Permits, except to the extent that a
violation does not and cannot reasonably be expected to have a material adverse
effect on the Assets. Seller further represents that it does not possess, nor is
it required to possess, a certificate of public need to conduct the Seller's
business as it is currently being conducted.
f. List of Procedures. Schedule II(f) lists the total number
of lithotripsy procedures performed by Columbia Reston Hospital Center for each
of the calendar years ending December 31, 1996, 1997 and 1998, and for the
period beginning January 1, 1999 and ending May 31, 1999. Schedule II(f) also
lists the total number of Maryland residents who received lithotripsy services
at Columbia Reston Hospital Center for the calendar year ending December 31,
1998 and for the period beginning January 1, 1999 and ending June 29, 1999.
Seller represents and warrants that Schedule II(f) fairly represents the number
of lithotripsy procedures performed on patients for the indicated periods.
Seller also represents and warrants that Schedule II(f) fairly represents ^ the
number of Maryland residents receiving lithotripsy procedures at Columbia Reston
Hospital Center for the indicated periods.
g. No Adverse Changes. Since ^ May 31, 1999, there has not
been any adverse change in the Assets, business or operations of Seller, other
than changes in the ordinary course of business that are not (when viewed in
conjunction with all other such changes) materially adverse.
h. Claims and Litigation. To the best of Seller's actual
knowledge, after due inquiry, there are no claims, actions, litigation, suits or
proceedings pending or threatened against or affecting Seller, Seller's
business, the Assets, or the transactions contemplated by this Agreement, at law
or in equity, at or before any federal, state or municipal court or other
governmental department, commission, board, bureau, agency or instrumentality.
None of the Control Parties is subject to or in default with respect to any
order, writ, injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality or arbitration tribunal with respect to
the ownership, operation or sale of the Assets or having a material and adverse
effect on the ability of such Control Party to perform their respective
covenants and obligations set forth in this Agreement.
i. No Material Misstatements. No representation, warranty or
covenant of any of the Control Parties that is contained in this Agreement, or
in any Schedule or Exhibit hereto, contains any untrue statement of a material
fact or omits any material fact necessary to make any such representation,
warranty or covenant, in light of the circumstances under which they were made,
not misleading.
<PAGE>
37
j. No Violation; Compliance with Laws. The execution, delivery
and performance of each of the Transaction Documents, and the consummation of
the transactions contemplated hereby and thereby, do not and will not (i)
violate any law or regulation or any judicial or administrative order, award,
judgment or decree applicable to Seller or the Assets (other than applicable
"bulk sales" laws); (ii) result in the creation of any lien, security interest,
charge or encumbrance upon any of the Assets; or (iii) violate or conflict with
any provision of Seller's organizational documents, excluding from the foregoing
clauses (i) and (iii) such violations that do not and cannot reasonably be
expected to have a material adverse effect on the Assets.
k. No Known Breaches by Other Parties. Each Control Party (severally, and
not jointly) represents and warrants to Buyer that it has no actual knowledge of
any breach or default by any of the other Control Parties hereto of any
representation, warranty or covenant contained in any of the Transaction
Documents.
l. Representations and Warranties True at Closing. Each and
every representation and warranty by the Control Parties shall be true and
correct as of the Closing Date in all respects, regardless of whether the
Closing Date occurs on the date of execution of this Agreement or some later
date pursuant to Section 7.1 hereof.
m. Ownership of Seller; Equity Interest Owners of RLA. RLA, CAHS and ROBERT
BALL, M.D. each possess a partnership interest in Seller of 72%, 27% and 1%,
respectively. RLA, CAHS and ROBERT BALL, M.D. are the only partners of Seller
and no other person or entity holds an equity interest of Seller. Schedule II(m)
sets forth a list of each and every person or entity that owns an ownership
interest in RLA.
n. Disclaimer of Warranties. BUYER ACKNOWLEDGES AND AGREES
THAT EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, SELLER HAS MADE AND MAKES
NO WARRANTIES EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE ASSETS, INCLUDING
WITHOUT LIMITATION, THE IMPLIED WARRANTY OF MERCHANTABILITY OR THE IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. BUYER FURTHER ACKNOWLEDGES AND
AGREES THAT EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, THE ASSETS ARE
BEING TRANSFERRED AS IS, WHERE IS, AND WITH ALL FAULTS.
ARTICLE III.
WARRANTIES, REPRESENTATIONS AND
COVENANTS OF BUYER
Buyer hereby represents, warrants to, and covenants with Seller as
follows:
a. Corporate Existence. Buyer is a corporation duly organized, validly
existing in good standing under the laws of the State of New York. Buyer is
authorized to transact business in Virginia, and Buyer has all requisite
corporate power to own and operate its business and to enter into and perform
the terms of this Agreement.
b. Corporate Action. The execution, delivery and performance
of each Transaction Document to which Buyer is a party have been authorized by
all necessary corporate action, and such Transaction Document constitutes a
valid and binding obligation upon Buyer, enforceable against it in accordance
with its terms.
c. No Violation. The execution, delivery and performance by Buyer of each
Transaction Document to which Buyer is a party, and the consummation of the
transactions contemplated herein and therein, do not and will not violate any
law or regulation or any judicial or administrative order, award, judgment or
decree applicable to Buyer.
ARTICLE IV.
PURCHASE PRICE AND PAYMENT
The total purchase price and consideration for the Assets to be sold to
Buyer pursuant to this Agreement shall be $2,400,000.00, to be paid to Seller at
the Closing in immediately available funds.
ARTICLE V.
ALLOCATION OF PURCHASE PRICE
Seller and Buyer hereby agree to allocate the purchase price among the
Assets, the non-competition covenant set forth in Article VIII hereof, and the
other agreements entered into in connection with this Agreement, in accordance
with the allocations set forth on Schedule V hereto. Such allocations have been
mutually determined by the parties at arm's length and the parties hereto agree
to use such allocations for federal income tax purposes.
ARTICLE VI.
LIABILITIES
Buyer is not assuming any debts, liabilities or obligations of any
kind, of Seller or any Control Parties, or otherwise, in connection with the
purchase of the Assets, the Closing or the consummation of the transactions
contemplated by this Agreement. All claims, liabilities or obligations of, or
against, Seller and each other Control Party (including, without limitation, any
and all federal, state or other governmental taxes and related liabilities),
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, fixed or contingent, known or unknown, will be and remain the liability and
responsibility of Seller or such other Control Party, as applicable. SELLER AND
EACH OTHER CONTROL PARTY AGREE TO HOLD BUYER AND THE BUYER INDEMNIFIED PARTIES
HARMLESS FOR SAME AND AGREE TO DEFEND AND INDEMNIFY BUYER AND THE BUYER
INDEMNIFIED PARTIES IN CONNECTION WITH ANY SUCH CLAIMS, LIABILITIES, OR
OBLIGATIONS ASSERTED AGAINST BUYER, PURSUANT TO THE PROVISIONS OF ARTICLE IX
HEREOF.
ARTICLE VII.
CLOSING
Section 7.1 Closing. The purchase, sale and transfer of possession of
the Assets (the "Closing") shall take place at the offices of Grad, Logan &
Klewans, P.C., 1421 Prince Street, Suite 320, Alexandria, Virginia 22314, on the
date of execution of this Agreement, or at such other place, date and time as
the parties hereto shall mutually agree upon in writing. The date that the
Closing occurs is referred to herein as the "Closing Date."
Section 7.2 Action by Seller. At the Closing, Seller shall execute (as
applicable), acknowledge and deliver, or cause to be executed and delivered, to
Buyer, the following:
a. Assignment and Warranty Bill of Sale, in substantially the form
attached hereto as Exhibit A, covering all Assets.
b. Executed copies of non-compete agreements, in the form
attached hereto as Exhibit B, for each of the sixteen shareholders in RLA who
does not own an existing, competing interest and is not engaged in a competing
activity.
c. Executed copies of non-compete agreements, in the form
attached hereto as Exhibit C, for each of the two shareholders in RLA who owns
an existing, competing interest or engages in a competing activity.
d. Closing certificate executed by an authorized general
partner of Seller stating that all representations and warranties of Seller set
forth in any Transaction Document are true, complete and correct at the time of
Closing, and that between the date hereof and the Closing, there has been no
material change in the condition of the Assets or Seller's business.
e. Closing certificate executed by the President of RLA
stating that all representations and warranties of RLA set forth in any
Transaction Document are true, complete and correct at the time of Closing and
that RLA has no actual knowledge of a breach of a representation and warranty by
either of the other Control Parties.
f. Closing certificate executed by an authorized officer of
CAHS stating that all representations and warranties of CAHS set forth in any
Transaction Document are true, complete and correct at the time of Closing and
that CAHS has no actual knowledge of a breach of any representation and warranty
by either of the other Control Parties.
g. Closing certificate executed by ROBERT BALL, M.D. stating that all
representations and warranties of ROBERT BALL, M.D. set forth in any
Transaction Document are true, complete and correct at the time of Closing
and that ROBERT BALL, M.D. has no actual knowledge of a breach of any
representation and warranty by either of the other Control Parties.
Section 7.3 Action by Buyer. At the Closing, Buyer shall execute (as
applicable), acknowledge and deliver, or cause to be executed and delivered, to
Seller, the following:
a. The cash sum in the amount of $2,400,000.00 pursuant to Article IV
hereof, by wire transfer to an account designated by Seller.
b. Closing certificate executed by the President or Secretary
of Buyer stating that all representations and warranties of Buyer set forth in
any Transaction Document are true, complete and correct at the time of Closing.
Section 7.4 Further Assurances. At any time and from time to time after
the Closing, Seller and the other Control Parties shall, at the reasonable
request of Buyer, execute and deliver or cause to be executed and delivered, all
such bills of sale, assignments, consents, documents (including documents of
title with respect to any titled property included among the Assets),
certificates and instruments, and take or cause to be taken all such other
action, as may be reasonably deemed necessary or desirable in order to put Buyer
in actual possession and operating control of the Assets, or to more fully and
effectively vest in Buyer or to confirm in buyer full right, title and interest
to the Assets, free and clear of all liens and security interests, in accordance
with this Agreement, or to assist Buyer in exercising its rights with respect
thereto, or otherwise to carry out the intents and purposes of this Agreement.
Section 7.5 Conditions to Closing. In the event the Closing does not
occur on the date of execution of this Agreement, it shall be a condition to
Closing by each party that (i) Buyer, Prime Medical Services, Inc., a Delaware
corporation ("Prime"), or one of Prime's subsidiaries shall have entered into a
Lithotripsy Agreement with CAHS pursuant to which Buyer or one of Prime's
subsidiaries will provide lithotripsy and related services at Reston Hospital
Center; (ii) all actions required to be taken by the other party or parties set
forth in this Article VII shall have been taken at or prior to the Closing;
(iii) all documents to be delivered pursuant to this Article VII shall be
satisfactory in form and substance to such party and its counsel; and (iv) such
party or its counsel shall have received copies of all documents, instruments or
certificates, executed or certified, whichever may be appropriate, as is
required by this Article VII. For purposes of this Section, all forms of closing
documents attached to this Agreement are hereby stipulated by the parties to be
in satisfactory form.
ARTICLE VIII.
NON-COMPETITION COVENANTS
Section 8.1 Seller, RLA and Ball, severally and not jointly, hereby
agrees that, until the expiration of its respective Restriction Period (as
defined for each below), it 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 its own
benefit or for the benefit of any other person, firm or corporation, without the
prior written consent of Buyer, commit any of the following acts, which acts
shall be considered violations of this covenant not to compete:
(a) Lithotripsy Services. Except as permitted pursuant to
Section 8.3 below, directly or indirectly provide lithotripsy services,
including without limitation, patient lithotripsy services, lithotripsy
management services, Lithotripter leasing, or similar lithotripsy services
(collectively, "Lithotripsy Services"), anywhere within 50 miles of Columbia
Reston Hospital Center, Reston, Virginia.
(b) Interference with Business Relationships. Directly or
indirectly request or advise any patient or physician or any other person, firm
or corporation having a business relationship with Buyer or any of Buyer's
affiliates (or having a past business relationship with Seller) to withdraw,
curtail, or cancel its business with Buyer or Buyer's affiliates, as the case
may be; or
(c) Solicitation of Employees. Directly or indirectly hire any
employee of Buyer or any of Buyer's affiliates or induce or attempt to influence
any employee of Buyer or any of Buyer's affiliates to terminate his or her
employment with such entity.
Section 8.2 So long as Buyer, its affiliates, assignees or successors
continues to provide Lithotripsy Services to Reston Hospital Center, CAHS hereby
agrees that, until the expiration of its Restriction Period (as defined below),
it will not directly or indirectly, ^ whether 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), ^ through
the actions of its member HCA Health Services of Virginia, Inc., or as a
principal, 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, firm or corporation, without the prior written
consent of Buyer, commit any of the following acts, which acts shall be
considered violations of this covenant not to compete:
(a) Lithotripsy Services. Except as otherwise permitted in
this subparagraph (a) and Section 8.3 below, directly or indirectly provide
Lithotripsy Services anywhere within the Restriction Area (defined below) for
the applicable period. The restriction set forth in this subparagraph (a) shall
not apply to any facility in which CAHS, or any affiliate or successor thereof,
acquires after the Closing a beneficial interest that, at the time of such
acquisition, provides Lithotripsy Services to the general public and for which ^
annual gross revenues from Lithotripsy Services do not exceed 5% of ^ such
facility's ^ annual gross revenues. For purposes of this Agreement, the
"Restriction Area" shall mean that area within the Commonwealth of Virginia
which is defined by a driving distance radius from Columbia Reston Hospital
Center, Reston, Virginia of 50 miles for the first year of the Restriction
Period, 30 miles for the second year of the Restriction Period and 20 miles for
each of the third, fourth and fifth years of the Restriction Period.
(b) Interference with Business Relationships. Directly or
indirectly request or advise any patient or physician or any other person, firm
or corporation having a business relationship with Buyer or any of Buyer's
affiliates (or having a past business relationship with Seller) to withdraw,
curtail, or cancel its business with Buyer or Buyer's affiliates, as the case
may be; or
(c) Solicitation of Employees. Directly or indirectly hire any
employee of Buyer or any of Buyer's affiliates or induce or attempt to influence
any employee of Buyer or any of Buyer's affiliates to terminate his or her
employment with such entity.
Section 8.3 Medical Judgment. 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.
Section 8.4 Restriction Period. For purposes of this Agreement, the
"Restriction Period" shall begin on the Effective Date and continue until five
(5) years after the Effective Date.
Section 8.5 Affiliates. For purposes of this Agreement, the Buyer's
affiliates shall include Prime, and each of Prime's and Buyer's respective
current and future (throughout the Restriction Period), direct and indirect,
subsidiaries and affiliates.
Section 8.6 Restrictions Reasonable. RLA, CAHS and Ball have reviewed
and carefully considered the provisions of this Article VIII 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.
Section 8.7 Equitable Relief. RLA, CAHS and Ball each agree that a
violation on its part of any covenant contained in this Article VIII 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 addition
to whatever other remedies, at law or in equity, may be available, including,
specifically, recovery of additional damages.
ARTICLE IX.
INDEMNIFICATION OF BUYER
Section 9.1 Indemnification of Buyer. For a period of two years after
the Closing Date, Seller and each of the other Control Parties, jointly and
severally, but subject to the limitation set forth below, agree to indemnify and
hold Buyer, Prime and each of Prime's and Buyer's respective representatives,
officers, directors, employees, and affiliates (collectively, the "Buyer
Indemnified Parties") harmless from and against any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs, and expenses
(including court costs and reasonable 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 Buyer Indemnified Parties may sustain,
arising out of, or with respect to, (i) any breach or default by Seller or any
of the other Control Parties of any of the representations, warranties,
covenants or agreements contained in any Transaction Document, (ii) any
obligations or any liabilities to any finder, broker or sales agent engaged or
retained by Seller or another Control Party, (iii) any debts, liabilities or
obligations of Seller (iv) any debts, liabilities or obligations of any Control
Parties with respect to the Assets or business conducted utilizing the Assets,
(v) any act or omission by Seller that occurred prior to the Closing, or (vi)
any act or omission by any of the Control Parties that relates to the Assets or
business conducted utilizing the Assets and occurred prior to the Closing.
Regardless of anything contained in this Agreement to the contrary, Seller's
indemnification liability shall be limited to an amount equal to the purchase
price and each of the Control Parties' indemnification liability shall be
limited to an amount equal to $24,000.00 for ROBERT BALL, M.D., $1,728,000.00
for RLA and $648,000.00 for CAHS, and in no case shall the collective liability
of the Seller and Control Parties be greater than the purchase price.
Section 9.2 Defense of Third-Party Claims. A Buyer Indemnified Party
shall give prompt written notice to Seller and the other Control Parties of the
commencement or assertion of any third-party action in respect of which such
Buyer Indemnified Party shall seek indemnification hereunder. Any failure so to
notify Seller and the other Control Parties shall not relieve Seller and the
other Control Parties from any liability that they may have to such Buyer
Indemnified Party under this Article IX, unless the failure to give such notice
materially and adversely prejudices Seller and the other Control Parties. Seller
and the other Control Parties 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 Buyer Indemnified Party shall be entitled, at his, her, or its
own expense, to participate in the defense of such third-party action;
(b) Seller and the other Control Parties shall obtain the
prior written approval of the Buyer 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 Buyer Indemnified Party
or if, in the reasonable opinion of the Buyer Indemnified Party, such
settlement, compromise, admission, or acknowledgment would have a material
adverse effect on its business or, in the case of a Buyer Indemnified Party who
is a natural person, on his or her assets or interests;
(c) Seller and the other Control Parties 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
Buyer Indemnified Party of a release from all liability in respect of such
third-party action;
(d) Seller and the other Control Parties shall not be entitled
to control (but shall be entitled to participate at their own expense in the
defense of), and the Buyer 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 Seller and the other
Control Parties fail to assume the defense within a reasonable length of time
after giving notice to Seller and the other Control Parties or (ii) to the
extent the third-party action seeks an order, injunction, or other equitable
relief against the Buyer Indemnified Party which, if successful, would
materially adversely affect the business, operations, assets, or financial
condition of the Buyer Indemnified Party; provided, however, that the Buyer
Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment which would give rise to liability on the part of Seller or the
other Control Parties without the prior written consent of Seller and the other
Control Parties;
(e) Seller and the other Control Parties shall make payments
of all amounts required to be made pursuant to the foregoing provisions of this
Article IX to or for the account of the Buyer Indemnified Party from time to
time promptly upon receipt of bills or invoices relating thereto or when
otherwise due and payable, provided that the Buyer Indemnified Party has agreed
in writing to reimburse Seller and the other Control Parties for the full amount
of such payments if the Buyer Indemnified Party is ultimately determined not to
be entitled to such indemnification; and
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this Article
IX 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 X.
INDEMNIFICATION OF
THE CONTROL PARTIES
Section 10.1 Indemnification of Seller and the other Control Parties.
For a period of one year after the Closing Date, Buyer agrees to indemnify and
hold harmless Seller and the other Control Parties, and, where applicable, their
respective partners, officers, directors, employees, and affiliates
(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 the Seller Indemnified Parties may sustain,
arising out of, or with respect to, (i) any breach or default by Buyer of any of
the representations, warranties, covenants or agreements contained in any
Transaction Document, (ii) any obligations or liabilities to any finder, broker
or sales agent engaged or retained by Buyer or (iii) any act or omission by
Buyer that relates to the Assets and occurs after the Closing. Regardless of
anything contained in this Agreement to the contrary, Buyer's indemnification
liability to each Control Party shall be limited to an amount equal to
$24,000.00 for ROBERT BALL, M.D., $1,728,000.00 for RLA and $648,000.00 for
CAHS, and in no case shall the collective liability of the Buyer be greater than
the purchase price.
Section 10.2 Defense of Third-Party Claims. A Seller Indemnified Party
shall give prompt written notice to Buyer 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 Buyer shall not relieve
Buyer from any liability that it may have to such Seller Indemnified Party under
this Article X unless the failure to give such notice materially and adversely
prejudices Buyer. Buyer shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his, her, or
its own expense, to participate in the defense of such third-party action;
(b) Buyer shall obtain the prior written approval of the
Seller 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 Seller Indemnified Party or if; in the reasonable opinion of
the Seller Indemnified Party, such settlement, compromise, admission, or
acknowledgment would have a material adverse effect on its business or, in the
case of a Seller Indemnified Party who is a natural person, on his or her assets
or interests;
(c) Buyer 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 Indemnified Party of a
release from all liability in respect of such third-party action; and
(d) Buyer 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
(i) as to which Buyer 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 against the Seller Indemnified Party which, if
successful, would materially adversely affect the business, operations, assets,
or financial condition of the Seller Indemnified Party; provided, however, that
the Seller Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment which would give rise to liability on the part of Buyer without
the prior written consent of Buyer.
(e) Buyer shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this Article X 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
Buyer 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 X
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 XI
GENERAL
Section 11.1 Costs. Each party hereto agrees to pay their respective
costs and expenses incurred by them in the negotiation, preparation, performance
of and compliance with all agreements, covenants and conditions contained in
each Transaction Document to which it is a party, including, but not limited to,
their respective attorney's fees and accountant's fees.
Section 11.2 No Brokers. Each party represents that no brokers, agents
or finders are involved in this transaction and each agrees to hold the other
harmless from liability for any brokerage, agency, or finder's fees or
commissions with respect to which any such party may have incurred an
obligation.
Section 11.3 Assignability. This Agreement may not be assigned by any
party hereto without the prior written consent of all other parties to this
Agreement, except that Buyer may, upon written notice to Seller and the other
Control Parties, assign its rights pursuant to the non-competition covenants set
forth in Article VIII hereof without the written consent of any other party
hereto, provided that any such assignment is made in connection with a sale or
transfer of (i) all or substantially all of the Assets, (ii) all or
substantially all of the business or assets of Buyer (including the assets
required to provide Lithotripsy Services to Reston Hospital Center), (iii) at
least 50% of the outstanding voting stock of Buyer or consummation of a merger
or other transaction that results in a change of control of Buyer, or (iv) ^
Buyer's or Buyer's affiliates' ^ obligations under the lithotripsy services
agreement referred to in Section 7.5.
Section 11.4 Entire Agreement. This Agreement and the other Transaction
Documents, together with all schedules and exhibits referred to herein, which by
this reference are hereby incorporated herein and made a part hereof for all
purposes, contain the entire agreement between the parties hereto with respect
to the transactions contemplated herein, and supersede all written or oral
negotiations, commitments, warranties or representations, and cannot be altered
or otherwise amended except pursuant to an instrument in writing signed by each
of the parties hereto. For all purposes of this Agreement, in lieu of physically
attaching referenced exhibits to this Agreement, such exhibits may be signed and
approved by the parties hereto and delivered concurrently with the execution and
delivery of this Agreement and deemed attached hereto.
Section 11.5 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or mailed by certified or registered mail,
postage prepaid to:
If to Buyer: Prime Lithotripsy Services, Inc.
1301 Capital of Texas Highway
Suite C-300
Austin, TX 78746
Attn: Cheryl L. Williams
With Copy to: Akin, Gump, Strauss, Hauer & Feld L.L.P.
816 Congress Avenue, Suite 1900
Austin, TX 78701
Attn: Tim LaFrey
If to Seller: Reston Hospital Lithotripter Joint Venture
1850 Town Center Parkway
Reston, Virginia 22090
With Copy to: Michael P. Logan, Esquire
Grad, Logan & Klewans, P.C.
1421 Prince Street, Suite 320
Alexandria, Virginia 22314
If to RLA: Reston Lithotripsy Associates, Inc.
1850 Town Center Parkway
Reston, VA 22090
Attn: A. Daniel Laurent, M.D.
With Copy to: Michael P. Logan, Esquire
Grad, Logan & Klewans, P.C.
1421 Prince Street, Suite 320
Alexandria, Virginia 22314
If to CAHS: Reston Hospital Center
1850 Town Center Parkway
Reston, VA 22090
Attn: William A. Adams, CEO
With Copy to: McGuire, Woods, Battle & Boothe LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
Attn: Thomas J. Stallings
If to ROBERT BALL, M.D.: Robert Ball, M.D.
7005 Symphony Court
McLean, Virginia 22101
Section 11.6 Waiver. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. Except as otherwise provided herein, no
waiver by any party of any condition, or of any breach of any term, covenant,
representation or warranty contained in this Agreement, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such condition or breach, or a waiver of any other condition or breach of
any other term, covenant, representation or warranty.
Section 11.7 Headings. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and shall in
no way restrict or otherwise modify any of the terms or provisions hereof.
Section 11.8 Materiality. The term "material" as used in this Agreement
is hereby defined to mean all accounting adjustments, costs, values, damages,
deficiencies, assessments or expenses with respect to the value of the Assets
and businesses to be purchased by Buyer hereunder or the liabilities to be
assumed by Buyer hereunder, which either separately or in the aggregate exceed
the sum of $10,000.
Section 11.9 Counterparts. This Agreement, and each other Transaction
Document may be executed simultaneously in multiple counterparts, each of which
when so executed shall be deemed to be an original, and such counterparts shall
together constitute one and the same instrument.
Section 11.10 Severance. Should any portion of this Agreement be
declared invalid and unenforceable, then such portion shall be deemed to be
severed from this Agreement and shall not affect the remainder thereof.
Section 11.11 Extension of Benefits. All of the terms and conditions of
this Agreement shall be binding upon and inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective heirs, personal
representatives, executors, successors and assigns; provided, however, that in
the event that CAHS is dissolved, the terms and conditions of this Agreement, if
still applicable, shall solely be binding upon, and inure to the benefit of, HCA
Health Services of Virginia, Inc., a Virginia corporation and a member of CAHS.
Section 11.12 Tax Advice. Each party hereto acknowledges that they have
consulted with their respective tax advisors in connection with the transactions
contemplated by this Agreement, and each party hereto acknowledges that they
have not relied upon any advice or opinions given by the other party or its
attorneys or agents, nor has any party hereto guaranteed any particular tax
consequences in connection with the transactions contemplated by this Agreement.
Section 11.13 Survival of Representations, Warranties and Covenants.
All of the representations, warranties and covenants contained in this Agreement
shall survive the Closing Date for a period of two years.
IN WITNESS WHEREOF, the parties have executed and delivered, or caused
this Agreement to be executed and delivered by their respective duly authorized
officers, on the day and year first above written.
BUYER: PRIME LITHOTRIPSY SERVICES, INC.
By:/s/ Cheryl Williams
---------------------
Printed Name: Cheryl Williams
Title: Chief Financial Officer
SELLER: RESTON HOSPITAL LITHOTRIPTER
JOINT VENTURE
Reston Lithotripsy Associates, Inc.
General Partner
By: /s/ Michael R. Hardy, President
----------------------------------
Printed Name: Michael R. Hardy, President
Title: President, Reston Lithotripsy
Associates, Inc.
RLA: RESTON LITHOTRIPSY ASSOCIATES, INC.
By: /s/ Michael R. Hardy
------------------------
Printed Name: Michael R. Hardy
Title: President
CAHS: COLUMBIA ARLINGTON HEALTHCARE SYSTEM, L.L.C.
By:/s/ William A. Adams
-----------------------
Printed Name: William A. Adams
Title: COO/Authorized Agent
BALL:
/s/ Robert Ball, M.D.
-------------------------------------
ROBERT BALL, M.D.
<PAGE>
Schedule II(e)
Non-Assignable Permits of Seller
Business and Professional Occupations License issued by the County of
Fairfax, Virginia.
<PAGE>
Schedule II(f)
List of Procedures
Year Procedures
1996 506
1997 443
1998 534
1999, up to May 31, 1999 228
Maryland Patients
Year Patients
1998 8
1999, up to June 29, 1999 7
<PAGE>
Schedule II(m)
Ownership of RLA
Amer Z. Al-Juberi, M.D.
Janice Arnold, M.D.
John J. Basile, M.D.
Michael E. Beall, M.D.
Myron Berger, M.D.
Robert M. Berger, M.D.
Mark Bilowus, M.D.
Giovanni DiSandro, M.D.
William Glover, Jr., M.D.
Michael R. Hardy, M.D.
A. Daniel Laurent, M.D.
J. Martin Lebowitz, M.D.
EK Seng Lou, M.D.
Jeff Pan, M.D.
Philip A. St. Raymond, M.D.
William Reha, M.D.
Domingo Suatengco, M.D.
Anthony Vara, M.D.
<PAGE>
Schedule V
Allocation of Purchase Price
<PAGE>
EXHIBIT A
Form of Assignment and Warranty Bill of Sale
<PAGE>
EXHIBIT B
Form of Non-compete Agreement
Non-competition Agreement
THIS NON-COMPETITION AGREEMENT (this "Agreement") entered into this ___
day of July, 1999 (the "Effective Date"), by the undersigned individual (the
"Restricted Party") for the benefit of Prime Medical Services, Inc., a Delaware
corporation (the "Company") and the Company's affiliates.
WHEREAS, the Company, through a subsidiary, has acquired certain
lithotripsy equipment from the Restricted Party and certain affiliates of the
Restricted Party; and
WHEREAS, as a material inducement for the Company's purchase of such
equipment, the Restricted Party has agreed, among other things, not to engage in
certain competitive activities, or assist or participate with any other person
or entity engaging in such activities, as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, the Restricted Party
hereby covenants and agrees as follows:
1. Agreement. The Restricted Party hereby covenants and agrees that,
until the expiration of the Restriction Period (as defined below), the
Restricted Party will not, directly or indirectly, either through any kind of
ownership (other than ownership of securities of a publicly held corporation of
which the Restricted Party owns less than five percent (5%) 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 the Restricted Party's own benefit or for the benefit of any other
person, corporation or other entity, without the prior written consent of the
Company, commit any of the following acts described in paragraphs (a) through
(c) below, which acts shall be considered violations of this covenant not to
compete:
(a) Lithotripsy Services. Except as permitted pursuant to paragraph (d)
below, directly or indirectly provide lithotripsy services, including without
limitation, patient lithotripsy services, lithotripsy management services,
lithotripter leasing, or similar lithotripsy services, anywhere within fifty
(50) miles of Columbia Reston Hospital Center in Reston, Virginia. The area
described in the preceding sentence is hereinafter referred to as the
"Restricted Area."
(b) Interference with Business Relationships. Directly or indirectly
request or advise any patient or physician or any other person, corporation or
other entity having a business relationship with the Company or any of the
Company's affiliates to withdraw, curtail, or cancel its business with such
entity.
(c) Solicitation of Employees. Directly or indirectly hire any employee
of the Company or any of the Company's affiliates or induce or attempt to
influence any employee of the Company or any of the Company's affiliates to
terminate his or her employment with such entity.
(d) Medical Judgment. Nothing in this Agreement shall be construed to
limit or infringe upon the professional medical judgment or ability to practice
medicine of the Restricted Party, if the Restricted Party is a physician
(including, but not limited to, the selection of appropriate facilities for
medical care), and no exercise of professional medical judgment or act
constituting the practice of medicine shall be considered a violation of this
Agreement.
2. Restriction Period. For purposes of this Agreement, the "Restriction
Period" shall begin on the Effective Date and continue until five (5) years
after the Effective Date.
3. General. For purposes of this Agreement, the Company's affiliates
shall include its current and future (throughout the Restriction Period)
subsidiaries and affiliates. The Restricted Party has reviewed and carefully
considered the provisions of this Agreement and, having done so, 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, and (c) are reasonably
required for the protection of the legitimate interests of the Company and its
affiliates. The Restricted Party agrees that a violation on its part of any
covenant contained in this Agreement will cause the Company and its affiliates
irreparable damage for which remedies at law may be insufficient, and for that
reason, agrees that the Company and its affiliates 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, may be available, including, specifically,
recovery of additional damages.
4. Miscellaneous.
(a) 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 the Company.
(b) Expenses. The Restricted Party shall pay all costs and
expenses incurred by it in connection with this Agreement, including the fees
and disbursements of its counsel.
(c) 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.
(d) Waiver. No failure or delay on the part of the Company 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.
(e) 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 Restricted Party acknowledges and
agrees 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.
(f) Forum. The Restricted Party consents to the in personam
jurisdiction of any state or federal court in Alexandria, Virginia and waives
any objection to the venue of any such suit, action or proceeding. In the event
that the Restricted Party institutes a proceeding involving this Agreement in a
jurisdiction outside Alexandria, Virginia, the Restricted Party shall indemnify
the Company and its affiliates for any losses and expenses that may result from
the failure to institute such proceeding only in a state or federal court in
Alexandria, Virginia, including without limitation any additional expenses
incurred as a result of litigating in another jurisdiction, such as reasonable
fees and expenses of local counsel and travel and lodging expenses for parties,
witnesses, experts and support personnel.
[Signature page follows]
<PAGE>
SIGNATURE PAGE
TO
NON-COMPETITION AGREEMENT
IN WITNESS WHEREOF, the Restricted Party has duly executed this
Agreement as of the day and year first above written.
RESTRICTED PARTY
Signature:
Printed Name:
<PAGE>
EXHIBIT C
Form of Non-compete Agreement
Non-competition Agreement
THIS NON-COMPETITION AGREEMENT (this "Agreement") entered into this ___
day of July, 1999 (the "Effective Date"), by the undersigned individual (the
"Restricted Party") for the benefit of Prime Medical Services, Inc., a Delaware
corporation (the "Company") and the Company's affiliates.
WHEREAS, the Company, through a subsidiary, has acquired certain
lithotripsy equipment from the Restricted Party and certain affiliates of the
Restricted Party; and
WHEREAS, as a material inducement for the Company's purchase of such
equipment, the Restricted Party has agreed, among other things, not to engage in
certain competitive activities, or assist or participate with any other person
or entity engaging in such activities, as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, the Restricted Party
hereby covenants and agrees as follows:
1. Agreement. The Restricted Party hereby covenants and agrees that,
until the expiration of the Restriction Period (as defined below), the
Restricted Party will not, directly or indirectly, either through any kind of
ownership (other than ownership of securities of a publicly held corporation of
which the Restricted Party owns less than five percent (5%) 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 the Restricted Party's own benefit or for the benefit of any other
person, corporation or other entity, without the prior written consent of the
Company, commit any of the following acts described in paragraphs (a) through
(c) below, which acts shall be considered violations of this covenant not to
compete:
(a) Lithotripsy Services. Except as permitted pursuant to paragraph (d)
below, directly or indirectly provide lithotripsy services, including without
limitation, patient lithotripsy services, lithotripsy management services,
lithotripter leasing, or similar lithotripsy services, anywhere within fifty
(50) miles of Columbia Reston Hospital Center in Reston, Virginia. The area
described in the preceding sentence is hereinafter referred to as the
"Restricted Area." Notwithstanding the foregoing, the passive ownership interest
by Restricted Party in that certain lithotripsy partnership described on
Exhibit-A hereto shall not be deemed a violation by Restricted Party of this
paragraph (a); provided, however, that Restricted Party agrees that, during the
term of this Agreement, Restricted Party shall not increase its ownership in
such lithotripsy partnership.
(b) Interference with Business Relationships. Directly or indirectly
request or advise any patient or physician or any other person, corporation or
other entity having a business relationship with the Company or any of the
Company's affiliates to withdraw, curtail, or cancel its business with such
entity.
(c) Solicitation of Employees. Directly or indirectly hire any employee
of the Company or any of the Company's affiliates or induce or attempt to
influence any employee of the Company or any of the Company's affiliates to
terminate his or her employment with such entity.
(d) Medical Judgment. Nothing in this Agreement shall be construed to
limit or infringe upon the professional medical judgment or ability to practice
medicine of the Restricted Party, if the Restricted Party is a physician
(including, but not limited to, the selection of appropriate facilities for
medical care), and no exercise of professional medical judgment or act
constituting the practice of medicine shall be considered a violation of this
Agreement.
2. Restriction Period. For purposes of this Agreement, the
"Restriction Period" shall begin on the Effective Date and continue until five
(5) years after the Effective Date.
3. General. For purposes of this Agreement, the Company's
affiliates shall include its current and future (throughout the Restriction
Period) subsidiaries and affiliates.The Restricted Party has reviewed and
carefully considered the provisions of this Agreement and, having done so,
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, and
(c) are reasonably required for the protection of the legitimate interests of
the Company and its affiliates.
The Restricted Party agrees that a violation on its part of any
covenant contained in this Agreement will cause the Company and its affiliates
irreparable damage for which remedies at law may be insufficient, and for that
reason, agrees that the Company and its affiliates 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, may be available, including, specifically,
recovery of additional damages.
4. Miscellaneous.
(a) 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 the Company.
(b) Expenses. The Restricted Party shall pay all costs and expenses
incurred by it in connection with this Agreement, including the fees and
disbursements of its counsel.
(c)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.
(d) Waiver. No failure or delay on the part of the Company 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.
(e) 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 Restricted Party acknowledges and
agrees 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.
(f) Forum. The Restricted Party consents to the in personam
jurisdiction of any state or federal court in Alexandria, Virginia and waives
any objection to the venue of any such suit, action or proceeding. In the event
that the Restricted Party institutes a proceeding involving this Agreement in a
jurisdiction outside Alexandria, Virginia, the Restricted Party shall indemnify
the Company and its affiliates for any losses and expenses that may result from
the failure to institute such proceeding only in a state or federal court in
Alexandria, Virginia, including without limitation any additional expenses
incurred as a result of litigating in another jurisdiction, such as reasonable
fees and expenses of local counsel and travel and lodging expenses for parties,
witnesses, experts and support personnel.
[Signature page follows]
<PAGE>
SIGNATURE PAGE
TO
NON-COMPETITION AGREEMENT
IN WITNESS WHEREOF, the Restricted Party has duly executed this
Agreement as of the day and year first above written.
RESTRICTED PARTY
Signature:
Printed Name:
<PAGE>
EXHIBIT A
TO NON-COMPETITION AGREEMENT
DESCRIPTION OF EXISTING INVESTMENT
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
MOBILE KIDNEY STONE CENTERS
OF CALIFORNIA III, L.P.
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
MOBILE KIDNEY STONE CENTERS OF CALIFORNIA III, L.P.
---------------------------------------------------
TABLE OF CONTENTS
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.................................................7
----------
9. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF CERTAIN LIMITED
----------------------------------------------------------
PARTNERS...................................................7
--------
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GENERAL
--------------------------------------------------------
PARTNER....................................................7
-------
11. ADMISSION OF LIMITED PARTNERS..............................8
-----------------------------
12. CAPITAL ACCOUNTS...........................................9
----------------
13. ALLOCATIONS...............................................10
-----------
14. DISTRIBUTIONS.............................................13
-------------
l5. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS................14
------------------------------------------
16. LIMITED LIABILITY.........................................16
-----------------
i
<PAGE>
17. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS...........16
-----------------------------------------------
18. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON
-----------------------------------------------------
CERTAIN EVENTS............................................20
--------------
19. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL PARTNER'S
-----------------------------------------------------------
INTEREST..................................................26
--------
20. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER........27
--------------------------------------------------
21. MANAGEMENT AND OPERATION OF BUSINESS......................27
------------------------------------
22. RESERVES..................................................30
--------
23. INDEMNIFICATION AND EXCULPATION OF THE GENERAL PARTNER
------------------------------------------------------
.........................................................30
24. DISSOLUTION OF THE PARTNERSHIP............................31
------------------------------
25. DISTRIBUTION UPON DISSOLUTION.............................32
-----------------------------
26. BOOKS OF ACCOUNT, RECORDS AND REPORTS.....................33
-------------------------------------
27. NOTICES...................................................34
-------
28. AMENDMENTS................................................34
----------
29. LIMITATIONS ON AMENDMENTS.................................34
-------------------------
30. MEETINGS, CONSENTS AND VOTING.............................35
-----------------------------
31. SUBMISSIONS TO THE LIMITED PARTNERS.......................35
-----------------------------------
32. ADDITIONAL DOCUMENTS......................................35
--------------------
33. SURVIVAL OF RIGHTS........................................36
------------------
34. INTERPRETATION AND GOVERNING LAW..........................36
--------------------------------
35. SEVERABILITY..............................................36
------------
36. AGREEMENT IN COUNTERPARTS.................................36
-------------------------
ii
<PAGE>
37. THIRD PARTIES.............................................36
-------------
38. POWER OF ATTORNEY.........................................36
-----------------
39. ARBITRATION...............................................37
-----------
40. CREDITORS.................................................37
---------
SCHEDULES
Schedule A - Schedule of Partnership Interests
iii
<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 CALIFORNIA CORPORATE
SECURITIES LAW OF 1968, AS AMENDED, OR REGISTERED UNDER SIMILAR LAWS OR ACTS OF
OTHER STATES IN RELIANCE UPON EXEMPTIONS UNDER SUCH LAWS. IN ADDITION, NO
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS MAY BE MADE WITHOUT COMPLIANCE WITH
THE RESTRICTIONS SET FORTH IN ARTICLE 17 BELOW.
AGREEMENT
OF LIMITED PARTNERSHIP
OF
MOBILE KIDNEY STONE CENTERS
OF CALIFORNIA III, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement") is
made as of August 12, 1999, by and among MOBILE KIDNEY STONE CENTERS OF
CALIFORNIA, LTD. I, a California limited partnership (the "General Partner"),
and persons listed on Schedule A attached hereto as the Limited Partners.
1. FORMATION.
---------
The Partnership was formed pursuant to the filing in the
Office of the Secretary of State of California on or about February 2, 1999 of a
Certificate of Limited Partnership in accordance with the provisions of the Act.
2. NAME.
----
2.1 The name of the Partnership is "Mobile Kidney Stone
Centers of California III, 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 initial 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. Pursuant to the Act, the Partnership will
-1-
<PAGE>
also maintain certain Partnership records in California at a location set forth
in the Partnership's Certificate of Limited Partnership (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
acquire and operate one or more transportable lithotripters (or any other renal
stone treatment equipment) for the treatment of renal stones primarily in
California in the counties of Alameda, Contra Costa, Merced, Nevada, Placer, San
Joaquin and Stanislaus, 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; provided, that such equipment as of the date of acquisition
by the Partnership has received FDA premarket approval; (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 December 31, 2049, 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.
Bank. First-Citizens Bank & Trust Company, its successors
and assigns.
-2-
<PAGE>
Capital Account. The Partnership capital account of a
Partner as computed pursuant to Article 12 of this Agreement.
Capital Contributions. All capital contributions made by a
Partner or his or her 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 Article 7.4 of this
Agreement, the future offering of additional limited partnership interests in
the Partnership as determined by the General Partner. Except as otherwise
provided in Article 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 equipment used in the operation of the
Lithotripsy System, including the mobile transport vehicle, the lithotripter and
miscellaneous medical equipment and supplies, and any similar additional
equipment acquired by the Partnership in the future.
FDA. The United States Food and Drug Administration.
General Partner. The general partner of the Partnership,
Mobile Kidney Stone Centers of California, Ltd. I, a California
limited partnership.
Guaranty. The Guaranty Agreement pursuant to which each
Limited Partner will guarantee a portion of the Partnership's obligations to the
Bank under the Loan. The form of the Guaranty Agreement is included in the
Subscription Packet accompanying the Memorandum.
Initial Limited Partner. Stan Johnson, a resident of Arizona
and an Affiliate of the general partner 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 Limited
Partner in accordance with the provisions of this Agreement.
-3-
<PAGE>
Lithotripter. The extracorporeal shock-wave lithotripter to
be acquired by the Partnership and any replacements therefor or
additional lithotripters to be purchased by the Partnership.
Lithotripsy System. The mobile transport vehicle and
operational Lithotripter.
Loan. The loan of up to $487,125 from the Bank to the
Partnership. Loan proceeds will be used by the Partnership to (i) acquire an
extracorporeal shockwave lithotripter with options (estimated at $400,000), (ii)
acquire and upfit a mobile van to transport the lithotripter (estimated at
$50,000) and (iii) pay state sales taxes on the purchase of the Lithotripsy
System (estimated at $37,125).
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 Percentage Interests in the Partnership
held by the Limited Partners.
Memorandum. The Confidential Private Placement Memorandum of
the Partnership dated February 8, 1999, 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.
Offering. The offer to potential investors of 60 Units
pursuant to the Memorandum.
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. Mobile Kidney Stone Centers of California III,
L.P., 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
established reserves, over (B) the sum of (i) all cash expenses paid by the
Partnership for
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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 or her Unit ownership based upon the Limited Partners holding
an aggregate 60% Percentage Interest in the Partnership, with each initial Unit
sold representing an initial 1% interest. The General Partner will initially own
a 40% 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 also be reflected by amendments 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.
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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
Memorandum.
Sales Commission. The $250 sales commission paid to MedTech
Investments, Inc. for each Unit sold.
Service. The Internal Revenue Service.
Units. The 60 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 $4,871.25 principal guaranty obligation).
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 the amount equal to 40% (up to $100,000) 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 or her admission to the Partnership the cash amount set forth
opposite his or her 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, offer, sell and issue, for and on behalf
of the Partnership, additional limited partnership interests in the Partnership
(a "Dilution Offering") to investors who are not already Limited Partners
("Qualified Investors"). The primary purpose of any Dilution Offering would be
to raise additional capital for any legitimate Partnership purpose as set forth
in Article 4. 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 unless otherwise determined by a vote of the General Partner and
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a Majority in Interest of the Limited Partners. Any sale of additional limited
partnership interests will result in the proportionate dilution of the
Percentage Interests of the existing Partners. Notwithstanding the above, in the
event of a Dilution Offering, the General Partner may elect, in its sole
discretion, to prevent dilution of its Percentage Interest by either
contributing additional capital to the Partnership or purchasing additional
limited partnership interests in any Dilution Offering. Limited Partners shall
have no right to purchase additional limited partner interests in any Dilution
Offering or to make additional capital contributions or take any other action to
prevent dilution of their Percentage Interest. 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 an amended Schedule A to be
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 in the amount
set forth opposite his or her name on Schedule A attached hereto.
9. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF CERTAIN
--------------------------------------------------
LIMITED PARTNERS.
----------------
The obligations of any Limited Partners acquiring their
Partnership Interests in the Offering or a Dilution Offering 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 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
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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) Except as disclosed in the Memorandum or documentation
prepared in connection with a Dilution Offering, 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 California limited partnership
formed and existing under the laws of the State of California.
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 Offerings and may admit persons 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 or her 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
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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 in accordance with 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 or her
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 or her Capital Contribution pursuant
to Article 7; and
(ii) The amount of Profits allocated to him or her 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 or her pursuant to
Article 13; and
(ii) The amount of Partnership Cash Flow, Partnership Sales
Proceeds and Partnership Refinancing Proceeds distributed to him
or her 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.
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13. ALLOCATIONS
(a) Nonrecourse Deductions. Nonrecourse Deductions shall be
allocated among the Partners in accordance with their respective
Percentage Interests.
(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 Regulations Section 1.704-2(i).
(c) Profits and Losses.
(i) 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.
(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
1% of all items of income, gain, loss, deduction or credit.
(d) Special Allocations. The following special allocations
shall be made:
(i) Partnership 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
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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.
(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(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
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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.
(iv) Sales Commission. The Sales Commission shall be
allocated to the Units which are not held by the General
Partner and its Affiliates and are acquired in the Offering in
proportion to the respective capital contributions represented
by such Units (i.e., $250 in Sales Commissions per each such
Unit). The purpose of this Article 13(c)(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.
(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).
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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 (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 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.
(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, 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
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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.
l5. 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 local medical director(s) of the Lithotripsy System. No Limited Partner may
withdraw from the Partnership except as expressly permitted herein.
15.2 Operation of Lithotripsy System. The Limited Partners
shall not operate or utilize the Partnership 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 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 (s)he shall not engage in "Outside Activities" (as defined below) in
the "Market Area" (as defined below) while(s)he is a Limited Partner in the
Partnership and shall otherwise be subject to the provisions of this Article
15.3. The phrase "Outside Activities" means directly or indirectly owning,
leasing or subleasing a lithotripter (or any similar equipment or competing
devices used for treating renal or biliary stone disease) or any other
therapeutic equipment acquired by the Partnership; provided that an ownership
interest in the General Partner or an Affiliate of the General Partner shall not
constitute an Outside Activity. Prohibited indirect ownership shall include
without limitation the direct or indirect ownership of any interest in a
business venture (through stock ownership, partnership interest ownership,
ownership by or through a close family member, or as otherwise determined in
good faith by the General Partner) involving the ownership, purchase, lease,
sublease, promotion, management or operation of a lithotripter (or similar
equipment or competing devices used for treating renal or biliary stone disease)
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. Notwithstanding the above, Outside Activities
shall not include (i) ownership of less than 1% of the capital stock (calculated
on a fully diluted basis) of a corporation whose stock is publicly owned or
regularly traded on any public exchange, (ii) any ownership interest in an
entity engaging in an Outside Activity acquired before the date hereof;
provided, that the Limited Partner may not increase or enhance any such
previously held investment during the term of the Partnership, and (iii) any
other
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activity determined by the General Partner, in its sole discretion, not to be
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 18.3 hereof, the withdrawing Limited Partner shall not, for a period of
two (2) years following the date of 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 15.3, the term "Market Area" shall mean (i) the
area within a fifty (50) 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 thirty (30) 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 fifteen (15) 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 in Article 18.3 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 15.3. In the event of breach of the waiting period, 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.
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 15.3, 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 18.3 and shall be entitled to any other remedy at law or equity
including without limitation an injunction or suit for damages.
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 (other than the
General Partner and its Affiliates that may also hold Limited Partner
Partnership Interests) agrees that at all times during his or her participation
in the Partnership as a Limited Partner and thereafter, (s)he 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 the Limited
Partner, (i) any trade, technical, operational, management or other secrets, any
patient or customer lists or other confidential or secret data, or any other
proprietary,
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confidential or secret information of the Partnership or (ii) any confidential
information concerning any of the financial arrangements, financial condition,
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
Partnership 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 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.
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;
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(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 or the merger of the General
Partner with another person or entity; 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 Article 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.
(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
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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 or her predecessor in interest,
except that (s)he shall be entitled to receive and be credited or debited with
his or her 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:
(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:
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(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;
(f) Such other documents or instruments as may be required
in order to effect his, her or its admission as a general
partner; and
(g) Payment of such reasonable expenses as may be incurred
in connection with his, her or 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
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.
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17.7 Fundamental Changes. In the event a plan is approved by
the General Partner and a Majority in Interest of the Limited Partners 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 limitation, 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 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 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
dissent, appraisal or similar rights in connection with a plan contemplated by
this Article 17.7.
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 canceled and 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 18.7 of this Agreement and on the terms and
conditions provided in Article 18.8 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,
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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 the 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 in 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 the 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) at the
price determined in the manner provided in Article 18.7 of this Agreement and on
the terms and conditions provided in Article 18.8 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 Article 18.2 to the Partnership and, in such case, the Partnership
shall have the same rights as provided for the General Partner in this Article
18.2.
18.3 Breach of Article 15.3. In the event the General Partner
either receives a Notice of Withdrawal as provided in Article 15.3 or receives
notice of a breach of Article 15.3 by or with respect to a Limited Partner (the
"Competing 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 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 Competing 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 Competing Limited Partner (which the Competing
Limited Partner shall then become obligated to sell) at the price determined in
the manner provided in Article 18.7 of this Agreement and on the terms and
conditions provided in Article 18.8 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date it sends the Notice of
Default (the "Option Period") within which to notify in
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writing the Competing Limited Partner, whether the Partnership wishes to
purchase all or a portion of the Partnership Interest of the Competing Limited
Partner. If the General Partner does not elect to purchase the entire
Partnership Interest of the Competing 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 Competing 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 Competing 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 in 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 the Limited Partner shall then become
obligated to sell), at the price determined in the manner provided in Article
18.7 of this Agreement and on the terms and conditions provided in Article 18.8
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 Article 18.4 to the Partnership and, in such
case, the Partnership shall have the same rights as provided for the General
Partner in 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 sole 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(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 18.7 and shall be on the terms and conditions as provided in
Article 18.8. The transfer of the Partnership Interests, the payment of the
purchase price and the assumption of the Limited Partners' obligations under
their respective Guaranties (as provided in Article 18.7) 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
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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. The foregoing power of attorney shall
not be affected by the subsequent incapacity, mental incompetence, dissolution
or bankruptcy of any Limited Partner.
18.6 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, then
the General Partner shall have the right to immediately take the steps as
outlined in this Article 18.6 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 or her
Partnership Interest to the purchaser at the purchase price determined in the
manner as provided in Article 18.7 and on the terms and conditions as provided
in Article 18.8. The transfer of the Partnership Interest, the payment of the
purchase price, and the assumption of the Defaulting Limited Partner's
obligations under his or her Guaranty (as provided in Article 18.7), 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 or her true and lawful attorney-in-fact, to take such
actions and execute such documents on his or her behalf to effect the transfer
of his or her Partnership Interest as provided in this Article 18.6, in the
event such Limited Partner becomes a Defaulting Limited Partner.
18.7 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, 18.5 or 18.6 (the
"Selling Limited Partner") shall be determined in the manner provided in this
Article 18.7. The purchase price for a Partnership Interest purchased pursuant
to the provisions of Article 18.1 shall be an amount equal to the greater of (i)
one and one-half (1.5) times the aggregate distributions made with respect to
such Partnership Interest pursuant to Article 14(a) during the twelve-month
period ending on the Valuation Date (as defined below), or (ii) the Selling
Limited Partner's share of the Partnership's book value determined in the manner
described below. The purchase price for a Partnership Interest purchased
pursuant to the provisions of Articles 18.2, 18.3, 18.4, 18.5 or 18.6 shall be
an amount equal to the lesser of (i) the fair market value of the Selling
Limited Partner's Partnership Interest on the Valuation Date (prorated in the
event that only a portion of his or her Partnership Interest is being purchased)
as determined by an Appraiser (as defined below) selected by the General
Partner, or (ii) the Selling Limited Partner's share of the
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Partnership's book value, if any (prorated in the event that only a portion of
his or her Partnership Interest is being purchased) as reflected by the Capital
Account of the Selling Limited Partner (unadjusted for any appreciation in
Partnership assets and as reduced by depreciation deductions claimed by the
Partnership for tax purposes) as of the Valuation Date (as defined below). The
General Partner, in its sole discretion, may pursue both of the above valuation
methods and choose the lesser value of the two as indicated above, or may
designate and follow only one of the methods in calculating the purchase price.
For purposes of this Article 18.7, the term "Appraiser" shall mean an
independent appraiser who is qualified in appraising limited partnership
interests and who has at least five years experience. In determining fair market
value, the Appraiser shall take into consideration any outstanding indebtedness,
liabilities, liens and obligations of the Partnership and the relative
Partnership Interests and capital accounts of all Partners, as well as applying
any customary discounts for lack of liquidity and control. Such appraisal shall
be conducted in accordance with professional appraisal standards. The valuation
of the Appraiser shall be conclusive and binding upon the Partnership, the
purchaser and the Selling Limited Partner and his or her representatives. The
determination of the Selling Limited Partner's Capital Account or aggregate
distributable amount 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 or aggregate distributable amount of the Selling Limited Partner on the
Valuation Date shall be binding and conclusive upon the Partnership, the
purchaser and the Selling Limited Partner and his or her representatives. The
Valuation Date means the last day of the month immediately preceding the month
in which occurs: (i) the death of a Selling Limited Partner, in the case of a
purchase by reason of death; (ii) the bankruptcy or insolvency of a Selling
Limited Partner, in the case of a purchase by reason of such bankruptcy or
insolvency; (iii) the Notice of Withdrawal or breach of Article 15.3 as provided
in 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; (v) the Notice of Election as provided in Article 18.5, in the case of
a purchase by reason thereof; or (vi) the notice of Defaulting Event as provided
in Article 18.6, in the case of a purchase occurring by reason of one of such
events. Any Limited Partner whose Partnership Interest is purchased pursuant to
the provisions of Article 18.1, 18.2, 18.3, 18.4, 18.5 or 18.6 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 Partnership shall have the
right to deduct the amount of any distributions made to the Selling Limited
Partner after the Valuation Date from the purchase price. If as of the date of
the Closing the Selling 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 Selling 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 to evidence the assumption of such portion of the
Obligation, and obtain if possible, the release of the Selling Limited Partner
from such portion of the Obligation. The transfer of a Partnership Interest of a
Selling Limited Partner shall be deemed to occur as of the Valuation Date and
the Selling Limited Partner shall have no voting
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or other rights as a Limited Partner after such date. Notwithstanding the above,
the Partnership shall not be obligated to assume any outstanding personal
obligation of a Selling Limited Partner.
18.8 Closing.
-------
18.8.1 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
(ii) The date that coincides with the close of the Option
Period.
At the Closing, although not necessary to effect the transfer, the
Selling 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 Selling Limited
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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, 18.5 or 18.6 and compliance with all
the Articles of this Agreement, except the execution of the transfer
documents by the Selling Limited Partner as provided above in this
Article 18.8.1, are sufficient to effect the complete transfer of the
Selling Limited Partner's Partnership Interest and the Selling 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 Selling Limited Partner shall be deemed to occur as of
the Valuation Date as defined in Article 18.7. The deemed transfer is
effective regardless of whether the Selling Limited Partner performs
the duties set forth in this Article 18.8.1.
18.8.2 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 purposes 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
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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
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carry out the purposes, business and objectives of the Partnership. Such
powers shall include, without limitation, the following:
(a) To conduct the Offering and any Dilution Offering on
behalf of the Partnership;
(b) To acquire on behalf of the Partnership (i) one or more
fixed base or transportable lithotripsy systems, including the
Lithotripsy System, (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 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 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
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<PAGE>
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 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, (s)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 Sun Medical Technologies, Inc., a California corporation
("Sun") with respect to the supervision and coordination of the
management and administration of the day-to-day operations of the
Partnership's business for a monthly fee equal to 7.5% of net
Partnership Cash Flow per month. All costs incurred by Sun under the
Management Agreement shall be paid or reimbursed by the Partnership
directly. The Partnership may also contract with healthcare facilities
and/or qualified physicians desiring to use its Lithotripsy System for
the treatment of patients. Owning an interest in the Partnership shall
not be a condition to using the Lithotripsy System. The General Partner
and its Affiliates (including Sun) 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
fixed-base or mobile lithotripsy unit, 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 the
Partnership's Certificate of Limited Partnership;
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<PAGE>
(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. 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.
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<PAGE>
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 December 31, 2049;
(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 occurrence of an event described in a plan approved by
the General Partner and a Majority in Interest of the Limited Partners
pursuant to Article 17.7 resulting in the dissolution of the
Partnership;
(e) The election of the General Partner to dissolve the
Partnership following the occurrence of an event described in
Article 18.5;
(f) Except as otherwise provided in any plan approved by the
General Partner and a Majority in Interest of the Limited Partners
pursuant to Article 17.7, 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 California; provided, that the events
described in Sections 15681(c) and (d) 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
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<PAGE>
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 as provided above 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.
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 such 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
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<PAGE>
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 or her 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 or as otherwise required by law 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
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<PAGE>
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)-1, as modified from time to time. In its
capacity as Tax Matters Partner, the General Partner shall oversee the
Partnership's tax affairs in the manner which, in its best judgment, is 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 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 29. Further, no Limited
Partner consent shall be required to amend Schedule A to reflect the admission
of Partners as contemplated by the Offering, any Dilution Offering or as
otherwise herein permitted.
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 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
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<PAGE>
(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 generally 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 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.
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<PAGE>
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 California 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.
38. POWER OF ATTORNEY.
-----------------
Each Limited Partner hereby makes, constitutes and appoints
Stan Johnson and Cheryl Williams, severally, with full power of substitution,
his or her true and lawful attorneys-in- fact, for him or her and in his or her
name, place and stead and for his or her 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
-36-
<PAGE>
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, legal
incapacity, dissolution or bankruptcy 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 or her 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
bankruptcy, dissolution, 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 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.
40. CREDITORS.
---------
None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Partnership.
[signature page follows]
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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:
MOBILE KIDNEY STONE CENTERS OF
CALIFORNIA, LTD. I, a California limited
partnership
By: Sun Medical Technologies, Inc., a California
corporation and its sole general partner
By: /s/ Stan Johnson
---------------------
Stan Johnson
President
ATTEST:
/s/ James D. Clark [CORPORATE SEAL]
- -----------------------
Secretary
INITIAL LIMITED PARTNER:
-----------------------
/s/ Stan Johnson
----------------
Stan Johnson
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<PAGE>
STATE OF North Carolina
COUNTY OF Cumberland
On this 23 day of August, 1999, before me, the
undersigned Notary Public in and for the County of Cumberland in the State
of North Carolina, personally came Stan Johnson, who, being by me
duly sworn, said that he is President of Sun Medical Technologies, Inc., the
sole general partner of Mobile Kidney Stone Centers of California, Ltd. I, the
sole general partner of Mobile Kidney Stone Centers of California III, 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
Stan Johnson, 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.
Notary Public
My commission expires:
May 1, 2004
STATE OF North Carolina
COUNTY OF Cumberland
I, Debra J. Scott, a notary public in and for
the State and County set forth above, do hereby certify that Stan Johnson
personally appeared before me this 23 day of August, 1999 and
acknowledged and swore to the due execution of the foregoing Limited Partnership
Agreement in his capacity as the initial limited partner.
/s/ Debra J. Scott
------------------
Notary Public
My commission expires:
May 1, 2004
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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 Mobile Kidney Stone Centers of California III, L.P., and his or
her intention to be legally bound thereby.
Dated this _________ day of ___________________, 1999.
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 __________________, 1999,
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]
-40-
<PAGE>
SCHEDULE A
Schedule of Partnership Interests
MOBILE KIDNEY STONE CENTERS OF CALIFORNIA III, L.P.
---------------------------------------------------
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND PERCENTAGE
INTERESTS
Cash Percentage
General Partner Contribution Guaranty(1) Interest
- --------------- ------------ -------- -----------
Mobile Kidney Stone Centers $ 97,667.00 $194,850.00 40%
of California, Ltd. I
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Limited Partners
N. Erik Albert, M.D. $ 5,000.00 $ 9,742.50 2%
Gene R. Conley, M.D. 7,500.00 14,613.75 3%
Rajendra H. Dwivedi, M.D. 12,500.00 24,356.25 5%
Barton Gershbein, M.D. 12,500.00 24,356.25 5%
Tu-Hi Hong, M.D. 12,500.00 24,356.25 5%
William W. Kirby, M.D. 12,500.00 24,356.25 5%
Gregory M. Lomas, M.D. 2,500.00 4,871.25 1%
Mobile Kidney Stone Centers 31,500.00 68,197.50 14%
of California, Ltd. I
Robert J. Reiner, M.D. 12,500.00 24,356.25 5%
Alfonso Richards, M.D. 12,500.00 24,356.25 5%
Mark A. Silvert, M.D. 12,500.00 24,356.25 5%
Alan K. Wong, M.D. 12,500.00 24,356.25 5%
TOTAL: $244,167.00 $487,125.00 100%
=========== =========== ====
(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 $487,125. The General Partner will guarantee 40% of the Loan
(up to a $194,850 principal guaranty) as provided in the Memorandum.
The Limited Partners will individually guarantee 1% of the loan (up to
a $4,871.25 principal guaranty) for each unit purchased as provided in
the Memorandum.
-41-
AMENDMENT TO FIRST AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
OHIO MOBILE LITHOTRIPTER, LTD.
THIS AMENDMENT, effective January 1, 2000, is entered into by and among
Ohio Litho, Inc., a Delaware corporation, the General Partner of Ohio Mobile
Lithotripter, Ltd., a Texas limited partnership (the "Partnership"), and the
Limited Partners of the Partnership.
RECITALS:
--------
A. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," entered into that certain First
Amended and Restated Agreement of Limited Partnership dated August 1, 1991, as
heretofore amended (the "Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meanings given them in the Agreement.
B. The Partners desire to amend the Agreement to substitute the Partnership
as the holder of the right of first refusal under of Section 9.03 of the
Agreement.
NOW, THEREFORE, the Partners agree as follows:
1. Section 9.03 of the Agreement is hereby amended by deleting subsections
(b) and (c) thereof in their entirety and by substituting the language set forth
below:
(b) Upon receipt of such notice, the Partnership shall have
the right and option, exercisable at any time during a period of thirty
(30) days from the date of the Selling Partner's notice of the Offer
(the "Option Period"), to purchase all or any portion of the Purchase
Interest. If the Partnership elects to exercise its option, it shall
give written notice to the Selling Partner and the sale and purchase
shall be closed within thirty (30) days after the end of the Option
Period. Any purchase made under this paragraph shall be on the same
terms and conditions as contained in the Offer.
(c) If the Partnership does not elect to purchase all of the
Purchase Interest, the Selling Partner shall be free for a period of
sixty (60) days after the expiration of the foregoing notice periods to
sell the Purchase Interest to the purchaser named in the Offer upon the
terms and conditions contained in the Offer, subject to the requirement
of consent by the General Partner pursuant to Section 9.02; provided,
that the said purchaser qualifies as a Qualified Purchaser. In the
event that the sale is not consummated within such sixty
<PAGE>
(60)-day period, no sale shall be made without again complying with the
provisions of this Section 9.03.
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first written above.
OHIO LITHO, INC., as General Partner and as
Attorney-In-Fact for the Limited Partners
By:_________________________________ (SEAL)
---------------------------------
(Type Name and Title)
<PAGE>
AMENDMENT TO FIRST AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
OHIO MOBILE LITHOTRIPTER, LTD.
THIS AMENDMENT, effective January 1, 2000, is entered into by and among Ohio
Litho, Inc., a Delaware corporation, the General Partner of Ohio Mobile
Lithotripter, Ltd., a Texas limited partnership (the "Partnership"), and the
Limited Partners of the Partnership.
RECITALS:
--------
A. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," entered into that certain First
Amended and Restated Agreement of Limited Partnership dated August 1, 1991, as
heretofore amended (the "Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meanings given them in the Agreement.
B. The Partners desire to amend the Agreement to delete in its entirety
Section 10.02(g) of the Agreement.
NOW, THEREFORE, the Partners agree as follows:
1. Section 10.02(g) of the Agreement is hereby deleted in its entirety with
the effect that such provision shall be void and of no effect.
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first written above.
OHIO LITHO, INC., as General Partner and as
Attorney-In-Fact for the Limited Partners
By:_________________________________ (SEAL)
---------------------------------
(Type Name and Title)
<PAGE>
AMENDMENT TO FIRST AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
OHIO MOBILE LITHOTRIPTER, LTD.
THIS AMENDMENT, effective February 1, 2000, is entered into by and among
Ohio Litho, Inc., a Delaware corporation, the General Partner of Ohio Mobile
Lithotripter, Ltd., a Texas limited partnership (the "Partnership"), and the
Limited Partners of the Partnership.
RECITALS:
--------
A. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," entered into that certain First
Amended and Restated Agreement of Limited Partnership dated August 1, 1991, as
heretofore amended (the "Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meanings given them in the Agreement.
B. The Partners desire to amend the Agreement to effect a
redesignation of the Partnership's geographic service area as defined in Section
16.16(a) effective on the date appropriate consents are received from the
General Partner and Two Thirds in Interest of the Limited Partners.
NOW, THEREFORE, the Partners agree as follows:
1. Section 16.16(a) of the Agreement is hereby amended by deleting the
following language from the last sentence thereof:
"(excluding any territory located in Cuyahoga County, Ohio)"
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first written above.
OHIO LITHO, INC., as General Partner and as
Attorney-In-Fact for the Limited Partners
By:_________________________________ (SEAL)
---------------------------------
(Type Name and Title)
<PAGE>
SECOND AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
PACIFIC MEDICAL LIMITED PARTNERSHIP
THIS AMENDMENT, effective as of the 1st day of January, 1999,
is entered into by and among Lithotripters, Inc., a North Carolina corporation
and the General Partner of Pacific Medical Limited Partnership, a Hawaii limited
partnership (the "Partnership"), and the Limited Partners of the Partnership.
RECITALS:
--------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," entered into that certain Agreement
of Limited Partnership of Pacific Medical Limited Partnership dated April 1,
1996, as amended by that certain First Amendment to Agreement of Limited
Partnership of the Partnership, effective as of August 1, 1998.
2. The Partners desire to amend the Agreement to reflect the
assignment by Lithotripters, Inc. (the "Assignor") of a two percent (2%)
limited partnership interest in the Partnership to Charles D. Kim, Jr.,
M.D. and a two percent (2%) limited partnership interest in the Partnership
to Richard I. Tsou, M.D.
NOW, THEREFORE, in consideration of the mutual promises,
covenants, conditions and agreements herein contained, the parties hereto agree
as follows:
Schedule A-1 is deleted in its entirety and new
Schedule A-2, attached hereto, is substituted in its place.
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first-above written.
GENERAL PARTNER:
Lithotripters, Inc.
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
President
ALL THE LIMITED PARTNERS OF THE
PARTNERSHIP WHOSE NAMES APPEAR ON
SCHEDULE A-2
By:/s/ Joseph Jenkins, M.D. (SEAL)
---------------------------
Joseph Jenkins, M.D.,
Attorney-in-Fact*
* Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
1-
<PAGE>
SCHEDULE A-2
Schedule of Partnership Interests
PACIFIC MEDICAL LIMITED PARTNERSHIP
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND GUARANTIES
Cash Percentage
General Partner Contribution Guaranty(1) Interest
Lithotripters, Inc. $47,688 $330,402.80 20%
Limited Partners
Lithotripters, Inc. $47,250 $181,721.54 11%
Antonio Tan $10,000 $66,080.56 4%
Robert Carlile $10,000 $66,080.56 4%
Herbert Chinn $10,000 $66,080.56 4%
Rick Davis $10,000 $66,080.56 4%
Terry Yee $5,000 $33,040.28 2%
William Flanagan $2,250 $16,520.14 1%
Keith Mooney $2,500 $16,520.14 1%
Franklin Clark $2,250 $16,520.14 1%
Thomas Jordan $2,250 $16,520.14 1%
William Jordan $2,250 $16,520.14 1%
Philip Gallina $2,250 $16,520.14 1%
William Grine $2,250 $16,520.14 1%
Jack Cassell $2,500 $16,520.14 1%
Marilyn Hata $10,000 $66,080.56 4%
Charles D. Kim, Jr. N/A(2) $33,040.28(3) 2%
David Kychenbecker $10,000 $66,080.56 4%
<PAGE>
Cash Percentage
General Partner Contribution Guaranty(1) Interest
Douglas Gary Lattimer $10,000 $66,080.56 4%
William Yarborough $10,000 $66,080.56 4%
Dan Myers $2,250 $16,520.14 1%
Jim Brady $2,250 $16,520.14 1%
Tom Mobley $2,250 $16,520.14 1%
Timothy Quillen $2,250 $16,520.14 1%
James Monroe $2,250 $16,520.14 1%
J. Ronald Smith $2,250 $16,520.14 1%
David M. Coussens $2,500 $16,520.14 1%
Denis E. Healey $2,500 $16,520.14 1%
Lewis F. Russell $2,500 $16,520.14 1%
Alan Terry $2,250 $16,520.14 1%
Anthony Rand $2,250 $16,520.14 1%
Joseph Jenkins $2,250 $16,520.14 1%
Rene Sepulveda $2,500 $16,520.14 1%
Robert McAlpine $2,250 $16,520.14 1%
Lance Templeton $2,500 $16,520.14 1%
Lelan C. Byrd $2,500 $16,520.14 1%
Donald A. Stewart $2,500 $16,520.14 1%
Larry Raithaus N/A(2) $33,040.28(3) 2%
Richard I. Tsou N/A(2) $33,040.28(3) 2%
William Yarborough, M.D.,
Inc. N/A(2) $66,080.56(3) 4%
TOTAL: $238,438 $1,652,014.00 100%
======== ============= ====
<PAGE>
(1) Represents the estimated 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.
(2) Larry Raithaus, M.D., Charles D. Kim, Jr., M.D., Richard I. Tsou, M.D. and
William Yarborough, M.D., Inc. received their limited partnership interests by
an assignment from Lithotripters, Inc. and therefore made no capital
contributions to the Partnership.
(3) Pursuant to the terms of the assignments by Lithotripters, Inc., Larry
Raithaus, M.D., Charles D. Kim, Jr., M.D., Richard I. Tsou, M.D. and William
Yarborough, M.D., Inc. assumed their pro rata portion of the initial limited
partner guaranty of Lithotripters, Inc.
<PAGE>
SECOND AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VII, L.P.
THIS AMENDMENT, effective as of the 1st day of January, 1999 is entered
into by and among Lithotripters, Inc., a North Carolina corporation and the
General Partner of Texas Lithotripsy Limited Partnership VII, L.P. (the
"Partnership"), and the Limited Partners of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Initial Limited Partner named
therein entered into that certain Agreement of Limited Partnership of Texas
Lithotripsy Limited Partnership VII, L.P., dated as of September 4, 1998, as
amended by that certain Amendment to Agreement of Limited Partnership of the
Partnership, effective as of October 7, 1998 (the "Agreement").
2. The General Partner and the undersigned Limited Partners
(collectively, the "Partners") desire to further amend the Agreement to reflect
the successful closing of the Merger pursuant to the Merger Agreement, and the
assignment by William Mulchin, M.D. of his .29893238% limited partner interest
in the Partnership to Fifth Street Corp.
NOW, THEREFORE, in consideration of the mutual promises,
covenants, conditions and agreements herein contained, the parties hereto agree
as follows:
Schedule A is deleted in its entirety and a new
Schedule A-1, attached hereto, is substituted in its
place.
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
Lithotripters, Inc.
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
President
-1-
<PAGE>
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact1
- --------
1Pursuant to a Power of Attorney given by the Limited Partners in the Agreement.
-2-
<PAGE>
SCHEDULE A-1
Schedule of Partnership Interests
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VII, L.P.
-----------------------------------------------
General Partner Percentage Interest
- --------------- -------------------
Lithotripters, Inc. 20.80897806%
2008 Litho Place
Fayetteville, NC 28304
Limited Partners
Robert Admire 0.41200000%
Joyce Allen 0.29893238%
Mark Allen 0.20600000%
Thomas Arnold 1.15074320%
John Ballard, III 0.29893238%
Charles Bamberger 1.74054700%
Marc Barrett 2.30148640%
James Brady 0.20600000%
Franklin Clark 0.20600000%
James Cochran 1.29537367%
Donald Cook 0.29893238%
Stephen Corwin 0.29893238%
Philip Damstra 0.38375240%
Jules Delaune 0.57537160%
Ruth Delaune 0.57537160%
Robert Dowling 0.38375240%
-3-
<PAGE>
Limited Partners Percentage Interest
- ---------------- -------------------
J. Stephen Dryden 0.20600000%
Richard Dulany 0.20600000%
Glenn Dunnington 0.29893238%
Christopher Fetner 0.82400000%
Fifth Street Corp 2.09252669%
Larry Frank 0.20600000%
Gerald Frankel 0.82400000%
William Freeborn 0.82400000%
Alan Freeman 0.29893238%
Philip Gallina 0.20600000%
Glen Goldsmith 0.29893238%
William Grine 0.20600000%
Scott Hassell 0.41200000%
Wayne Hey 0.76699080%
A. Mason Holden 0.29893238%
Ira Hollander 1.72611480%
Joseph Jenkins 0.20600000%
Dan Johnson 1.43842900%
John Johnson 0.57537160%
Sid Jones 1.15074320%
Lillian Jordan 0.57537160%
Thomas Jordan 0.20600000%
William Jordan 0.20600000%
T.S. Kent 0.29893238%
-4-
<PAGE>
Farid Khoury 0.20600000%
Mario Labardini 0.20600000%
J.L. LaManna, III 0.29893238%
Hugh Lamensdorf 1.15074320%
Edward Lee 1.15074320%
Stephen Lieman 0.61800000%
Lithotripters, Inc. 22.05669678%
Barney Maddox 0.29893238%
Donald McKay 0.61800000%
William Mitchell 0.29893238%
Thomas Mobley 0.20600000%
Yondell Moore 0.20600000%
Dan Myers 0.20600000%
Jerry Newton 0.29893238%
Denis Ortiz 0.38375240%
Paris Urology Assoc. Pension 0.59786477%
Allen Plotkin 0.29893238%
Drew Pumphrey 1.53454700%
Anthony Rand 0.20600000%
Richard Reese 0.59786477%
Jack Rice 0.29893238%
Edward Rietze Estate 0.20600000%
William Risk 1.49466192%
Donald Ross 0.57537160%
-5-
<PAGE>
James Saalfield 0.97299080%
Rashinda Singh 0.57537160%
Southwest Lithotripter Partners 8.70117438%
John Staub 0.29893238%
Martha Storrie 2.15254700%
Mark Story 2.01380060%
Robert Stroud 0.38375240%
Roger Stuart 0.20600000%
Agif Syed 0.29893238%
Alan Terry 0.20600000%
Addison Thurman 1.15074320%
Arthur Tijerina 1.79359431%
Eugene Todd 0.59786477%
Michael Walter 0.57537160%
R.D. West 0.19928826%
Jeannie Westerburg 0.19928826%
Robert Westerburg 0.19928826%
Roger Wolfert 0.29893238%
-----------
TOTAL 100%
-6-
<PAGE>
THIRD AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VII, L.P.
THIS AMENDMENT, effective as of the 2nd day of February, 1999 is entered
into by and among Lithotripters, Inc., a North Carolina corporation and the
General Partner of Texas Lithotripsy Limited Partnership VII, L.P. (the
"Partnership"), and the Limited Partners of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," entered into that certain Agreement
of Limited Partnership of Texas Lithotripsy Limited Partnership VII, L.P., dated
as of September 4, 1998, as amended by that certain Amendment to Agreement of
Limited Partnership of the Partnership, effective as of October 7, 1998, and as
further amended by that certain Second Amendment to Agreement of Limited
Partnership of the Partnership, effective as of January 1,1999 (the
"Agreement").
2. The Partners desire to further amend the Agreement to
reflect the Partners's adjusted Percentage Interests resulting from the
successful closing of the offering of limited partner interests in the
Partnership pursuant to the Partnership's Confidential Private Placement
Memorandum dated September 4, 1998, as amended, and the subsequent admission of
new Limited Partners to the Partnership.
NOW, THEREFORE, in consideration of the mutual promises,
covenants, conditions and agreements herein contained, the parties hereto agree
as follows:
Schedule A-1 is deleted in its entirety and a new
Schedule A-2, attached hereto, is substituted in its
place.
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
Lithotripters, Inc.
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
President
-1-
<PAGE>
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-1
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact1
- --------
1Pursuant to a Power of Attorney given by the Limited Partners in the Agreement.
-2-
<PAGE>
SCHEDULE A-2
Schedule of Partnership Interests
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VII, L.P.
-----------------------------------------------
General Partner Percentage Interest
- --------------- -------------------
Lithotripters, Inc. 19.22749573%
2008 Litho Place
Fayetteville, NC 28304
Limited Partners
Robert Admire 0.38068800%
Joyce Allen 0.27621352%
Mark Allen 0.19034400%
Thomas Arnold 328672%
Steven Ash 0.57000000%
John Ballard, III 0.27621352%
Charles Bamberger 1.60826543%
Marc Barrett 2.12657343%
Baylor Health Care System 1.14000000%
James Brady 0.19034400%
Harold Calhoun 0.19000000%
David Casey 0.19000000%
Franklin Clark 0.19034400%
James Cochran 1.19692527%
Michael Collini 0.57000000%
Donald Cook 0.27621352%
Robert Corwin 0.57000000%
Stephen Corwin 0.27621352%
Philip Damstra 0.35458722%
Jules Delaune 0.53164336%
Ruth Delaune 0.53164336%
Limited Partners Percentage Interest
- ---------------- -------------------
Robert Dowling 0.35458722%
J. Stephen Dryden 0.19034400%
Richard Dulany 0.19034400%
Glenn Dunnington 0.27621352%
Kurt Evans 0.19000000%
John Fairbanks 0.57000000%
Christopher Fetner 0.76137600%
Fifth Street Corp 1.93349466%
Joshua Fine 0.57000000%
Myron Fine 0.19000000%
Manny Forkowitz 0.57000000%
Larry Frank 0.19034400%
Gerald Frankel 0.76137600%
William Freeborn 0.76137600%
Alan Freeman 0.27621352%
Steven Frost 0.57000000%
Philip Gallina 0.19034400%
Kenneth Goldberg 0.57000000%
Glen Goldsmith 0.27621352%
Mike Goldstein 0.57000000%
Carole L. Gordon 0.190000000%
Nathan Graves 0.57000000%
Rufus Green 0.38000000%
William Grine 0.19034400%
Scott Hassell 0.38068800%
Wayne Hey 0.70869950%
A. Mason Holden 0.27621352%
Ira Hollander 1.59493008%
-3-
<PAGE>
Limited Partners Percentage Interest
- ----------------
Allen Van Horn 0.57000000%
Joseph Jenkins 0.19034400%
Dan Johnson 1.32910840%
John Johnson 0.53164336%
Sid Jones 1.06328672%
Lillian Jordan 0.53164336%
Thomas Jordan 0.19034400%
William Jordan 0.19034400%
T.S. Kent 0.27621352%
Farid Khoury 0.19034400%
Mario Labardini 0.19034400%
J.L. LaManna, III 0.27621352%
Hugh Lamensdorf 1.06328672%
Jeffrey H. Landau 0.57000000%
Edward Lee 1.06328672%
Kenneth Licker 0.19000000%
Stephen Lieman 0.57103200%
Lithotripters, Inc. 15.06038783%
Barney Maddox 0.27621352%
James Mason 0.19000000%
Roy Carrington Mason 0.19000000%
Donald McKay 0.57103200%
William Mitchell 0.27621352%
Thomas Mobley 0.19034400%
Frank Moore, III 0.5700000%
Yondell Moore 0.19034400%
Dan Myers 0.19034400%
Jerry Newton 0.27621352%
-4-
<PAGE>
Limited Partners Percentage Interest
- ----------------
Denis Ortiz 0.35458722%
Paris Urology Assoc. Pension 0.55242705%
Allen Plotkin 0.27621352%
Drew Pumphrey 1.41792143%
Anthony Rand 0.19034400%
Richard Reese 0.55242705%
Jack Rice 0.27621352%
Edward Rietze Estate 0.19034400%
William Risk 1.38106762%
Donald Ross 0.53164336%
James Saalfield 0.89904350%
Jeff Sanders 0.57000000%
Nabel Sayed 0.38000000%
Ben Schnitzer 0.19000000%
Roger Schoenvogel 0.57000000%
Rashinda Singh 0.53164336%
Southwest Lithotripter Partners 7.45776513%
Frank Splann 0.19000000%
John Staub 0.27621352%
Donald Stewart 0.57000000%
Martha Storrie 1.98895343%
Mark Story 1.86075175%
Robert Stroud 0.35458722%
Roger Stuart 0.19034400%
Agif Syed 0.27621352%
Alan Terry 0.19034400%
Addison Thurman 1.06328672%
Arthur Tijerina 1.65728114%
-5-
<PAGE>
Limited Partners Percentage Interest
- ----------------
Eugene Todd 0.55242705%
Michael Walter 0.53164336%
R.D. West 0.18414235%
Jeannie Westerburg 0.18414235%
Robert Westerburg 0.18414235%
Roger Wolfert 0.27621352%
-----------
TOTAL 100%
-6-
<PAGE>
FOURTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VII, L.P.
THIS AMENDMENT, effective as of the 1st day of March, 1999 is entered into
by and among Lithotripters, Inc., a North Carolina corporation and the General
Partner of Texas Lithotripsy Limited Partnership VII, L.P. (the "Partnership"),
and the Limited Partners of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," entered into that certain Agreement
of Limited Partnership of Texas Lithotripsy Limited Partnership VII, L.P., dated
as of September 4, 1998, as amended by that certain Amendment to Agreement of
Limited Partnership of the Partnership, effective as of October 7, 1998, as
further amended by that certain Second Amendment to Agreement of Limited
Partnership of the Partnership, effective as of January 1,1999, and as further
amended by that certain Third Amendment to Agreement of Limited Partnership of
the Partnership effective as of February 2, 1999 (the "Agreement").
2. The Partners desire to further amend the Agreement to
reflect the Partners' adjusted Percentage Interests resulting from the
assignment by each of Mark Allen, M.D. ("Allen"), J. Scott Hassell ("Hassell")
and Steven Lieman ("Lieman") of their entire limited partnership interests in
the Partnership to the Partnership. As a consequence of the foregoing
assignments, Allen, Hassell and Lieman are no longer limited partners of the
Partnership as of the date hereof.
NOW, THEREFORE, in consideration of the mutual promises,
covenants, conditions and agreements herein contained, the parties hereto agree
as follows:
Schedule A-2 is deleted in its entirety and a new
Schedule A-3, attached hereto, is substituted in its
place.
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
Lithotripters, Inc.
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
President
-1-
<PAGE>
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-2
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact
- --------
1Pursuant to a Power of Attorney given by the Limited Partners in the Agreement.
-2-
<PAGE>
SCHEDULE A-2
Schedule of Partnership Interests
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP VII, L.P.
-----------------------------------------------
General Partner Percentage Interest
- --------------- -------------------
Lithotripters, Inc. 19.449629%
2008 Litho Place
Fayetteville, NC 28304
Limited Partners Percentage Interest
- ---------------- ------------------
Robert Admire 0.385086%
Joyce Allen 0.279404%
Thomas Arnold 1.075570%
Steven Ash 0.576585%
John Ballard, III 0.279404%
Charles Bamberger 1.626845%
Marc Barrett 2.151141%
Baylor Health Care System 1.153170%
James Brady 0.192543%
Harold Calhoun 0.192195%
David Casey 0.192195%
Franklin Clark 0.192543%
James Cochran 1.210753%
Michael Collini 0.576585%
Donald Cook 0.279404%
Robert Corwin 0.576585%
Stephen Corwin 0.279404%
Philip Damstra 0.358684%
Jules Delaune 0.537785%
Ruth Delaune 0.537785%
Robert Dowling 0.358684%
J. Stephen Dryden 0.192543%
-3-
<PAGE>
2008 Litho Place
Richard Dulany 0.192543%
Glenn Dunnington 0.279404%
Kurt Evans 0.192195%
John Fairbanks 0.576585%
Christopher Fetner 0.770172%
Fifth Street Corp 1.955832%
Joshua Fine .576585%
Myron Fine 0.192195%
Manny Forkowitz 0.576585%
Larry Frank 0.192543%
Gerald Frankel 0.770172%
William Freeborn 0.770172%
Alan Freeman 0.279404%
Steven Frost 0.576585%
Philip Gallina 0.192543%
Kenneth Goldberg 0.576585%
Glen Goldsmith 0.279404%
Mike Goldstein 0.576585%
Carole L. Gordon 0.192195%
Nathan Graves 0.576585%
Rufus Green 0.384390%
William Grine 0.192543%
Wayne Hey 0.716887%
A. Mason Holden 0.279404%
Ira Hollander 1.613356%
Joseph Jenkins 0.192543%
Dan Johnson 1.344463%
John Johnson 0.537785%
Sid Jones 1.075570%
-4-
<PAGE>
2008 Litho Place
Lillian Jordan 0.537785%
Thomas Jordan 0.192543%
William Jordan 0.192543%
T.S. Kent 0.279404%
Farid Khoury 0.192543%
Mario Labardini 0.192543%
J.L. LaManna, III 0.279404%
Hugh Lamensdorf 1.075570%
Jeffrey H. Landau 0.576585%
Edward Lee 1.075570%
Kenneth Licker 0.192195%
Lithotripters, Inc. 15.233413%
Barney Maddox 0.279404%
James Mason 0.192195%
Roy Carrington Mason 0.192195%
Donald McKay 0.577629%
William Mitchell 0.279404%
Thomas Mobley 0.192543%
Frank Moore, III 0.576585%
Yondell Moore 0.192543%
Dan Myers 0.192543%
Jerry Newton 0.279404%
Denis Ortiz 0.358684%
Paris Urology Assoc. Pension Plan 0.558809%
Allen Plotkin 0.279404%
John Pumphrey 1.434302%
Anthony Rand 0.192543%
Richard Reese 0.558809%
Jack Rice 0.279404%
-5-
<PAGE>
2008 Litho Place
Edward Rietze Estate 0.192543%
William Risk 1.397023%
Donald Ross 0.537785%
James Saalfield 0.909430%
Jeff Sanders 0.576585%
Nabel Sayed 0.384390%
Ben Schnitzer 0.192195%
Roger Schoenvogel 0.576585%
Rashinda Singh 0.537785%
Southwest Lithotripter Partners 7.543922%
Frank Splann 0.192195%
John Staub 0.279404%
Donald Stewart 0.576585%
Martha Storrie 2.011931%
Mark Story 1.882248%
Robert Stroud 0.358684%
Roger Stuart 0.192543%
Agif Syed 0.279404%
Alan Terry 0.192543%
Addison Thurman 1.075570%
Arthur Tijerina 1.676427%
Eugene Todd 0.558809%
Allen Van Horn 0.576585%
Michael Walter 0.537785%
R.D. West 0.186270%
Jeannie Westerburg 0.186270%
Robert Westerburg 0.186270%
Roger Wolfert 0.279404%
---------
TOTAL 100%
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<PAGE>
FOURTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
SAN DIEGO LITHOTRIPTERS LIMITED PARTNERSHIP
THIS AMENDMENT, effective as of the 15TH day of February,
1999, is entered into by and among Lithotripters, Inc., a North Carolina
corporation and the General Partner of San Diego Lithotripters Limited
Partnership, a California limited partnership (the "Partnership"), and the
Limited Partners of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," are parties to that certain
Agreement of Limited Partnership of San Diego Lithotripters Limited Partnership,
as amended (the "Agreement").
2. Effective as of February 15, 1999, the General Partner and
the requisite percentage of the Limited Partners consented in writing to the
following amendments to the Agreement, such amendments intended to: (i) allow
the General Partner the authority to periodically offer and sell additional
limited partner interests (a "Dilution Offering") to local investors;(ii)
clarify and strengthen the noncompetition provisions of Articles 15.3 and 18.4
of the Agreement; (iii) add a new provision to the Agreement to prevent the
disclosure of Confidential Partnership Information that might harm the
Partnership and its Partners; and (iv) allow the General Partner, in its sole
discretion, to elect to assign to the Partnership its rights under Article 18 of
the Agreement to purchase the Partnership Interest of any deceased, insolvent or
competing Limited Partner:
NOW, THEREFORE, in accordance with Articles 29 and 30 of the
Partnership Agreement and pursuant to the written consent of the General Partner
and the requisite percentage of the Limited Partners, the parties hereto agree
as follows:
The Agreement is hereby amended as set forth in
Exhibits A, B and C attached hereto.
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<PAGE>
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
LITHOTRIPTERS, INC., a North Carolina corporation and
sole general partner of the Partnership
By:_________________________________________
Title:________________________________________
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-3
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact*
- --------
*Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
W#876952.1
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<PAGE>
EXHIBIT A
DILUTION OFFERING AMENDMENT
1. Capitalized terms used in this Exhibit and not otherwise defined shall
have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of San Diego Lithotripters
Limited Partnership (the "Partnership").
2. The purpose of this Exhibit is to set forth a proposed amendment to the
Partnership Agreement that would give the General Partner the authority
periodically to offer and sell additional limited partner interests
("Dilution Offerings") to local investors who are not Limited Partners
in the Partnership ("Qualified Investors"). As required by Articles 28
and 29 of the Partnership Agreement, to be effective this amendment
must be approved by the Partners representing two-thirds of the
aggregate interests in the Partnership.
3. The purposes of a Dilution Offering are (i) to raise additional capital for
any valid Partnership purpose, and (ii) to assure the highest quality of
patient care by admitting Qualified Investors to the Partnership who will
be dedicated and motivated as owners to follow the Partnership's treatment
protocol, and comply with its quality assurance and outcome analysis
programs. Any additional capital raised by the Partnership in a Dilution
Offering can be used for any legitimate Partnership purpose, including
upgrading the Partnership's Lithostar(TM)Mobile System, and/or upon the
vote of a Majority in Interest of the Limited Partners, the acquisition of
an additional lithotripter and transport vehicle.
4. In the event the Dilution Offering Amendment receives the requisite
approval of the Limited Partners, the General Partner intends to conduct a
Dilution Offering for the purposes of raising additional capital for (i)
upgrading and refurbishing the Partnership's Lithostar(TM) Mobile System,
and (ii) acquiring and operating a new Storz Modulith(R)SLX-T ("SLX-T")
model lithotripter and a new mobile transport vehicle for transporting the
SLX-T from site to site in the Partnership's current service area. It is
estimated that the cost for the SLX-T and transport vehicle will be
approximately $525,000. In the event the proceeds of the Dilution Offering
alone are insufficient to fund the necessary upgrades of the Lithostar(TM)
Mobile System and the purchases of the SLX-T and transport vehicle, the
necessary additional funds will be borrowed (the "Loan") by the Partnership
from a commercial financial institution acceptable to the General Partner.
The General Partner anticipates that the Partnership will be the principal
guarantor of the Loan. Therefore, the Limited Partners will not be liable
for such debt individually. However, payments by the Partnership under the
Loan will impact the cash flow of the Partnership, and therefore the
distributions to be received by the Limited Partners from Partnership
operations during the term of the Loan.
The General Partner believes that the acquisition of a new lithotripter
and transport vehicle are in the best interests of the Partnership. Due
to certain market forces existing in the
W#876952.1
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<PAGE>
Partnership's current service area, the demand for alternative
technology to the Partnership's Lithostar(TM) has increased. The
General Partner and the Partnership's Medical Director believe that the
best means for the Partnership to address such demand, and thereby
remain competitive in the Partnership's market area, is to provide the
equipment technology available with the SLX-T. The General Partner,
however, reserves the right to pursue technology other than the SLX-T
if such alternative technology is more beneficial to the Partnership
and the Limited Partners. As required by Article 28 of the Partnership
Agreement, the acquisition of a new lithotripter, and the Partnership's
incurrence of debt in excess of $100,000 per year (if necessary to fund
the acquisition of the lithotripter and transport vehicle), must be
approved by the General Partner and a Majority in Interest of the
Limited Partners.
5. Any sale of limited partner interests to Qualified Investors will
result in the proportionate dilution of the Partnership Percentage
Interests of the existing Partners; i.e., the interests of the General
Partner and the Limited Partners in Partnership allocations, cash
distributions and voting rights will be proportionately reduced by a
successful Dilution Offering.
6. The Percentage Interests of the existing Partners cannot be diluted
through Dilution Offerings by more than 20% in the aggregate without
the prior written consent of a Majority in Interest of all the
Partners. Without obtaining this additional consent, the existing
Partners cannot be diluted to less than 80% of their Percentage
Interest ownership at the time of this Amendment.
7. The General Partner has determined that the purchase price per 1%
Partnership Interest offered in the initial planned Dilution Offering
will be at its fair market value as determined by an independent third
party appraiser (Philpott, Ball & Company). The price for Units sold in
future Dilution Offerings also must be at a price no less than fair
market value as determined by the General Partner and a third party
appraiser.
8. Upon the successful sale of Partnership Interests in a Dilution
Offering, the General Partner will prepare and attach a new Schedule A
to the Partnership Agreement to reflect (i) the Partners' adjusted
Percentage Interests in the Partnership, and (ii) the admission of the
new Limited Partners to the Partnership.
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<PAGE>
EXHIBIT B
NONCOMPETITION PROVISION AND
----------------------------
CONFIDENTIALITY PROVISION AMENDMENTS
--------------- --------- ---------
Capitalized terms used in this Exhibit and not otherwise
defined shall have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of San Diego Lithotripters Limited
Partnership (the "Partnership"), and any amendments thereto.
Noncompetition Provision Amendment
Article 15.3 of the Partnership Agreement is hereby amended by
deleting the current provision in its entirety and by substituting the language
set forth below:
15.3 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" (as defined below) in the "Market Area"
(as defined below) while he or she is a Limited Partner in the
Partnership. The phrase "Outside Activities" means directly or
indirectly owning, leasing or subleasing a lithotripter (or any similar
equipment or competing devices used for treating renal or biliary stone
disease). Prohibited indirect ownership shall include the direct or
indirect ownership of any interest in a business venture (through stock
ownership, partnership interest ownership, ownership by or through a
close family member, or as otherwise determined in good faith by the
General Partner) involving the ownership, purchase, lease, sublease,
promotion, management or operation of a lithotripter (or similar
equipment or competing devices used for treating renal or biliary stone
disease), 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 18.4 hereof, the withdrawing Limited
Partner shall not, for a period of two (2) years following the date of
his or her 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 15.3, 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.
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<PAGE>
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 and/or the Limited
Partners the purchase rights as provided in Article 18.4 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 15.3. In the event of breach of the
waiting period, 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.
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 15.3, 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 General Partner and/or Limited Partners may invoke the
purchase rights provided in Article 18.4 and shall be entitled to any
other remedy at law or equity including without limitation an
injunction or suit for damages.
Article 18.4 of the Partnership Agreement is hereby amended by
deleting the current provision in its entirety and by substituting the language
set forth below.
18.4 Breach of Article 15.3. In the event the General
Partner either receives a Notice of Withdrawal as provided in Article
15.3 or receives notice of a breach of Article 15.3 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 18.4. If the
General Partner elects to enforce the provisions of this Article 18.4,
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 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 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
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<PAGE>
entire Partnership Interest of the Defaulting Limited Partner before
the expiration of the First Option Period and in the manner provided
herein, the Limited Partners shall have the option to purchase all or
any part of the Partnership Interest of the Defaulting Limited Partner
not purchased by the General Partner 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. Any Limited
Partner desiring to purchase any part or all of the remaining
Partnership Interest of the Defaulting Limited Partner shall deliver to
the General Partner a written election to purchase all or a specified
portion of such Partnership Interest within the ten (10) day period
immediately following the close of the First Option Period (the "Second
Option Period"). If the Limited Partners in the aggregate elect to
purchase more than the Partnership Interest then available, each
electing Limited Partner shall have a priority, up to that portion
specified in his or her notice of election, to purchase such proportion
of the Partnership Interest of the Defaulting Limited Partner then
available as his or her Percentage Interest bears to the aggregate
Percentage Interests of the Limited Partners electing to purchase. That
portion of the Defaulting Limited Partner's Partnership Interest not
purchased on such a priority basis shall be allocated in one or more
successive allocations to those remaining Limited Partners electing to
purchase more of the Partnership Interest than they have a priority
right, up to the portion specified in their respective elections, in
the proportion that each of their Percentage Interests bears to the
aggregate Percentage Interests of all of them. The Valuation Date for
determining the price paid for the Defaulting Limited Partner's
interest under Article 18.6 shall be the last day of the month
immediately preceding the month in which occurs the Notice of
Withdrawal or breach of Article 15.3.
Within the ten (10) day period immediately following
the close of the Second Option Period (the "Confirmation Period"), the
General Partner shall inform each electing Limited Partner of the
portion of the Partnership Interest of the Defaulting Limited Partner
as to which his or her election is effective. The General Partner shall
give notice to the Defaulting Limited Partner within the ten (10) day
period following the close of the Confirmation Period (the
"Notification Period") of the election by the Limited Partners to
exercise their option. Such notice shall indicate the portion of the
Defaulting Limited Partner's Partnership Interest that will be
purchased by each of the purchasing Limited Partners and the General
Partner, if any.
Confidentiality Provision Amendment
Article 15 of the Partnership Agreement is hereby amended by
adding a new Article 15.5 as set forth below:
15.5 Disclosure of Confidential Information. Each Limited Partner acknowledges
and agrees that his or her participation in the Partnership under this
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<PAGE>
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
15.5 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.
-8-
<PAGE>
EXHIBIT C
PURCHASE OPTION ASSIGNMENT AMENDMENT
-----------------------------------
Capitalized terms used in this Exhibit and not otherwise
defined shall have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of San Diego Lithotripters Limited
Partnership (the "Partnership").
Purchase Option Assignment Amendment
Articles 18.1.2, 18.2.2, 18.3.2 and 18.4.2 are hereby amended
to allow the General Partner to either exercise its purchase option rights
during the First Option Period as provided in such Articles, or to assign such
purchase option rights in whole or in part to the Partnership. If the General
Partner's purchase option rights are assigned to the Partnership as provided
herein, the Partnership shall have the right to use Partnership revenues to
exercise such rights. Further, Articles 18.6 and 18.7 are also amended by
substituting the Partnership as a buyer to the extent the General Partner elects
to assign to the Partnership its purchase option rights under Articles 18.1.2,
18.2.2, 18.3.2 and 18.4.2. If the Partnership acquires a Partnership Interest
pursuant to the terms of this Amendment, then the General Partner shall have the
authority to amend Schedule A to the Partnership Agreement to reflect the
deletion of the interests held by the selling Limited Partners (or their
successors in interest), and to reflect the increased Percentage Interests of
the remaining Partners resulting from the redemption.
-9-
<PAGE>
AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP - VIRGINIA I
THIS AMENDMENT, effective as of the 1st day of March, 1999, is
entered into by and among Lithotripters, Inc., a North Carolina corporation and
the General Partner of Fayetteville Lithotripters Limited Partnership-Virginia
I, a Virginia limited partnership (the "Partnership"), and the Limited Partners
of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," are parties to that certain
Agreement of Limited Partnership of Fayetteville Lithotripters Limited
Partnership-Virginia I, as amended (the "Agreement").
2. Effective as of March 1, 1999, the General Partner and the
requisite percentage of the Limited Partners consented in writing to the
following amendment to the Agreement, such amendment intended to allow the
General Partner the authority to periodically offer and sell additional limited
partner interests (a "Dilution Offering ") to local investors.
NOW, THEREFORE, in accordance with Articles 28 and 29 of the
Partnership Agreement and pursuant to the written consent of the General Partner
and the requisite percentage of the Limited Partners, the parties hereto agree
as follows:
The Agreement is hereby amended as set forth in
Exhibit A hereto.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
LITHOTRIPTERS, INC., a North Carolina
corporation and sole general partner of the Partnership
By:_________________________________________
Title:________________________________________
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-2
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact*
- --------
*Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
-2-
<PAGE>
EXHIBIT A
DILUTION OFFERING AMENDMENT
1. Capitalized terms used in this Exhibit and not otherwise
defined shall have the same meaning as provided in the Limited
Partnership Agreement (the "Partnership Agreement") of
Fayetteville Lithotripters Limited Partnership-Virginia I (the
"Partnership").
2. The purpose of this Exhibit is to set forth a proposed amendment to the
Partnership Agreement that would give the General Partner the authority
periodically to offer and sell additional limited partner interests
("Dilution Offering") to local Virginia urologists who are not investors in
the Partnership ("Qualified Investors"). As required by Articles 28 and 29
of the Partnership Agreement, to be effective this amendment must be
approved by the Partners representing two-thirds of the aggregate interests
in the Partnership.
3. The purposes of a Dilution Offering are (i) to raise additional capital for
Partnership operations, and (ii) to assure the highest quality of patient
care by admitting Qualified Investors to the Partnership who will be
dedicated and motivated as owners to follow the Partnership's treatment
protocol, and comply with its quality assurance and outcome analysis
programs. Any additional capital raised by the Partnership in a Dilution
Offering can be used for any legitimate Partnership purpose, including (i)
upgrading the Partnership's Lithostar(TM)Mobile System.
4. Any sale of limited partner interests to Qualified Investors
will result in the proportionate dilution of the Partnership
Percentage Interests of the existing Partners; i.e., the
interests of the General Partner and the Limited Partners in
Partnership allocations, cash distributions and voting rights
will be proportionately reduced by a successful Dilution
Offering.
5. The Percentage Interests of the existing Partners cannot be
diluted through Dilution Offerings by more than 20% in the
aggregate without the prior written consent of a Majority in
Interest of all the Partners. Without obtaining this
additional consent, the existing Partners cannot be diluted to
less than 80% of their Percentage Interest ownership at the
time of this Amendment.
6. The General Partner has determined that the purchase price per
1% Partnership Interest offered in the initial planned
Dilution Offering will be at its fair market value as
determined by an independent third party appraiser (Philpott,
Ball & Company). The price for units sold in future dilution
offerings also must be at a price no less than fair market
value as determined by the General Partner.
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<PAGE>
7. Upon the successful sale of Partnership Interests in a
Dilution Offering, the General Partner will prepare and attach
a new Schedule A to the Partnership Agreement to reflect (i)
the Partners' adjusted Percentage Interests in the
Partnership, and (ii) the admission of the new Limited
Partners to the Partnership.
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<PAGE>
FOURTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP - SOUTH CAROLINA II
THIS AMENDMENT, effective as of the 1st day of April, 1999, is
entered into by and among Lithotripters, Inc., a North Carolina corporation and
the General Partner of Fayetteville Lithotripters Limited Partnership-South
Carolina II, a South Carolina limited partnership (the "Partnership"), and the
Limited Partners of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," are parties to that certain
Agreement of Limited Partnership of Fayetteville Lithotripters Limited
Partnership-South Carolina II, as amended (the "Agreement").
2. Effective as of April 1, 1999, the General Partner and the
requisite percentage of the Limited Partners consented in writing to the
following amendments to the Agreement, such amendments intended to: (i) allow
the General Partner the authority to periodically offer and sell additional
limited partner interests (a "Dilution Offering") to local South Carolina and
North Carolina investors;(ii) clarify and strengthen the noncompetition
provisions of Articles 15.3 and 18.4 of the Agreement; (iii) add a new provision
to the Agreement to prevent the disclosure of Confidential Partnership
Information that might harm the Partnership and its Partners; (iv) allow the
General Partner, in its sole discretion, to elect to assign to the Partnership
its rights under Article 18 of the Agreement to purchase the Partnership
Interest of any deceased, insolvent or competing Limited Partner; and (v) allow
the General Partner or the Partnership, as the case may be, to purchase the
Partnership Interest of any deceased Limited Partner at a price equal to the
greater of (a) Capital Account value or (b) 1.5 times the aggregate distribution
amount attributable to such interest during the twelve month period preceding
the death of the Limited Partner.
NOW, THEREFORE, in accordance with Articles 29 and 30 of the
Partnership Agreement and pursuant to the written consent of the General Partner
and the requisite percentage of the Limited Partners, the parties hereto agree
as follows:
The Agreement is hereby amended as set forth in
Exhibits A, B, C and D attached hereto.
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<PAGE>
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
LITHOTRIPTERS, INC., a North Carolina corporation and
sole general partner of the Partnership
By:_________________________________________
Title:________________________________________
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-3
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact*
- --------
*Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
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<PAGE>
EXHIBIT A
DILUTION OFFERING AMENDMENT
1. Capitalized terms used in this Exhibit and not otherwise defined shall have
the same meaning as provided in the Agreement of Limited Partnership (the
"Partnership Agreement") of Fayetteville Lithotripters Limited Partnership -
South Carolina II (the "Partnership"), and any amendments thereto.
2. The purpose of this Exhibit is to set forth a proposed amendment to the
Partnership Agreement that would give the General Partner the authority
periodically to offer and sell additional limited partner interests (a "Dilution
Offering") to local South Carolina and North Carolina urologists who are not
investors in the Partnership ("Qualified Investors"). As required by Article 30
of the Partnership Agreement, to be effective this amendment must be approved by
the Partners representing two-thirds of the aggregate interests in the
Partnership.
3. The purposes of a Dilution Offering are (i) to raise additional capital for
any valid Partnership purpose, and (ii) to assure the highest quality of patient
care by admitting Qualified Investors to the Partnership who will be dedicated
and motivated as owners to follow the Partnership's treatment protocol, and
comply with its quality assurance and outcome analysis programs. Any additional
capital raised by the Partnership in a Dilution Offering can be used for any
legitimate Partnership purpose, including upgrading the Partnership's
Lithostar(TM) Mobile Systems.
4. Any sale of limited partner interests to Qualified Investors will result in
the proportionate dilution of the Partnership Percentage Interests of the
existing Partners; i.e., the interests of the General Partner and the Limited
Partners in Partnership allocations, cash distributions and voting rights will
be proportionately reduced by a successful Dilution Offering.
5. The Percentage Interests of the existing Partners cannot be diluted through
Dilution Offerings by more than 20% in the aggregate without the prior written
consent of a Majority in Interest of all the Partners. Without obtaining this
additional consent, the existing Partners cannot be diluted to less than 80% of
their Percentage Interest ownership at the time of this Amendment.
6. The General Partner has determined that the purchase price per 1% Partnership
Interest offered in the initial planned Dilution Offering will be at its fair
market value as determined by an independent third party appraiser. The price
for Units sold in future dilution offerings also must be at a price no less than
fair market value as determined by the General Partner.
7. Upon the successful sale of Partnership Interests in a Dilution Offering, the
General Partner will prepare and attach a new Schedule A to the Partnership
Agreement to reflect (i) the Partners' adjusted Percentage Interests in the
Partnership, and (ii) the admission of the new Limited Partners to the
Partnership.
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<PAGE>
EXHIBIT B
NONCOMPETITION PROVISION AMENDMENT
Capitalized terms used in this Exhibit and not otherwise
defined shall have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of Fayetteville Lithotripters Limited
Partnership - South Carolina II (the "Partnership"), and any amendments thereto.
Noncompetition Provision Amendment
Article 15.3 of the Partnership Agreement is hereby amended by
deleting the current provision in its entirety and by substituting the language
set forth below:
15.3 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" (as defined below) in the "Market Area" (as defined below)
while he or she is a Limited Partner in the Partnership. The phrase
"Outside Activities" means directly or indirectly owning, leasing or
subleasing a lithotripter (or any similar equipment or competing
devices used for treating renal or biliary stone disease). Prohibited
indirect ownership shall include the direct or indirect ownership of
any interest in a business venture (through stock ownership,
partnership interest ownership, ownership by or through a close family
member, or as otherwise determined in good faith by the General
Partner) involving the ownership, purchase, lease, sublease, promotion,
management or operation of a lithotripter (or similar equipment or
competing devices used for treating renal or biliary stone disease),
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 18.4 hereof, the withdrawing Limited
Partner shall not, for a period of two (2) years following the date of
his or her 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 15.3, 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.
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<PAGE>
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 and/or the Limited
Partners the purchase rights as provided in Article 18.4 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 15.3. In the event of breach of the
waiting period, 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.
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 15.3, 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 General Partner and/or Limited Partners may invoke the
purchase rights provided in Article 18.4 and shall be entitled to any
other remedy at law or in equity including without limitation an
injunction or suit for damages.
Article 18.4 of the Partnership Agreement is hereby amended by
deleting the current provision in its entirety and by substituting the language
set forth below.
18.4 Breach of Article 15.3. In the event the General
Partner either receives a Notice of Withdrawal as provided in Article
15.3 or receives notice of a breach of Article 15.3 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 18.4. If the
General Partner elects to enforce the provisions of this Article 18.4,
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 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 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
-5-
<PAGE>
entire Partnership Interest of the Defaulting Limited Partner before
the expiration of the First Option Period and in the manner provided
herein, the Limited Partners shall have the option to purchase all or
any part of the Partnership Interest of the Defaulting Limited Partner
not purchased by the General Partner 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. Any Limited
Partner desiring to purchase any part or all of the remaining
Partnership Interest of the Defaulting Limited Partner shall deliver to
the General Partner a written election to purchase all or a specified
portion of such Partnership Interest within the ten (10) day period
immediately following the close of the First Option Period (the "Second
Option Period"). If the Limited Partners in the aggregate elect to
purchase more than the Partnership Interest then available, each
electing Limited Partner shall have a priority, up to that portion
specified in his or her notice of election, to purchase such proportion
of the Partnership Interest of the Defaulting Limited Partner then
available as his or her Percentage Interest bears to the aggregate
Percentage Interests of the Limited Partners electing to purchase. That
portion of the Defaulting Limited Partner's Partnership Interest not
purchased on such a priority basis shall be allocated in one or more
successive allocations to those remaining Limited Partners electing to
purchase more of the Partnership Interest than they have a priority
right, up to the portion specified in their respective elections, in
the proportion that each of their Percentage Interests bears to the
aggregate Percentage Interests of all of them. the Valuation Date for
determining the price paid for the Defaulting Limited Partner's
interest under Article 18.6 shall be the last day of the month
immediately preceding the month in which occurs the Notice of
Withdrawal or breach of Article 15.3.
Within the ten (10) day period immediately following
the close of the Second Option Period (the "Confirmation Period"), the
General Partner shall inform each electing Limited Partner of the
portion of the Partnership Interest of the Defaulting Limited Partner
of the portion of the Partnership Interest of the Defaulting Limited
Partner as to which his or her election is effective. The General
Partner shall give notice to the Defaulting Limited Partner within the
ten (10) day period following the close of the Confirmation Period (the
"Notification Period") of the election by the Limited Partners to
exercise their option. Such notice shall indicate the portion of the
Defaulting Limited Partner's Partnership Interest that will be
purchased by each of the purchasing Limited Partners and the General
Partner, if any.
-6-
<PAGE>
Confidentiality Provision Amendment
Article 15 of the Partnership Agreement is hereby amended by
adding a new Article 15.4 as set forth below:
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 (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 15.4 as determined
by the General Partner, the Partnership shall be entitled to any remedy
at law or in equity with respect to such breach, including without
limitation, an injunction or suit for damages.
-7-
<PAGE>
EXHIBIT C
PURCHASE OPTION ASSIGNMENT AMENDMENT
Capitalized terms used in this Exhibit and not otherwise
defined shall have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of Fayetteville Lithotripters Limited
Partnership - South Carolina II (the "Partnership").
Purchase Option Assignment Amendment
Articles 18.1.2, 18.2.2, 18.3.2 and 18.4.2 are hereby amended
to allow the General Partner to either exercise its purchase option rights
during the First Option Period as provided in such Articles, or to assign such
purchase option rights in whole or in part to the Partnership. If the General
Partner's purchase option rights are assigned to the Partnership as provided
herein, the Partnership shall have the right to use Partnership revenues to
exercise such rights. Further, Articles 18.6 and 18.7 are also amended by
substituting the Partnership as a buyer to the extent the General Partner elects
to assign to the Partnership its purchase option rights under Articles 18.1.2,
18.2.2, 18.3.2 and 18.4.2. If the Partnership acquires a Partnership Interest
pursuant to the terms of this Amendment, then the General Partner shall have the
authority to amend Schedule A to the Partnership Agreement to reflect the
deletion of the interests held by the selling Limited Partners (or their
successors in interest), and to reflect the increased Percentage Interests of
the remaining Partners resulting from the redemption.
-8-
<PAGE>
EXHIBIT D
DEATH PURCHASE PRICE AMENDMENT
Capitalized terms used in this Exhibit and not
otherwise defined shall have the same meaning as provided in the
Agreement of Limited Partnership (the "Partnership Agreement") of
Fayetteville Lithotripters Limited Partnership - South Carolina II (the
"Partnership").
Death Purchase Price Amendment
Article 18.6 is hereby amended to allow the General
Partner (or in the event the Purchase Option Assignment Amendment is
approved, the Partnership as the General Partner's Assignee) to
purchase the Partnership Interest of a deceased Limited Partner upon
exercise of the purchase option right granted to the General Partner
(or its assignee, the Partnership) during the First Option Period under
Article 18.1.2, for a price equal to the greater of (i) the deceased
Limited Partner's share of the Partnership's book value determined in
the manner described in Article 18.6, or (ii) 1.5 times the aggregate
distribution attributable to such deceased Limited Partner's
Partnership Interest for the twelve-month period immediately preceding
the Valuation Date. At the Closing of the sale of the Partnership
Interest of a deceased Limited Partner, although not necessary to
effect the transfer, the executor or personal representative of the
deceased Limited Partner's estate shall, concurrently with tender and
receipt of the purchase price, deliver to the General Partner, duly
executed instruments of transfer and assignment assigning good and
marketable title to the deceased Limited Partner's entire Partnership
Interest, free and clear from any liens or encumbrances or rights of
others therein. The deemed transfer is effective regardless of whether
the executor or personal representative of the deceased Limited
Partner's estate performs the duties set forth herein. Notwithstanding
the date of the Closing, or whether a Closing is successfully held, the
transfer of a Partnership Interest of a deceased Limited Partner shall
be deemed to occur as of the Valuation Date. Further, in connection
with the foregoing, Articles 14 and 17.3 are amended to provide that a
transferee of a deceased Limited Partner who receives such Limited
Partner's Partnership Interest by operation of law or otherwise shall
have no right to receive any distributions attributable to such Limited
Partner's Partnership Interest after the Valuation Date, unless the
General Partner consents to the same. The Partnership shall have the
right to deduct from the purchase price payable for such deceased
Limited Partner's Partnership Interest the amount of any distributions
made to the estate of the deceased Limited Partner after the Valuation
Date.
-9-
<PAGE>
FIFTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP - SOUTH CAROLINA II
THIS AMENDMENT, effective as of the 1st day of August 1999, is
entered into by and among Lithotripters, Inc., a North Carolina corporation and
the General Partner of Fayetteville Lithotripters Limited Partnership - South
Carolina II, a South Carolina limited partnership (the "Partnership"), and the
Limited Partners of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," are parties to that certain
Agreement of Limited Partnership of Fayetteville Lithotripters Limited
Partnership - South Carolina II, dated effective as of March 17, 1989, and as
subsequently amended (the "Agreement").
2. The Partners desire to further amend the Agreement to reflect the
assignment of an aggregate of a 2.67% limited partner interest in the
Partnership, respectively, from Harry W. Kinard, M.D. and Clifton L. Williams,
M.D. to the following individuals: Peter Parramoure, M.D. (.78%); Jim Lugg, J.D.
(.78%); Thomas E. Hamilton, M.D. (.78%); William F. Flanagan, M.D. (.78%); Roger
G. McAlpine, M.D. (.37); Preston Turner, M.D. (.29%); J. Ronald Smith, M.D.
(.78%); and J. Robert Monroe, M.D. (.78%), (collectively, the "Assignees"), and
the admission of the Assignees as substitute Limited Partners.
NOW, THEREFORE, in consideration of the mutual promises,
covenants, conditions and agreements herein contained, the parties hereto agree
as follows:
Schedule A-3 is deleted in its entirety and a new
Schedule A-4, attached hereto, is substituted in its
place.
[Signature Page Follows}
-1-
<PAGE>
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
Lithotripters, Inc.
By:
Name:____________________________
Title:_____________________________
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-3
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact*
- --------
*Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
-2-
<PAGE>
SCHEDULE A-4
Schedule of Partnership Interests
FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP-SOUTH CAROLINA II
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND PERCENTAGE INTERESTS
Cash Percentage
General Partner Contribution(1) Interest
- --------------- ------------ --------
Lithotripters, Inc. $ 19,375 20.00%
2008 Litho Place, Suite 201
Fayetteville, NC 28304
Limited Partners
Charlton P. Armstrong III 4,000 4.00%
52 Bear Drive
Greenville, SC 29605
H. Sykes Dehart 2,750 3.00%
11 Park Creek Drive
Greenville, SC 29605
R. Douglas DeVore 2,000 2.00%
310 Memorial Drive
Greer, SC 29650
Dean M. Dobson 2,000 2.00%
Post Office Box 427
Seneca, SC 29679
John S. Evans 2,000 2.00%
11 Park Creek Drive
Greenville, SC 29605
William F. Flanagan N/A (3) .78%
Lawrence Hill 2,000 2.00%
527 Mills Avenue
Greenville, SC 29605
-3-
<PAGE>
Cash Percentage
Limited Partners Contribution Interest
Thomas E. Hamilton N/A (3) .78%
Thomas H. Jordan 1,125 1.00%
644 S. Third Street, WC 244
Louisville, KY 40202-2465
David M. Kraebber, M.D. 2,000 1.33%
404 West 8th Street
Hendersonville, NC 28739
J. Ernest Lathem 4,000 4.00%
527 Mills Avenue
Greenville, SC 29605
Lithotripters, Inc. N/A(2) 12.33%
2008 Litho Place, Suite 201
Fayetteville, NC 28304
Woodrow W. Long, Jr. 4,000 4.00%
18 Memorial Medical Drive
Greenville, SC 29605
Jim Lugg N/A (3) .78%
R. James McNaughton, Jr. 2,000 2.00%
317 S. Francis Drive
Suite 210
Greenville, SC 29348
Michael S. Mathers 4,000 4.00%
52 Bear Drive
Greenville, SC 29605
Roger G. McAlpine N/A (3) .37%
Roy M. McCoy 4,000 4.00%
527 Mills Avenue
Greenville, SC 29605
J. Robert Monroe N/A (3) .78%
-4-
<PAGE>
Cash Percentage
Limited Partners Contribution Interest
Arnold P. Mulkey 4,000 4.00%
Greenwood Medical Center
Greenwood, SC 29646
Peter Parramoure N/A (3) .78%
James D. Rice 2,000 2.00%
52 Bear Drive
Greenville, SC 29605
J. Ronald Smith N/A (3) .78%
Colin B. Thomas 3,000 2.00%
512 6th Avenue
Hendersonville, NC 28739
Michael D. Turner 4,000 4.00%
Greenwood Medical Center
Greenwood, SC 29646
Preston Turner N/A (3) .29%
Donald R. Vaughn, M.D. 4,000 4.00%
18 Memorial Drive Extension
Greer, SC 29650
John E. Walton 4,000 4.00%
400 Memorial Drive Extension
Greer, SC 29650
Linton B. West, M.D. 2,750 3.00%
11 Park Creek Drive
Greenville, SC 29605
Norris W. Whitlock 2,000 2.00%
310 Memorial Drive
Greer, SC 29650
-5-
<PAGE>
Cash Percentage
Limited Partners Contribution Interest
David Randall Williams, M.D. 3,000 2.00%
512 6th Avenue
Hendersonville, NC 28739
--------- ---------
TOTAL $ 92,000 100%
(1) The cash contributions listed reflect the initial contributions of
those Partners who currently hold an interest in the Partnership.
(2) Lithotripters, Inc. received its limited partner interest pursuant to
various assignments from existing limited partners and, therefore, made no cash
contributions to the Partnership.
(3) Received their limited partner interests pursuant to various
assignments from existing limited partners as of August 1, 1999 and, therefore,
made no cash contributions to the Partnership.
-6-
<PAGE>
AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP - UTAH I
THIS AMENDMENT, effective as of the 1st day of June, 1999, is
entered into by and among Lithotripters, Inc., a North Carolina corporation and
the General Partner of Fayetteville Lithotripters Limited Partnership-Utah I, a
Utah limited partnership (the "Partnership"), and the Limited Partners of the
Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," are parties to that certain Amended
and Restated Agreement of Limited Partnership of Fayetteville Lithotripters
Limited Partnership-Utah I, dated as of January 7, 1989 as amended (the
"Agreement").
2. The Partners desire to further amend the Agreement to
reflect the redemption by the Partnership of an aggregate 1.5% limited partner
interest from Stacy Childs, M.D.
NOW, THEREFORE, in consideration of the mutual promises,
covenants, conditions and agreements herein contained, the parties hereto agree
as follows:
Schedule A-6 is deleted in its entirety and a new
Schedule A-7, attached hereto is substituted in its
place.
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
LITHOTRIPTERS, INC.
By:/s/ Joseph Jenkins, M.D.
--------------------------
Joseph Jenkins, M.D.
President
-1-
<PAGE>
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-6
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact*
- --------
*Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
-2-
<PAGE>
SCHEDULE A-7
Schedule of Partnership Interests
FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP-UTAH I
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND PERCENTAGE INTERESTS
Cash Percentage
General Partner Contribution (1) Interest
- ------- ------- ------------ --------
Lithotripters, Inc. $ 19,562.50 19.644670%
2008 Litho Place, Suite 201
Fayetteville, NC 28304
Limited Partners
Joseph Armstrong, M.D. $ 2,000.00 1.964467%
1055 North 300 West #303
Provo, UT 84604
Michael J. Bateman 2,000.00 1.964467%
Medical Arts Building
1448 East Center, #7
Pocatello, ID 83201
Hal H. Bourne, M.D. 4,000.00 2.913706%
324 Tenth Avenue, #178
Salt Lake City, UT 84103
Thomas W. Brady, M.D. 400.00 .261929%
Dean L. Bristow, M.D. 2,000.00 1.964467%
50 South Medical Drive
Payson, UT 84651
Curtis Campbell, M.D. 2,000.00 1.964467%
3905 Harrison Boulevard
Ogden, UT 84403
-3-
<PAGE>
Peter M. Cannon, M.D. 3,000.00 2.947208%
Teton Medical Specialty Center
2001 South Woodruff, Suite 4
Idaho Falls, ID 83404-6370
S. Corbin Clark, M.D. 2,000.00 1.964467%
9690 South 1300 East, #100
Sandy, UT 84070
Paul K. Clark, M.D. 2,000.00 1.964467%
508 East South Temple
Suite 100
Salt Lake City, UT 84102
Robert C. Clift, M.D. 400.00 .392893%
Cottage Creek, L.L.C. N/A (3) 1.015228%
Ronald H. Crouch, M.D. 4,000.00 2.619289%
515 South 300 East
St. George, UT 84770
Duane E. Davis, M.D. 2,000.00 .982234%
930 North Fifth West
Provo, UT 84601
Danielle Davis Trust N/A (3) .982234%
Jonathan Garey-Sage, M.D. 400.00 .392893%
David Henderson, M.D. 2,000.00 1.964467%
415 Medical Drive, #202A
Bountiful, UT 84010
James C. Jensen, M.D. 52,500.00 .761421%
Thomas H. Jordan 750.00 .491371%
82 Highwood Street
Louisville, KY 40206
David Kimball, M.D. 4,000.00 3.928934%
5770 South 250 East, #305
Salt Lake City, UT 84107
-4-
<PAGE>
Kenneth Kofoed, M.D. 2,000.00 1.964467%
2084 North 1700 West
Layton, UT 84041
Richard E. Lee, M.D. 2,000.00 1.964467%
324 Tenth Avenue, #178
Salt Lake City, UT 84103
Lithotripters, Inc. 4,000.00(2) 15.28934%
2008 Litho Place
Fayetteville, NC 28304
Ned L. Mangelson, M.D. 2,000.00 1.964467%
333 South Ninth East
Salt Lake City, UT 84102
Michael McFadden, M.D. 35,000.00 .507614%
Richard B. Melzer, M.D. 1,000.00 .654822%
2825-8th Avenue North
Billings, MT 59101
Anthony W. Middleton, Jr., M.D. 2,000.00 1.964467%
1060 East First South, #112
Salt Lake City, UT 84102
George W. Middleton, M.D. 2,000.00 1.964467%
1060 East First South, #112
Salt Lake City, UT 84102
James F. Morrell, M.D. 2,000.00 1.964467%
1220 East 3900 South
Salt Lake City, UT 84124
Steven L. Moss, M.D. 400.00 .261929%
Ronald I. Oldroyd, M.D. 3,000.00 1.964467%
930 North 500 West
Provo, UT 84601
Stephen Richardson, M.D. 2,000.00 1.309645%
3980 South 700 East, #20
Murray, UT 84107
- 5 -
<PAGE>
Odell F. Rigby, M.D. 4,000.00 3.928934%
333 South Ninth East
Salt Lake City, UT 84102
Ronald J. Saunders, M.D. 2,000.00 1.964467%
120 North, 1220 East
American fork, UT 84003
John G. Scott, M.D. 400.00 .261929%
Herbert B. Spencer, M.D. 2,000.00 1.964467%
920 North Fifth West
Provo, UT 84601
Charles T. Swallow, M.D. 2,000.00 1.309645%
225 East Fourth North
Logan, UT 84321
Roger H. Tall, M.D. 4,000.00 3.928934%
Teton Medical Specialty Center
2001 South Woodruff, Suite 8
Idaho Falls, ID 83404-6370
Timothy Taylor, M.D. 35,000.00 .507614%
Perry T. Walters, M.D. 2,000.00 1.964467%
425 Medical Drive
Bountiful, UT 84010
Vanez B. Wilson, M.D. 2,000.00 1.309645%
3980 South 700 East, #20
Murray, UT 84107
-------------- -------
TOTAL $320,812.50 100%
(1) The cash contributions reflect the initial cash contributions of those
Partners who currently hold an interest in the Partnership.
(2) Lithotripters, Inc. acquired a portion of its limited partner interest
pursuant to various assignments from existing limited partners and made no cash
contributions to the Partnership for the limited partner interests received as a
result of such assignments.
-6-
<PAGE>
(3) Acquired its limited partner interest pursuant to assignment from
existing limited partner and made no cash contributions to the
Partnership for the limited partner interest received as a result of
such assignment.
-7-
<PAGE>
THIRD AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
FLORIDA LITHOTRIPTERS LIMITED PARTNERSHIP I
THIS AMENDMENT, effective as of the 30th day of September,
1999, is entered into by and among Lithotripters, Inc., a North Carolina
corporation and the General Partner of Florida Lithotripters Limited Partnership
I, a Florida limited partnership (the "Partnership"), and the Limited Partners
of the Partnership.
RECITALS:
--------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners", entered into that certain Agreement
of Limited Partnership of Florida Lithotripters Limited Partnership I dated
August 5, 1991, as amended.
2. The Partners desire to amend the Agreement to reflect the assignment by
D. Russell Locke and Ira W. Klimberg of their respective 1.95% limited partner
interests in the Partnership to Lithotripters, Inc., and the admission of
Lithotripters, Inc. as a substitute Limited Partner.
NOW, THEREFORE, in consideration of the mutual promises,
covenants, conditions and agreements herein contained, the parties hereto agree
as follows:
Schedule A-3 is deleted in its entirety and new
Schedule A-4, attached hereto, is substituted in its place.
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first-above written.
GENERAL PARTNER:
Lithotripters, Inc.
By:
Name:
Title:
ALL THE LIMITED PARTNERS OF THE
PARTNERSHIP WHOSE NAMES APPEAR ON
SCHEDULE A-3
By:/s/ Joseph Jenkins, M.D. (SEAL)
---------------------------
Joseph Jenkins, M.D.,
Attorney-in-Fact*
* Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
-1-
<PAGE>
SCHEDULE A-4
Schedule of Partnership Interests
Florida Lithotripters Limited Partnership I
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND GUARANTIES
Cash Percentage
General Partner Contribution Interest
Lithotripters, Inc. $49,687.52 20.0000
Limited Partners
John P. Adams 2,500.00 1.0000
Stephen W. Alcorn 2,500.00 1.0000
Thomas Ayers 2,500.00 1.0000
Dan Beraha 4,875.00 1.9500
Jim Brady 936.68 0.4163
B. Thomas Brown 4,500.00 1.8000
Joseph L. Camps 3,250.00 1.3000
Anthony L. Cantwell 2,500.00 1.0000
Charles Cartwright 2,500.00 1.0000
Ramesh Chopra 2,500.00 1.0000
Franklin Clark 937.58 0.4167
Mark Cohen 2,500.00 1.0000
J. A. Colom 3,250.00 1.3000
David Cunningham 4,125.00 1.6500
Allan Davis 2,500.00 1.0000
Stephen L. Deardourff 2,500.00 1.0000
Fran Deture N/A (1) 1.0000
Pareshkumar Desai 4,875.00 1.9500
Martin K. Dineen 4,125.00 1.6500
Neil P. Dunn 2,500.00 1.0000
Basil Fossum 2,500.00 1.0000
Clark Gaddy 2,500.00 1.0000
Philip Gallina 937.58 0.4167
John Garner 2,500.00 1.0000
Michael Grable 4,125.00 1.6500
Frank Greskovich 2,500.00 1.0000
William Grine 937.58 0.4167
<PAGE>
Cash Percentage
General Partner Contribution Interest
Lawrence Hatchattq $2,500.00 1.0000%
Dennis Healey N/A (2) 0.6500
Warren T. Hitt 3,250.00 1.3000
Joseph Jenkins 937.58 0.4167
William Jones 2,500.00 1.0000
Thomas Jordan 937.58 0.4167
William Jordan 937.58 0.4167
Charles King 4,875.00 1.9500
Robert Lankford 4,875.00 1.9500
Lithotripters, Inc. N/A (3) 6.0500
Mark McCaughan 2,500.00 1.0000
Alvie Carl McCully 2,500.00 1.0000
David Miles 3,250.00 1.3000
Thomas Mobley 937.58 0.4167
Bert Morrow 4,500.00 1.8000
Dan Myers 937.58 0.4167
Robert C. Newman 5,375.00 2.1500
Enrique Panlilio 2,500.00 1.0000
Greg Parr 1,250.00 0.5000
Jack Paulk 4,875.00 1.9500
Dennis Peters 2,500.00 1.0000
William Eugene Potts, Jr. 2,500.00 1.0000
Tony Rand 937.58 0.4167
Edward Rietze 937.58 0.4167
Raleigh Rollins 2,500.00 1.0000
Tom Sanders 2,500.00 1.0000
W. Paul Sawyer 2,500.00 1.0000
Scott Sellinger 2,500.00 1.0000
Fouad Shami 2,500.00 1.0000
John Sharpe 4,875.00 1.9500
David Sneed 4,125.00 1.6500
James C. Springer 2,500.00 1.0000
Thomas F. Stringer 2,500.00 1.0000
Harvey Taub N/A (4) 0.6500
Alan Terry 937.58 0.4167
Derrick Thompson 2,500.00 1.0000
John W. Timmons 2,500.00 1.0000
Minoo Vaghaiwalla 3,250.00 1.3000
Dixon Walker 2,500.00 1.0000
John Wescot 3,250.00 1.3000
<PAGE>
Cash Percentage
General Partner Contribution Interest
Robert Youngman $2,500.00 1.0000%
Thomas Zachos 2,500.00 1.0000
Nicholai Zelneranok 3,250.00 1.3000
TOTAL $245,187.58 100.0000
(1) Fran Deture purchased his limited partnership interest from the Estate
of David Drylie and, therefore, he made no capital contribution to the
Partnership.
(2) Dennis Healey received his limited partnership interest due to an
assignment from the Estate of Byron H. McCormick and, therefore, made
no capital contribution to the Partnership.
(3) Lithotripters, Inc. purchased its limited partnership interest pursuant to
various assignments from existing Limited Partners and, therefore, made no
capital contribution to the Partnership as a result of its purchase of such
interest.
(4) Harvey Taub received his limited partnership interest due to an
assignment from the Estate of Byron H. McCormick and, therefore, made
no capital contribution to the Partnership.
<PAGE>
FOURTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
INDIANA LITHOTRIPTERS LIMITED PARTNERSHIP I
THIS AMENDMENT, effective as of the 30th day of September,
1999, is entered into by and among Lithotripters, Inc., a North Carolina
corporation and the General Partner of Indiana Lithotripters Limited Partnership
I, an Indiana limited partnership (the "Partnership"), and the Limited Partners
of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," are parties to that certain
Agreement of Limited Partnership of Indiana Lithotripters Limited Partnership I,
as amended (the "Agreement").
2. Effective as of September 30, 1999, the General Partner and
the requisite percentage of the Limited Partners consented in writing to the
following amendments to the Agreement, such amendments intended to: (i) allow
the General Partner the authority to periodically offer and sell additional
limited partner interests (a "Dilution Offering") to local investors;(ii)
clarify and strengthen the noncompetition provisions of Articles 15.3 and 18.3
of the Agreement; (iii) add a new provision to the Agreement to prevent the
disclosure of Confidential Partnership Information that might harm the
Partnership and its Partners; and (iv) allow the General Partner, in its sole
discretion, to elect to assign to the Partnership its rights under Article 18 of
the Agreement to purchase the Partnership Interest of any deceased, insolvent or
competing Limited Partner:
NOW, THEREFORE, in accordance with Articles 28 and 29 of the
Partnership Agreement and pursuant to the written consent of the General Partner
and the requisite percentage of the Limited Partners, the parties hereto agree
as follows:
The Agreement is hereby amended as set forth in
Exhibits A, B and C attached hereto.
[Signature Page Follows]
-1-
<PAGE>
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
LITHOTRIPTERS, INC., a North Carolina corporation and
sole general partner of the Partnership
By:_________________________________________
Title:________________________________________
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-3
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact*
- --------
*Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
-2-
<PAGE>
EXHIBIT A
DILUTION OFFERING AMENDMENT
1. Capitalized terms used in this Exhibit and not otherwise defined shall
have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of Indiana Lithotripters
Limited Partnership I (the "Partnership").
2. The purpose of this Exhibit is to set forth a proposed amendment to the
Partnership Agreement that would give the General Partner the authority
periodically to offer and sell additional limited partner interests
("Dilution Offerings") to local investors who are not Limited Partners
in the Partnership ("Qualified Investors"). As required by Article 29
of the Partnership Agreement, to be effective this amendment must be
approved by the Partners representing two-thirds of the aggregate
interests in the Partnership.
3. The purposes of a Dilution Offering are (i) to raise additional capital for
any valid Partnership purposes, and (ii) to assure the highest quality of
patient care by admitting Qualified Investors to the Partnership who will
be dedicated and motivated as owners to follow the Partnership's treatment
protocol, and comply with its quality assurance and outcome analysis
programs. Any additional capital raised by the Partnership in a Dilution
Offering can be used for any legitimate Partnership purpose, including
upgrading the imaging components of the Partnership's Siemens
Lithostar(TM)extracorporeal shockwave lithotripter and funding Partnership
expenses as the General Partner deems appropriate.
4. In the event the Dilution Offering Amendment receives the requisite
approval of the Limited Partners, the General Partner intends to
conduct a Dilution Offering for the purposes of raising additional
capital to upgrade the imaging components of the Partnership's
Lithostar(TM) and to fund other Partnership expenses deemed appropriate
by the General Partner.
5. Any sale of limited partner interests to Qualified Investors will
result in the proportionate dilution of the Partnership Percentage
Interests of the existing Partners; i.e., the interests of the General
Partner and the Limited Partners in Partnership allocations, cash
distributions and voting rights will be proportionately reduced by a
successful Dilution Offering.
6. The General Partner has determined that the purchase price per 1%
Partnership Interest offered in the initial planned Dilution Offering
will be at its fair market value as determined by an independent third
party appraiser. The price for Units sold in future Dilution Offerings
also must be at a price no less than fair market value as determined by
the General Partner.
7. Upon the successful sale of Partnership Interests in a Dilution
Offering, the General Partner will prepare and attach a new Schedule A
to the Partnership Agreement to reflect (i) the Partners' adjusted
Percentage Interests in the Partnership, and (ii) the admission of the
new Limited Partners to the Partnership.
-3-
<PAGE>
EXHIBIT B
NONCOMPETITION PROVISION AND
CONFIDENTIALITY PROVISION AMENDMENTS
Capitalized terms used in this Exhibit and not otherwise
defined shall have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of Indiana Lithotripters Limited
Partnership I (the "Partnership").
Noncompetition Provision Amendment
Article 15.3 of the Partnership Agreement is hereby amended by
deleting the current provision in its entirety and by substituting the language
set forth below:
15.3 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" (as defined below) in the "Market Area"
(as defined below) while he or she is a Limited Partner in the
Partnership. The phrase "Outside Activities" means directly or
indirectly owning, leasing or subleasing a lithotripter (or any similar
equipment or competing devices used for treating renal or biliary stone
disease) or any other therapeutic equipment acquired by the Partnership
as permitted by Article 4. Prohibited indirect ownership shall include
the direct or indirect ownership of any interest in a business venture
(through stock ownership, partnership interest ownership, ownership by
or through a close family member, or as otherwise determined in good
faith by the General Partner) involving the ownership, purchase, lease,
sublease, promotion, management or operation of a lithotripter (or
similar equipment or competing devices used for treating renal or
biliary stone disease) 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 18.3 hereof, the withdrawing Limited
Partner shall not, for a period of two (2) years following the date of
his or her 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 15.3, 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
-4-
<PAGE>
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 in Article 18.3 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 15.3. In the event of breach of the waiting period, 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.
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 15.3, 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 General Partner may invoke the purchase rights provided in
Article 18.3 and shall be entitled to any other remedy at law or equity
including without limitation an injunction or suit for damages.
Article 18.3 of the Partnership Agreement is hereby amended by
deleting the current provision in its entirety and by substituting the language
set forth below.
18.3 Breach of Article 15.3. In the event the General
Partner either receives a Notice of Withdrawal as provided in Article
15.3 or receives notice of a breach of Article 15.3 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 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 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 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 Notice of Default
(the "Option Period") within
-5-
<PAGE>
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.
Confidentiality Provision Amendment
Article 15 of the Partnership Agreement is hereby amended by
adding a new Article 15.4 as set forth below:
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 (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 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.
-6-
<PAGE>
EXHIBIT C
PURCHASE OPTION ASSIGNMENT AMENDMENT
-----------------------------------
Capitalized terms used in this Exhibit and not otherwise
defined shall have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of Indiana Lithotripters Limited
Partnership I (the "Partnership").
Purchase Option Assignment Amendment
Articles 18.1, 18.2 and 18.3 are hereby amended to allow the
General Partner to either exercise its purchase option rights during the Option
Period, as provided in such Articles, or to assign such purchase option rights
in whole or in part to the Partnership. If the General Partner's purchase option
rights are assigned to the Partnership as provided herein, the Partnership shall
have the right to use Partnership revenues or borrowings to exercise such
rights. Further, Articles 18.5 and 18.6 are also amended by substituting the
Partnership as a purchaser to the extent the General Partner elects to assign to
the Partnership its purchase option rights under Articles 18.1, 18.2 and 18.3.
If the Partnership acquires a Partnership Interest pursuant to the terms of this
Amendment, then the General Partner shall have the authority to amend Schedule A
to the Partnership Agreement to reflect the deletion of the interests held by
the selling Limited Partners (or their successors in interest), and to reflect
the increased Percentage Interests of the remaining Partners resulting from the
redemption.
-7-
<PAGE>
SIXTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
TEXAS LITHOTRIPSY LIMITED PARTNERSHIP III L.P.
THIS AMENDMENT, effective as of the 1st day of November, 1999,
is entered into by and among Pacific Lithotripsy, a North Carolina general
partnership and the General Partner of Texas Lithotripsy Limited Partnership III
L.P., a Texas limited partnership (the "Partnership"), and the Limited Partners
of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter collectively
referred to as the "Partners," are parties to that certain Agreement of Limited
Partnership of Texas Lithotripsy Limited Partnership III L.P., as amended (the
"Agreement").
2. Effective as of November 1, 1999, the General Partner and
the requisite percentage of the Limited Partners consented in writing to the
following amendment to the Agreement, such amendment intended to allow the
General Partner the authority to periodically offer and sell additional limited
partner interests (a "Dilution Offering ") to local investors.
NOW, THEREFORE, in accordance with Article 29 of the
Partnership Agreement and pursuant to the written consent of the General Partner
and the requisite percentage of the Limited Partners, the parties hereto agree
as follows:
The Agreement is hereby amended as set forth in
Exhibit A hereto.
[Signature Page Follows]
-1-
<PAGE>
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
PACIFIC LITHOTRIPSY, a North Carolina general
partnership
By: Lithotripters, Inc., a North Carolina corporation
and a general partner of the Partnership
By:_________________________________________
Title:________________________________________
By: LithoWest, Inc., a California corporation and a
general partner of the Partnership
By: _______________________________________
Title: _____________________________________
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-5
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact*
- --------
*Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
-2-
<PAGE>
EXHIBIT A
DILUTION OFFERING AMENDMENT
1. Capitalized terms used in this Exhibit and not otherwise defined shall
have the same meaning as provided in the Limited Partnership Agreement
(the "Partnership Agreement") of Texas Lithotripsy Limited Partnership
III L.P. (the "Partnership"), and any amendments thereto.
2. The purpose of this Exhibit is to set forth a proposed amendment to the
Partnership Agreement that would give the General Partner the authority
periodically to offer and sell additional limited partner interests
("Dilution Offering") to local urologists who are not investors in the
Partnership ("Qualified Investors"). As required by Article 29 of the
Partnership Agreement, to be effective this amendment must be approved
by the Partners representing two-thirds of the aggregate interests in
the Partnership.
3. The purposes of a Dilution Offering are (i) to raise additional capital
for any valid Partnership purpose, and (ii) to assure the highest
quality of patient care by admitting Qualified Investors to the
Partnership who will be dedicated and motivated as owners to follow the
Partnership's treatment protocol, and comply with its quality assurance
and outcome analysis programs. Any additional capital raised by the
Partnership in a Dilution Offering can be used for any legitimate
Partnership purpose including upgrading the Partnership's Lithostar(TM)
Mobile System.
4. Any sale of limited partner interests to Qualified Investors will
result in the proportionate dilution of the Partnership Percentage
Interests of the existing Partners; i.e., the interests of the General
Partner and the Limited Partners in Partnership allocations, cash
distributions and voting rights will be proportionately reduced by a
successful Dilution Offering.
5. The Percentage Interests of the existing Partners cannot be diluted
through Dilution Offerings by more than 20% in the aggregate without
the prior written consent of a Majority in Interest of all the
Partners. Without obtaining this additional consent, the existing
Partners cannot be diluted to less than 80% of their Percentage
Interest ownership at the time of this Amendment.
6. The General Partner has determined that the purchase price per 1%
Partnership Interest offered in the initial planned Dilution Offering
will be at its fair market value as determined by an independent third
party appraiser. The price for Units sold in future dilution offerings
also must be at a price no less than fair market value as determined by
the General Partner.
7. Upon the successful sale of Partnership Interests in a Dilution
Offering, the General Partner will prepare and attach a new Schedule A
to the Partnership Agreement to reflect (i) the Partners' adjusted
Percentage Interests in the Partnership, and (ii) the admission of the
new Limited Partners to the Partnership.
-3-
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
MOBILE KIDNEY STONE CENTERS
OF CALIFORNIA II, L.P.
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
MOBILE KIDNEY STONE CENTERS OF CALIFORNIA II, L.P.
--------------------------------------------------
TABLE OF CONTENTS
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..........................................7
----------
9. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF CERTAIN LIMITED
----------------------------------------------------------
PARTNERS.............................................7
--------
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GENERAL
--------------------------------------------------------
PARTNER..............................................7
-------
11. ADMISSION OF LIMITED PARTNERS........................8
-----------------------------
12. CAPITAL ACCOUNTS.....................................9
----------------
13. ALLOCATIONS.........................................10
-----------
14. DISTRIBUTIONS.......................................11
-------------
l5. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..........12
------------------------------------------
16. LIMITED LIABILITY...................................14
-----------------
17. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS.....14
-----------------------------------------------
i
<PAGE>
18. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON CERTAIN
-------------------------------------------------------------
EVENTS................................................18
------
19. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL PARTNER'S
-----------------------------------------------------------
INTEREST..............................................24
--------
20. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER....25
--------------------------------------------------
21. MANAGEMENT AND OPERATION OF BUSINESS..................25
------------------------------------
22. RESERVES..............................................28
--------
23. INDEMNIFICATION AND EXCULPATION
OF THE GENERAL PARTNER.........................28
24. DISSOLUTION OF THE PARTNERSHIP........................29
------------------------------
25. DISTRIBUTION UPON DISSOLUTION.........................30
-----------------------------
26. BOOKS OF ACCOUNT, RECORDS AND REPORTS.................31
-------------------------------------
27. NOTICES...............................................32
-------
28. AMENDMENTS............................................32
----------
29. LIMITATIONS ON AMENDMENTS.............................32
-------------------------
30. MEETINGS, CONSENTS AND VOTING.........................33
-----------------------------
31. SUBMISSIONS TO THE LIMITED PARTNERS...................33
-----------------------------------
32. ADDITIONAL DOCUMENTS..................................33
--------------------
33. SURVIVAL OF RIGHTS....................................34
------------------
34. INTERPRETATION AND GOVERNING LAW......................34
--------------------------------
35. SEVERABILITY..........................................34
------------
36. AGREEMENT IN COUNTERPARTS.............................34
-------------------------
37. THIRD PARTIES.........................................34
-------------
38. POWER OF ATTORNEY.....................................34
-----------------
ii
<PAGE>
39. ARBITRATION...........................................35
-----------
40. CREDITORS.............................................35
---------
SCHEDULES
Schedule A - Schedule of Partnership Interests
iii
<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 CALIFORNIA CORPORATE
SECURITIES LAW OF 1968, AS AMENDED, OR REGISTERED UNDER SIMILAR LAWS OR ACTS OF
OTHER STATES IN RELIANCE UPON EXEMPTIONS UNDER SUCH LAWS. IN ADDITION, NO
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS MAY BE MADE WITHOUT COMPLIANCE WITH
THE RESTRICTIONS SET FORTH IN ARTICLE 17 BELOW.
AGREEMENT
OF LIMITED PARTNERSHIP
OF
MOBILE KIDNEY STONE CENTERS
OF CALIFORNIA II, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement") is
made as of April 1, 1999, by and among MOBILE KIDNEY STONE CENTERS OF
CALIFORNIA, LTD., a California limited partnership (the "General Partner"), and
persons listed on Schedule A attached hereto as the Limited Partners.
1. FORMATION.
---------
The Partnership was formed pursuant to the filing in the
Office of the Secretary of State of California on or about December 11, 1998 of
a Certificate of Limited Partnership in accordance with the provisions of the
Act.
2. NAME.
----
2.1 The name of the Partnership is "Mobile Kidney Stone Centers of
California II, 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 15195
National Avenue, Suite 203, Los Gatos, California 95032, or at such other place
as the General Partner may be required to maintain within the State of
California pursuant to the Act or may otherwise, from time to time, designate by
notice to the Limited Partners (the "Records Office").
-1-
<PAGE>
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
acquire and operate one or more transportable lithotripters (or any other renal
stone treatment equipment) for the treatment of renal stones primarily within a
150 mile radius of Sacramento, California 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; provided, that such equipment as of the
date of acquisition by the Partnership has received FDA premarket approval;
(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 December 31, 2049, 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.
Bank. First-Citizens Bank & Trust Company, its successors and assigns.
Capital Account. The Partnership capital account of a Partner as computed
pursuant to Article 12 of this Agreement.
-2-
<PAGE>
Capital Contributions. All capital contributions made by a
Partner or his or her 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 Article 7.4 of this
Agreement, the future offering of additional limited partnership interests in
the Partnership as determined by the General Partner. Except as otherwise
provided in Article 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 equipment used in the operation of the
Lithotripter System, including the mobile transport vehicle, the transportable
lithotripter and miscellaneous medical equipment and supplies, and any similar
additional equipment acquired by the Partnership in the future.
FDA. The United States Food and Drug Administration.
General Partner. The general partner of the Partnership, Mobile Kidney
Stone Centers of California, Ltd., a California limited partnership.
Guaranty. The Guaranty Agreement pursuant to which each
Limited Partner will guarantee a portion of the Partnership's obligations to the
Bank under the Loan. The form of the Guaranty Agreement is included in the
Subscription Packet accompanying the Memorandum.
Initial Limited Partner. Stan Johnson, a resident of Arizona
and an Affiliate of the general partner 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 Limited
Partner in accordance with the provisions of this Agreement.
Lithotripter. The extracorporeal shock-wave lithotripter to be acquired by
the Partnership and any replacements therefor or additional lithotripters to be
purchased by the Partnership.
-3-
<PAGE>
Lithotripter System. The mobile transport vehicle and operational
Lithotripter.
Loan. The loan of up to $487,125 from the Bank to the
Partnership. Loan proceeds will be used by the Partnership to (i) acquire an
extracorporeal shockwave lithotripter with options (estimated at $400,000), (ii)
acquire and upfit a mobile van to transport the lithotripter (estimated at
$50,000) and (iii) pay sales taxes on the purchase of the Lithotripter System
(estimated at $37,125).
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 Percentage Interests in the Partnership
held by the Limited Partners.
Memorandum. The Confidential Private Placement Memorandum of the
Partnership dated January 13, 1999, 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.
Offering. The offer to potential investors of 60 Units pursuant to the
Memorandum.
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. Mobile Kidney Stone Centers of California II, L.P., 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
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
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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 or her Unit ownership based upon the Limited Partners holding
an aggregate 60% Percentage Interest in the Partnership, with each initial Unit
sold representing an initial 1% interest. The General Partner will initially own
a 40% 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 also be reflected by amendments 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.
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Sales Commission. The $250 sales commission paid to MedTech Investments,
Inc. for each Unit sold.
Service. The Internal Revenue Service.
Units. The 60 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 $4,871.25 principal guaranty obligation).
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 the amount equal to 40% (up to $100,000) 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 or her admission to the Partnership the cash amount set forth
opposite his or her 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, offer, sell and issue, for and on behalf
of the Partnership, additional limited partnership interests in the Partnership
(a "Dilution Offering") to investors who are not already Limited Partners
("Qualified Investors"). The primary purpose of any Dilution Offering would be
to raise additional capital for any legitimate Partnership purpose as set forth
in Article 4. 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 unless otherwise determined by a vote of the General Partner and
a Majority in Interest of the Limited Partners. Any sale of additional limited
partnership interests will result in the proportionate dilution of the
Percentage Interests of the existing Partners. Notwithstanding the above, in the
event of a Dilution Offering, the General Partner may elect, in its sole
discretion, to prevent dilution of its Percentage Interest by either
contributing additional capital to the Partnership or purchasing additional
limited partnership interests in any Dilution Offering. Limited Partners shall
have no right to purchase additional limited partner interests in any Dilution
Offering or to make
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additional capital contributions or take any other action to prevent dilution of
their Percentage Interest. 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 an amended Schedule A to be 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 in the amount
set forth opposite his or her name on Schedule A attached hereto.
9. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF CERTAIN
--------------------------------------------------
LIMITED PARTNERS.
----------------
The obligations of any Limited Partners acquiring their
Partnership Interests in the Offering or a Dilution Offering 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 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) Except as disclosed in the Memorandum or documentation
prepared in connection with a Dilution Offering, 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 California limited partnership
formed and existing under the laws of the State of California.
10.2 The General Partner hereby covenants to the Limited Partners
that:
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(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 Offerings and may admit persons 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 or her 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 in accordance with 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 or her
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:
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(i) The amount of his or her Capital Contribution
pursuant to Article 7; and
(ii) The amount of Profits allocated to him or her
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 or her
pursuant to Article 13; and
(ii) The amount of Partnership Cash Flow, Partnership
Sales Proceeds and Partnership Refinancing Proceeds
distributed to him or her 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.
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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) Partnership 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 made pursuant to the previous sentence will
be made in proportion to the respective amounts required to be
allocated to each Partner pursuant to that section of the Regulations.
This provision relating to Partnership Minimum Gain Chargebacks is
intended to comply with Treasury Regulations Section 1.704-2(f) and
will be interpreted and applied in a manner consistent with that
Regulation.
(c) Partner Minimum Gain Chargeback. 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 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
and determined in accordance with Treasury Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence will be
made in proportion to the respective amounts required to be allocated
to each Partner pursuant to that section of the Regulations. This
provision relating to Partner Minimum Gain Chargebacks is intended to
comply with Regulation Section 1.704-2(i)(4) and will be interpreted
and applied in a manner consistent with that Regulation.
(d) 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)
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(d)
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.
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(e) Sales Commission. The Sales Commission shall be allocated
to the Units which are not held by the General Partner and its
Affiliates and are acquired in the Offering in proportion to the
respective capital contributions represented by such Units (i.e., $250
in Sales Commissions per each such Unit). The purpose of this Article
13(e) is to allocate the Sales Commission to those Partners who
actually bore the burden of paying the Sales Commission.
(f) 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 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.
(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, 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
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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.
l5. 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 local medical director(s) of the Lithotripter System. No Limited Partner may
withdraw from the Partnership except as expressly permitted herein.
15.2 Operation of Lithotripter System. The Limited Partners
shall not operate or utilize the Partnership Lithotripter 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 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 (s)he shall not engage in "Outside Activities" (as defined below) in
the "Market Area" (as defined below) while(s)he is a Limited Partner in the
Partnership and shall otherwise be subject to the provisions of this Article
15.3. The phrase "Outside Activities" means directly or indirectly owning,
leasing or subleasing a lithotripter (or any similar equipment or competing
devices used for treating renal or biliary stone disease) or any other
therapeutic equipment acquired by the Partnership; provided that an ownership
interest in the General Partner or an Affiliate of the General Partner shall not
constitute an Outside Activity. Prohibited indirect ownership shall include
without limitation the direct or indirect ownership of any interest in a
business venture (through stock ownership, partnership interest ownership,
ownership by or through a close family member, or as otherwise determined in
good faith by the General Partner) involving the ownership, purchase, lease,
sublease, promotion, management or operation of a lithotripter (or similar
equipment or competing devices used for treating renal or biliary stone disease)
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; provided, however, that the General Partner may,
in its sole discretion, waive the provisions of this Section 15.3 with respect
to any ownership interest of a Limited Partner in an Outside Activity acquired
before the date hereof. Notwithstanding the above, a Limited Partner shall not
be prohibited from owning less than 1% of the capital stock (calculated on a
fully diluted basis) of a corporation whose stock is publicly owned or regularly
traded on any public exchange.
Upon the termination or transfer of a Limited Partner's
interest in the Partnership for any reason, including a transfer pursuant to
Article 18.3 hereof, the withdrawing Limited Partner shall not, for a period of
two (2) years following the date of withdrawal, engage in any Outside Activities
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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 15.3, the term "Market Area" shall mean (i) the
area within a fifty (50) 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 thirty (30) 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 fifteen (15) 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 in Article 18.3 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 15.3. In the event of breach of the waiting period, 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.
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 15.3, 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 18.3 and shall be entitled to any other remedy at law or equity
including without limitation an injunction or suit for damages.
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 (other than the
General Partner and its Affiliates that may also hold Limited Partner
Partnership Interests) agrees that at all times during his or her participation
in the Partnership as a Limited Partner and thereafter, (s)he 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 the Limited
Partner, (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
condition, 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
Partnership Interests) acknowledge that all of the foregoing
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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.
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
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Limited Partners pursuant to a Dilution Offering shall be governed by
the provisions of Article 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.
(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
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therein shall not be entitled to any of the rights, powers, or privileges of his
or her predecessor in interest, except that (s)he shall be entitled to receive
and be credited or debited with his or her 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:
(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;
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(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
(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
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 and a Majority in Interest of the Limited Partners 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 limitation, executing such instruments,
and
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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 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 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
dissent, appraisal or similar rights in connection with a plan contemplated by
this Article 17.7.
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 canceled and reallocated to the Limited Partners.
18. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS
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ON CERTAIN EVENTS.
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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 18.7 of this Agreement and on the terms and
conditions provided in Article 18.8 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 the 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 in 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
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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 the 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) at the price determined in the manner provided in
Article 18.7 of this Agreement and on the terms and conditions provided in
Article 18.8 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 Article 18.2 to the
Partnership and, in such case, the Partnership shall have the same rights as
provided for the General Partner in this Article 18.2.
18.3 Breach of Article 15.3. In the event the General Partner
either receives a Notice of Withdrawal as provided in Article 15.3 or receives
notice of a breach of Article 15.3 by or with respect to a Limited Partner (the
"Competing 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 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 Competing 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 Competing Limited Partner (which the Competing
Limited Partner shall then become obligated to sell) at the price determined in
the manner provided in Article 18.7 of this Agreement and on the terms and
conditions provided in Article 18.8 of this Agreement. The General Partner shall
have a period of thirty (30) days following the date it sends the Notice of
Default (the "Option Period") within which to notify in writing the Competing
Limited Partner, whether the Partnership wishes to purchase all or a portion of
the Partnership Interest of the Competing Limited Partner. If the General
Partner does not elect to purchase the entire Partnership Interest of the
Competing 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 Competing 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
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Interest of a Competing 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 in 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 the Limited Partner shall then become
obligated to sell), at the price determined in the manner provided in Article
18.7 of this Agreement and on the terms and conditions provided in Article 18.8
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 Article 18.4 to the Partnership and, in such
case, the Partnership shall have the same rights as provided for the General
Partner in 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 sole 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(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 18.7 and shall be on the terms and conditions as provided in
Article 18.8. The transfer of the Partnership Interests, the payment of the
purchase price and the assumption of the Limited Partners' obligations under
their respective Guaranties (as provided in Article 18.7) 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. The foregoing power of attorney shall not be
affected by the subsequent incapacity, mental incompetence, dissolution or
bankruptcy of any Limited Partner.
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18.6 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, then
the General Partner shall have the right to immediately take the steps as
outlined in this Article 18.6 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 or her
Partnership Interest to the purchaser at the purchase price determined in the
manner as provided in Article 18.7 and on the terms and conditions as provided
in Article 18.8. The transfer of the Partnership Interest, the payment of the
purchase price, and the assumption of the Defaulting Limited Partner's
obligations under his or her Guaranty (as provided in Article 18.7), 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 or her true and lawful attorney-in-fact, to take such
actions and execute such documents on his or her behalf to effect the transfer
of his or her Partnership Interest as provided in this Article 18.6, in the
event such Limited Partner becomes a Defaulting Limited Partner.
18.7 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, 18.5 or 18.6 (the
"Selling Limited Partner") shall be determined in the manner provided in this
Article 18.7. The purchase price for a Partnership Interest purchased pursuant
to the provisions of Article 18.1 shall be an amount equal to the greater of (i)
one and one-half (1.5) times the aggregate distributions made with respect to
such Partnership Interest pursuant to Article 14(a) during the twelve-month
period ending on the Valuation Date (as defined below), or (ii) the Selling
Limited Partner's share of the Partnership's book value determined in the manner
described below. The purchase price for a Partnership Interest purchased
pursuant to the provisions of Articles 18.2, 18.3, 18.4, 18.5 or 18.6 shall be
an amount equal to the lesser of (i) the fair market value of the Selling
Limited Partner's Partnership Interest on the Valuation Date (prorated in the
event that only a portion of his or her Partnership Interest is being purchased)
as determined by an Appraiser (as defined below) selected by the General
Partner, or (ii) the Selling Limited Partner's share of the Partnership's book
value, if any (prorated in the event that only a portion of his or her
Partnership Interest is being purchased) as reflected by the Capital Account of
the Selling Limited Partner (unadjusted for any appreciation in Partnership
assets and as reduced by depreciation deductions claimed by the Partnership for
tax purposes) as of the Valuation Date (as defined below). The General Partner,
in its sole discretion, may pursue both of the above valuation methods and
choose the lesser value of the two as indicated above, or may designate and
follow only one of the methods in calculating the purchase price. For purposes
of this Article 18.7, the term "Appraiser" shall mean
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an independent appraiser who is qualified in appraising limited partnership
interests and who has at least five years experience. In determining fair market
value, the Appraiser shall take into consideration any outstanding indebtedness,
liabilities, liens and obligations of the Partnership and the relative
Partnership Interests and capital accounts of all Partners, as well as applying
any customary discounts for lack of liquidity and control. Such appraisal shall
be conducted in accordance with professional appraisal standards. The valuation
of the Appraiser shall be conclusive and binding upon the Partnership, the
purchaser and the Selling Limited Partner and his or her representatives. The
determination of the Selling Limited Partner's Capital Account or aggregate
distributable amount 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 or aggregate distributable amount of the Selling Limited Partner on the
Valuation Date shall be binding and conclusive upon the Partnership, the
purchaser and the Selling Limited Partner and his or her representatives. The
Valuation Date means the last day of the month immediately preceding the month
in which occurs: (i) the death of a Selling Limited Partner, in the case of a
purchase by reason of death; (ii) the bankruptcy or insolvency of a Selling
Limited Partner, in the case of a purchase by reason of such bankruptcy or
insolvency; (iii) the Notice of Withdrawal or breach of Article 15.3 as provided
in 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; (v) the Notice of Election as provided in Article 18.5, in the case of
a purchase by reason thereof; or (vi) the notice of Defaulting Event as provided
in Article 18.6, in the case of a purchase occurring by reason of one of such
events. Any Limited Partner whose Partnership Interest is purchased pursuant to
the provisions of Article 18.1, 18.2, 18.3, 18.4, 18.5 or 18.6 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. If as of the date of the Closing
the Selling 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 Selling 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 to evidence the assumption of such portion of the
Obligation, and obtain if possible, the release of the Selling Limited Partner
from such portion of the Obligation. The transfer of a Partnership Interest of a
Selling Limited Partner shall be deemed to occur as of the Valuation Date and
the Selling 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 the
Partnership shall have the right to deduct the amount of any such distributions
made to the Selling Limited Partner after the Valuation Date from the purchase
price. Notwithstanding the above, the Partnership shall not be obligated to
assume any outstanding personal obligation of a Selling Limited Partner.
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18.8 Closing.
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18.8.1 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
(ii) The date that coincides with the close of the
Option Period.
At the Closing, although not necessary to effect the transfer, the
Selling 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 Selling 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, 18.5 or 18.6
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and compliance with all the Articles of this Agreement, except the
execution of the transfer documents by the Selling Limited Partner as
provided above in this Article 18.8.1, are sufficient to effect the
complete transfer of the Selling Limited Partner's Partnership Interest
and the Selling 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 Selling Limited Partner shall
be deemed to occur as of the Valuation Date as defined in Article 18.7.
The deemed transfer is effective regardless of whether the Selling
Limited Partner performs the duties set forth in this Article 18.8.1.
18.8.2 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 purposes 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.
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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.
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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.
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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:
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(a) To conduct the Offering and any Dilution Offering on behalf
of the Partnership;
(b) To acquire on behalf of the Partnership (i) one or more
fixed base or transportable lithotripsy systems, including the
Lithotripter System, (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 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
Lithotripter 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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(j) To execute, acknowledge and deliver any and all instruments
which may be deemed necessary or convenient to effect the foregoing;
(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, (s)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 Sun Medical Technologies, Inc., a California corporation
("Sun") and the general partner of the General Partner, with respect to
the supervision and coordination of the management and administration
of the day-to-day operations of the Partnership's business for a
monthly fee equal to 7.5% of net Partnership Cash Flow per month. All
costs incurred by Sun under the Management Agreement shall be paid or
reimbursed by the Partnership directly. The Partnership may also
contract with healthcare facilities and/or qualified physicians
desiring to use its Lithotripter System for the treatment of patients.
Owning an interest in the Partnership shall not be a condition to using
the Lithotripter System. The General Partner and its Affiliates
(including Sun) 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 fixed-base or mobile
lithotripsy unit, 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 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;
-27-
<PAGE>
(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. 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 December 31, 2049;
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<PAGE>
(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 occurrence of an event described in a plan approved by
the General Partner and a Majority in Interest of the Limited Partners
pursuant to Article 17.7 resulting in the dissolution of the
Partnership;
(e) The election of the General Partner to dissolve the
Partnership following the occurrence of an event described in Article
18.5;
(f) Except as otherwise provided in any plan approved by the
General Partner and a Majority in Interest of the Limited Partners
pursuant to Article 17.7, the sale, exchange or other disposition of
all or substantially all of the property of the Partnership without
making provision for the replacement thereof;
(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 California; provided, that the events
described in Sections 15681(c) and (d) 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;
(h) The election to dissolve the Partnership made by all of the
Partners.
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
-29-
<PAGE>
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 as provided above 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.
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 such 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.
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<PAGE>
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 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 or as otherwise required by law 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)-1, as modified from time to time. In its
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<PAGE>
capacity as Tax Matters Partner, the General Partner shall oversee the
Partnership's tax affairs in the manner which, in its best judgment, is 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 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 29. Further, no Limited
Partner consent shall be required to amend Schedule A to reflect the admission
of Partners as contemplated by the Offering, any Dilution Offering or as
otherwise herein permitted.
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 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.
-32-
<PAGE>
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 generally 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 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.
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<PAGE>
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 California 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.
38. POWER OF ATTORNEY.
-----------------
Each Limited Partner hereby makes, constitutes and appoints
Stan Johnson and Cheryl Williams, 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.
-34-
<PAGE>
The foregoing power of attorney is a special power of attorney
coupled with an interest, is irrevocable and shall survive the death, legal
incapacity, dissolution or bankruptcy 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
bankruptcy, dissolution, 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 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.
40. CREDITORS.
---------
None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Partnership.
[signature page follows]
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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:
MOBILE KIDNEY STONE CENTERS OF
CALIFORNIA, LTD., a California limited
partnership
By: Sun Medical Technologies, Inc., a California
Corporation and its sole general partner
By: /s/ Stan Johnson
---------------------
Stan Johnson
President
ATTEST:
/s/ Vincent Prendergast [CORPORATE SEAL]
- -----------------------
Secretary
INITIAL LIMITED PARTNER:
-----------------------
/s/ Stan Johnson
----------------
Stan Johnson
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<PAGE>
STATE OF North Carolina
COUNTY OF Cumberland
On this 31 day of March, 1999, before me, the undersigned Notary Public in
and for the County of Cumberland in the State of North Carolina, personally came
Stan Johnson, who, being by me duly sworn, said that he is President of Sun
Medical Technologies, Inc., the sole general partner of Mobile Kidney Stone
Centers of California, Ltd., the sole general partner of Mobile Kidney Stone
Centers of California II, 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 Stan Johnson, 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/ Debra J. Scott
------------------
Notary Public
My commission expires:
May 1, 1999
STATE OF North Carolina
COUNTY OF Cumberland
I, Debra J. Scott, a notary public in and for
the State and County set forth above, do hereby certify that Stan Johnson
personally appeared before me this 31 day of March, 1999 and acknowledged
and swore to the due execution of the foregoing Limited Partnership Agreement in
his capacity as the initial limited partner.
/s/ Debra J. Scott
------------------
Notary Public
My commission expires:
May 1, 1999
-37-
<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 Mobile Kidney Stone Centers of California II, L.P., and his or
her intention to be legally bound thereby.
Dated this _________ day of ___________________, 1999.
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 __________________, 1999,
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]
-38-
<PAGE>
SCHEDULE A
Schedule of Partnership Interests
MOBILE KIDNEY STONE CENTERS OF CALIFORNIA II, L.P.
--------------------------------------------------
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND PERCENTAGE
----------------------------------------------------------
INTERESTS
Cash Percentage
Contribution Guaranty(1) Interest
------------ -------- -----------
General Partner
Mobile Kidney Stone Centers
Of California, Ltd. I
15195 National Avenue,
Suite 203
Los Gatos, CA 95032 $100,000.00 $194,850.00 40.0%
Limited Partners
Erik Birzgalis, M.D.
3637 Mission Avenue
Carmichael, CA 95608 $ 9,750.00 $ 18,997.88 3.9%
Frederick Burrell, M.D.
3160 Folsom Boulevard
Sacramento, CA 95816 $ 7,500.00 $ 14,613.75 3.0%
Capital Urology Medical Group, Inc.
2801 K Street, Suite 220
Sacramento, CA 95816 $ 9,750.00 $ 18,997.88 3.9%
Jong Chen, M.D.
3941 J Street #366
Sacramento, CA 95819 $ 7,500.00 $ 14,613.75 3.0%
David Couillard, M.D.
2801 K Street #205
Sacramento, CA 95816 $ 9,750.00 $ 18,997.88 3.9%
Leonard Crawford, M.D.
2801 K Street #220
Sacramento, CA 95816 $ 9,750.00 $ 18,997.88 3.9%
Kaushik DeSai, M.D.
1600 Creekside Drive, Suite 2700
Folsom, CA 95630 $ 9,750.00 $ 18,997.88 3.9%
Abdo Faddoul, M.D.
Two Medical Plaza #125
Roseville, CA 95661 $ 7,500.00 $ 14,613.75 3.0%
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<PAGE>
Cash Percentage
Patricia Fone, M.D.
2 Medical Plaza #255
Roseville, CA 95661 $ 9,750.00 $ 18,997.88 3.9%
Klumars Hekmat, M.D.
2801 K Street #220
Sacramento, CA 95816 $ 9,750.00 $ 18,997.88 3.9%
William Hoch, M.D.
2020 Sutter Place #102
Davis, CA 95616 $ 7,500.00 $ 14,613.75 3.0%
H. Setsup Masaki, M.D.
5252 Elvas Avenue
Sacramento, CA 95819 $ 5,000.00 $ 9,742.50 2.0%
Iraj Nabi, M.D.
3160 Folsom Boulevard
Sacramento, CA 95816 $ 7,500.00 $ 14,613.75 3.0%
Brian Naftulin, M.D.
2801 K Street #220
Sacramento, CA 95816 $ 5,000.00 $ 9,742.50 2.0%
Peter Novick, M.D.
77 Scripps Drive #112
Sacramento, CA 95825 $ 9,750.00 $ 18,997.88 3.9%
Gordon Quinones, M.D.
6401 Coyle Avenue, Suite 310
Carmichael, CA 95608 $ 5,000.00 $ 9,742.50 2.0%
Nicholas Simopoulos, M.D.
100 Fowler Way #5
Placerville, CA 95667 $ 9,750.00 $ 18,997.88 3.9%
Robert Wright, M.D.
2801 K Street #205
Sacramento, CA 95816 $ 9,750.00 $ 18,997.88 3.9%
TOTAL: $250,000.00 $487,125.00 100.0%
(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 $487,125. The General
Partner will guarantee 40% of the Loan (up to a $194,850 principal guaranty) as
provided in the Memorandum. The Limited Partners will individually guarantee 1%
of the loan (up to a $4,871.25 principal guaranty) for each unit purchased as
provided in the Memorandum.
-40-
<PAGE>
FOURTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
LOUISIANA LITHOTRIPSY INVESTMENT LIMITED PARTNERSHIP
THIS AMENDMENT, effective as of the 1st day of April, 1999, is
entered into by and among Lithotripters, Inc., a North Carolina corporation and
the General Partner of Louisiana Lithotripsy Investment Limited Partnership, a
North Carolina limited partnership (the "Partnership"), and the Limited Partners
of the Partnership.
R E C I T A L S:
---------------
1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners", entered into that certain Amended
and Restated Agreement of Limited Partnership of Louisiana Lithotripsy
Investment Limited Partnership, dated as of October 30, 1989, as amended by that
certain First Amendment to Agreement of Limited Partnership of the Partnership,
effective as of January 1, 1990, and as amended by that certain Second Amendment
to Agreement of Limited Partnership of the Partnership, effective as of January
1, 1997, and as amended by that certain Third Amendment to Agreement of Limited
Partnership of the Partnership, effective as of July 1, 1998 (the "Partnership
Agreement").
2. The Partners desire to further amend the Partnership
Agreement to reflect the Partners's adjusted Percentage Interests resulting from
the Partnership's Dilution Offering, and the subsequent admission of the
following new Limited Partners to the Partnership; Christopher P. Fontenot, M.D.
(1.000%), Gordon Sean Healey (0.500%), Brad Johnson (1.000%), Chuen K. Kwok
(1.000%), Steven A. Socher (1.000%), Lance Templeton (1.000%) and Kenneth S.
Verheeck (1.000%).
NOW, THEREFORE, in consideration of the mutual promises,
covenants, conditions and agreements herein contained, the parties hereto agree
as follows:
Schedule A-2 is deleted in its entirety and a new
Schedule A-3, attached hereto, is substituted in its
place.
IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
Lithotripters, Inc.
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
President
<PAGE>
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-3
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
Attorney-in-Fact1
- --------
1 Pursuant to a Power of Attorney given by the Limited Partners.
2
<PAGE>
SCHEDULE A-3
Schedule of Partnership Interests
LOUISIANA LITHOTRIPSY INVESTMENT LIMITED PARTNERSHIP
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND INTERESTS
Cash Contribution(1) Percentage Interest(2)
----------------- -------------------
General Partner
Lithotripters, Inc. $1,000.00 1.165%
2008 Litho Place, Suite 201
Fayetteville, NC 28304
Limited Partners
Thomas Alderson, M.D. $2,000.00 2.281%
234 S. Ryan
Lake Charles, LA 70601
David Autin, M.D. $2,500.00 2.853%
4212 W. Congress
Lafayette, LA 70503
Bruce Bass, M.D. $1,000.00 1.136%
234 S. Ryan
Lake Charles, LA 70601
Al Beachum, M.D. $3,500.00 3.989%
913 S. College Road
Lafayette, LA 70503
Maged R. Botros, M.D. $2,500.00 2.853%
Mary Dickerson Hospital
Jasper, TX 75951
J. Bourdreau, M.D. $1,000.00 1.136%
4212 W. Congress
Lafayette, LA 70503
Charles Bowie, M.D. $1,000.00 0.757%
4400 Moosa Blvd.
Eunice, LA 70535
Edward Breaux, M.D. $2,000.00 2.281%
118 Hospital Drive
Lafayette, LA 70503
1
<PAGE>
Cash Contribution(1) Percentage Interest(2)
Joseph Busby, M.D. $2,500.00 2.853%
2104-G Loop Road
Winnsboro, LA 71295
J. Michael Cage, M.D. $2,500.00 1.902%
711 St. John Street
Monroe, LA 71201
Gerardo Chica, M.D. $2,000.00 2.281%
1323 S. 27th, Suite 300
Nederland, TX 77627
Martin Ducote, M.D. $3,500.00 3.989%
604 St. Landry Street
Lafayette, LA 70506
Edwin Edgerton, M.D. $1,000.00 0.757%
2417 N. 7th Street
West Monroe, LA 71291
John Enright, M.D. $2,000.00 2.281%
234 S. Ryan
Lake Charles, LA 70601
Christopher P. Fontenot(3) $32,028.00 1.180%
Carroll Guinn, M.D. $1,000.00 1.136%
602 N. Lewis
New Iberia, LA 70560
James M. Harris, M.D. $2,000.00 2.281%
810 Hospital Drive
Beaumont, TX 77701
John Denton Harris, M.D. $3,500.00 3.989%
810 Hospital Drive
Beaumont, TX 77701
G. Bruce Healey, M.D. $2,000.00 2.281%
3020 Allison
Groves, TX 77619
Gordon Sean Healey(3) $16,014.00 0.590%
John Henderson, M.D. $2,500.00 2.853%
810 Hospital Drive
Beaumont, TX 77701
2
<PAGE>
Cash Contribution(1) Percentage Interest(2)
George Hoffman, M.D. $2,500.00 2.853%
3212 Concord Dr., Suite F
Orange, TX 77630
Brad Johnson(3) $32,028.00 1.180%
Thomas Jordan $281.25 0.425%
233 W. Broadway, Suite 501
Louisville, KY 40202
Chuen K. Kwok(3) $32,028.00 1.180%
Edmond Lamperez, M.D. $1,000.00 0.757%
602 N. Lewis
New Iberia, LA 70560
Arthur Liles, M.D. $2,500.00 2.853%
711 St. John Street
Monroe, LA 71201
Lithotripters, Inc.(4) $2,000.00 8.467%
2008 Litho Place
Fayetteville, NC 28304
Leo Lowentritt, M.D. $2,500.00 2.853%
3311 Prescott Road
Alexandria, LA 71301
Don F. Marx, M.D. $2,500.00 2.853%
North Monroe Medical Plaza
Suite I
Monroe, LA 71203
Robert Marx, M.D. $2,000.00 2.281%
417 Wood Street
Monroe, LA 71201
James Meek, M.D. $2,000.00 1.523%
301 4th Street
Alexandria, LA 71301
Charles E. Moss, M.D. $2,000.00 2.281%
118 Hospital Drive
Lafayette, LA 70503
Seth Novoselsky, M.D. $1,000.00 1.136%
3311 Prescott Road
Suite 103
Alexandria, LA 71301
3
<PAGE>
Cash Contribution(1) Percentage Interest(2)
Tika Ranjitkar, M.D. $2,000.00 2.281%
1200 S. Farmerville
Ruston, LA 71270
James Rounder, M.D. $1,000.00 1.136%
3311 Prescott Road
Suite 103
Alexandria, LA 71301
Manuel Soasai, M.D. $2,500.00 2.853%
710 S. 8th Street
Beaumont, TX 77701
Steven A. Socher(3) $32,028.00 1.180%
Benjamin Stage, M.D. $2,500.00 2.853%
612 S. Washington
Bastrop, PA 71220
Charles Tanner, M.D. $1,000.00 0.757%
1200 S. Farmerville
Ruston, LA 71270
Lane Templeton(3) $32,028.00 1.180%
Paul Tennis, M.D. $2,500.00 2.853%
711 St. John Street
Monroe, LA 71201
Richard Texada, M.D. $1,000.00 1.136%
3311 Prescott Road
Alexandria, LA 71301
Jack Thielen, M.D. $1,000.00 1.136%
234 S. Ryan
Lake Charles, LA 70601
Kenneth S. Verheeck(3) $32,028.00 1.180%
J.W. Vildibill, M.D. $3,500.00 3.989%
604 St. Landry Street
Lafayette, LA 70506
TOTAL 286,463.25 100.00%
(1) The cash contributions reflect the initial cash contributions of those
Partners who currently hold an interest in the Partnership.
(2) Percentage figures are approximated.
4
<PAGE>
(3) Limited partnership interest was acquired pursuant to the Partnership's
dilution offering which closed March 31, 1999.
(4) Lithotripters, Inc. acquired a portion of its percentage interests pursuant
to various assignments from limited partners of the Partnership effective as of
January 1, 1997, and made no cash contributions to the Partnership for the
limited partner interests received as a result of such assignments.
5
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
TEXAS I PROSTATHERAPY LIMITED PARTNERSHIP
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, OR REGISTERED OR QUALIFIED UNDER
ANY STATE SECURITIES LAWS OR ACTS IN RELIANCE UPON EXEMPTIONS UNDER SUCH LAWS.
IN ADDITION, NO TRANSFERS OF LIMITED PARTNERSHIP INTERESTS MAY BE MADE WITHOUT
COMPLIANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE 16 HEREIN.
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
TEXAS I PROSTATHERAPY LIMITED PARTNERSHIP
TABLE OF CONTENTS
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 CERTAIN LIMITED
----------------------------------------------------------
PARTNERS...................................................6
--------
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GENERAL
--------------------------------------------------------
PARTNER....................................................7
-------
10. ADMISSION OF LIMITED PARTNERS..............................8
-----------------------------
11. CAPITAL ACCOUNTS...........................................8
----------------
12. ALLOCATIONS................................................9
-----------
13. DISTRIBUTIONS.............................................13
-------------
l4. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS................13
------------------------------------------
15. LIMITED LIABILITY.........................................15
-----------------
16. TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS...........16
-----------------------------------------------
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<PAGE>
17. OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON
-----------------------------------------------------
CERTAIN EVENTS............................................20
--------------
18. SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL PARTNER'S
-----------------------------------------------------------
INTEREST..................................................24
--------
19. TERMINATION OF THE SERVICES OF THE GENERAL PARTNER........25
--------------------------------------------------
20. MANAGEMENT AND OPERATION OF BUSINESS......................26
------------------------------------
21. RESERVES..................................................29
--------
22. INDEMNIFICATION AND EXCULPATION OF THE GENERAL PARTNER
------------------------------------------------------
.........................................................29
23. DISSOLUTION OF THE PARTNERSHIP............................29
------------------------------
24. DISTRIBUTION UPON DISSOLUTION.............................31
-----------------------------
25. BOOKS OF ACCOUNT, RECORDS AND REPORTS.....................31
-------------------------------------
26. NOTICES...................................................32
-------
27. AMENDMENTS................................................33
----------
28. LIMITATIONS ON AMENDMENTS.................................33
-------------------------
29. MEETINGS, CONSENTS AND VOTING.............................33
-----------------------------
30. SUBMISSIONS TO THE LIMITED PARTNERS.......................34
-----------------------------------
31. ADDITIONAL DOCUMENTS......................................34
--------------------
32. SURVIVAL OF RIGHTS........................................34
------------------
33. INTERPRETATION AND GOVERNING LAW..........................34
--------------------------------
34. SEVERABILITY..............................................34
------------
35. AGREEMENT IN COUNTERPARTS.................................35
-------------------------
36. THIRD PARTIES.............................................35
-------------
ii
<PAGE>
37. POWER OF ATTORNEY.........................................35
-----------------
38. ARBITRATION...............................................36
-----------
39. CREDITORS.................................................36
---------
SCHEDULES
Schedule A - Schedule of Partnership Interests
iii
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
TEXAS I PROSTATHERAPY LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement") is
made as of December 31, 1999, by and among PROSTATHERAPIES, INC., a Delaware
corporation (the "General Partner"), and persons listed on Schedule A attached
hereto as the Limited Partners.
1. FORMATION.
---------
The Partnership was formed pursuant to the filing in the
Office of the Secretary of State of Texas on or about August 11, 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 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 initial 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.
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
acquire and operate one or more Prostatron(R) Mobile Systems for the treatment
of BPH primarily in the Service Area or in 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(s) or equipment, provided that such equipment as of the date of
acquisition by the Partnership has received FDA premarket approval; (iii) to
acquire an interest in any business entity, including,
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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 December 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 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.
BHP. Benign prostatic hyperplasia.
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 or her 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 Article 7.4 of this
Agreement, the future offering of additional limited partnership interests in
the Partnership as determined by the General Partner. Except as otherwise
provided in Article 7.4, any successful Dilution Offering will proportionately
reduce the Percentage Interests of the then current Partners in the Partnership.
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<PAGE>
Domestic Proceeding. Any divorce, annulment, separation or similar domestic
proceeding between a married couple.
Equipment. The equipment used in the operation of the
Prostatron(R) Mobile System, including the mobile coach, the Prostatron(R) and
miscellaneous medical equipment and supplies, and any similar additional
equipment acquired by the Partnership in the future.
FDA. The United States Food and Drug Administration.
General Partner. The general partner of the Partnership, Prostatherapies,
Inc., a Delaware corporation.
Initial Limited Partner. James Cochran, M.D., a resident of Texas. 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 Percentage Interests in the Partnership
held by the Limited Partners.
Memorandum. The Confidential Private Placement Memorandum of the
Partnership dated June 22, 1999, 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.
Offering. The offer to potential investors of 320 Units pursuant to the
Memorandum.
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<PAGE>
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 I Prostatherapy Limited Partnership, 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.
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 will initially
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 also be reflected by
amendments to Schedule A.
-4-
<PAGE>
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.
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.
Prostatron(R). The Prostatron(R) Praktis(R) Model
transurethral microwave thermotherapy device for treatment of BPH which is
manufactured by EDAP Technomed, Inc.. The Prostratron(R) will be acquired by the
Partnership with the proceeds of this Offering and the General Partner's initial
cash contributions upon the successful closing of this Offering.
Prostatron(R)Mobile System. The mobile coach with the installed and
operational Prostatron(R)and ultrasound system.
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 up to
320 Units pursuant to the Memorandum.
Sales Commission. The $75 sales commission paid to MedTech Investments,
Inc. for each Unit sold.
Service. The Internal Revenue Service.
Service Area. The geographic region in which Partnership
operations are expected to be conducted and which is anticipated to consist of
various regions in the State of Texas. The General Partner has sole discretion
to expand the service area.
TUMT. Transurethral microwave thermotherapy.
Units. The 320 equal limited partner interests in the Partnership offered
pursuant to the Memorandum for a price per Unit of $1,875 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 the amount equal to 20% (up to $150,000) of the total cash
contributed to the Partnership by the Partners in the Offering made pursuant to
the Memorandum.
-5-
<PAGE>
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 or her admission to the Partnership the cash amount set forth
opposite his or her 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, offer, sell and issue, for and on behalf
of the Partnership, additional limited partnership interests in the Partnership
(a "Dilution Offering") to investors who are not already Limited Partners
("Qualified Investors"). The primary purpose of any Dilution Offering would be
to raise additional capital for any legitimate Partnership purpose as set forth
in Article 4. 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 unless otherwise determined by a vote of the General Partner and
a Majority in Interest of the Limited Partners. Notwithstanding the above, in
the event of a Dilution Offering, the General Partner may elect, in its sole
discretion, to prevent dilution of its Percentage Interest by either
contributing additional capital to the Partnership or purchasing additional
limited partnership interests in any Dilution Offering. Limited Partners shall
have no right to purchase additional limited partner interests in any Dilution
Offering or to make additional capital contributions or take any other action to
prevent dilution of their Percentage Interest. Any sale of additional limited
partnership interests will result in the proportionate dilution of the
Percentage Interests of the existing Partners. 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 an amended Schedule A to be
attached hereto.
8. CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF CERTAIN
--------------------------------------------------
LIMITED PARTNERS.
----------------
The obligations of any Limited Partners acquiring their
Partnership Interests in the Offering or a Dilution Offering 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.
-6-
<PAGE>
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) Except as disclosed in the Memorandum or
documentation prepared in connection with a Dilution Offering, 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 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 Offerings and may admit
-7-
<PAGE>
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 or her 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 in accordance with 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 or her
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 or her Capital Contribution pursuant to
Article 7; and
(ii) The amount of Profits allocated to him or her 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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<PAGE>
(i) The amount of Losses allocated to him or her pursuant to
Article 12; and
(ii) The amount of Partnership Cash Flow,
Partnership Sales Proceeds and Partnership Refinancing
Proceeds distributed to him or her 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) Nonrecourse Deductions. Nonrecourse Deductions shall be
allocated among the Partners in accordance with their respective
Percentage Interests.
(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 Regulations Section 1.704-2(i).
(c) Profits and Losses.
(i) 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.
(ii) In no event shall Losses be allocated
under this Article 12(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
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<PAGE>
application of the preceding sentence shall be allocated to
the General Partner. For purposes of this Article 12(c), a
Partner's Capital Account shall be treated as reduced by
Qualified Income Offset Items as provided in Article
12(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 12(d), the General Partner
shall be allocated at least 1% of all items of income, gain,
loss, deduction or credit.
(d) Special Allocations. The following special allocations shall
be made:
(i) Partnership 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 12(d)(i) is intended to comply with
the minimum gain chargeback requirement in such Section of the
Regulations and shall be interpreted consistently therewith.
(ii) Partner Minimum Gain Chargeback.
Notwithstanding any other provision of this Article 12 except
Article 12(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
-10-
<PAGE>
determined in accordance with Treasury Regulations Section
1.704- 2(i)(4). This Article 12(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
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 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.
(iv) Sales Commission. The Sales Commission
shall be allocated to the Units which are not held by the
General Partner and its Affiliates and are acquired in the
Offering in proportion to the respective capital contributions
represented by such Units (i.e., $75 in Sales Commissions per
each such Unit). The purpose of this Article 12(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 12
and 13 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.
(ii) Capital Accounts shall be reduced by
Distributions of Partnership Cash Flow under Article 13(a).
(iii) Capital Accounts shall be reduced by
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Distributions of Partnership Sales Proceeds and Partnership
Refinancing Proceeds under Article 13(b).
(iv) Capital Accounts shall be increased by
any Minimum Gain Chargeback under Articles 12(d)(i) and (ii).
(v) Capital Accounts shall be increased by any Qualified Income
Offset under Article 12(d)(iii).
(vi) Capital Accounts shall be reduced by
allocations of Nonrecourse Deductions under Article 12(a).
(vii) Capital Accounts shall be reduced by
allocations of Partner Nonrecourse Deductions under Article
12(b).
(viii) Capital Accounts shall be increased
by allocations of Profits under Article 12(c).
(ix) Capital Accounts shall be reduced by
allocations of Losses under Article 12(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 12(d)(i), (ii) and (iii) had not
occurred.
(f) 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
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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.
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.
l4. 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(s) of 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 Partnership 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.
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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 (s)he shall not engage in "Outside Activities" (as defined below) in
the "Market Area" (as defined below) while (s)he is a Limited Partner in the
Partnership and shall otherwise be subject to the provisions of this Article
14.3. The phrase "Outside Activities" means directly or indirectly owning,
leasing or subleasing a TUMT device (or any similar equipment or competing
devices used for treating BPH) or any other therapeutic equipment acquired by
the Partnership; provided that an ownership interest in the General Partner or
an Affiliate of the General Partner shall not constitute an Outside Activity.
Prohibited indirect ownership shall include without limitation the direct or
indirect ownership of any interest in a business venture (through stock
ownership, partnership interest ownership, ownership by or through a close
family member, or as otherwise determined in good faith by the General Partner)
involving the ownership, purchase, lease, sublease, promotion, management or
operation of a TUMT device (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. Notwithstanding the above, Outside Activities
shall not include (i) ownership of less than 1% of the capital stock (calculated
on a fully diluted basis) of a corporation whose stock is publicly owned or
regularly traded on any public exchange, (ii) any ownership interest in an
entity engaging in an Outside Activity acquired before the date hereof;
provided, that the Limited Partner may not increase or enhance any such
previously held investment during the term of the Partnership, and (iii) any
other activity determined by the General Partner, in its sole discretion, not to
be 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 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 fifty (50) 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 thirty (30) 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 fifteen (15) 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 in 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 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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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
Partnership Interests) agrees that at all times during his or her participation
in the Partnership as a Limited Partner and thereafter, (s)he 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 the Limited
Partner, (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
condition, 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
Partnership 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 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 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 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 or the merger of
the General Partner with another person or entity; 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 Article 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:
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(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.
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 or her predecessor in interest,
except that (s)he shall be entitled to receive and be credited or debited with
his or her 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);
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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 his, her or its admission as a general partner; and
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(g) Payment of such reasonable expenses as may be incurred in
connection with his, her or 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 and a Majority in Interest of the Limited Partners 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 limitation, 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 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
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
dissent, 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 canceled and 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 the deceased Limited Partner under this Article 17.1 to
the Partnership and, in such case, the Partnership shall have the same rights as
provided for the General Partner in this Article 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 the 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) 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
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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 17.2 to the Partnership and, in such case, the Partnership shall have
the same rights as provided for the General Partner in this Article 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 a breach of Article 14.3 by or with respect to a Limited Partner (the
"Competing 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 Competing 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 Competing Limited Partner (which the Competing
Limited Partner shall then become obligated to sell) 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 it sends the Notice of
Default (the "Option Period") within which to notify in writing the Competing
Limited Partner, whether the [General Partner] wishes to purchase all or a
portion of the Partnership Interest of the Competing Limited Partner. If the
General Partner does not elect to purchase the entire Partnership Interest of
the Competing 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 Competing 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 Competing Limited
Partner under this Article 17.3 to the Partnership and, in such case, the
Partnership shall have the same rights as provided for the General Partner in
this Article 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 the Limited Partner shall then become
obligated to sell), 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
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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
17.4 to the Partnership and, in such case, the Partnership shall have the same
rights as provided for the General Partner in this Article 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 sole 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 17.6 and shall be on the terms and conditions as provided in
Article 17.7. The transfer of the Partnership Interests, the payment of the
purchase price and the assumption of the Limited Partners' obligations under
their respective Guaranties (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. The foregoing power of attorney shall not be
affected by the subsequent incapacity, mental incompetence, dissolution or
bankruptcy of any Limited Partner.
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
"Selling Limited Partner") shall be determined in the manner provided in this
Article 17.6. The purchase price for a Partnership Interest purchased pursuant
to the provisions of Articles 17.1, 17.2, 17.3, 17.4 or 17.5 shall be an amount
equal to the Limited Partner's share of the Partnership's book value, if any, as
reflected by the Limited Partner's capital account in the Partnership
(unadjusted for any appreciation in Partnership assets and as reduced by
depreciation deductions claimed by the Partnership for tax purposes) as of the
Valuation Date. The Valuation Date means the last day of the month immediately
preceding the month in which occurs: (i) the death of a Selling Limited Partner,
in the case of a purchase by reason of death; (ii) the bankruptcy or insolvency
of a Selling 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
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
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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 Partnership shall have the right to deduct the amount of any such
distributions made to the Selling Limited Partner after the Valuation Date from
the purchase price. The transfer of a Partnership Interest of a Selling Limited
Partner shall be deemed to occur as of the valuation Date, and the Selling
Limited Partner shall have no voting or other rights as a Limited Partner after
such date. Such price is likely to be considerably less than the fair market
value of the Limited Partner's interest in the Partnership and may not provide
any positive return on the Limited Partner's investment. Because Partnership
losses, depreciation deductions and Distributions reduce capital accounts, and
because appreciation in Partnership assets is not reflected in capital accounts,
it is the opinion of the General Partner that the option purchase price will be
nominal in amount.
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.
(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:
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(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
Selling 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 Selling 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 Selling Limited Partner as provided above in this
Article 17.7.1, are sufficient to effect the complete transfer of the
Selling Limited Partner's Partnership Interest and the Selling 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 Selling 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 Selling Limited Partner performs
the duties set forth in this Article 17.7.1.
(c) In case of a purchase occurring by reason of the
occurrence of an event described in Article 17.5, the Closing shall be
held as soon as possible following the determination of the purchase
price.
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.
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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 purposes 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.
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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 conduct the Offering and any Dilution Offering on behalf
of the Partnership;
(b) To acquire on behalf of the Partnership (i) one
or more Prostatron(R) Mobile Systems; (ii) any other urological
device(s) or equipment so long as such device has FDA premarket
approval at the time it is required by the Partnership; 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 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;
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(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;
(j) To execute, acknowledge and deliver any and all instruments
which may be deemed necessary or convenient to effect the foregoing;
(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, (s)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 Partnership's
business for a monthly fee equal to the greater of 7.5% of net
Partnership Cash Flow per month or $8,000 per month (beginning as of
the Closing Date but not to be paid for more than four months before
the month in which Partnership's treatment
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operations commence). All costs incurred by the General Partner under
the Management Agreement shall be paid or reimbursed by the Partnership
directly. The Partnership may also contract with healthcare facilities
and/or qualified physicians desiring to use its 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 fixed-base or mobile TUMT unit, 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:
(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) 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.
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.
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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. 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 December 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 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 occurrence of an event described in a plan
approved by the General Partner and a Majority in Interest of the
Limited Partners pursuant to Article 16.7 resulting in the dissolution
of the Partnership;
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(e) The election of the General Partner to dissolve the
Partnership following the occurrence of an event described in Article
17.5;
(f) Except as otherwise provided in any plan approved
by the General Partner and a Majority in Interest of the Limited
Partners pursuant to Article 16.7, the sale, exchange or other
disposition of all or substantially all of the property of the
Partnership without making provision for the replacement thereof; or
(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 as
provided above 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;
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(b) Second, to the creation of any reserves which the
General Partner (or such 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.
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 or her 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 or as otherwise required by law a copy of the Partnership's original
Certificate of Limited Partnership and any certificate of amendment, restated
certificate, or certificate of cancellation, if any.
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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)-1, as modified from time to time. In its capacity as Tax Matters
Partner, the General Partner shall oversee the Partnership's tax affairs in the
manner which, in its best judgment, is 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 or her 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. Further, no Limited
Partner consent shall be required to amend Schedule A to reflect the admission
of Partners as contemplated by the Offering, any Dilution Offering or as
otherwise herein permitted.
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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 generally 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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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 may contain more than one
counterpart of the signature page and this Agreement may
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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
Joseph Jenkins, M.D. and David Vela, M.D., severally, with full power of
substitution, his or her true and lawful attorneys- in-fact, for him or her and
in his or her name, place and stead and for his or her 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, legal
incapacity, dissolution or bankruptcy 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 or her 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
bankruptcy, dissolution, 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
-35-
<PAGE>
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.
[signature page follows]
-36-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
of Limited Partnership as of the day and year first above written.
GENERAL PARTNER:
By: PROSTATHERAPIES, INC.,
a Delaware corporation
By:/s/ Joseph Jenkins, M.D.
---------------------------
Joseph Jenkins, M.D.
President
ATTEST:
_________________________ [CORPORATE SEAL]
Secretary
INITIAL LIMITED PARTNER:
-----------------------
/s/ James Cochran, M.D.
-----------------------
James Cochran, M.D.
-37-
<PAGE>
STATE OF ____________________)
)
COUNTY OF __________________ )
On this _______ day of ___________, _____, before me, the
undersigned Notary Public in and for the County of _______________ in the State
of ___________________________, personally came Joseph Jenkins, M.D., who, being
by me duly sworn, said that he is President of Prostatherapies, Inc., the sole
general partner of Texas 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 Stan
Johnson, 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.
Notary Public
My commission expires:
- ---------------------------
STATE OF ________________ )
)
COUNTY OF ______________ )
I, _______________________________, a notary public in and for
the State and County set forth above, do hereby certify that James Cochran,
M.D., personally appeared before me this _____ day of _____________, _____ and
acknowledged and swore to the due execution of the foregoing Limited Partnership
Agreement in his capacity as the initial limited partner.
Notary Public
My commission expires:
- ---------------------------
-38-
<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 I Prostatherapy Limited Partnership, and his or her
intention to be legally bound thereby.
Dated this _________ day of ___________________, _______.
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 __________________, _____,
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]
-39-
<PAGE>
SCHEDULE A-1
Schedule of Partnership Interests
Texas I Prostatherapy Limited Partnership
CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND GUARANTIES
Cash Contribution Percentage Interest
General Partner
Prostatherapies, Inc. $147,488 20
1301 Capital of Texas Highway
Suite C-300
Austin, TX 78746
Limited Partners
Danilo Asase 1,875 0.25
Charles Bamberger 30,000 4
Marc T. Barrett 1,875 0.25
Steve Best 7,500 1
Christopher Brehm 7,500 1
Robert M. Brenner 7,500 1
James Cochran 30,000 4
Robert Corwin 3,750 0.5
Stephen Corwin 3,750 0.5
Richard B. Dulany 1,875 0.25
William P. Fitch, III 7,500 1
Ralph Fritzsch 3,750 0.5
Frederick M. Fry 1,875 0.25
Carole Gordon 7,500 1
Rudy Haddad 7,500 1
Martin E. Hanisch 1,875 0.25
Wayne A. Hey 7,500 1
Ira Hollander 5,625 0.75
Madelyn Holzman 7,500 1
Daniel Johnson 3,750 0.5
John Johnson 7,500 1
<PAGE>
Cash Contribution Percentage Interest
Alfred A. Kopecky 7,500 1
Edward M. Lee 7,500 1
Barney Maddox 3,750 0.5
David W. McNichols 5,625 0.75
Raul Mireles 7,500 1
Yondell E. Moore 3,750 0.5
Michael Newell 9,375 1.25
Dennis Ortiz 3,750 0.5
M. Sheldon Polsky 7,500 1
John A. Pumphrey 7,500 1
William Risk 18,750 2.5
Dave Rittenhouse 3,750 0.5
Lewis Russell 7,500 1
Clifford T. Sarnacki 7,500 1
Michael F. Sarosdy 7,500 1
Randall Singleton 9,375 1.25
Howard Solomon 9,375 1.25
C. Ritchie Spence 13,125 1.75
Robert G. Stroud 7,500 1
Leopoldo Tecauanhuey 7,500 1
Addison E. Thurman 7,500 1
James B. Tyree 7,500 1
Michael Walter 1,875 0.25
Gordon R. Welch 1,875 0.25
Marshall Wiener 1,875 0.25
Donald Willis 7,500 1
Sidney Worsham 1,875 0.25
Randolph Zuber 5,625 0.75
Prostatherapies, Inc. 241,200 33.5
------- ----
TOTAL 737,438 100%
2
<PAGE>
PRIME REFRACTIVE MANAGEMENT, L.L.C.
LOAN AGREEMENT
$14,000,000.00 ADVANCING TERM LOAN
BANK OF AMERICA, N.A.
as Administrative Agent
BANKBOSTON, N.A.
as Documentation Agent
and
THE LENDERS NAMED HEREIN,
as Lenders
Dated as of January 31, 2000
BANC OF AMERICA SECURITIES LLC
as Lead Arranger and Book Manager
<PAGE>
LOAN AGREEMENT
vi
TABLE OF CONTENTS
ARTICLE I -- DEFINITIONS...................................................2
Section 1.1 Amendment and Restatement........................2
Section 1.2 Definitions......................................2
Section 1.3 Other Definitional Provisions...................17
ARTICLE II -- ADVANCES....................................................17
Section 2.1 Commitments.....................................17
Section 2.2 Notes..........................................18
Section 2.3 Repayment of Notes..............................18
Section 2.4 Interest........................................19
Section 2.5 Borrowing Procedure.............................19
Section 2.6 Continuations; Conversions......................20
Section 2.7 Use of Proceeds.................................20
Section 2.8 Fees............................................20
ARTICLE III -- PAYMENTS...................................................20
Section 3.1 Method of Payment...............................20
Section 3.2 Optional Prepayment.............................21
Section 3.3 Pro Rata Treatment..............................21
Section 3.4 Non-Receipt of Funds by the
Administrative Agent......................21
Section 3.5 Withholding Taxes...............................21
Section 3.6 Withholding Tax Exemption.......................22
Section 3.7 Computation of Interest.........................22
Section 3.8 Order of Application............................22
ARTICLE IV -- YIELD PROTECTION AND ILLEGALITY.............................23
Section 4.1 Additional Costs................................23
Section 4.2 Limitation on Eurodollar Advances...............24
Section 4.3 Illegality......................................24
Section 4.4 Treatment of Eurodollar Advances................25
Section 4.5 Compensation....................................25
Section 4.6 Capital Adequacy................................26
ARTICLE V -- SECURITY.....................................................26
Section 5.1 Collateral......................................26
Section 5.2 Future Liens. ..................................27
Section 5.3 Release of Collateral...........................28
Section 5.4 Setoff..........................................28
ARTICLE VI -- CONDITIONS PRECEDENT........................................28
Section 6.1 Initial Advance.................................28
Section 6.2 All Advances....................................30
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.......................................33
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......................34
Section 7.15 Agreements......................................34
Section 7.16 Compliance with Legal Requirements;
Governmental Authorizations................34
Section 7.17 Investment Company Act..........................35
Section 7.18 Public Utility Holding Company Act..............35
Section 7.19 Environmental Matters...........................35
Section 7.20 Year 2000 Compliance............................35
ARTICLE VIII -- POSITIVE COVENANTS........................................35
Section 8.1 Reporting Requirements..........................35
Section 8.2 Maintenance of Existence; Conduct of Business...38
Section 8.3 Maintenance of Properties.......................38
Section 8.4 Taxes and Claims................................38
Section 8.5 Insurance.......................................39
Section 8.6 Inspection Rights...............................39
Section 8.7 Keeping Books and Records.......................39
Section 8.8 Compliance with Laws............................39
Section 8.9 Compliance with Agreements......................39
Section 8.10 Further Assurances..............................39
Section 8.11 ERISA...........................................40
Section 8.12 Information Relating to Proposed Acquisitions...40
Section 8.13 After-Acquired Subsidiaries.....................40
Section 8.14 Syndication Cooperation.........................40
ARTICLE IX -- NEGATIVE COVENANTS..........................................40
Section 9.1 Debt............................................40
Section 9.2 Limitation on Liens.............................41
Section 9.3 Mergers, Etc....................................42
Section 9.4 Restricted Payments.............................42
Section 9.5 Investments.....................................42
Section 9.6 Limitation on Issuance of Capital Stock.........43
Section 9.7 Transactions With Affiliates....................43
Section 9.8 Disposition of Assets. ........................43
Section 9.9 Sale and Leaseback..............................43
Section 9.10 Prepayment of Debt..............................43
Section 9.11 Nature of Business..............................44
Section 9.12 Environmental Protection........................44
Section 9.13 Accounting......................................44
Section 9.14 Amendment of Partnership
and Management Agreements..................44
Section 9.15 Financial Hedges................................44
Section 9.16 Capital Expenditures............................44
Section 9.17 Operating Expenses..............................44
Section 9.18 Control of Prime Refractive, L.L.C..............45
ARTICLE X -- FINANCIAL COVENANTS..........................................45
Section 10.1 Senior Funded Debt To EBITDA Ratio..............45
Section 10.2 Debt Service Coverage Ratio.....................45
ARTICLE XI -- DEFAULT.....................................................45
Section 11.1 Events of Default...............................45
Section 11.2 Remedies........................................47
Section 11.3 Performance by the Administrative Agent.........48
ARTICLE XII -- THE ADMINISTRATIVE AGENT...................................48
Section 12.1 Appointment, Powers and Immunities..............48
Section 12.2 Rights of Administrative Agent as a Lender......49
Section 12.3 Sharing of Payments, Etc........................50
Section 12.4 Indemnification.................................50
Section 12.5 Independent Credit Decisions....................51
Section 12.6 Several Commitments.............................51
Section 12.7 Successor Administrative Agent..................51
Section 12.8 Independent Contractor..........................52
ARTICLE XIII -- MISCELLANEOUS.............................................52
Section 13.1 Expenses........................................52
Section 13.2 Indemnification.................................52
Section 13.3 No Duty.........................................53
Section 13.4 No Fiduciary Relationship.......................53
Section 13.5 No Waiver; Cumulative Remedies..................53
Section 13.6 Successors and Assigns..........................53
Section 13.7 Survival........................................56
Section 13.8 ENTIRE AGREEMENT................................56
Section 13.9 Amendments, Etc.................................56
Section 13.10 Maximum Interest Rate...........................56
Section 13.11 Notices.........................................57
Section 13.12 Governing Law...................................57
Section 13.13 Counterparts....................................57
Section 13.14 Severability....................................57
Section 13.15 Headings........................................57
Section 13.16 Construction....................................57
Section 13.17 Independence of Covenants.......................57
Section 13.18 Confidentiality.................................58
Section 13.19 Waiver of Jury Trial............................58
Section 13.20 Choice of Forum; Consent to
Service of Process and Jurisdiction. ......58
Section 13.21 Chapter 346.....................................59
<PAGE>
INDEX TO EXHIBITS
Exhibit Description of Exhibit
A Advance Request Form
B Form of Assignment and Acceptance
C Form of Note
D Perfection Certificate
E Form of Opinion of Counsel for Borrower and Guarantors
F Compliance Certificate
G Permitted Refractive Acquisition 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
<PAGE>
LOAN AGREEMENT
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement"), dated as of January 31, 2000, is
among PRIME REFRACTIVE MANAGEMENT, L.L.C., a Delaware limited liability company
("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"),
BANK OF AMERICA, N.A. ("Bank of America"), 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
BANKBOSTON, N.A. ("BankBoston"), 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").
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 Prime Medical Services, Inc., a Delaware
corporation ("Prime Medical"), of which Borrower is a Wholly-Owned Subsidiary,
the Banks defined therein, and BankBoston (then known as The First National Bank
of Boston), 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 Prime
Medical, Bank of America (then known as NationsBank of Texas, N.A.), as
Documentation Agent, BankBoston, as Administrative Agent, and BankBoston, as
Syndication Agent, as amended by the First Amendment to Amended and Restated
Loan Agreement dated as of June 14, 1996 among Prime Medical, BankBoston, Bank
of America (then known as NationsBank of Texas, N.A.), and the other banks named
therein, as further amended by the Second Amended and Restated Loan Agreement
dated as of March 31, 1997 among Prime Medical, BankBoston, as Administrative
Agent, Bank of America (then known as NationsBank of Texas, N.A.), as
Documentation Agent, and NationsBanc Capital Markets, Inc., and the lenders
named therein, as amended and waived from time to time, as further amended by
the Third Amended and Restated Loan Agreement dated as of April 20, 1998 among
Prime Medical, BankBoston, as original Administrative Agent, and successor
Documentation Agent, Bank of America (then known as NationsBank of Texas, N.A.),
as original Documentation Agent and successor Administrative Agent, and the
lenders named therein, as amended and waived from time to time (collectively,
the "Original Credit Agreement").
2. The parties hereto desire to restructure, modify, refinance, and
replace a $14,000,000 portion of the credit available under Original Credit
Agreement, subject to the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
<PAGE>
ARTICLE I -- DEFINITIONS
Section 1.1 Amendment and Restatement. The Obligations (as hereinafter
defined) are in restructure, modification, refinancing, and replacement of a
portion of the credit available under the Original Credit Agreement and
constitutes and is hereby designated by Borrower as "Designated Senior Debt" as
defined in the Senior Subordinated Indenture, and is a portion of the "Senior
Credit Facility" under the Senior Subordinated Indenture.
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 Prime Refractive, L.L.C. directly or indirectly (a) acquires
all or substantially all 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 or managing
member interests of any Person, or (d) acquires additional Partnership or other
equity interests in any Subsidiary.
"Additional Costs" has the meaning specified in Section 4.1.
"Adjusted EBITDA" means for any Person for any period, the sum of: (i)
EBITDA, except in the case of any Target Company in respect of which
Consolidated Earn-Out Indebtedness is payable, EBITDA of such Target Company
shall be increased by the amount, if any, by which the annualized fiscal year to
date EBITDA used in the definition of Consolidated Earn-Out Indebtedness exceeds
the actual EBITDA for the four previous fiscal quarters of such Person for such
period, plus (ii) without duplication, all cash Distributions related to
minority interests in Partnerships actually received by Borrower; plus (iii)
without duplication, on a pro forma basis the EBITDA of any Target Company
acquired during such period as if it were acquired on the first day of such
period.
"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" means Bank of America, N.A., and its permitted
successors and assigns as "Administrative Agent" for Lenders under this
Agreement.
"Advance" means each advance of funds by the Lenders or any of them to
Borrower pursuant to Section 2.5(a).
"Advance Request Form" means a certificate, in substantially the form
of Exhibit A, properly completed and signed by Borrower requesting an Advance.
<PAGE>
"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
Lead Arranger. "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.
"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, for Advances under the
Commitment (a) from the date hereof until the delivery of financial statements
and a compliance certificate for the period ending December 31, 1999, as
required hereunder, three-eighths of one percent (.375%) for Alternate Base Rate
Advances, and one and seven-eighths of one percent (1.875%) for Eurodollar
Advances; and (b) thereafter, based on the Total Funded 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:
========================== =========================== =========================
Applicable Margin
Total Funded Alternate Base Rate Applicable Margin
Debt to EBITDA Ratio Advances Eurodollar Advances
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
Less than 1.5 to 1.0 0.375% 1.875%
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
Greater than or equal
to 2.75 to 1.0 1.375% 2.875%
========================== =========================== =========================
<PAGE>
The Total Funded 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 Refractive Acquisition, calculating any
adjustments to such ratio necessitated as a result of the Permitted Refractive
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 Refractive 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 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.
"Applicable Unused Fee Percentage" means the per annum rate with
respect to the unused portion of the Commitments as follows: (a) from the date
hereof until delivery of financial statements and a compliance certificate for
the period ending December 31,1999, as required hereunder, three-eights of one
percent (.375%); and (b) thereafter, based on the Total Funded 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:
====================================================== =========================
Total Funded Applicable Unused Fee
Debt to EBITDA Ratio Percentage
- ------------------------------------------------------ -------------------------
- ------------------------------------------------------ -------------------------
Less than 1.5 to 1.0 .375%
- ------------------------------------------------------ -------------------------
- ------------------------------------------------------ -------------------------
Greater than or equal to 1.5 to 1.0 .500%
====================================================== =========================
The Applicable Unused Fee Percentage shall be adjusted, if necessary, at the
same time as adjustments to the Applicable Margin. 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 Unused Fee Percentage shall apply until
such time as such financial statements and compliance certificates are so
delivered.
"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.
"Bank of America" means Bank of America, N.A. and its permitted successors
and assigns.
"BankBoston" means BankBoston, N.A. and its permitted successors and
assigns.
<PAGE>
"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 (a) the Borrower Security Agreement
dated as of the date hereof, executed by Borrower in favor of Administrative
Agent for the benefit of the Lenders, as the same may be amended, supplemented,
or modified from time to time.
"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.
"Capital Expenditure" means any expenditure by a Person for an asset
which will be used in a year or years subsequent to the year in which the
expenditure is made and which asset is properly classifiable in relevant
financial statements of such Person as property, equipment or improvements,
fixed assets, or a similar type of capitalized asset in accordance with GAAP.
"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 any of the following has occurred: (i)
Borrower ceases to own legally and beneficially at least 51% of the membership
interests in Prime Refractive, LLC or ceases to Control Prime Refractive, LLC,
(ii) Prime RVC ceases to own legally and beneficially 100% of the issued and
outstanding equity securities of Borrower, (iii) PMOI ceases to own legally and
beneficially 100% of the issued and outstanding stock of Prime RVC, or (iv)
Prime Medical Services, Inc. ceases to own legally and beneficially 100% of the
issued and outstanding stock of PMOI.
"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.
"Collateral Documents" means the Borrower Security Agreement, the
Guarantor Security Agreements, the Pledge Agreements, and all other collateral,
security, lien creating agreements executed or delivered pursuant to or in
connection with this Agreement, as the same may be amended, modified, renewed,
or supplemented from time to time.
<PAGE>
"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 Commitment, as the same may be reduced pursuant to Section
2.1(b) or terminated pursuant to Section 2.1(b) 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. "Commitments" means the Commitments of all of the Lenders in
the original aggregate amount of $14,000,000.00.
"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:
(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 Earn-Out Indebtedness" means as to any Person, at any
time, in connection with each applicable Permitted Refractive Acquisition in
which an earn-out payment or other post-closing payment or payments is or may be
due pursuant to the applicable purchase or acquisition agreement, the projected
aggregate amount of such earn-out or post-closing payments that would be or
become due based upon all events or circumstances that have occurred as of any
date of determination, regardless of whether any such payments are then actually
payable under the terms of the applicable purchase or acquisition agreement;
provided that to the extent any such payments are based on net income, revenues,
EBITDA or similar financial performance criteria of any Target Company for a
defined post-closing period or periods, the actual applicable financial
performance during the applicable period to date shall be utilized in making
such projection. Borrower shall submit the calculation of Consolidated Earn-Out
Indebtedness with respect to each applicable Permitted Refractive Acquisition,
together with each compliance certificate delivered pursuant to Section 8.1(d),
together with any applicable supporting documentation, all of which must be
satisfactory to Administrative Agent.
"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.
<PAGE>
"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, including, without limitation,
Subordinated Debt; (c) all obligations of such Person to pay the deferred
purchase price of property or services, including, without limitation,
Consolidated Earn-Out Indebtedness, 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 or for which such Person is liable as a
partner in any partnership or joint venturer in any joint venture; (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,
banker's acceptances, surety or other bonds and similar instruments; (h)
obligations under any Financial Hedge; 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.
"Debt Service Coverage Ratio" means, as to the Companies (including on
a pro forma basis any Company acquired in any Permitted Refractive Acquisition
for each of the components of and for the entire period of calculation of Debt
Service Coverage Ratio) for any period, the ratio of (a) the sum of: (i)
Adjusted EBITDA for such period, minus (ii) the aggregate amount of capital
expenditures made during such period, minus (iii) all cash tax payments, divided
by (b) the sum of: (w) all cash interest payments payable during such period in
respect of all Debt of the Companies (without deduction for any minority
interests), plus (x) 1/7 of the outstanding principal amount of the Loans as of
any date of determination, plus (y) 1/7 of the then applicable aggregate
Earn-Out Indebtedness, plus (z) any regularly scheduled principal payments on
Debt (including Subordinated Debt, but excluding Consolidated Earn-Out
Indebtedness) all as determined on a rolling four (4) quarter and consolidated
basis in accordance with GAAP.
"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.
"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%).
"Defaulting Lender" means any Lender that in Administrative Agent's
reasonable judgment has defaulted on any of its obligations under this
Agreement.
<PAGE>
"Distribution" for any Person means, with respect to any shares of any
capital stock, general or limited partnership interests, or other equity
securities issued by such Person, (a) the retirement, redemption, purchase, or
other acquisition for value of any such securities, (b) the declaration or
payment of any dividend, distribution, income, or other amount, on or with
respect to any such securities or interests, and (c) any other payment by such
Person with respect to such securities or interests.
"Documentation Agent" means BankBoston, N.A., and its permitted
successors and assigns as "Documentation Agent" for Lenders under this
Agreement.
"Dollars" and "$" mean lawful money of the United States of America.
"EBITDA" means, for any Person for any period: (a) Consolidated Net
Income of such Person for such period, determined after deduction of any
minority interests, plus (b) all amounts deducted therefrom during such period,
in conformity with GAAP, for interest, taxes, depreciation and amortization.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender;
or (iii) any other Person approved by the Administrative Agent (which approval
shall not be unreasonably withheld or delayed by Administrative Agent) and,
unless an Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 13.6, Borrower, such approval
not to be unreasonably withheld or delayed by Borrower and such approval to be
deemed given by Borrower if no objection is received by the assigning Lender and
the Administrative Agent from Borrower within two (2) Business Days after notice
of such proposed assignment has been provided by the assigning Lender to
Borrower; provided, however, that neither Borrower nor an Affiliate of Borrower
shall qualify as an Eligible Assignee.
"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.ss. 9601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C.ss. 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C.ss. 651 et seq., the Clean Air Act,
42 U.S.C.ss.7401 et seq., the Clean Water Act, 33 U.S.C.ss.1251 et seq., and the
Toxic Substances Control Act, 15 U.S.C.ss.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.
<PAGE>
"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.
"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.
"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.
"Financial Hedge" means either (a) a swap, collar, floor, cap, or other
contract which is intended to reduce or eliminate the risk of fluctuations in
interest rates, or (b) a foreign exchange, currency hedging, commodity hedging,
or other contract which is intended to reduce or eliminate the market risk of
holding currency or a commodity in either the cash or futures markets, which
Financial Hedge under either clause (a) or clause (b) is entered into by
Borrower with any Lender or an Affiliate of any Lender.
"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.
<PAGE>
"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.
"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, (a) the Guaranty Agreements, each
dated as of the date hereof, executed by the Guarantors in favor of the
Administrative Agent for the benefit of the Lenders, and shall also include any
other guaranty agreement heretofore or hereafter from time to time executed by
any Guarantor and delivered to the Administrative Agent for the benefit of
Lenders, as the same may be amended, restated, renewed, and substituted from
time to time. "Guaranty" means any one of the Guaranties.
"Guarantors" means, collectively, Prime Medical, all "Guarantors" under
the Prime Facility, Prime Refractive, LLC, and all Wholly-Owned Subsidiaries of
Borrower, now owned or hereafter acquired or formed, and "Guarantor" means any
one of the Guarantors.
"Guarantor Security Agreements" means (a) the Security Agreements, each
dated as of the date hereof, executed by the Guarantors in favor of
Administrative Agent for the benefit of the Lenders , (b) the Security Agreement
dated as of the date hereof, executed by LASIK Investors, LLC, in favor of
Administrative Agent for the benefit of the Lenders, relating to its interest in
Prime Refractive, LLC, and (c) shall also include any other security agreements
heretofore or hereafter from time to time executed by any Guarantor or LASIK
Investors, LLC and delivered to the Administrative Agent for the benefit of
Lenders, as amended, restated, renewed, and substituted from time to time.
"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.
<PAGE>
"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
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
four (4) 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.
"Lead Arranger" means Bank of America Securities LLC.
"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.
"Lenders" mean, on any date of determination, the financial
institutions named on Schedule 2.1 (as the same may be amended from time to time
by Administrative Agent to reflect the assignments made in accordance with
Section 13.6(b) of this Agreement), and subject to the terms and conditions of
this Agreement, and their respective successors and assigns (but not any
Participant who is not otherwise a party to this Agreement); provided that,
solely for purposes of any Collateral Documents and Section 12, "Lenders" shall
also include any Lender or Affiliate of a Lender who is a party to a Financial
Hedge with Borrower and their respective successors and assigns (for purposes
hereof, each Lender shall be deemed to have entered into this Agreement for and
on behalf of any Affiliate now or hereafter party to a Financial Hedge with
Borrower).
"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.
"Loan" means all Advances with respect to the Commitment, evidenced by
the Notes.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
Borrower Security Agreement, the Guarantor Security Agreements, the Pledge
Agreements, any Financial Hedge documents, 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.
"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 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.
<PAGE>
"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.
"Note" means an advancing term loan note executed by Borrower,
substantially in the form of Exhibit C, payable to each Lender in an amount
equal to such Lender's Commitment, as the same may be amended, supplemented,
modified or restated from time to time, evidencing the obligation of Borrower to
repay the Loan, and all renewals, modifications and extensions thereof. "Notes"
means all of the Notes of the Lenders.
"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; provided that, all references to the "Obligations" in the Collateral
Documents, and in Section 12, shall, in addition to the foregoing, also include
all present and future indebtedness, liabilities, and obligations (and all
renewals and extensions thereof or any part thereof) now or hereafter owed to
any Lender or any Affiliate of a Lender arising from, by virtue of, or pursuant
to any Financial Hedge entered into by any Company.
"Partnerships" means the partnerships and limited liability companies
in which Borrower or any Subsidiary now owns or hereafter acquires general
and/or limited partnership interests or membership interests, including, without
limitation, the partnerships and other Persons listed on Schedule 3.
"Partnership" means any one of the Partnerships, and shall also include any non
Wholly-Owned Subsidiaries of Borrower.
"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 January 31, 2000, and
(b) with respect to Eurodollar Advances, the last day of the respective Interest
Period therefor, provided that if any Interest Period is greater than three (3)
months, then accrued interest 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 Refractive Acquisition" means an acquisition by Borrower,
any Guarantor, or Prime Refractive, L.L.C., with respect to which each of the
following conditions shall have been satisfied:
(a) the acquisition by Borrower, any Guarantor, or Prime
Refractive, LLC is of a business, assets, or Person (as applicable, the
"Target Company ") which is engaged in the businesses of correcting
refractive error of the eye which are substantially the same as those
which are conducted by Borrower or any Company on the date hereof, or
any other business reasonably related thereto;
<PAGE>
(b) as of the closing of such Permitted Refractive
Acquisition, the Permitted Refractive Acquisition has been approved by
the board of directors or other applicable governing body of the Target
Company and the Person from which the Target Company is to be acquired;
(c) prior to the closing of such Permitted Refractive
Acquisition, the Target Company and the Person from which the Target
Company is to be acquired must be Solvent;
(d) as of the closing of such Permitted Refractive
Acquisition, after giving effect to such Permitted Refractive
Acquisition, Borrower, the Guarantor, or Prime Refractive LLC, that is
the acquiring party, as the case may be, must be Solvent and the
Companies, on a consolidated basis, must be Solvent;
(e) as of the closing of such Permitted Refractive
Acquisition, after giving effect to such Permitted Refractive
Acquisition, no Default shall exist or occur as a result of, and after
giving effect to, such Permitted Refractive Acquisition;
(f) the aggregate purchase price with respect to such
Permitted Refractive Acquisition does not exceed six (6) times EBITDA
of the Target Company, subject to adjustments acceptable to the
Administrative Agent, for the four (4) fiscal quarters ending on the
most recently ended fiscal period prior to the date of such Permitted
Refractive Acquisition;
(g) the aggregate nonstock consideration for any Permitted
Refractive Acquisition (including, without limitation, any financing
of interests acquired by LASIK Investors, L.L.C. and Consolidated
Earn-Out Indebtedness reasonably estimated by Administrative Agent and
Borrower) does not exceed $10,000,000.00;
(h) not less than 15 Business Days prior to the closing of any
Permitted Refractive Acquisition, 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;
(i) if the Target Company is to be an After-Acquired Subsidiary,
then Borrower shall have complied with the terms and conditions set
forth in Section 8.13;
(j) review by a third party acceptable to the Administrative
Agent of Borrower's due diligence process and procedures as related to
Permitted Refractive Acquisitions, acceptable to Administrative Agent
and Lenders;
(k) with respect to any Permitted Refractive Acquisition where
the aggregate nonstock consideration is $10,000,000 or less (including,
without limitation, any financing of interests acquired by LASIK
Investors, L.L.C. and Consolidated Earn-Out Indebtedness reasonably
estimated by Administrative Agent and Borrower), the Target Company
has, at a minimum, provided company prepared financial statements for
the immediately preceding four fiscal quarters prepared in accordance
with the due diligence procedures approved in (j) above;
<PAGE>
(l) the Target Company or other business segment being acquired
must have positive proforma trailing twelve month EBITDA;
(m) the capital and ownership structure of the Target Company
(after giving effect to the Permitted Refractive Acquisition) shall be
satisfactory to the Administrative Agent;
(n) the absence of action, suit, investigation, or proceeding
pending or threatened in any court or before any arbitrator or
governmental authority that affects the Target Company or the proposed
Permitted Refractive Acquisition, which could have reasonably been
expected to have a material adverse effect on the Target Company or the
Borrower;
(o) receipt of all governmental, shareholder, and third party
consents and approvals necessary or desirable in connection with the
acquisition of the Target Company and all transactions contemplated
thereby;
(p) the Administrative Agent has received a certificate dated
on or immediately prior to the date of Permitted Refractive
Acquisition, 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
Refractive Acquisition and the transactions contemplated thereby, and
setting forth the calculations supporting compliance with the
limitations prescribed herein; and
(q) Borrower or Prime Refractive, L.L.C. must own at least 51% of
the equity or membership interests in and Control the Target Company
upon completion of the Permitted Refractive Acquisition.
"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.
"Pledge Agreements" means (a) the Pledge Agreements, each dated as of
the date hereof, executed by Borrower and each Subsidiary of Borrower that owned
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. "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.
"PMOI" means Prime Medical Operating, Inc., a Delaware
corporation, and its permitted successors and assigns.
"Prime Agent" means Bank of America, N.A., as Administrative
Agent under the Prime Facility and its permitted successors and
assigns.
"Prime Companies" shall mean the "Companies" under the Prime Facility.
<PAGE>
"Prime Facility" means the $86,000,000 Revolving Credit Loan to Prime
Medical pursuant to the Fourth Amended and Restated Loan Agreement dated as of
the date hereof among Prime Medical, Bank of America, N.A., as Administrative
Agent, BankBoston, N.A., as Documentation Agent, and the lenders named therein,
as amended, modified, renewed, or restated from time to time.
"Prime Medical" is defined in the Recitals, and includes its permitted
successors and assigns.
"Prime RVC" means Prime RVC, Inc., a Delaware corporation, and
its permitted successors and assigns.
"Principal Office" means the office of the Administrative Agent,
presently located at 901 Main Street, 7th Floor, Dallas, Texas 75202.
"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 the Commitments (other than of any Defaulting Lenders), or if the
Commitments shall have been terminated, then of the aggregate unpaid principal
amount of the Notes (other than of any Defaulting Lenders).
<PAGE>
"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 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.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of
1970, as amended from time to time.
"Senior Debt" means, as of any date, all Total Funded Debt of the
Companies which is not Subordinated Debt.
"Senior Funded Debt" means, as to the Companies, as of any date, Total
Funded Debt of such Persons, minus Subordinated Debt of such Persons.
"Senior Funded Debt to EBITDA Ratio" means, as of any date, the ratio
of (a) the aggregate amount of Senior Funded Debt of the Companies (without
deduction for any minority interests), as of such date, to (b) Adjusted EBITDA
of the Companies, for the four (4) fiscal quarter period ending on the date of
determination (including on a pro forma basis any Permitted Refractive
Acquisition).
"Senior Subordinated Indenture" means that certain Trust Indenture
dated as of March 24, 1998 between Prime Medical and State Street Bank and Trust
Company, as Trustee, and any trust indenture entered into in connection with the
Exchange Notes.
"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.
"Subordinated Debt" means Debt due and owing from time to time by
Borrower to Prime Medical, Prime RVC, or PMOI containing terms acceptable to
Administrative Agent and Required Lenders, which is subordinated to the
Obligations in form and substance acceptable to the Administrative Agent and the
Required Lenders, and which does not exceed $16,000,000 in aggregate original
principal amount.
"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 or membership
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.
<PAGE>
"Target Company" means any Person that has been or may be acquired
pursuant to a Permitted Refractive Acquisition permitted hereunder.
"Termination Date" means 1:00 p.m. Dallas, Texas time on April 21,
2003, or such earlier date and time on which the Commitments terminate as
provided in this Agreement.
"Total Cash Flow" means as to Borrower, for any period, the sum of: (i)
EBITDA, plus (ii) all minority interest expense attributable to LASIK Investors,
L.L.C., minus (iv) the amount of Capital Expenditures.
"Total Funded Debt" means, as of any date, outstanding Debt of the
Companies (without deduction for minority interests).
"Total Funded Debt to EBITDA Ratio" means, as of any date, the ratio of
(a) the aggregate amount of Total Funded Debt (without deduction for any
minority interests), as of such date, to (b) Adjusted EBITDA of the Companies,
for the four (4) fiscal quarter period ending on the date of determination
(including on a pro forma basis any Permitted Refractive Acquisition).
"Type" means any type of Advance (i.e., Alternate Base Rate Advance or
Eurodollar Advance).
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas 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.
<PAGE>
(a) Advancing Term 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 Commitment as then in effect. Subject to the foregoing
limitations, and the other terms and provisions of this Agreement, Borrower may
borrow, the amount of the Commitments by means of Eurodollar Advances or
Alternate Base Rate Advances. Advances which are repaid may not be reborrowed.
Advances requested hereunder to finance a portion of the purchase price of a
Permitted Refractive Acquisition shall not exceed the lesser of: one-half (1/2)
of the total purchase price of the Permitted Refractive Acquisition, and (ii)
two and one-half (2.5) times the pro forma EBITDA of the Target Company for the
most recently completed four fiscal quarters.
(b) Optional Reduction and Termination of Commitments. Borrower shall
have the right to terminate in whole or reduce in part the unused portion of the
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 Notes exceeds the Commitments (after giving effect to such notice)
plus accrued and unpaid interest on the principal amount so prepaid. No portion
of the Commitments may be reinstated after it has been terminated or reduced.
Section 2.2 Notes. The obligation of Borrower to repay each Lender for
Advances made by such Lender pursuant to such Lender's Commitment, and all
interest thereon, shall be evidenced by a 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 Commitment. Upon receipt of an affidavit of an officer
of any Lender to the loss, theft, destruction or mutilation of any Note, and, in
the case of any such loss, theft, destruction or mutilation, upon cancellation
of such Note, Borrower will issue, in lieu thereof, a replacement note in the
same principal amount thereof and otherwise of like tenor.
Section 2.3 Repayment of Notes. Borrower shall repay the Notes and apply
Total Cash Flow in the following order:
(1) Interest on the Notes shall be due and payable as set forth in Section 2.4
below.
(2) After making the payments when due set forth in Section 2.3(a) above,
Borrower shall be permitted to retain an aggregate amount of Total Cash
Flow not exceeding $150,000 in each fiscal year for working capital.
(c) Prime Refractive, L.L.C. and its Partnerships may make
Distributions to their respective partners not more often than
quarterly, limited to an amount sufficient to pay such partners'
federal and state income tax liability arising from their partnership
interest in the applicable Partnerships.
(d) Outstanding principal of the Notes will be due and payable
quarterly on the last day of each January, April, July, and October,
commencing January 31, 2000 in an amount equal to the sum of the
aggregate amounts which would be required to be paid on each Advance
made hereunder to fully amortize each Advance in sixteen equal
principal payments, but only to the extent Total Cash Flow is available
to pay such amounts, which amounts, if not fully paid on any quarterly
payment date will be due and payable on each succeeding quarterly
interest payment date, to the extent Total Cash Flow is available to
make such payments.
<PAGE>
(e) Any remaining Total Cash Flow may be paid as interest
payments on the Subordinated Indebtedness, when due and payable.
(f) All remaining Total Cash Flow, not applied as set forth
above, shall be applied on the last day of each January, April, July,
and October, commencing January 31, 2000 to the unpaid principal amount
of the Loans, pro rata, in the inverse order of maturity.
(g) All outstanding unpaid principal of and accrued interest on
the Notes shall be due and payable on the Termination Date.
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 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) Loan. Borrower shall give the Administrative Agent notice by means
of an Advance Request Form of each requested Advance under the Commitments
hereunder at least three (3) 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 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
Commitments. Any telephonic request for an Advance under the Commitments by
Borrower shall be promptly confirmed by submission of a properly completed
Advance Request Form to the Administrative Agent. Each Advance under the
Commitments shall be in a minimum principal amount of $500,000.00 or a greater
integral multiple thereof, provided that if such Advance equals the entire
remaining unfunded portion of the 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 $1,000,000.00. All notices under this Section
2.5(a) shall be irrevocable and shall be given not later than 11:00 a.m. Dallas,
Texas time on the day which is not less than the number of Business Days
specified above for such notice.
<PAGE>
(b) Generally. The Administrative Agent shall promptly notify each
Lender of the contents of each Advance Request Form. Not later than 11:00 a.m.
Dallas, Texas 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.
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
irrevocable and must be given by Borrower not later than 11:00 a.m. Dallas,
Texas time at least three (3) 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.
(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. Dallas, Texas time at least three
(3) 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. The proceeds of Advances under the
Commitments shall be used by Borrower (i) to finance Permitted Refractive
Acquisitions and (ii) to finance capital expenditures.
Section 2.8 Fees.
(a) Commitment Fees. Borrower hereby agrees to pay to the
Administrative Agent, for the ratable account of each Lender having a
Commitment, a commitment fee on the daily average unused amount of such Lender's
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 360-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) Agents' Fees. 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.
ARTICLE III -- PAYMENTS
<PAGE>
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. Dallas, Texas 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 Notes 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 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. All notices under this Section 3.2 shall be
irrevocable and must be given by Borrower not later than 11:00 a.m. Dallas,
Texas time on the day which is not less than the number of Business Days
specified above for such notice. Optional prepayments shall be applied as set
forth in Section 3.8.
Section 3.3 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) the making and Continuation of Advances under the Commitment shall
be made pro rata among the Lenders according to the amounts of their respective
Commitments; (b) each termination or reduction of the Commitments under Section
2.1(b) or otherwise shall be applied to the Commitments of the Lenders pro rata,
according to their respective unused Commitments; and (c) 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 3.4 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.
<PAGE>
Section 3.5 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 3.6. 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 3.6 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 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 3.7 Computation of Interest. Interest on all Advances and all
other amounts payable by Borrower hereunder shall be computed on the basis of a
year of 360 days, and actual days elapsed.
Section 3.8 Order of Application.
(a) No Default. Prior to the occurrence of an Event of Default any
payment (whether voluntary or mandatory) of the Notes shall be applied to the
Notes on a pro rata basis based upon the outstanding principal balances of the
Notes as of the date of payment. No payment on the Notes may be reborrowed.
<PAGE>
(b) After Default. After the occurrence and during the continuance of
an Event of Default, any payment or proceeds of Collateral 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 Notes on a pro
rata basis, based upon the outstanding principal balances of the Notes as of the
date of payment; (iii) to the principal of the Notes and amounts due and owing
under any Financial Hedge on a pro rata basis, based upon the outstanding
principal balances of the Notes or obligation due and owing under any Financial
Hedge as of the date of payment; and (iv) to all other Obligations.
(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.
<PAGE>
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 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.
<PAGE>
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.
<PAGE>
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 Security Agreement. Borrower shall execute and deliver to the
Administrative Agent, for the benefit of the Lenders, the Borrower Security
Agreement.
(b) Guarantor Security Agreement. The Guarantors shall execute and deliver
to the Administrative Agent, for the benefit of the Lenders, Guarantor Security
Agreements.
(c) Pledge Agreement. Pledgors shall execute and deliver to the
Administrative Agent, for the benefit of the Lenders, the Pledge Agreements.
<PAGE>
(d) Further Assurances. 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.
(e) Description of Collateral. Collateral includes, without limitation, the
following assets of Borrower and Guarantors:
(i) All present and future accounts, contract rights, general
intangibles, chattel paper, documents, instruments, investment
property, inventory, equipment, and other goods, wherever located, now
owned or hereafter acquired.
(ii) All present and future issued and outstanding shares of
capital stock of, or partnership and membership interests, now owned or
hereafter acquired by Borrower or any Guarantor, including, without
limitation, all capital stock of, or partnership and membership
interests in, the Guarantors.
(iii) To the extent allowed by the respective partnership
agreements, certain partnership interests or economic interests in
partnership interests owned by Borrower and Guarantors.
(iv) All present and future automobiles, trucks, truck
tractors, trailers, semi-trailers, or other motor vehicles or rolling
stock now owned or hereafter acquired by Borrower or any Guarantor
(collectively, the "Vehicles").
(v) All present and future rights, awards, and judgments to
which Borrower or any Guarantor is entitled under any litigation now
existing or hereafter arising.
(vi) All present and future rights, titles, and interests of
Borrower or any Guarantor in and to all patents, patent applications,
patent right, service marks, trademarks, tradenames, trade secrets,
intellectual property, registrations, goodwill, copyrights, franchises,
licenses, permits, proprietary information, customer lists, designs,
and inventions.
(vii) All present and future books, records, data, plans,
manuals, computer software and computer programs of Borrower and
Guarantors.
(viii) All proceeds and products of the Collateral heretofore
described.
Provided that the Collateral owned by the Guarantor under the Prime
Facility shall be subject to a first lien in favor of the agents and lenders
under the Prime Facility.
Collateral shall also include LASIK Investors, LLC's interests in Prime
Refractive, LLC,, now owned or hereafter acquired and all assets financed by
Prime Refractive, LLC.
<PAGE>
Section 5.2 Future Liens. Promptly, and in any event within twenty-one
(21) days after (a) the acquisition of any assets (real, personal, tangible, or
intangible) by Borrower or any Guarantor or (b) the removal, termination, or
expiration of any prohibition upon the granting of a lien in any asset (real,
personal, tangible, or intangible) of any Borrower or any Guarantor (including,
without limitation, the granting of liens in all general and limited partnership
interests in which Borrower and Guarantors own 100% of the partnership
interests) (the "Additional Assets"), Borrower shall (or shall cause such other
Guarantor to) execute and deliver to Administrative Agent all further
instruments and documents (including, without limitation, certificates and
instruments representing shares of stock or evidencing Debt and any realty
appraisals as Administrative Agent may require with respect to any such
Additional Assets), and shall take all such further action that may be necessary
or desirable, or that Administrative Agent may reasonably request, to grant,
perfect, and protect liens in favor of Administrative Agent for the benefit of
Lenders in such Additional Assets, as security for the Obligations; it being
expressly understood that the granting of such additional security for the
Obligations is a material inducement to the execution and delivery of this
Agreement by each Lender. Upon satisfying the terms and conditions hereof, such
Additional Assets shall be included in the "Collateral" for all purposes under
the Loan Documents, and all references to the "Collateral" in the Loan Documents
shall include the Additional Assets.
Section 5.3 Release of Collateral. Upon any sale, transfer, or
disposition of Collateral which is expressly permitted pursuant to the Loan
Documents (or is otherwise authorized by Required Lenders or Lenders, as the
case may be), and upon ten (10) Business Days' prior written request by Borrower
(which request must be accompanied by true and correct copies of (a) all
documents of transfer or disposition, including any contract of sale, (b) a
preliminary closing statement and instructions to the title company, if any, and
(c) all requested release instruments, Administrative Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of liens granted to Administrative Agent for
the benefit of lenders pursuant hereto in such Collateral; provided that, (x) no
such release of Lien shall be granted if any Default or Event of Default has
occurred and is continuing, including, without limitation, the failure to make
certain mandatory prepayments in accordance with Section 2.3 in conjunction with
the sale and transfer of such Collateral; (y) Administrative Agent shall not be
required to execute any such document on terms which, in Administrative Agent's
opinion, would expose Administrative Agent to liability or create any obligation
or entail any consequence, other than the release of such Liens without recourse
or warranty; and (z) such release shall not in any manner discharge, affect, or
impair the Obligations, or liens upon or obligations of Borrower or any
Guarantor in respect of all interests retained by the Borrower and Guarantors,
including, without limitation, the proceeds of any sale, all of which shall
continue to constitute Collateral.
Section 5.4 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.
<PAGE>
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 Administrative
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 Administrative 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 each Guarantor certified by the appropriate governmental office;
(d) Bylaws. The bylaws of Borrower and each Guarantor certified by the
Secretary or an Assistant Secretary of each such Company;
(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. Borrower Security Agreement executed by
Borrower;
(h) Guaranties. The Guaranty Agreements executed by Guarantors;
(i) Guarantor Security Agreement. The Guarantor Security Agreements
executed by the Guarantors;
(j) Pledge Agreements. The 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, as
requested by Administrative Agent;
(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, and
acknowledgements by the Prime Agent, of the second liens in stock created
thereunder;
<PAGE>
(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 Guarantors 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 D 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 E hereto of Akin, Gump, Strauss, Hauer & Feld, L.L.P., Texas legal
counsel to Borrower and the Guarantors.
(r) Closing of Prime Facility. Evidence that the closing of the Prime
Facility has occurred and contains terms and conditions acceptable to
Administrative Agent.
(s) 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;
(t) Fees. Borrower shall have paid to the Administrative Agent,
Lenders, and Lead Arranger the fees owed by Borrower to the Administrative
Agent, Lenders, and Lead Arranger pursuant to the letter agreements between
Borrower and Administrative Agent;
(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; and
(u) No Material Adverse Change. No material adverse change shall have
occurred since September 30, 1999 in the business, assets, operations,
conditions (financial or otherwise) or prospects of Prime Medical and its
Subsidiaries or of the Companies or in the facts and information delivered to
Lenders on or prior to the date of the initial Advance.
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;
<PAGE>
(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;
(d) Permitted Refractive Acquisitions. The amount of any Advance hereunder
to finance a portion of the purchase price of any Permitted Refractive
Acquisition shall not exceed the lesser of: (a) one-half of the total purchase
price, or (b) 2.5 times the pro forma EBITDA of the Target Company for the most
recently completed four fiscal quarters; and
(e) 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 and the Guarantors): (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 Guarantor. 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 (and each of the
Partnerships as defined in the Prime Facility): (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 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 Guarantor.
<PAGE>
Section 7.2 Financial Statements. Borrower has delivered to the
Administrative Agent audited consolidated financial statements of Prime Medical
as of and for the fiscal year ended December 31, 1998, and unaudited
consolidated financial statements of Prime Medical for the nine (9) month period
ended September 30, 1999. Such financial statements have been prepared in
accordance with GAAP, and fairly present, on a consolidated basis, the financial
condition of Prime Medical and its Subsidiaries, 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
(as defined in the Prime Facility) taken as a whole or Prime Medical 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 and each Guarantor of this Agreement and the other
Loan Documents to which such Company or Guarantor 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 or Guarantor
is a partnership, then partnership action) on the part of such Company or
Guarantor 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 Guarantor (or, if such Company or Guarantor is a
partnership, then the partnership agreement of such Company or Guarantor), (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 or Guarantor is a party
or by which such Company or Guarantor 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 or any Guarantor.
Section 7.4 Operation of Business. Each of the Companies and each
Guarantor 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 or Guarantors 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 Guarantor.)
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
or any Guarantor, 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 or Borrower, or any Guarantor, 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 and each
Guarantor 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 none of the properties, assets, or
leasehold interests of any Company is subject to any Lien, except as permitted
by Section 9.2.
<PAGE>
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 and the Guarantors
have no Debt, except as disclosed on Schedule 7.9.
Section 7.10 Taxes. The Companies and the Guarantors 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 other than
certain state tax returns required to be filed on or before the date hereof.
Except as previously disclosed to the Administrative Agent in writing, no
Company nor any Guarantor 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 nor any
Guarantor 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 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 and the Guarantors 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, Guarantors nor any ERISA Affiliate has completely or
partially withdrawn from a Multi-employer Plan. The Companies, Guarantors 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
Guarantors, nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
<PAGE>
Section 7.13 Disclosure. All factual information (taken as a whole)
furnished by or on behalf of Borrower or any Guarantor 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 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 or any Guarantor 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. The Partnerships listed on
Schedule 3, constitute all of the Subsidiaries of Prime Medical or Borrower, as
the case may be. 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 Prime Medical or Borrower, as the
case may be. All of the outstanding capital stock of Borrower and each of its
Subsidiaries and Prime Medical 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 and Guarantors.
Section 7.15 Agreements. None of the Companies or Guarantors 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 Guarantor 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 or Guarantors 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 Guarantor.
Section 7.16 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Schedule 7.16.1: (i) each Company and
Guarantor 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 or Guarantor
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.
<PAGE>
(b) Except as set forth in Schedule 7.16: (i) each Company and
Guarantor is in material compliance with all of the terms and requirements of
each Governmental Authorization held by such Company or Guarantor; (ii) no
Company or Guarantor 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
Authorizations have been duly made on a timely basis with the appropriate
Governmental Authorities; (iv) all Governmental Authorizations of the Companies
and Guarantors are transferable to the Companies and Guarantors; (v) upon
consummation of the transactions contemplated hereby, the Companies and
Guarantors 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
the Companies and Guarantors possesses the necessary Governmental Authorizations
(i) necessary to permit each Company and Guarantor to lawfully conduct and
operate its respective business in the manner it currently conducts and operates
such business and to permit such Company or Guarantor 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 and Guarantor, upon the consummation of the
transactions contemplated hereby, to lawfully conduct and operate its business
and to permit each Company and Guarantor 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 Guarantor.
Section 7.17 Investment Company Act. No Company or Guarantor 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 or
Guarantor 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 each Guarantor and all of their
respective properties, assets, and operations are in compliance in all material
respects with all Environmental Laws. No Company or Guarantor 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 or
Guarantor with all material Environmental Laws; and
(b) The Companies and Guarantors 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 and each
Guarantor is in compliance is all material respects with all of the terms and
conditions of such permits.
Section 7.20 Year 2000 Compliance. Borrower represents that it is aware
of the possible impact of the year 2000 problem (that is, the risk that computer
applications may not be able to properly perform date-sensitive functions after
December 31, 1999) upon its computer applications and on-going business.
Borrower represents that any corrective action necessary will be taken and that
the year 2000 problem will not result in a material adverse change in the
Companies' and Guarantors' business condition (financial or otherwise),
operations, properties or prospects, or ability to repay the Obligations.
<PAGE>
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 Prime Medical,
beginning with the fiscal year ending December 31, 1999, a copy of the annual
audit report of the Prime Companies for such fiscal year containing, on a
consolidated 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;
(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 and the Prime
Companies as of the end of such month and for the portion of the fiscal year
then ended, containing, on a consolidated basis, balance sheets and statements
of income and retained earnings, 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 basis, at the date and for the periods indicated therein;
(c) Quarterly Financial Statements. As soon as available, and in any
event within forty-five (45) days after the end of each quarter of each fiscal
year of Borrower, a copy of an unaudited financial report of the Companies and
the Prime Companies and of Prime RVC as of the end of such quarter and for the
portion of the fiscal year then ended, containing, on a consolidated 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 or
treasurer 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 and the Prime
Companies and Prime RVC and its Subsidiaries, as the case may be, on a
consolidated basis, at the date and for the periods indicated therein, and a
copy of an unaudited financial report of the Companies as of the end of such
quarter beginning with the fiscal quarter ending March 31, 2000 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, as the case may
be, on a consolidated and consolidating basis, at the date and for the periods
indicated therein;
<PAGE>
(d) Compliance Certificate. Concurrently with the delivery of each of
the financial statements referred to in Section 8.1(a) and within forty-five
(45) 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 or treasurer of Borrower, in substantially the form of Exhibit F, (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;
(e) 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 and of Prime
Medical and each of its Subsidiaries as of the end of such month in a form
reasonably satisfactory to the Administrative Agent;
(f) Business Plan and Budget. As soon as available and in any event by
January 15 of the then current year, a copy of the annual budget and business
plan of Borrower and its Subsidiaries and of Prime Medical and each of its
Subsidiaries for the upcoming fiscal year, together with details of the
assumptions, if any, underlying such budget and business plan;
(g) Management Letters. Promptly upon receipt thereof, a copy of any
management letter or written report submitted to any Company or any Guarantor by
independent certified public accountants with respect to the business, condition
(financial or otherwise), operations, or properties of any Company;
(h) 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 or any of the Prime
Companies which, if determined adversely to Borrower, Guarantor or any such
Subsidiary, could have a material adverse effect on the business, condition
(financial or otherwise), options, or properties of Borrower, any Subsidiary,
the Companies, or the Prime Companies (taken as a whole);
(i) 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;
(j) ERISA Reports. Promptly after the filing or receipt thereof, copies
of all reports, including annual reports, and notices which any Company or Prime
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 or Prime 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 or Prime 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;
(k) Reports to Other Creditors. Promptly after the furnishing thereof,
copies of any statement or report furnished by Borrower or any of its
Subsidiaries or any Guarantor to any other creditor to which any Company or any
Guarantor owes $250,000.00 or more or to the trustee under the Senior
Subordinated Indenture (as defined in the Prime Facility), 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;
<PAGE>
(l) Proxy Statements, Etc. As soon as available, one (1) copy of each
financial statement, report, notice or proxy statement sent by Prime Medical to
its stockholders generally and one (1) copy of each regular, periodic or special
report, registration statement, or prospectus filed by Prime Medical 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;
(m) 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 and addresses of each partner or member of
each of the Partnerships and percentage ownership by each Company of each
Partnership;
(n) 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 Prime Companies or that otherwise relate to the business of, or to
any of the assets owned or used by, each of the Companies and each of the Prime
Companies;
(o) Dilution Reports. Promptly upon the occurrence of any Restricted
Transfer (as hereinafter defined), a report setting forth the occurrence of
Restricted Transfer, including the name of the Partnership, purchasers, purchase
price, and EBITDA for the immediately preceding four fiscal quarters
attributable thereto, and also of the contribution of any Partnership assets to
any other Partnership, including the names of the Partnerships, assets
transferred, value thereof and consideration received;
(p) 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,
regulations, 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
(q) 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 Guarantor. 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.
<PAGE>
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 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 Guarantor.
Section 8.4 Taxes and Claims. Borrower will pay or discharge, and will
cause each of its Subsidiaries other than the Excepted 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.
<PAGE>
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
effect on the business, condition (financial or otherwise), operations or
properties of the Companies taken as a whole, Borrower, or any Guarantor.
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 Guarantor 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.
<PAGE>
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:
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 $4,000,000.00 at
any time outstanding the proceeds of which are used by the Companies to purchase
equipment;
(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;
(g) Subordinated Debt; and
(h) Any Financial Hedge.
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) Liens securing Debt permitted by Section 9.1(d);
(c) Liens in favor of the Administrative Agent, for the benefit of the
Lenders or the counter-party under any Financial Hedge;
(d) Liens securing Debt permitted by Section 9.1(g), which are subordinated
to the Liens described in Section 9.2(c);
(e) Liens securing the Prime Facility, which are subordinated to the Liens
described in Section 9.2(c);
<PAGE>
(f) 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;
(g) 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;
(h) 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
(i) 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, neither Borrower nor any Guarantor will become a party to a
merger or consolidation, except in connection with any Permitted Refractive
Acquisition so long as Borrower or a Guarantor is the surviving entity. Borrower
will not, and will not permit any of its Subsidiaries (other than the
Partnerships) to, wind-up, dissolve or liquidate itself, except as permitted
above. Except as otherwise permitted by this Agreement, Borrower will not, and
will not permit any of its Subsidiaries 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 Refractive
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. Borrower shall not permit to
exist any arrangement, agreement, or corporate governance agreement, which
directly or indirectly prohibits or restricts any Subsidiary from declaring or
paying any dividend or distribution, on account of its capital stock,
partnership, limited liability company, or other ownership interests; provided
that to the extent permitted by Section 2.3(c), the Partnerships may make
Distributions to their respective partners not more often than quarterly limited
to an amount sufficient to pay such partners' federal and state income tax
liability arising from their partnership interests in the applicable
Partnerships.
Section 9.5 Investments. Borrower will not make, nor permit any of its
Subsidiaries 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 to purchase or own, any stock, bonds, notes, debentures, or other
securities of, any Person, except:
<PAGE>
(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 Borrower and Guarantors 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;
(c) Permitted Refractive Acquisitions;
(d) Any Financial Hedge; and
(e) Loans from Borrower to Prime Refractive, L.L.C. in connection with any
Permitted Refractive Acquisition, so long as such loans secure payment of the
Obligations and the "Obligations" under the Prime Facility.
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 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. No Company shall
make any loan, advance, investment, or transfer any assets to any Excepted
Subsidiary, so long as such Excepted Subsidiary is not in good standing where
incorporated.
<PAGE>
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 2.3) (a) inter-Company transfers between Borrower and a Wholly-Owned
Subsidiary or between Wholly-Owned Subsidiaries, (b) 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, and (g) transfers by Borrower or by any Subsidiary of
interests in Partnerships, so long as the aggregate EBITDA Transfer for all
Restricted Transfers does not exceed the lesser of : (a) ten percent (10%) of
Borrower's EBITDA for the most recently ended four fiscal quarters, and (b)
$2,000,000. "EBITDA Transfer" with respect to any Partnership interests in any
Partnership transferred by Borrower or by any Subsidiary shall equal the EBITDA
generated by such Partnership interests for the last four fiscal quarters prior
to the date of such transfer of each such Partnership interest. A Restricted
Transfer shall be any transfer or series of related transfers of Partnership
interests in any one Partnership by Borrower or any Subsidiary in any 90 day
period, in which the EBITDA Transfer equals or exceeds $250,000. In the case of
any transfers pursuant to paragraph (g), after giving effect to such transfers,
a Company must own at least 51% of the equity interests in such Partnership and
Control such Partnership. Administrative Agent is authorized to release any
liens on such Partnership interests transferred pursuant to this Section 9.8, as
further set forth in Section 5.3.
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 refractive vision operations that has
been or is to be sold or transferred, directly or indirectly, by it to such
Person.
Section 9.10 Prepayment of Debt. Borrower will not prepay, nor permit any
of its Subsidiaries to prepay, any Debt except the Obligations.
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 correcting refractive error of the eye or businesses which are
reasonably related thereto.
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 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, regulations, or articles 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 Guarantor.
Section 9.15 Financial Hedges.
(a) To the extent any Lender or its Affiliate issues a Financial Hedge
to any Company, such Lender or its Affiliate is afforded the benefits of (and
Borrower [or any Company by execution of Collateral Documents] hereby confirms a
grant of) Liens in and to the Collateral as evidenced by the Collateral
Documents to the extent of such Lender's (or Affiliate thereof's) credit
exposure under such Financial Hedge; such Lien is pari passu with that of
Administrative Agent on behalf of the Lenders.
<PAGE>
(b) Financial Hedges held by any Company permitted by the Loan
Documents, shall be subject to the following: (i) each such Lender or other
institution issuing a Financial Hedge shall calculate its credit exposure in a
reasonable and customary manner; (ii) all documentation for such Financial Hedge
shall conform to ISDA standards and must be acceptable to Administrative Agent
with respect to intercreditor issues; (iii) if issued by any Lender or any
Affiliate of a Lender to Borrower, the credit exposure under such Financial
Hedge shall be secured by Liens in and to the Collateral as evidenced by the
Collateral Documents on a pari passu basis with the Liens of Administrative
Agent (held for the benefit of Lenders), and such Lender or Affiliate issuing a
Financial Hedge shall, by acceptance of the benefits of such Liens in the
Collateral agree to the provisions of Section 12.6; and (iv) such Financial
Hedge shall be incurred in the ordinary course of business and consistent with
prior business practices of the Companies and not for speculative purposes.
Section 9.16 Capital Expenditures. Borrower shall not make Capital
Expenditures in any fiscal year exceeding $500,000. Such limitation set forth in
this Section shall not apply to any of Borrower's Subsidiaries or Partnerships.
Section 9.17 Operating Expenses. Borrower shall not incur or pay
operating expenses in any fiscal year in excess of $200,000. Such limitation set
forth in this Section shall not apply to any of Borrower's Subsidiaries or
Partnerships.
Section 9.18 Control of Prime Refractive, L.L.C. Borrower shall own 51% of
the membership interests in and Control Prime Refractive, L.L.C.
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 Senior Funded Debt To EBITDA Ratio. Borrower will not
permit the Senior Net Debt to EBITDA Ratio as of the last day of each fiscal
quarter of Borrower to exceed the ratio set forth opposite such dates below:
Period Ratio
Date hereof through December 31, 2000 2.50 to 1.0
January 1, 2002 and thereafter 2.00 to 1.0
Section 10.2 Debt Service Coverage Ratio. Borrower will not permit the
Debt Service Coverage Ratio as of the last day of each fiscal quarter of
Borrower to be less than the ratio set forth opposite such dates below:
Period Ratio
Date hereof through December 31, 2000 1.50 to 1.0
January 1, 2002 and thereafter 1.75 to 1.0
<PAGE>
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 to 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 Party shall fail to perform, observe, or comply with any covenant,
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 or 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 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
either such involuntary proceeding shall remain undismissed and unstayed for a
period of forty-five (45) days or an order for relief is entered.
(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 Five Hundred Thousand and 00/100 Dollars
($500,000.00) against any of its assets or properties.
<PAGE>
(h) A final judgment or judgments for the payment of money in excess of
Five Hundred Thousand and 00/100 Dollars ($500,000.00) 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 the Subordinated Debt or on any other Debt in an aggregate principal amount
of Five Hundred Thousand and 00/100 Dollars ($500,000.00) or more (other than
the Obligations and the Prime Facility), or the maturity of the Subordinated
Debt or any such Debt (other than the Prime Facility) shall have been
accelerated, or the Subordinated Debt or any such Debt (other than the Prime
Facility) 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 the
Subordinated Debt or such Debt (other than the Prime Facility) 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, any Guarantor 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, 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, or any Guarantor, 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 Five
Hundred Thousand and 00/100 Dollars ($500,000.00).
(l) Any Change in Control shall occur.
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:
<PAGE>
(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 State of Texas 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 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 Bank of America to act as their Administrative
Agent hereunder and under each of the other Loan Documents. Bank of America
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:
<PAGE>
(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 Borrower Security
Agreement, the Guarantor Security Agreements, the Pledge Agreements,
and any other security documents as the secured party; and
(i) To take such other actions as may be requested by the
Required Lenders.
<PAGE>
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
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, Bank of
America 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 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.
<PAGE>
Section 12.4 Indemnification. THE LENDERS HEREBY AGREE TO INDEMNIFY THE
AGENTS FROM AND HOLD THE AGENTS 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 ANY 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
ANY AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS INCLUDING ANY PORTION
OF THE FOREGOING TO THE EXTENT CAUSED BY THE ANY 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 ANY AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION OF
THE LENDERS THAT THE AGENTS 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
AGENTS. WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION, EACH LENDER AGREES
TO REIMBURSE EACH 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 AGENTS 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 SUCH 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 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.
<PAGE>
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, 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
<PAGE>
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, including any work-outs, amendments to any Loan
Documents, or negotiations related thereto, and the enforcement of this
Agreement or any other Loan Document, including, without limitation, the fees
and expenses of legal counsel and professional advisors 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 AS TO ANY AGENT OR LENDER SHALL
EXCLUDE ANY LOSS, LIABILITY, OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM,
DEFICIENCY OR EXPENSE ARISING BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH AGENT OR LENDER.
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.
<PAGE>
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 $____________, 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
$3,500.00. 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). The provisions of Article IV and Section 13.2
shall continue with respect to such Assigning Lender.
<PAGE>
(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 B, (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 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 C.
<PAGE>
(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 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.
<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. Regardless of any provision
contained in any Loan Document, neither Administrative Agent nor any Lender
shall ever be entitled to contract for, charge, take, reserve, receive, or
apply, as interest on all or any part of the Obligations, any amount in excess
of the Maximum Rate, and, if Lenders ever do so, then such excess shall be
deemed a partial prepayment of principal and treated hereunder as such and any
remaining excess shall be refunded to Borrower. In determining if the interest
paid or payable exceeds the Maximum Rate, Borrower and Lenders shall, to the
maximum extent permitted under applicable Law, (a) treat all Advances as but a
single extension of credit (and Lenders and Borrower agree that such is the case
and that provision herein for multiple Advances is for convenience only), (b)
characterize any nonprincipal payment as an expense, fee, or premium rather than
as interest, (c) exclude voluntary prepayments and the effects thereof, and (d)
amortize, prorate, allocate, and spread the total amount of interest throughout
the entire contemplated term of the Obligations. However, if the Obligations are
paid and performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of existence thereof
exceeds the Maximum Amount, Lenders shall refund such excess, and, in such
event, Lenders shall not, to the extent permitted by Law, be subject to any
penalties provided by any laws for contracting for, charging, taking, reserving,
or receiving interest in excess of the Maximum Amount. The "Maximum Rate" or the
"Maximum Amount," mean the "weekly ceiling" from time to time in effect under
Texas Finance Code ss. 303.305, as amended.
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 STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.
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.
<PAGE>
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 each Lender (each, a "Lending Party") agrees to keep
confidential any Confidential Information; provided that nothing herein shall
prevent any Lending Party from disclosing such information (a) to any other
Lending Party or any Affiliate of any Lending Party, or any officer, director,
employee, agent, or advisor of any Lending Party or any Affiliate of any Lending
Party, (b) to any other Person if reasonably incidental to the administration of
the credit facility provided herein, (c) as required by any law, rule, or
regulation, (d) upon the order of any court or administrative agency, (e) upon
the request or demand of any regulatory agency or authority, (f) in connection
with any litigation to which such Lending Party may be a party, (g) to the
extent necessary in connection with the exercise of any remedy under this
Agreement or any other Loan Document, and (h) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or Assignee. Furthermore, and notwithstanding the
foregoing, no Lending Party shall provide any Confidential Information to any
officer, director, employee, agent or advisor of any Affiliate of a Lending
Party if such officer, director, employee, agent or advisor's position involves
the ability to transact trades in, or solicit or accept orders for the purchase
or sale of, the common stock of Borrower.
(b) The Lending Parties are aware 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.
(c) The Companies and the Lending Parties agree that monetary damages
would not be a sufficient remedy for any breach of this Section 13.18 by the
Lending Parties 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.
(d) The restrictions and obligations of this Section 13.18 shall
survive the repayment of the Obligations and shall continue to bind the Lending
Parties.
<PAGE>
Section 13.19 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 13.20 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 State of Texas, Travis
County, or in the United States courts located in the State of Texas, 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 State
of Texas, Dallas County, 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
Travis County, Texas.
Section 13.21 Chapter 346. Borrower agrees that Chapter 346, of the
Texas Finance Code, as amended (which regulates certain revolving credit loan
documents and revolving tri-party accounts) does not apply to the Obligations.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
<PAGE>
Loan Agreement
Signature Page
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
PRIME REFRACTIVE MANAGEMENT, L.L.C.
By: /s/ Teena E. Belcik
Name: Teena E. Belcik
Title: Vice President-Treasurer
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attention: Treasurer
Fax No.: (512) 328-8510
Telephone No.: (512) 314-4554
<PAGE>
BANK OF AMERICA:
BANK OF AMERICA, N.A.
as Administrative Agent and a Lender
By: /s/ Daneil H. Penkar
Name: Daniel H. Penkar
Title: Senior Vice President
Address for Notices:
515 Congress Avenue, 11th Floor
Post Office Box 908
Austin, Texas 78701-0908
Attention: Wade Morgan
Fax No.: (512) 397-2052
Telephone No.: (512) 397-2241
Lending Office for Base Rate Advances:
515 Congress Avenue, 11th Floor
Post Office Box 908
Austin, TX 78701-0908
Lending Office for Eurodollar Advances:
515 Congress Avenue, 11th Floor
Post Office Box 908
Austin, TX 78701-0908
<PAGE>
BANKBOSTON:
BANKBOSTON, N.A.,
as Documentation Agent, and a Lender
By: /s/ Walter J. Marullo
Name: Walter J. Marullo
Title: Vice President
Address for Notices:
100 Federal Street, MS 01-08-05
P.O. Box 2016
Boston, Massachusetts 02106
Attention: Walter J. Marullo, Vice President
Fax No.: (617) 434-2472
Telephone No.: (617) 434-2308
Lending Office for Base Rate Advances:
100 Federal Street
P. 0. Box 2016
Boston, MA 02106
Lending Office for Eurodollar Advances:
100 Federal Street
P.O. Box 2016
Boston, MA 02106
<PAGE>
BANK ONE, TEXAS, N.A.,
as Lender
By: /s/ Edward W. Lick, Jr.
Name: Edward W. Lick, Jr.
Title: Vice President
Address for Notices:
221 West 6th Street, Suite 200
Austin, Texas 78701
Attention: Ed Lick
Fax No.: (512) 479-5720
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
<PAGE>
FLEET NATIONAL BANK,
as Lender
By: /s/ Walter J. Marullo
Name: Walter J. Marullo
Title: Vice President
Address for Notices:
100 Federal Street, MS 01-08-05
P.O. Box 2016
Boston, Massachusetts 02106
Attention: Walter J. Marullo, Vice President
Fax No.: (617) 434-2472
Telephone No.: (617) 434-2308
Lending Office for Base Rate Advances:
Fleet National Bank
One Federal Street
Mail Stop: MA OF D07B
Boston, MA 02110
Lending Office for Eurodollar Advances:
Fleet National Bank
One Federal Street
Mail Stop: MA OF D07B
Boston, MA 02110
<PAGE>
LASALLE BANK, NATIONAL ASSOCIATION,
as Lender
By: /s/ Dana Friedman
Name: Dana Friedman
Title: Lending Officer
Address for Notices:
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Dana Friedman
Fax No.: (312) 904-6457
Telephone No.: (312) 904-5416
Lending Office for Base Rate Advances:
LaSalle Bank, National Association
135 South LaSalle Street
Chicago, IL 60603
Lending Office for Eurodollar Advances:
LaSalle Bank, National Association
135 South LaSalle Street
Chicago, IL 60603
<PAGE>
GUARANTY FEDERAL BANK, F.S.B.
By: /s/ Chris Harkrider
Name: Chris Harkrider
Title: Vice President
Addresses for Notices:
301 Congress Avenue
Suite 300
Austin, TX 78701
Attention: Chris Harkrider
Fax No.: (512) 320-1041
Telephone No.: (512) 320-1205
Lending Office for Base Rate Advances:
Guaranty Federal Bank, F.S.B.
8333 Douglas Avenue
Dallas, TX 75225
Lending Office for Eurodollar Advances:
Guaranty Federal Bank, F.S.B.
8333 Douglas Avenue
Dallas, TX 75225
PRIME MEDICAL SERVICES, INC.
FOURTH AMENDED AND RESTATED
LOAN AGREEMENT
$86,000,000.00 REVOLVING CREDIT LOAN
BANK OF AMERICA, N.A.
as Administrative Agent
BANKBOSTON, N.A.
as Documentation Agent
and
THE LENDERS NAMED HEREIN,
as Lenders
Dated as of January 31, 2000
BANC OF AMERICA SECURITIES LLC
as Lead Arranger and Book Manager
<PAGE>
LOAN AGREEMENT
vii
TABLE OF CONTENTS
ARTICLE I -- DEFINITIONS......................................................2
Section 1.1 Amendment and Restatement...........................2
Section 1.2 Definitions.........................................2
Section 1.3 Other Definitional Provisions......................22
ARTICLE II -- ADVANCES.......................................................23
Section 2.1 Commitments........................................23
Section 2.2 Notes.............................................23
Section 2.3 Repayment of Advances..............................23
Section 2.4 Interest...........................................23
Section 2.5 Borrowing Procedure................................24
Section 2.6 Continuations; Conversions.........................24
Section 2.7 Use of Proceeds....................................25
Section 2.8 Fees...............................................25
ARTICLE III -- PAYMENTS......................................................25
Section 3.1 Method of Payment..................................25
Section 3.2 Optional Prepayment................................25
Section 3.3 Mandatory Prepayments..............................26
Section 3.4 Pro Rata Treatment.................................26
Section 3.5 Non-Receipt of Funds by the Administrative Agent...26
Section 3.6 Withholding Taxes..................................26
Section 3.7 Withholding Tax Exemption..........................27
Section 3.8 Computation of Interest............................27
Section 3.9 Order of Application...............................27
ARTICLE IV -- YIELD PROTECTION AND ILLEGALITY................................28
Section 4.1 Additional Costs...................................28
Section 4.2 Limitation on Eurodollar Advances..................29
Section 4.3 Illegality.........................................29
Section 4.4 Treatment of Eurodollar Advances...................30
Section 4.5 Compensation.......................................30
Section 4.6 Capital Adequacy...................................31
ARTICLE V -- SECURITY........................................................31
Section 5.1 Collateral.........................................31
Section 5.2 Future Liens. .....................................32
Section 5.3 Release of Collateral..............................33
Section 5.4 Setoff.............................................33
ARTICLE VI -- CONDITIONS PRECEDENT...........................................33
Section 6.1 Initial Advance...........................33
Section 6.2 All Advances.......................................35
ARTICLE VII -- REPRESENTATIONS AND WARRANTIES................................36
Section 7.1 Existence..........................................36
Section 7.2 Financial Statements...............................36
Section 7.3 Corporate Action: No Breach.......................37
Section 7.4 Operation of Business..............................37
Section 7.5 Litigation and Judgments...........................37
Section 7.6 Rights in Properties; Liens........................37
Section 7.7 Enforceability.....................................37
Section 7.8 Approvals..........................................37
Section 7.9 Debt...............................................38
Section 7.10 Taxes..............................................38
Section 7.11 Use of Proceeds; Margin Securities.................38
Section 7.12 ERISA..............................................38
Section 7.13 Disclosure.........................................38
Section 7.14 Subsidiaries; Partnerships.........................38
Section 7.15 Agreements.........................................39
Section 7.16 Compliance with Legal Requirements;
Governmental Authorizations..................39
Section 7.17 Investment Company Act.............................40
Section 7.18 Public Utility Holding Company Act.................40
Section 7.19 Environmental Matters..............................40
Section 7.20 Year 2000 Compliance...............................40
ARTICLE VIII -- POSITIVE COVENANTS...........................................40
Section 8.1 Reporting Requirements.............................40
Section 8.2 Maintenance of Existence; Conduct of Business......43
Section 8.3 Maintenance of Properties..........................43
Section 8.4 Taxes and Claims...................................43
Section 8.5 Insurance..........................................43
Section 8.6 Inspection Rights..................................44
Section 8.7 Keeping Books and Records..........................44
Section 8.8 Compliance with Laws...............................44
Section 8.9 Compliance with Agreements.........................44
Section 8.10 Further Assurances.................................44
Section 8.11 ERISA..............................................44
Section 8.12 Information Relating to Proposed Acquisitions......44
Section 8.13 After-Acquired Subsidiaries........................44
Section 8.14 Syndication Cooperation............................45
ARTICLE IX -- NEGATIVE COVENANTS.............................................45
Section 9.1A Debt...............................................45
Section 9.1B Debt of Refractive Entities........................46
Section 9.2 Limitation on Liens................................46
Section 9.3 Mergers, Etc.......................................46
Section 9.4 Restricted Payments................................47
Section 9.5 Investments........................................47
Section 9.6 Limitation on Issuance of Capital Stock............49
Section 9.7 Transactions With Affiliates.......................49
Section 9.8 Disposition of Assets. ...........................49
Section 9.9 Sale and Leaseback.................................50
Section 9.10 Prepayment of Debt.................................50
Section 9.11 Nature of Business.................................50
Section 9.12 Environmental Protection...........................50
Section 9.13 Accounting.........................................50
Section 9.14 Amendment of Partnership
and Management Agreements.....................50
Section 9.15 Financial Hedges...................................50
Section 9.16 Control of Prime Refractive, L.L.C.................51
ARTICLE X -- FINANCIAL COVENANTS.............................................51
Section 10.1 Total Net Funded Debt to EBITDA....................51
Section 10.2 Senior Net Funded Debt To EBITDA Ratio.............51
Section 10.3 Debt Service Coverage Ratio........................51
Section 10.4 Consolidated Net Worth.............................52
ARTICLE XI -- DEFAULT........................................................52
Section 11.1 Events of Default..................................52
Section 11.2 Remedies...........................................54
Section 11.3 Performance by the Administrative Agent............54
ARTICLE XII -- THE ADMINISTRATIVE AGENT......................................55
Section 12.1 Appointment, Powers and Immunities.................55
Section 12.2 Rights of Administrative Agent as a Lender.........56
Section 12.3 Sharing of Payments, Etc...........................56
Section 12.4 Indemnification....................................57
Section 12.5 Independent Credit Decisions.......................57
Section 12.6 Several Commitments................................58
Section 12.7 Successor Administrative Agent.....................58
Section 12.8 Independent Contractor.............................58
ARTICLE XIII -- MISCELLANEOUS................................................59
Section 13.1 Expenses...........................................59
Section 13.2 Indemnification....................................59
Section 13.3 No Duty............................................59
Section 13.4 No Fiduciary Relationship..........................60
Section 13.5 No Waiver; Cumulative Remedies.....................60
Section 13.6 Successors and Assigns.............................60
Section 13.7 Survival...........................................62
Section 13.8 ENTIRE AGREEMENT...................................62
Section 13.9 Amendments, Etc....................................63
Section 13.10 Maximum Interest Rate..............................63
Section 13.11 Notices............................................63
Section 13.12 Governing Law......................................64
Section 13.13 Counterparts.......................................64
Section 13.14 Severability.......................................64
Section 13.15 Headings...........................................64
Section 13.16 Construction.......................................64
Section 13.17 Independence of Covenants..........................64
Section 13.18 Confidentiality....................................64
Section 13.19 Restatement of Original Credit Agreement...........65
Section 13.20 Assignments and Assumptions Among Lenders. .......65
Section 13.21 Waiver of Jury Trial...............................65
Section 13.22 Choice of Forum; Consent to Service
of Process and Jurisdiction. .................65
Section 13.23 Chapter 346........................................66
<PAGE>
INDEX TO EXHIBITS
Exhibit Description of Exhibit
A Advance Request Form
B Form of Assignment and Acceptance
C Form of Note
D Perfection Certificate
E Form of Opinion of Counsel for Borrower and the Guarantors
F Compliance Certificate
G Permitted Acquisition Certificate
H Permitted Passive Investment Certificate
I Permitted Other Business Acquisition Certificate
J Permitted Refractive Acquisition Certificate
K Non-Borrower and Guarantor Acquisition Certificate
L Form of Subordinated Note
M Form of Subordination Agreement
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
<PAGE>
LOAN AGREEMENT
FOURTH AMENDED AND RESTATED LOAN AGREEMENT
THIS FOURTH AMENDED AND RESTATED LOAN AGREEMENT (the "Agreement"),
dated as of January 31, 2000, 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"), BANK OF AMERICA, N.A. ("Bank of America"), 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 BANKBOSTON, N.A. ("BankBoston"), 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").
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 BankBoston (then known as The First National Bank
of Boston), 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 Borrower, BankBoston, as Administrative Agent, Bank of
America (then known as NationsBank of Texas, N.A.), as Documentation
Agent, and BankBoston, as Syndication Agent, as amended by the First
Amendment to Amended and Restated Loan Agreement dated as of June 14,
1996 among Borrower, BankBoston, as Administrative Agent, Bank of
America (then known as NationsBank of Texas, N.A.), as Documentation
Agent, and the other banks named therein, as further amended by the
Second Amended and Restated Loan Agreement dated as of March 31, 1997
among Borrower, BankBoston, as Administrative Agent, Bank of America
(then known as NationsBank of Texas, N.A.), as Documentation Agent, and
NationsBanc Capital Markets, Inc., and the lenders named therein, as
amended and waived from time to time, as further amended by the Third
Amended and Restated Loan Agreement dated as of April 20, 1998 among
Borrower, BankBoston, as original Administrative Agent and as successor
Documentation Agent, Bank of America (then known as NationsBank of
Texas, N.A.), as original Documentation Agent and as successor
Administrative Agent, and the lenders named therein, as amended and
waived from time to time (collectively, the "Original Credit
Agreement").
2. Subject to the terms and conditions set forth below,
Borrower and "Required Lenders" (as defined in the Original Credit
Agreement) desire to entirely amend, modify, and restate the Original
Credit Agreement, to provide for, among other things (a) a decrease in
the maximum amount available under the Revolving Credit Commitment to
$86,000,000, and (b) modification and amendment to certain provisions
therein, subject to the terms and conditions set forth in this
Agreement.
3. The amendment and restatement of the Original Credit
Agreement hereunder is not intended by the parties to constitute either
a novation or a discharge or satisfaction of the indebtedness and
"Obligations" under the Original Credit Agreement, which indebtedness
and obligations under the Original Credit Agreement shall remain
outstanding hereunder on the terms and conditions hereinafter provided.
<PAGE>
In consideration of the foregoing and the mutual covenants contained
herein, Borrower, Bank of America (in its capacity as Administrative Agent under
the Original Credit Agreement), BankBoston (in its capacity as Documentation
Agent under the Original Credit Agreement) and Required Lenders under the
Original Credit Agreement agree that, effective upon the Closing Date, the
Original Credit Agreement is amended and restated in its entirety, as follows:
ARTICLE I -- DEFINITIONS
Section 1.1 Amendment and Restatement. This Agreement is in
renewal, extension, modification, and restatement of the Original
Credit Agreement and constitutes and is hereby designated by Borrower
as "Designated Senior Debt" as defined in the Senior Subordinated
Indenture.
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, any
Guarantor, or any other Subsidiary of Borrower directly or indirectly (a)
acquires all or substantially all 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 or
managing member interests of any Person, or (d) acquires additional Partnership
or other equity interests in any Subsidiary.
"Additional Costs" has the meaning specified in Section 4.1.
"Adjusted EBITDA" means for any Person for any period, the sum of: (i)
EBITDA, except in the case of any Target Company in respect of which
Consolidated Earn-Out Indebtedness is payable, EBITDA of such Target Company
shall be increased by the amount, if any, by which such Person's annualized
fiscal year to date EBITDA used in the calculation of Consolidated Earn-Out
Indebtedness, exceeds the actual EBITDA for the four previous fiscal quarters of
such Person for such period, plus (ii) without duplication, all cash
Distributions related to minority interests in Partnership actually received by
Prime Refractive Management, L.L.C., plus (iii) without duplication, on a pro
forma basis, the EBITDA of any Target Company acquired during such period as if
it were acquired on the first day of such period.
"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" means Bank of America, N.A., and its permitted
successors and assigns as "Administrative Agent" for Lenders under this
Agreement.
"Advance" means each advance of funds by the Lenders or any of them to
Borrower pursuant to Section 2.5(a).
<PAGE>
"Advance Request Form" means a certificate, in substantially the form
of Exhibit A, properly completed and signed by Borrower requesting an Advance.
"Advancing Term Loan Facility" means the $14,000,000 Advancing Term
Loan pursuant to the Loan Agreement dated the date hereof among Bank of America,
N.A., as Administrative Agent, BankBoston, N.A., as Documentation Agent, the
lenders from time to time party thereto, and Prime Refractive Management,
L.L.C., as borrower.
"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
Lead Arranger. "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.
"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, for Advances under the
Commitment (a) from the date hereof until the delivery of financial statements
and a compliance certificate for the period ending December 31, 1999, as
required hereunder, one-half of one percent (.500%) for Alternate Base Rate
Advances, and two percent (2.000%) for Eurodollar Advances; and (b) thereafter,
based on the Net Total Funded 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:
<PAGE>
========================== =========================== =========================
Applicable Margin
Net Total Funded Alternate Base Rate Applicable Margin
Debt to EBITDA Ratio Advances Eurodollar Advances
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
Less than 1.5 to 1.0 .375% 1.375%
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
- -------------------------- --------------------------- -------------------------
Greater than or
equal to 2.75 to 1.0 .875% 2.375%
========================== =========================== =========================
The Net Total Funded 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, Permitted Passive Investment,
Permitted Other Business Acquisition, or Permitted Refractive Acquisition,
calculating any adjustments to such ratio necessitated as a result of the
Permitted Acquisition, Permitted Passive Investment, Permitted Other Business
Acquisition, or Permitted Refractive 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, Permitted Passive Investment, Permitted
Other Business Acquisition, or Permitted Refractive 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 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.
"Applicable Unused Fee Percentage" means the per annum rate with
respect to the unused portion of the Commitments as follows: (a) from the date
hereof until delivery of financial statements and a compliance certificate for
the period ending December 31,1999, as required hereunder, one-half of one
percent (.500%); and (b) thereafter, based on the Net Total Funded 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:
====================================================== =========================
Net Total Funded Applicable Unused Fee
Debt to EBITDA Ratio Percentage
- ------------------------------------------------------ -------------------------
- ------------------------------------------------------ -------------------------
Less than 1.5 to 1.0 .300%
- ------------------------------------------------------ -------------------------
- ------------------------------------------------------ -------------------------
Less than 2.0 to 1.0 but greater than or equal to .375%
1.5 to 1.0
Greater than or equal to 2.0 to 1.0 .500%
====================================================== =========================
<PAGE>
The Applicable Unused Fee Percentage shall be adjusted, if necessary, at the
same time as adjustments to the Applicable Margin. 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 Unused Fee Percentage shall apply until
such time as such financial statements and compliance certificates are so
delivered.
"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.
"Bank of America" means Bank of America, N.A. and its permitted successors
and assigns.
"BankBoston" means BankBoston, N.A. and its permitted successors and
assigns.
"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.
"BDEC Acquisition" means the acquisition by PMOI of an undivided 60%
interest in the "refractive surgery" assets of Barnet Dulaney Eye Center,
P.L.L.C., and the contribution by PMOI of such assets to Prime/BDEC Acquisition,
L.L.C.
"Borrower Security Agreement" means (a) the Borrower Security Agreement
dated as of April 26, 1996, executed by Borrower in favor of BankBoston, as
predecessor Administrative Agent to Administrative Agent for the benefit of the
Lenders, as the same may be amended, supplemented, or modified from time to
time, including (b) the Consent, Confirmation and Ratification of Borrower
Security Agreement dated as of March 31, 1997, (c) the Second Consent,
Confirmation and Ratification of Borrower Security Agreement dated as of April
20, 1998, and (d) the Third Consent, Confirmation and Ratification of Borrower
Security Agreement dated as of 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 BankBoston, as predecessor Administrative Agent to 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, and any other security agreement executed from time to time
by Borrower and delivered to the Administrative Agent for the benefit of the
Lenders, all as amended, renewed, restated, and substituted from time to time.
"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.
<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.
"Cash Equivalent" means any investments of the Companies which are
permitted by Section 9.5(a), and which mature within 180 days of any date of
determination, and which are unconditionally available for repayment of the
Obligations, upon liquidation.
"Change in Control" means a Change of Control as defined in the Senior
Subordinated Indenture.
"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.
"Collateral Documents" means the Borrower Security Agreement, the
Guarantor Security Agreements, the Pledge Agreements, and all other collateral,
security, lien creating agreements executed or delivered pursuant to or in
connection with this Agreement, as the same may be amended, modified, renewed,
or supplemented from time to time.
"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 Commitment, as the same may be reduced pursuant to Section
2.1(b) or terminated pursuant to Section 2.1(b) 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. "Commitments" means the Commitments of all of the Lenders in
the original aggregate amount of $86,000,000.00.
"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:
(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;
<PAGE>
(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 Earn-Out Indebtedness" means as to any Person, at any
time, in connection with each applicable Permitted Refractive Acquisition in
which an earn-out payment or other post-closing payment or payments is or may be
due pursuant to the applicable purchase or acquisition agreement, the projected
aggregate amount of such earn-out or post-closing payments that would be or
become due based upon all events or circumstances that have occurred as of any
date of determination, regardless of whether any such payments are then actually
payable under the terms of the applicable purchase or acquisition agreement;
provided that to the extent any such payments are based on net income, revenues,
EBITDA or similar financial performance criteria of any Target Company for a
defined post-closing period or periods, the actual applicable financial
performance during the applicable period to date shall be utilized in making
such projection. Borrower shall submit the calculation of Consolidated Earn-Out
Indebtedness with respect to each applicable Permitted Refractive Acquisition,
together with each compliance certificate delivered pursuant to Section 8.1(d),
together with any applicable supporting documentation, all of which must be
satisfactory to Administrative Agent.
"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.
<PAGE>
"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, including, without limitation, the
Senior Subordinated Notes; (c) all obligations of such Person to pay the
deferred purchase price of property or services, including, without limitation,
Consolidated Earn-Out Indebtedness, 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 or for which such Person is liable as a
partner in any partnership or joint venturer in any joint venture; (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,
banker's acceptances, surety or other bonds and similar instruments; (h) all
obligations under any Financial Hedge, 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.
"Debt Service Coverage Ratio" means, as to the Companies (including on
a pro forma basis any Company acquired in any Permitted Acquisition, Permitted
Other Business Acquisition, or Permitted Refractive Acquisition for each of the
components of and for the entire period of calculation of Debt Service Coverage
Ratio) for any period, the ratio of (a) the sum of: (i) Adjusted EBITDA for such
period, minus (ii) the aggregate amount of capital expenditures made during such
period, minus (iii) all cash tax payments, divided by (b) the sum of: (w) all
cash interest payments payable during such period in respect of all Debt of the
Companies (without deduction for any minority interests), plus (x) 1/7 of the
outstanding principal amount of the Loans and 1/7 of the outstanding
"Obligations" under the Advancing Term Loan Facility as of any date of
determination, plus (y) 1/7 of the Consolidated Earn-Out Indebtedness as of any
date of determination, plus (z) any regularly scheduled principal payments on
Debt (including Subordinated Debt, but excluding Earn-Out Indebtedness), all as
determined on a rolling four (4) quarter and consolidated basis in accordance
with GAAP.
"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.
"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%).
"Defaulting Lender" means any Lender that in Administrative Agent's
reasonable judgment has defaulted on any of its obligations under this
Agreement.
"Documentation Agent" means BankBoston, N.A., and its permitted
successors and assigns as "Documentation Agent" for Lenders under this
Agreement.
"Dollars" and "$" mean lawful money of the United States of America.
"EBITDA" means, for any Person for any period: (a) Consolidated Net
Income of such Person for such period, determined after deduction of any
minority interests, plus (b) all amounts deducted therefrom during such period,
in conformity with GAAP, for interest, taxes, depreciation and amortization,
provided that cash flow from Permitted Passive Investments shall only be
included in the calculation of EBITDA to the extent: (i) it has been actually
received by Borrower or a Guarantor, and (ii) it does not exceed fifteen percent
(15%) of total EBITDA for such period.
<PAGE>
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender;
or (iii) any other Person approved by the Administrative Agent (which approval
shall not be unreasonably withheld or delayed by Administrative Agent) and,
unless an Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 13.6, Borrower, such approval
not to be unreasonably withheld or delayed by Borrower and such approval to be
deemed given by Borrower if no objection is received by the assigning Lender and
the Administrative Agent from Borrower within two (2) Business Days after notice
of such proposed assignment has been provided by the assigning Lender to
Borrower; provided, however, that neither Borrower nor an Affiliate of Borrower
shall qualify as an Eligible Assignee.
"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.ss. 9601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C.ss. 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C.ss.651 et seq., the Clean Air Act,
42 U.S.C.ss. 7401 et seq., the Clean Water Act, 33 U.S.C.ss. 1251 et seq., and
the Toxic Substances Control Act, 15 U.S.C.ss.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.
"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.
"Excepted Subsidiaries" means FastStart, Inc., a North Carolina
corporation, National Lithotripters Association, Inc. a North Carolina
corporation, and MedTech Investments, Inc., a North Carolina corporation.
<PAGE>
"Exchange Notes" means those certain senior subordinated notes to be
issued in exchange for the originally issued Senior Subordinated Notes,
containing substantially the same terms as the original Senior Subordinated
Notes.
"Existing Permitted Passive Investments" means ownership by Borrower or
any Subsidiary of a 32.5% interest in Southern California Stone Center, L.L.C.,
a California limited liability company and a 38.25% interest in TENN-GA Stone
Group Two, a Tennessee general partnership.
"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.
"Financial Hedge" means either (a) a swap, collar, floor, cap, or other
contract which is intended to reduce or eliminate the risk of fluctuations in
interest rates, or (b) a foreign exchange, currency hedging, commodity hedging,
or other contract which is intended to reduce or eliminate the market risk of
holding currency or a commodity in either the cash or futures markets, which
Financial Hedge under either clause (a) or clause (b) is entered into by
Borrower with any Lender or an Affiliate of any Lender.
"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.
"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.
<PAGE>
"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, (a) the Guaranty Agreements, each
dated as of April 26, 1996, executed by certain Guarantors, (b) the Consent,
Confirmation and Ratification of Guaranty Agreements, dated as of March 31,
1997, executed by certain Guarantors, (c) the Second Consent, Confirmation and
Ratification of Guaranty Agreements dated as of April 20, 1998 executed by
certain Guarantors, (d) the Consent, Confirmation and Ratification of Guaranty
Agreements dated as of April 20, 1998 executed by certain Guarantors, (e) the
Guaranty Agreement dated as of March 31, 1997 executed by Prostatherapies, Inc.,
(f) the Guaranty Agreements, each dated April 20, 1998 executed by each Excepted
Subsidiary and Executive Medial Enterprises, Inc., (g) the Guaranty Agreement
dated as of the date hereof executed by each Guarantor; certain of which
Guaranty Agreements are in renewal, amendment, substitution and replacement of
the Guaranty Agreements executed by certain Guarantors under the Original Credit
Agreement in favor of the Agent and the Lenders under the Original Credit
Agreement and shall also include any other guaranty agreement heretofore or
hereafter from time to time executed by any Guarantor and delivered to the
Administrative Agent for the benefit of Lenders, as amended, restated, renewed,
and substituted from time to time. "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, other than Prime Refractive
Management, L.L.C. "Guarantor" means any one of the Guarantors.
"Guarantor Security Agreements" means (a) the Security Agreements, each
dated as of April 26, 1996, executed by certain Guarantors, (b) the Consent,
Confirmation and Ratification of Guarantor Security Agreements dated as of March
31, 1997, executed by certain Guarantors, (c) the Second Consent, Confirmation
and Ratification of Guarantor Security Agreement dated as of April 20, 1998,
executed by certain Guarantors, (d) the Consent, Confirmation and Ratification
of Guarantor Security Agreements dated as of the date hereof, executed by
certain Guarantors, (e) the Security Agreement dated as of March 31, 1997,
executed by Prostatherapies, Inc., (f) the Guarantor Security Agreements dated
April 20, 1998 executed by each Excepted Subsidiary and Executive Medical
Enterprises, Inc., (g) the Security Agreement dated as of the date hereof
executed by each Guarantor each in favor of Administrative Agent for the benefit
of Lenders, certain of which Security Agreements are in renewal, amendment,
restatement and substitution of the Security Agreements executed by certain
Guarantors under the Original Credit Agreement in favor of the Administrative
Agent, for the benefit of the Lenders under the Original Credit Agreement, and
shall also include any other security agreements heretofore or hereafter from
time to time executed by any Guarantor and delivered to the Administrative Agent
for the benefit of Lenders, as amended, restated, renewed, and substituted from
time to time. "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.
"Horizon Acquisition" means the acquisition by Prime/BDR Acquisition,
L.L.C. of 60% of the stock of Horizon Vision Center, Inc.
<PAGE>
"Immediately-available" means that any cash or Cash Equivalents are
capable of being liquidated (without premium, penalty, or restriction) within
180 days of any date of determination, are not subject to any Liens or claims of
third persons, and are unconditionally available for payment of the Obligations
upon liquidation.
"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
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 cash proceeds of (i) any sale or
issuance of Borrower's capital stock, excluding any sale or issuance of capital
stock under Borrower's stock option plans, or (ii) the incurrence of any Debt of
the type described in subsections (a) and (b) of the definition of Debt (other
than the Senior Subordinated Notes), in each case to the extent permitted
hereunder.
"Lead Arranger" means Bank of America Securities L.L.C.
"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.
"Lenders" mean, on any date of determination, the financial
institutions named on Schedule 2.1 (as the same may be amended from time to time
by Administrative Agent to reflect the assignments made in accordance with
Section 13.6(b) of this Agreement), and subject to the terms and conditions of
this Agreement, and their respective successors and assigns (but not any
Participant who is not otherwise a party to this Agreement); provided that,
solely for purposes of any Collateral Documents and Section 12, and "Lenders"
shall also include any Lender or Affiliate of a Lender who is party to a
Financial Hedge with Borrower and their respective successors and assigns (for
purposes hereof, each Lender shall be deemed to have entered into this Agreement
for and on behalf of any Affiliate now or hereafter party to a Financial Hedge
with Borrower).
"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.
<PAGE>
"Loan" means all Advances with respect to the Commitment, evidenced by
the Notes.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
Borrower Security Agreement, the Guarantor Security Agreements, the Pledge
Agreements, any Financial Hedge documents, 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 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.
"Net Total Funded Debt" means, as of any date, the sum of: (a) Debt of
the Companies; less (b) the amount of any Immediately-available cash and Cash
Equivalents held by the Companies in excess of $8,000,000 in the aggregate; plus
(c) the amount of all cash and cash equivalents held by any Company for
distribution to any partners or other owners of equity interests (other than any
Company) in any Partnership.
"Net Total Funded Debt to EBITDA Ratio" means, as of any date, the
ratio of (a) the aggregate amount of Net Total Funded Debt (without deduction
for any minority interests), outstanding as of such date, to (b) Adjusted EBITDA
of the Companies, for the four (4) fiscal quarter period ending on the date of
determination.
"Note" means a revolving credit note executed by Borrower,
substantially in the form of Exhibit C, payable to each Lender in an amount
equal to such Lender's Commitment, as the same may be amended, supplemented,
modified or restated from time to time, evidencing the obligation of Borrower to
repay the Loan, and all renewals, modifications and extensions thereof. "Notes"
means all of the Notes of the Lenders.
"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.
<PAGE>
"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; provided that, all references to the "Obligations" in the Collateral
Documents, and in Section 12, shall, in addition to the foregoing, also include
all present and future indebtedness, liabilities, and obligations (and all
renewals and extensions thereof or any part thereof) now or hereafter owed to
any Lender or any Affiliate of a Lender arising from, by virtue of, or pursuant
to any Financial Hedge entered into by any Company.
"Original Credit Agreement" has the meaning specified in the recitals.
"Partnerships" means the partnerships and limited liability companies
in which Borrower or any Subsidiary now owns or hereafter acquires general
and/or limited partnership interests or membership interests, including, without
limitation, the partnerships and other Persons listed on Schedule 3.
"Partnership" means any one of the Partnerships, and shall also include any non
Wholly-Owned Subsidiary of Prime RVC or Prime Refractive Management, L.L.C.
"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 January 31, 2000, and
(b) with respect to Eurodollar Advances, the last day of the respective Interest
Period therefor, provided that if any Interest Period is greater than three (3)
months, then accrued interest 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 the
Guarantors with respect to which each of the following conditions shall have
been satisfied:
(a) the Acquisition by Borrower or such Guarantor is of a
business, assets, or Person (as applicable, the "Target") which is
engaged in substantially the same lithotripsy business as the
lithotripsy business conducted by Borrower or such Guarantor on the
date hereof, or any other business reasonably related thereto;
(b) as of the closing of such Acquisition, the Acquisition has
been approved by the board of directors or other applicable governing
body of the Target and the Person from which the Target is to be
acquired;
(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 Guarantor 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;
<PAGE>
(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, 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 nonstock consideration for such Acquisition
does not exceed $20,000,000.00 (other than the Acquisition of
additional ownership interests in the Partnerships in which Borrower or
a Guarantor is, as if the date hereof, the general partner or managing
member) and the aggregate cash consideration for all Acquisitions
(other than the Acquisition of additional ownership interests of the
Partnerships in which Borrower or a Guarantor is, as of the date
hereof, the general partner or managing member) during the immediately
preceding twelve (12) month period (including such Acquisition) does
not exceed $40,000,000.00;
(h) not less than 15 Business Days prior to the closing of any
Acquisition, 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;
(i) as of the closing of such Acquisition, Borrower or a
Guarantor shall Control the Target;
(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;
(k) the absence of action, suit, investigation, or proceeding
pending or threatened in any court or before any arbitrator or
governmental authority that affects the Target Company or the proposed
Acquisition, which could reasonably be expected to have a material
adverse effect on the Target Company or the Borrower; and
(l) the Administrative Agent has received a certificate dated
on or immediately prior to the date of Acquisition, 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.
"Permitted Other Business Acquisition" means an acquisition by Borrower
or any of the Guarantors with respect to which each of the following conditions
shall have been satisfied:
(a) the acquisition by Borrower or such Guarantor is of a
business, assets, or Person (as applicable, the "Target") which is
engaged in substantially the same physician practice management,
prostatherapy, or servicing tractor/trailers business as such
businesses are conducted by Borrower or any Company on the date hereof,
or any other business reasonably related thereto;
<PAGE>
(b) as of the closing of such Permitted Other Business
Acquisition, the Permitted Other Business Acquisition has been approved
by the board of directors or other applicable governing body of the
Target and the Person from which the Target is to be acquired;
(c) prior to the closing of such Permitted Other Business
Acquisition, the Target and the Person from which the Target is to be
acquired must be Solvent;
(d) as of the closing of such Permitted Other Business
Acquisition, after giving effect to such Permitted Other Business
Acquisition, Borrower or the Guarantor 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 Permitted Other Business
Acquisition, after giving effect to such Permitted Other Business
Acquisition, no Default shall exist or occur as a result of, and after
giving effect to, such Permitted Other Business Acquisition;
(f) the aggregate purchase price with respect to such
Permitted Other Business 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, pursuant to the Permitted Other
Business Acquisition for the four (4) fiscal quarters ending on the
most recently ended fiscal period prior to the date of such Permitted
Other Business Acquisition;
(g) the aggregate nonstock consideration for all Permitted
Other Business Acquisitions (other than the acquisition of AK
Associates, which has been previously consented to) does not exceed
$5,000,000;
(h) not less than 15 Business Days prior to the closing of any
Permitted Other Business Acquisition, 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;
(i) 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;
(j) the absence of action, suit, investigation, or proceeding
pending or threatened in any court or before any arbitrator or
governmental authority that affects the Target Company or the proposed
Permitted Other Business Acquisition, which could reasonably be
expected to have a material adverse effect on the Target Company or the
Borrower; and
(k) the Administrative Agent has received a certificate dated
on or immediately prior to the date of Permitted Other Business
Acquisition, 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 Other
Business Acquisition and the transactions contemplated thereby, and
setting forth the calculations supporting compliance with the
limitations prescribed herein.
<PAGE>
The loan described in Sections 9.1A(h) and 9.2(h) hereof made by
Borrower shall not be included in the calculation of the aggregate nonstock
consideration for all Permitted Other Business Acquisitions. No repurchase or
redemption of Borrower's capital stock by Borrower or a Guarantor, whether
through issuance and performance of a put agreement, or otherwise shall be a
Permitted Other Business Acquisition.
"Permitted Passive Investment" means an acquisition by Borrower or any
of the Guarantors, in one transaction or in a series of transactions of
partnership, stock, or other interests of a Person ("Equity Interests") which is
not an Acquisition and does not permit Borrower or any Guarantor to Control such
Person, with respect to which each of the following conditions have been met:
(a) the acquisition by Borrower or such Guarantor is of Equity
Interests of a Person (the "Passive Target") which is engaged in
substantially the same lithotripsy business as the lithotripsy business
conducted by Borrower or such Guarantor on the date hereof, or any
other lithotripsy business reasonably related thereto;
(b) as of the closing of such Permitted Passive Investment,
the acquisition has been approved by the board of directors or other
applicable governing body of the Passive Target and the Person from
which the Equity Interests are to be acquired;
(c) prior to the closing of such acquisition, the Passive Target
and the Person from which the Equity Interests are to be acquired must
be Solvent;
(d) as of the closing of such Permitted Passive Investment,
after giving effect to such Permitted Passive Investment, Borrower or
the Guarantor 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 Permitted Passive Investment,
after giving effect to such Permitted Passive Investment, no Default
shall exist or occur as a result of, and after giving effect to, such
Permitted Passive Investment;
(f) the aggregate acquisition price of any Permitted Passive
Investment, together with the original purchase price of all then
existing Permitted Passive Investments of Borrower and its Guarantors
(excluding, however, any prior Permitted Passive Investment which
Borrower or any Guarantor then Controls) as of the date of consummation
of the Permitted Passive Investment, does not exceed the lesser of (i)
twenty percent (20%) of Total Equity or (ii) $50,000,000;
(g) not less than 30 Business Days prior to the closing of any
Permitted Passive Investment, the Administrative Agent shall have
received a certificate setting forth compliance with condition (f), set
forth above;
(h) the absence of action, suit, investigation, or proceeding
pending or threatened in any court or before any arbitrator or
governmental authority that affects the Target Company or the proposed
Permitted Passive Investment, which could reasonably be expected to
have a material adverse effect on the Target Company or the Borrower;
and
<PAGE>
(i) the Administrative Agent has received a certificate dated
on or immediately prior to the date of the Permitted Passive
Investment, 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 Passive
Investment and the transactions contemplated thereby, and setting forth
the calculations supporting compliance with the limitations prescribed
herein.
No repurchase or redemption of Borrower's capital stock by Borrower or a
Guarantor, whether through issuance and performance of a put agreement, or
otherwise, shall be a Permitted Passive Investment.
"Permitted Refractive Acquisition" means an Acquisition by
Borrower, any Guarantor, Prime Refractive Management, L.L.C., or Prime
Refractive, L.L.C., with respect to which each of the following
conditions shall have been satisfied:
(a) the acquisition by Borrower, Guarantors, Prime Refractive
Management, L.L.C., or Prime Refractive, L.L.C. is of a Target Company
which is engaged in the businesses of correcting refractive error of
the eye, or any other business reasonably related thereto;
(b) as of the closing of such Permitted Refractive
Acquisition, the Permitted Refractive Acquisition has been approved by
the board of directors or other applicable governing body of the Target
Company and the Person from which the Target Company is to be acquired;
(c) prior to or at closing, the closing of such Permitted
Refractive Acquisition, the Target Company and the Person from which
the Target Company is to be acquired must be Solvent;
(d) as of the closing of such Permitted Refractive Acquisition,
after giving effect to such Permitted Refractive Acquisition,
Borrower, the Guarantor that is the acquiring party, Prime Refractive
Management, L.L.C., or Prime Refractive L.L.C., as the case may be,
must be Solvent and the Companies, on a consolidated basis, must be
Solvent;
(e) as of the closing of such Permitted Refractive
Acquisition, after giving effect to such Permitted Refractive
Acquisition, no Default shall exist or occur as a result of, and after
giving effect to, such Permitted Refractive Acquisition;
(f) the aggregate purchase price with respect to such
Permitted Refractive Acquisition does not exceed six (6) times EBITDA
of the Target Company, subject to adjustments acceptable to the
Administrative Agent where less than all of the business, assets or
stock of the Target Company is acquired, pursuant to the Permitted
Refractive Acquisition for the four (4) fiscal quarters ending on the
most recently ended fiscal period prior to the date of such Permitted
Refractive Acquisition;
(g) the aggregate nonstock consideration for any Permitted
Refractive Acquisition (including, without limitation, any financing of
interests acquired by LASIK Investors, L.L.C., and Consolidated
Earn-Out Indebtedness reasonably estimated by Administrative Agent and
Borrower) does not exceed $10,000,000.00 and the aggregate nonstock
consideration for all Permitted Refractive Acquisitions in the
aggregate financed with Advances hereunder, advances under the
Advancing Term Loan Facility, and Consolidated Earn-Out Indebtedness,
does not exceed $65,000,000;
<PAGE>
(h) not less than 15 Business Days prior to the closing of any
Permitted Refractive Acquisition, 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;
(i) if the Target Company is to be an After-Acquired Subsidiary,
then Borrower shall have complied with the terms and conditions set
forth in Section 8.13;
(j) review by a third party acceptable to the Administrative
Agent of Borrower's due diligence process and procedures as related to
Permitted Refractive Acquisitions, acceptable to Administrative Agent
and Lenders;
(k) with respect to any Permitted Refractive Acquisition where
the aggregate nonstock consideration is $10,000,000 or less (including,
without limitation, any financing of interests acquired by LASIK
Investors, L.L.C. and Consolidated Earn-Out Indebtedness reasonably
estimated by Administrative Agent and Borrower), the Target Company
must, at a minimum, provide company prepared financial statements for
the immediately preceding four fiscal quarters prepared in accordance
with the due diligence procedures approved in (j) above;
(l) the Target Company or other business segment being acquired
must have positive pro forma trailing twelve month EBITDA;
(m) the capital and ownership structure of the Target Company
(after giving effect to the Permitted Refractive Acquisition) shall be
satisfactory to the Administrative Agent;
(n) the absence of action, suit, investigation, or proceeding
pending or threatened in any court or before any arbitrator or
governmental authority that affects the Target Company or the proposed
Permitted Refractive Acquisition, which could reasonably be expected to
have a material adverse effect on the Target Company or the Borrower;
(o) receipt of all governmental, shareholder, and third party
consents and approvals necessary or desirable in connection with the
acquisition of the Target Company and all transactions contemplated
thereby;
(p) the Administrative Agent has received a certificate dated
on or immediately prior to the date of Permitted Refractive
Acquisition, 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
Refractive Acquisition and the transactions contemplated thereby, and
setting forth the calculations supporting compliance with the
limitations prescribed herein; and
(q) Borrower or one of its Subsidiaries must own at least 51%
of the equity or membership interests in and Control the Target Company
upon completion of the Permitted Refractive Acquisition.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, Governmental Authority, or
other entity.
<PAGE>
"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.
"Pledge Agreements" means (a) the Pledge Agreements, each dated as of
April 26, 1996, executed by Borrower and each Subsidiary of Borrower that owned
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 (b) the Consent,
Confirmation and Ratification of Pledge and Security Agreements, dated as of
March 31, 1997, (c) the Second Consent, Confirmation and Ratification of Pledge
and Security Agreements dated as April 20, 1998, and (d) the Pledge and Security
Agreements dated as of the date hereof, and shall also include any other pledge
agreement heretofore or hereafter from time to time executed by any Person and
delivered to Administrative Agent for the benefit of Lenders, as amended,
restated, renewed, and substituted from time to time. "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.
"PMOI" means Prime Medical Operating, Inc., a Delaware corporation, and its
permitted successors and assigns.
"Prime RVC" means Prime RVC, Inc., a Delaware corporation, and its
permitted successors and assigns.
"Principal Office" means the office of the Administrative Agent,
presently located at 901 Main Street, 7th Floor, Dallas, Texas 75202.
"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.
<PAGE>
"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 the Commitments (other than of any Defaulting Lenders), or if the
Commitments shall have been terminated, then of the aggregate unpaid principal
amount of the Notes (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 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.
"RICO" means the Racketeer Influenced and Corrupt Organization Act of
1970, as amended from time to time.
"Senior Net Debt" means, as of any date, all Net Total Funded Debt of
the Companies which is not Subordinated Debt.
"Senior Net Funded Debt to EBITDA Ratio" means, as of any date, the
ratio of (a) the aggregate amount of Senior Net Debt of the Companies (without
deduction for any minority interests), as of such date, to (b) Adjusted EBITDA
of the Companies, for the four (4) fiscal quarter period ending on the date of
determination (including on a pro forma basis any Permitted Acquisition,
Permitted Other Business Acquisition or Permitted Refractive Acquisition).
"Senior Subordinated Indenture" means that certain Trust Indenture
dated as of March 24, 1998 between Borrower and State Street Bank and Trust
Company, as Trustee, and any trust indenture entered into in connection with the
Exchange Notes.
"Senior Subordinated Notes" means those certain $100,000,000 aggregate
principal amount Senior Subordinated Notes issued by Borrower pursuant to the
Senior Subordinated Indenture, due April 1, 2008, and the Exchange Notes, if
issued.
"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.
<PAGE>
"Subordinated Debt" means the Senior Subordinated Notes.
"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 or membership
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.
"Target Company" means any Person that has been or may be acquired
pursuant to an Acquisition permitted hereunder.
"Termination Date" means 1:00 p.m. Dallas, Texas time on April 21,
2003, or such earlier date and time on which the Commitments terminate as
provided in this Agreement.
"Total Equity" means, at any particular time, the sum of: (a)
Consolidated Net Worth, plus (b) outstanding principal amount of Subordinated
Debt.
"Total Net Funded Debt to EBITDA Ratio" means, as of any date, the
ratio of (a) the aggregate outstanding amount of Net Funded Debt (without
deduction for any minority interests), as of such date, to (b) Adjusted EBITDA
of the Companies for the four (4) fiscal quarter period ending on the date of
determination (including on a pro forma basis any Permitted Acquisition, any
Permitted Other Business Acquisition, or Permitted Refractive Acquisition).
"Type" means any type of Advance (i.e., Alternate Base Rate Advance or
Eurodollar Advance).
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas 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.
<PAGE>
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 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 Commitments
by means of Eurodollar Advances or Alternate Base Rate Advances.
(b) Optional Reduction and Termination of Commitments. Borrower shall
have the right to terminate in whole or reduce in part the unused portion of the
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 Notes exceeds the Commitments (after giving effect to such notice)
plus accrued and unpaid interest on the principal amount so prepaid. No portion
of the Commitments may be reinstated after it has been terminated or reduced.
Section 2.2 Notes. The obligation of Borrower to repay each Lender for
Advances made by such Lender pursuant to such Lender's Commitment, and all
interest thereon, shall be evidenced by a 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 Commitment. Upon receipt of an affidavit of an officer
of any Lender to the loss, theft, destruction or mutilation of any Note, and, in
the case of any such loss, theft, destruction or mutilation, upon cancellation
of such Note, Borrower will issue, in lieu thereof, a replacement note in the
same principal amount thereof and otherwise of like tenor.
Section 2.3 Repayment of Advances. Borrower shall repay the outstanding
principal amount of the Notes on the Termination Date.
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 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.
<PAGE>
Section 2.5 Borrowing Procedure.
(a) Loan. Borrower shall give the Administrative Agent notice by means
of an Advance Request Form of each requested Advance under the Commitments
hereunder at least three (3) 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 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
Commitments. Any telephonic request for an Advance under the Commitments by
Borrower shall be promptly confirmed by submission of a properly completed
Advance Request Form to the Administrative Agent. Each Advance under the
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 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. All notices under this Section 2.5(a) shall be irrevocable and
shall be given not later than 11:00 a.m. Dallas, Texas time on the day which is
not less than the number of Business Days specified above for such notice.
(b) Generally. The Administrative Agent shall promptly notify each
Lender of the contents of each Advance Request Form. Not later than 11:00 a.m.
Dallas, Texas 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.
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
irrevocable and must be given by Borrower not later than 11:00 a.m. Dallas,
Texas time at least three (3) 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.
(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. Dallas, Texas time at least three
(3) 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.
<PAGE>
Section 2.7 Use of Proceeds. The proceeds of Advances under the
Commitments shall be used by Borrower (i) for working capital, capital
expenditures, and other lawful corporate purposes, (ii) to finance Permitted
Acquisitions, Permitted Other Business Acquisitions, Permitted Passive
Investments, and Permitted Refractive Acquisitions, (iii) to the extent
permitted by this Agreement, to repurchase outstanding capital stock of
Borrower, (iv) 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), and (iii) of this Section 2.7, and
(v) to finance advances by PMOI or another Guarantor to LASIK Investors, L.L.C.
for the acquisition of certain interests in certain Permitted Refractive
Acquisitions.
Section 2.8 Fees.
(a) Commitment Fees. Borrower hereby agrees to pay to the
Administrative Agent, for the ratable account of each Lender having a
Commitment, a commitment fee on the daily average unused amount of such Lender's
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 360-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) Agents' Fees. 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.
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. Dallas, Texas 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.
<PAGE>
Section 3.2 Optional Prepayment. Borrower may, upon at least three (3)
Business Days' prior notice to the Administrative Agent, prepay the Notes 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. Dallas,
Texas time on the day which is not less than the number of Business Days
specified above for such notice. Optional prepayments shall be applied as set
forth in Section 3.9. Optional prepayments shall not reduce the Commitments
unless Borrower so elects pursuant to Section 2.1(b).
Section 3.3 Mandatory Prepayments.
(a) Asset Sales. Immediately upon the receipt of the proceeds
thereof, Borrower shall prepay the 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.
(b) Sale or Issuance of Capital Stock or Debt. Immediately upon
the receipt of the proceeds thereof, Borrower shall prepay the Notes
in an amount equal to 100 percent (100%) of any Issuance Proceeds.
(c) Application of Mandatory Prepayments. Any such mandatory
prepayments of the Notes shall be applied to the 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
Commitments.
Section 3.4 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) the making and Continuation of Advances under the Commitment shall
be made pro rata among the Lenders according to the amounts of their respective
Commitments; (b) each termination or reduction of the Commitments under Section
2.1(b) or otherwise shall be applied to the Commitments of the Lenders pro rata,
according to their respective unused Commitments; and (c) 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.
<PAGE>
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 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 all Advances and all
other amounts payable by Borrower hereunder shall be computed on the basis of a
year of 360 days, and actual days elapsed.
Section 3.9 Order of Application.
(a) No Default. Prior to the occurrence of an Event of Default any
payment (whether voluntary or mandatory) of the Notes shall be applied to the
Notes on a pro rata basis based upon the outstanding principal balances of the
Notes as of the date of payment.
<PAGE>
(b) After Default. After the occurrence and during the continuance of
an Event of Default, any payment or proceeds of Collateral 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 Notes on a pro
rata basis, based upon the outstanding principal balances of the Notes as of the
date of payment; (iii) to the principal of the Notes and amounts due and owing
under any Financial Hedge on a pro rata basis, based upon the outstanding
principal balances of the Notes or obligation due and owing under any Financial
Hedge as of the date of payment; and (iv) to all other Obligations.
(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.
<PAGE>
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 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.
<PAGE>
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.
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.
<PAGE>
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 Security Agreement. Borrower shall execute and deliver to the
Administrative Agent, for the benefit of the Lenders, the Consent, Confirmation
and Ratification of the Borrower Security Agreement.
(b) Guarantor Security Agreement. The existing Guarantors shall execute
and deliver to the Administrative Agent, for the benefit of the Lenders, the
Consent, Confirmation and Ratification of the Guarantor Security Agreements, and
Prime RVC shall execute and deliver to the Administrative Agent, for the benefit
of the Lenders, a Guarantor Security Agreement.
(c) Pledge Agreement. Pledgors shall execute and deliver to the
Administrative Agent, for the benefit of the Lenders, the Consent, Confirmation
and Ratification of the Pledge Agreements.
(d) Further Assurances. 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.
<PAGE>
(e) Description of Collateral. Collateral includes, without limitation, the
following assets of Borrower and Guarantors:
(i) All present and future accounts, contract rights, general
intangibles, chattel paper, documents, instruments, notes and other
debt instruments, and any collateral therefor, inventory, equipment,
and other goods, wherever located, now owned or hereafter acquired.
(ii) All present and future issued and outstanding shares of
capital stock of, or partnership and membership interests, now owned or
hereafter acquired by Borrower or any Guarantor, including, without
limitation, all capital stock of, or partnership and membership
interests in, the Guarantors.
(iii) To the extent allowed by the respective partnership
agreements, certain partnership interests or economic interests in
partnership interests owned by Borrower and Guarantors.
(iv) All present and future automobiles, trucks, truck
tractors, trailers, semi-trailers, or other motor vehicles or rolling
stock now owned or hereafter acquired by Borrower or any Guarantor
(collectively, the "Vehicles").
(v) All present and future rights, awards, and judgments to
which Borrower or any Guarantor is entitled under any litigation now
existing or hereafter arising.
(vi) All present and future rights, titles, and interests of
Borrower or any Guarantor in and to all patents, patent applications,
patent right, service marks, trademarks, tradenames, trade secrets,
intellectual property, registrations, goodwill, copyrights, franchises,
licenses, permits, proprietary information, customer lists, designs,
and inventions.
(vii) All present and future books, records, data, plans,
manuals, computer software and computer programs of Borrower and
Guarantors.
(viii) All proceeds and products of the Collateral heretofore
described.
Section 5.2 Future Liens. Promptly, and in any event within twenty-one
(21) days after (a) the acquisition of any assets (real, personal, tangible, or
intangible) by Borrower or any Guarantor or (b) the removal, termination, or
expiration of any prohibition upon the granting of a lien in any asset (real,
personal, tangible, or intangible) of any Borrower or any Guarantor (including,
without limitation, the granting of liens in all general and limited partnership
interests in which Borrower and Guarantors own 100% of the partnership
interests) (the "Additional Assets"), Borrower shall (or shall cause such other
Guarantor to) execute and deliver to Administrative Agent all further
instruments and documents (including, without limitation, certificates and
instruments representing shares of stock or evidencing Debt and any realty
appraisals as Administrative Agent may require with respect to any such
Additional Assets), and shall take all such further action that may be necessary
or desirable, or that Administrative Agent may reasonably request, to grant,
perfect, and protect liens in favor of Administrative Agent for the benefit of
Lenders in such Additional Assets, as security for the Obligations; it being
expressly understood that the granting of such additional security for the
Obligations is a material inducement to the execution and delivery of this
Agreement by each Lender. Upon satisfying the terms and conditions hereof, such
Additional Assets shall be included in the "Collateral" for all purposes under
the Loan Documents, and all references to the "Collateral" in the Loan Documents
shall include the Additional Assets.
<PAGE>
Section 5.3 Release of Collateral. Upon any sale, transfer, or
disposition of Collateral which is expressly permitted pursuant to the Loan
Documents (or is otherwise authorized by Required Lenders or Lenders, as the
case may be), and upon ten (10) Business Days' prior written request by Borrower
(which request must be accompanied by true and correct copies of (a) all
documents of transfer or disposition, including any contract of sale, (b) a
preliminary closing statement and instructions to the title company, if any, and
(c) all requested release instruments, Administrative Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of liens granted to Administrative Agent for
the benefit of lenders pursuant hereto in such Collateral; provided that, (x) no
such release of Lien shall be granted if any Default or Event of Default has
occurred and is continuing, including, without limitation, the failure to make
certain mandatory prepayments in accordance with Section 3.3(a) in conjunction
with the sale and transfer of such Collateral; (y) Administrative Agent shall
not be required to execute any such document on terms which, in Administrative
Agent's opinion, would expose Administrative Agent to liability or create any
obligation or entail any consequence, other than the release of such Liens
without recourse or warranty; and (z) such release shall not in any manner
discharge, affect, or impair the Obligations, or liens upon or obligations of
Borrower or any Guarantor in respect of all interests retained by the Borrower
and Guarantors, including, without limitation, the proceeds of any sale, all of
which shall continue to constitute Collateral.
Section 5.4 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.
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 Administrative
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 Administrative 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;
<PAGE>
(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 Guarantors certified by the applicable Secretary of State;
(d) Bylaws. The bylaws of Borrower and Litho certified by the Secretary or
an Assistant Secretary of each such Company;
(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 Borrower Security Agreement executed
by Borrower;
(h) Guaranties. The Guaranty Agreement executed by each Guarantor;
(i) Guarantor Security Agreements. The Guarantor Security Agreements
executed by the Guarantors;
(j) Pledge Agreements. The Pledge and Security Agreements executed by the
Pledgors;
(k) Financing Statements. Uniform Commercial Code financing statements or
amendments executed by Borrower and each Guarantor and covering the Collateral,
as requested by Administrative Agent;
(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 D hereto, properly completed and signed by the Chief Executive
or Chief Financial Officer or Vice President-Finance of Borrower and the
Guarantors;
<PAGE>
(q) Opinion of Counsel. Favorable opinions as to the matters set forth in
Exhibit E hereto of Akin, Gump, Strauss, Hauer & Feld, L.L.P., Texas legal
counsel to Borrower and the Guarantors;
(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;
(s) Fees. Borrower shall have paid to the Agents, Lenders, and Lead
Arranger the fees owed by Borrower to the Agents, Lenders, and Lead Arranger
pursuant to the letter agreements between Borrower and Administrative Agent;
(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; and
(u) No Material Adverse Change. No material adverse change shall have
occurred since September 30, 1999 in the business, assets, operations,
conditions (financial or otherwise) or prospects of the Companies or in the
facts and information delivered to Lenders on or prior to the date of the
initial Advance.
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;
(d) Availability. After giving effect to requested Advances, the remaining
availability under the Commitment shall be no less than the then existing
Consolidated Earn-Out Indebtedness, as evidenced by the calculations set forth
in the Advance Request Form; and
(e) Permitted Refractive Acquisitions. In connection with any Advance
the proceeds of which will be used to finance a Permitted Refractive Acquisition
by Prime Refractive, L.L.C., Administrative Agent shall receive the following,
each in form and substance acceptable to Administrative Agent:
(i) A subordinated promissory note substantially in the form of
Exhibit L hereto made by Prime Refractive Management, L.L.C. payable
to the order of Borrower, PMOI or Prime RVC, together with the
guaranty thereof by Prime Refractive, L.L.C., and the pledge of assets
(including any interests in Subsidiaries and Partnerships) of Prime
Refractive Management, L.L.C. and Prime Refractive, L.L.C., and the
interest of LASIK Investors, L.L.C. in Prime Refractive, L.L.C., all
duly perfected and assigned to Administrative Agent;
<PAGE>
(ii) A subordination agreement substantially in the form of
Exhibit M hereto, between the payee of the subordinated note, the maker
of the subordinated note, Administrative Agent, and the administrative
agent under the Advancing Term Facility; and
(iii) Such endorsements, financing statements, corporate
authorizations and other documents reasonably requested by
Administrative Agent.
(f) 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 Excepted
Subsidiaries and 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 (other than the Excepted
Subsidiaries) 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 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, 1998, and unaudited
consolidated financial statements of Borrower for the nine (9) month period
ended September 30, 1999. 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.
<PAGE>
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 (other than
the Excepted Subsidiaries) 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 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.
<PAGE>
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 (other than the Excepted
Subsidiaries) 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
other than certain state tax returns required to be filed on or before the date
hereof. 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, except
relating to the Excepted Subsidiaries.
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 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
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.
<PAGE>
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 for the Senior Subordinated Indenture,
the Senior Subordinated Notes, and 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 for the Excepted Subsidiaries and 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 for the Excepted Subsidiaries and 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
Authorizations have been duly 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 for the
Excepted Subsidiaries and as set forth on Schedule 7.16, each of 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.
<PAGE>
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.
Section 7.20 Year 2000 Compliance. Borrower represents that it is aware
of the possible impact of the year 2000 problem (that is, the risk that computer
applications may not be able to properly perform date-sensitive functions after
December 31, 1999) upon its computer applications and on-going business.
Borrower represents that any corrective action necessary will be taken and that
the year 2000 problem will not result in a material adverse change in the
Companies' business condition (financial or otherwise), operations, properties
or prospects, or ability to repay the Obligations.
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, 1998, a copy of the annual
audit report of the Companies for such fiscal year containing, on a consolidated
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;
<PAGE>
(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 basis, balance sheets and statements of income and retained
earnings, 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 basis, at the date and for the periods indicated therein;
(c) Quarterly Financial Statements. As soon as available, and in any
event within forty-five (45) days after the end of each quarter of each fiscal
year of Borrower, a copy of an unaudited financial report of the Companies as of
the end of such quarter and for the portion of the fiscal year then ended,
containing, on a consolidated 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 basis, at the date and for the periods indicated therein, and
a copy of an unaudited financial report of Prime RVC and its Subsidiaries as of
the end of such quarter beginning with the fiscal quarter ending March 31, 2000
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 or treasurer 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 Prime
RVC and its Subsidiaries, on a consolidated and consolidating basis, at the date
and for the periods indicated therein;
(d) Compliance Certificate. Concurrently with the delivery of each of
the financial statements referred to in Section 8.1(a) and within forty-five
(45) 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, chief financial
officer or treasurer of Borrower, in substantially the form of Exhibit F, (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;
(e) 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;
(f) Business Plan and Budget. As soon as available and in any event by
January 15 of each year, a copy of the annual budget and business plan of
Borrower and its Subsidiaries for such fiscal year, together with details of the
assumptions, if any, underlying such budget and business plan;
(g) 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;
<PAGE>
(h) 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);
(i) 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;
(j) 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;
(k) 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
or to the trustee under the Senior Subordinated Indenture, 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;
(l) 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;
(m) 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 and addresses of each partner or member of
each of the Partnerships and percentage ownership by each Company of each
Partnership;
(n) 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;
(o) Dilution Reports. Promptly upon the occurrence of any Restricted
Transfer (as hereinafter defined), a report setting forth the occurrence of any
Restricted Transfer, including the name of the Partnership, purchasers, purchase
price, and EBITDA for the immediately preceding four fiscal quarters
attributable thereto, and also of the contribution of any Partnership assets to
any other Partnership, including the names of the Partnerships, assets
transferred, value thereof and consideration received;
<PAGE>
(p) 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,
regulations, 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
(q) 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 other than the Excepted 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 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 other than the Excepted 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.
<PAGE>
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
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.
<PAGE>
Section 8.13 After-Acquired Subsidiaries. Concurrently upon the
formation or Acquisition by Borrower or any Guarantor 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:
Section 9.1A 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) The Exchange Notes and guaranties thereof by any Wholly-Owned
Subsidiary;
(d) Debt owed to Borrower or to any Wholly-Owned Subsidiary;
(e) Debt in an aggregate principal amount not to exceed $2,000,000.00
at any time outstanding the proceeds of which are used by Borrower or Litho to
purchase equipment, other than lithotripters, prostatrons, and lasers;
(f) Any Company's obligations as general partner of a Partnership for the
Debt of such Partnership;
(g) Any Company's Guarantee of Debt of any Partnership, if such Company is
a general partner of such Partnership;
(h) Debt not exceeding $1,750,000 in outstanding principal amount incurred
by AK Associates, L.L.C. in connection with the acquisition and improvement of
real estate;
(i) Any Financial Hedge; and
<PAGE>
(j) The Advancing Term Facility and Guarantees thereof.
Section 9.1B Debt of Refractive Entities. The Companies will not incur,
create, assume, or permit to exist Debt (other than the Obligations and Debt
under the Advancing Term Facility) exceeding $6,500,000 in outstanding principal
amount incurred to finance or refinance acquisitions of equipment used in
correcting refractive error of the eye, provided that of such Debt, Prime
Refractive Management, L.L.C., any of its Subsidiaries, or any Partnerships in
which they are a partner may only be liable for $4,000,000 in outstanding
principal amount of such Debt.
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 9.1A(d), (e)
and (k);
(c) Liens in favor of the Administrative Agent, for the benefit of the
Lenders or the counter-party under any Financial Hedge;
(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;
(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;
(h) Lien on real property and improvements of AK Associates, L.L.C.
securing Debt described in Section 9.1A(h) above;
(i) Liens securing the Advancing Term Facility; provided such Liens
granted by Borrower and the Guarantors are subordinated in form and substance
satisfactory to the Administrative Agent to the Liens in favor of the
Administrative Agent; and
(j) Liens securing subordinated Debt owing to PMOI or another
Guarantor, the proceeds of which were used to finance a portion of the purchase
price of a Permitted Refractive Acquisition.
<PAGE>
Section 9.3 Mergers, Etc. Except upon the prior written consent of the
Required Lenders, neither Borrower nor any Guarantor will become a party to a
merger or consolidation, except: (a) any of R.R. Litho, Inc., Ohio Litho, Inc.,
Prime Diagnostic Services, Inc., Prime Diagnostic Corp. of Florida, Prime
Practice Management, Inc., Prime Cardiac Rehabilitation Services, Inc., Prime
Lithotripsy Services, Inc., Alabama Renal Stone Institute, Inc., and Prime
Kidney Stone Treatment, Inc. may merge or consolidate into Prime Medical
Operating, Inc., so long as (w) Prime Medical Operating, Inc. is the surviving
entity, (x) no Default or Event of Default exists or would exist as the result
of such merger or consolidation, (y) no partnership agreement to which any such
Guarantor is a party would be breached by such merger or consolidation, and (z)
Borrower and the applicable Guarantors give Administrative Agent at least 15
Business Days prior written notice of any proposed merger or consolidation and
execute and deliver any Guaranty Agreement, Guarantor Security Agreement, Pledge
Agreement, Uniform Commercial Code financing statements, corporate
documentation, and opinions of counsel as required by the Administrative Agent
to create or continue first priority Liens in favor of the Administrative Agent,
for the benefit of the Lenders, in the assets of the surviving entity to secure
the Obligations, and (b) in connection with any Permitted Acquisition, Permitted
Other Business Acquisition, or Permitted Refractive Acquisition so long as
Borrower or a Guarantor is the surviving entity. Borrower will not, and will not
permit any of its Subsidiaries (other than the Partnerships) to, wind-up,
dissolve or liquidate itself, except as permitted in subsection (a) above.
Except as otherwise permitted by this Agreement, Borrower will not, and will not
permit any of its Subsidiaries 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,
Permitted Other Business Acquisition, Permitted Passive Investment, or Permitted
Refractive Acquisition, (c) Subsidiaries formed or acquired through the BDEC
Acquisition, or the Horizon Acquisition and (d) 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,
whether through issuance and performance of a put agreement, or otherwise, for
an aggregate consideration of no more than $11,993,000 on and after September
30, 1999, provided that upon completion of such purchases or redemptions no
Default or Event of Default would exist or be continuing, and provided further
that the proceeds from the sale of any Stock previously redeemed by Borrower
shall increase the limit hereunder dollar for dollar to the extent such proceeds
have been applied as set forth in Section 3.3(b). Borrower shall not permit to
exist any arrangement, agreement, or corporate governance agreement, which
directly or indirectly prohibits or restricts any Subsidiary from declaring or
paying any dividend or distribution, on account of its capital stock,
partnership, limited liability company, or other ownership interests, provided
that provisions in such agreements providing for the payment of Debt prior to
the payment of any dividend or distribution shall not violate this Section.
Section 9.5 Investments. Borrower will not make, nor permit any of its
Subsidiaries 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 to purchase or own, any stock, bonds, notes, debentures, or other
securities of, any Person, except:
<PAGE>
(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;
(d) The Borrower and Guarantors 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;
(e) Existing Permitted Passive Investments;
(f) Permitted Acquisitions, Permitted Other Business Acquisitions, and
Permitted Passive Investments; provided however, that Permitted Acquisitions,
Permitted Other Business Acquisitions, and Permitted Passive Investments made by
Companies other than the Borrower or a Guarantor shall not in the aggregate for
all such Companies exceed the lesser of: (a) $3,000,000.00; and (ii) 3% of Total
Equity;
(g) Permitted Refractive Acquisitions;
(h) Borrower may make a loan to AK Associates, L.L.C. described in
Section 9.1A(h) and Section 9.2(h) above;
(i) Any Financial Hedge;
(j) the BDEC Acquisition, and the Horizon Acquisition;
(k) the $200,000 working capital line of credit from PMOI or Prime
RVC to Prime Refractive, L.L.C., in form and substance acceptable
to Administrative Agent;
(l) the formation of and, as applicable, contribution of assets to
Prime/BDR Acquisition, L.L.C., Prime/BDEC Acquisition, L.L.C.,
Prime Refractive, L.L.C., and Prime Refractive Management,
L.L.C.;
(m) the aggregate $11,035,000 loans from PMOI to Prime/BDR
Acquisition, L.L.C., the proceeds of which were used to finance
the Horizon Acquisition;
(n) the purchase by PMOI of the interests in Prime/BDR Acquisition,
L.L.C. owned by the other owners of Prime/BDR Acquisition, L.L.C.
on the dates and for the purchase price required by the
Contribution Agreement (the "Contribution Agreement") entered
into among PMOI, Borrower, Prime/BDR Acquisition, L.L.C.,
Prime/BDEC Acquisition, L.L.C., Mark Rosenberg, the sellers of
the refractive surgery eye center assets, and certain other
parties; and
<PAGE>
(o) loans by PMOI or any other Guarantor to LASIK Investors,
L.L.C. required by the Contribution Agreement in effect on the
date hereof, so long as such loans are secured by a first
priority Lien in the interests being acquired and
Administrative Agent on behalf of the Lenders receives a
perfected, first priority lien in such loan and the Collateral
therefor.
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 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. No Company shall
make any loan, advance, investment, or transfer any assets to any Excepted
Subsidiary, so long as such Excepted Subsidiary is not in good standing where
incorporated.
<PAGE>
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 $1,000,000.00 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, (d)
dispositions of any tangible assets that are worn or obsolete, (e) contributions
of assets to Prime/BDEC Acquisition, L.L.C. as contemplated pursuant to the BDEC
Acquisition; (f) the sale by PMOI of its ownership interests in Prime/BDEC
Acquisition, L.L.C. (or all of Prime/BDEC Acquisition, L.L.C.'s assets) on the
dates and for the purchase price required by the Contribution Agreement,
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, and (g)
transfers by Borrower or by any Subsidiary of interests in Partnerships, so long
as the aggregate EBITDA Transfer for all Restricted Transfers does not exceed
the lesser of : (a) ten percent (10%) of Borrower's EBITDA for the most recently
ended four fiscal quarters, and (b) $6,500,000 and included within such amount,
the aggregate EBITDA Transfer for all Restricted LASIK Transfers does not exceed
the lesser of: (a) ten percent (10%) of the EBITDA of Prime RVC, and (b)
$2,000,000. "EBITDA Transfer" with respect to any Partnership interests in any
Partnership transferred by Borrower or any Subsidiary shall equal the EBITDA
generated by such Partnership interests for the last four fiscal quarters prior
to the date of such transfer of each such Partnership interest. A Restricted
Transfer shall be any transfer or series of related transfers of Partnership
interests in any one Partnership by Borrower or any Subsidiary in any 90 day
period, in which the EBITDA Transfer equals or exceeds $250,000. A Restricted
LASIK Transfer shall be any transfer or series of related transfers of
Partnership interests by Prime RVC or any of its Subsidiaries in which the
EBITDA Transfer equals or exceeds $250,000. In the case of any transfers
pursuant to paragraph (g), after giving effect to such transfers, a Company must
Control such Partnership. Administrative Agent is authorized to release any
liens on such Partnership interests transferred pursuant to this Section 9.8, as
further set forth in Section 5.3.
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 $500,000.00 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, or redeem
the Senior Subordinated Notes other than a redemption of a portion of the Senior
Subordinated Notes pursuant to Section 3.07 of the Senior Subordinated
Indenture, so long as after giving effect thereto, no Default or Event of
Default would exist.
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 or
businesses which are reasonably related thereto; 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 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, regulations, or articles 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.
Section 9.15 Financial Hedges.
(a) To the extent any Lender or its Affiliate issues a Financial Hedge
to any Company, such Lender or its Affiliate is afforded the benefits of (and
Borrower [or any Company by execution of Collateral Documents] hereby confirms a
grant of) Liens in and to the Collateral as evidenced by the Collateral
Documents to the extent of such Lender's (or Affiliate thereof's) credit
exposure under such Financial Hedge; such Lien is pari passu with that of
Administrative Agent on behalf of the Lenders.
<PAGE>
(b) Financial Hedges held by any Company permitted by the Loan
Documents, shall be subject to the following: (i) each such Lender or other
institution issuing a Financial Hedge shall calculate its credit exposure in a
reasonable and customary manner; (ii) all documentation for such Financial Hedge
shall conform to ISDA standards and must be acceptable to Administrative Agent
with respect to intercreditor issues; (iii) if issued by any Lender or any
Affiliate of a Lender to Borrower, the credit exposure under such Financial
Hedge shall be secured by Liens in and to the Collateral as evidenced by the
Collateral Documents on a pari passu basis with the Liens of Administrative
Agent (held for the benefit of Lenders), and such Lender or Affiliate issuing a
Financial Hedge shall, by acceptance of the benefits of such Liens in the
Collateral agree to the provisions of Section 12.6; and (iv) such Financial
Hedge shall be incurred in the ordinary course of business and consistent with
prior business practices of the Companies and not for speculative purposes.
Section 9.16 Control of Prime Refractive, L.L.C. Borrower or one of its
Wholly-Owned Subsidiaries must own at least 51% of the membership interests in
and Control Prime Refractive, L.L.C.
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 Net Funded Debt to EBITDA. Borrower will not permit
the Total Net Funded 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, 1998 through December 31, 2000 3.50 to 1.0
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
January 1, 2002 and thereafter 3.00 to 1.0
================================================= ==============================
Section 10.2 Senior Net Funded Debt To EBITDA Ratio. Borrower will not
permit the Senior Net Funded Debt to EBITDA Ratio as of the last day of each
fiscal quarter of Borrower to exceed the ratio set forth opposite such dates
below:
================================================= ==============================
Period Ratio
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
January 1, 1998 through December 31, 2000 2.50 to 1.0
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
January 1, 2002 and thereafter 2.00 to 1.0
================================================= ==============================
Section 10.3 Debt Service Coverage Ratio. Borrower will not permit the
Debt Service Coverage Ratio as of the last day of each fiscal quarter of
Borrower to be less than the ratio set forth opposite such dates below:
<PAGE>
================================================= ==============================
Period Ratio
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
January 1, 1998 through December 31, 2000 1.50 to 1.0
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------
January 1, 2002 and thereafter 1.75 to 1.0
================================================= ==============================
Section 10.4 Consolidated Net Worth. Borrower shall not permit, as of
the last day of each fiscal quarter of Borrower, its Consolidated Net Worth to
be less than $86,005,000, such amount to be increased beginning with the fiscal
quarter ending December 31, 1999, and on the last day of each successive fiscal
quarter of Borrower by an amount equal to one hundred percent (100%) of the
increase in net worth arising from any Acquisition or equity issuance during
such fiscal quarter, (b) increased on December 31, 1999 and on the last day of
each successive fiscal quarter of Borrower, by an amount equal to seventy-five
percent (75%) of positive Consolidated Net Income for such fiscal quarter; and
(c) decreased on any date after September 30, 1999 by the amount of capital
stock of Borrower repurchased or retired by Borrower or any Subsidiary, not
exceeding $11,993,000 in the aggregate.
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 to 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 Party shall fail to perform, observe, or comply with any covenant,
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).
<PAGE>
(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 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
either such involuntary proceeding shall remain undismissed and unstayed for a
period of forty-five (45) days or an order for relief is entered.
(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 Five Hundred Thousand and 00/100 Dollars
($500,000.00) against any of its assets or properties.
(h) A final judgment or judgments for the payment of money in excess of
Five Hundred Thousand and 00/100 Dollars ($500,000.00) 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 the Senior Subordinated Notes or on any other Debt (including, without
limitation, the Advancing Term Facility) in an aggregate principal amount of
Five Hundred Thousand and 00/100 Dollars ($500,000.00) or more (other than the
Obligations), or the maturity of the Senior Subordinated Notes or any such Debt
shall have been accelerated, or the Senior Subordinated Notes (except in
connection with the exchange thereof for the Exchange Notes) 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 the Senior
Subordinated Notes or 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.
<PAGE>
(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, 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 Five Hundred Thousand and 00/100 Dollars
($500,000.00).
(l) Any Change in Control shall occur.
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 State of Texas 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 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.
<PAGE>
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 Bank of America to act as their Administrative
Agent hereunder and under each of the other Loan Documents. Bank of America
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 Borrower Security
Agreement, the Guarantor Security Agreements, the Pledge Agreements,
and any other security documents as the secured party; and
(i) To take such other actions as may be requested by the
Required Lenders.
<PAGE>
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
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, Bank of
America 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 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.
<PAGE>
Section 12.4 Indemnification. THE LENDERS HEREBY AGREE TO INDEMNIFY THE
AGENTS FROM AND HOLD THE AGENTS 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 ANY 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
ANY AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS INCLUDING ANY PORTION
OF THE FOREGOING TO THE EXTENT CAUSED BY THE ANY 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 ANY AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION OF
THE LENDERS THAT THE AGENTS 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
AGENTS. WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION, EACH LENDER AGREES
TO REIMBURSE EACH 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 AGENTS 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 SUCH 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 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.
<PAGE>
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, 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.
<PAGE>
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, including any work-outs, amendments to any Loan
Documents, or negotiations related thereto, and the enforcement of this
Agreement or any other Loan Document, including, without limitation, the fees
and expenses of legal counsel and professional advisors 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 AS TO ANY AGENT OR LENDER SHALL
EXCLUDE ANY LOSS, LIABILITY, OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM,
DEFICIENCY OR EXPENSE ARISING BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH AGENT OR LENDER.
<PAGE>
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.
<PAGE>
(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
$3,500.00. 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). The provisions of Article IV and Section 13.2
shall continue with respect to such Assigning Lender.
(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.
<PAGE>
(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 B, (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 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 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 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.
<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. Regardless of any provision
contained in any Loan Document, neither Administrative Agent nor any Lender
shall ever be entitled to contract for, charge, take, reserve, receive, or
apply, as interest on all or any part of the Obligations, any amount in excess
of the Maximum Rate, and, if Lenders ever do so, then such excess shall be
deemed a partial prepayment of principal and treated hereunder as such and any
remaining excess shall be refunded to Borrower. In determining if the interest
paid or payable exceeds the Maximum Rate, Borrower and Lenders shall, to the
maximum extent permitted under applicable Law, (a) treat all Advances as but a
single extension of credit (and Lenders and Borrower agree that such is the case
and that provision herein for multiple Advances is for convenience only), (b)
characterize any nonprincipal payment as an expense, fee, or premium rather than
as interest, (c) exclude voluntary prepayments and the effects thereof, and (d)
amortize, prorate, allocate, and spread the total amount of interest throughout
the entire contemplated term of the Obligations. However, if the Obligations are
paid and performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of existence thereof
exceeds the Maximum Amount, Lenders shall refund such excess, and, in such
event, Lenders shall not, to the extent permitted by Law, be subject to any
penalties provided by any laws for contracting for, charging, taking, reserving,
or receiving interest in excess of the Maximum Amount. The "Maximum Rate" or the
"Maximum Amount," mean the "weekly ceiling" from time to time in effect under
Texas Finance Code ss. 303.305, as amended.
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.
<PAGE>
Section 13.12 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.
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 each Lender (each, a "Lending Party") agrees to keep
confidential any Confidential Information; provided that nothing herein shall
prevent any Lending Party from disclosing such information (a) to any other
Lending Party or any Affiliate of any Lending Party, or any officer, director,
employee, agent, or advisor of any Lending Party or any Affiliate of any Lending
Party, (b) to any other Person if reasonably incidental to the administration of
the credit facility provided herein, (c) as required by any law, rule, or
regulation, (d) upon the order of any court or administrative agency, (e) upon
the request or demand of any regulatory agency or authority, (f) in connection
with any litigation to which such Lending Party may be a party, (g) to the
extent necessary in connection with the exercise of any remedy under this
Agreement or any other Loan Document, and (h) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or Assignee. Furthermore, and notwithstanding the
foregoing, no Lending Party shall provide any Confidential Information to any
officer, director, employee, agent or advisor of any Affiliate of a Lending
Party if such officer, director, employee, agent or advisor's position involves
the ability to transact trades in, or solicit or accept orders for the purchase
or sale of, the common stock of Borrower.
(b) The Lending Parties are aware 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.
<PAGE>
(c) The Companies and the Lending Parties agree that monetary damages
would not be a sufficient remedy for any breach of this Section 13.18 by the
Lending Parties 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.
(d) The restrictions and obligations of this Section 13.18 shall
survive the repayment of the Obligations and shall continue to bind the Lending
Parties.
Section 13.19 Restatement of Original Credit Agreement. The parties
hereto agree that, after all conditions precedent set forth in Section 6.1 have
been satisfied or waived: (a) the Obligations (as defined herein) represent,
among other things, the amendment, extension, and modification of the
"Obligations" (as defined in the Original Credit Agreement); (b) this Agreement
is intended to, and does hereby, restate, consolidate, renew, extend, amend,
modify, supersede, and replace the Original Credit Agreement in its entirety;
(c) the Notes, if any, executed pursuant to this Agreement amend, renew, extend,
modify, replace, substitute for, and supersede in their entirety (but do not
extinguish, the Debt arising under) the promissory notes issued pursuant to the
Original Credit Agreement, which existing promissory notes shall be returned to
Administrative Agent promptly after the Closing Date, marked "cancelled and
replaced," and, thereafter, delivered by Administrative Agent to Borrower; and
(d) the entering into and performance of their respective obligations under this
Agreement and the transactions evidenced hereby do not constitute a novation.
Section 13.20 Assignments and Assumptions Among Lenders. The Lenders
hereby agree among themselves (and Borrower and Guarantors hereby consent to
such agreement) that, concurrently with the execution hereof, there shall be
deemed to have occurred assignments and assumptions with respect to the
Obligations, liens, rights, and obligations under this Agreement and the other
Loan Documents (including, without limitation, the Commitments) such that, after
giving effect to such assignments and assumptions, the Lender's Commitments are
as stated on Schedule 1, and the Lenders hereby make such assignments and
assumptions.
Section 13.21 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.
<PAGE>
Section 13.22 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 State of Texas, Travis
County, or in the United States courts located in the State of Texas, 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 State
of Texas, Dallas County, 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
Travis County, Texas.
Section 13.23 Chapter 346. Borrower agrees that Chapter 346, of the
Texas Finance Code, as amended (which regulates certain revolving credit loan
documents and revolving tri-party accounts) does not apply to the Obligations.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
<PAGE>
Fourth Amended and Restated Loan Agreement
Signature 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/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attention: Treasurer
Fax No.: (512) 328-8510
Telephone No.: (512) 314-4554
<PAGE>
BANK OF AMERICA:
BANK OF AMERICA, N.A.
as Administrative Agent and a Lender
By: /s/ Daniel H. Penkar
Daniel H. Penkar
Senior Vice President
Address for Notices:
515 Congress Avenue, 11th Floor
Post Office Box 908
Austin, Texas 78701-0908
Attention: Wade Morgan
Fax No.: (512) 397-2052
Telephone No.: (512) 397-2241
Lending Office for Base Rate Advances:
515 Congress Avenue, 11th Floor
Post Office Box 908
Austin, TX 78701-0908
Lending Office for Eurodollar Advances:
515 Congress Avenue, 11th Floor
Post Office Box 908
Austin, TX 78701-0908
<PAGE>
BANKBOSTON:
BANKBOSTON, N.A.,
as Documentation Agent, and a Lender
By: /s/ Walter J. Marullo
Walter J. Marullo
Vice President
Address for Notices:
100 Federal Street, MS 01-08-05
P.O. Box 2016
Boston, Massachusetts 02106
Attention: Walter J. Marullo, Vice President
Fax No.: (617) 434-2472
Telephone No.: (617) 434-2308
Lending Office for Base Rate Advances:
100 Federal Street
P. 0. Box 2016
Boston, MA 02106
Lending Office for Eurodollar Advances:
100 Federal Street
P.O. Box 2016
Boston, MA 02106
<PAGE>
BANK ONE, TEXAS, N.A.,
as Lender
By: Edward W. Lick, Jr.
Edward W. Lick, Jr.
Vice President
Address for Notices:
221 West 6th Street, Suite 200
Austin, Texas 78701
Attention: Ed Lick
Fax No.: (512) 479-5720
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
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
as Lender
By: /s/ John Oberle
John Oberle
Vice President
Address for Notices:
1301 Avenue of the Americas
New York, New York 10019-6022
Attention: John Oberle
Fax No.: (212) 261-3440
Telephone No.: (212) 261-7344
Lending Office for Base Rate Advances:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019-6022
Lending Office for Eurodollar Advances:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019-6022
<PAGE>
FLEET NATIONAL BANK,
as Lender
By: /s/ Walter J. Marullo
Walter J. Marullo
Vice President
Address for Notices:
100 Federal Street, MS 01-08-05
P.O. Box 2016
Boston, Massachusetts 02106
Attention: Walter J. Marullo, Vice President
Fax No.: (617) 434-2472
Telephone No.: (617) 434-2308
Lending Office for Base Rate Advances:
Fleet National Bank
One Federal Street
Mail Stop: MA OF D07B
Boston, MA 02110
Lending Office for Eurodollar Advances:
Fleet National Bank
One Federal Street
Mail Stop: MA OF D07B
Boston, MA 02110
<PAGE>
IMPERIAL BANK,
as Lender
By: /s/ M. Metheany
Name: M. Metheany
Title: Vice President
Address for Notices:
226 Airport Parkway
San Jose, California 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
<PAGE>
LASALLE BANK, NATIONAL ASSOCIATION
as Lender
By: /s/ Dana Friedman
Name: Dana Friedman
Title: Lending Officer
Address for Notices:
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Dana Friedman
Fax No.: (312) 904-6457
Telephone No.: (312) 904-6583
Lending Office for Base Rate Advances:
LaSalle Bank, National Association
135 South LaSalle Street
Chicago, IL 60603
Lending Office for Eurodollar Advances:
LaSalle Bank, National Association
135 South LaSalle Street
Chicago, IL 60603
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN -
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH, as Lender
By: /s/ J. David Thomas
J. David Thomas
Vice President
By: /s/ W. Pieter C. Kodde
W. Pieter C. Kodde
Vice President
Address for Notices:
245 Park Avenue
New York, New York 10167
Attention: Corporate Services Department
Fax. No.: (212) 818-0233
Telephone No.: (212) 916-7800
cc: 1201 West Peachtree Street,
Suite 3450
Atlanta, Georgia 30309-3400
Attention: Terrell Boyle
Fax. No.: (404) 877-9150
Telephone No.: (404) 877-9106
Lending Office for Base Rate Advances:
Cooperatieve Centrale Raiffeisen -
Boerenleenbank B.A., "Rabobank
Nederland", New York Branch
245 Park Avenue
New York, NY 10167
Lending Office for Eurodollar Advances:
Cooperatieve Centrale Raiffeisen -
Boerenleenbank B.A., "Rabobank
Nederland", New York Branch
245 Park Avenue
New York, NY 10167
<PAGE>
GUARANTY FEDERAL BANK, F.S.B.
By: /s/ Chris Harkrider
Chris Harkrider
Vice President
Addresses for Notices:
301 Congress Avenue
Suite 300
Austin, TX 78701
Attention: Chris Harkrider
Fax No.: (512) 320-1041
Telephone No.: (512) 320-1205
Lending Office for Base Rate Advances:
Guaranty Federal Bank, F.S.B.
8333 Douglas Avenue
Dallas, TX 75225
Lending Office for Eurodollar Advances:
Guaranty Federal Bank, F.S.B.
8333 Douglas Avenue
Dallas, TX 75225
Pledge and Security Agreement
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the "Agreement") dated as of
January 31, 2000, is by and between OHIO LITHO, INC., a Delaware corporation
("Pledgor"), whose street address is 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746-6550, for the benefit of BANK OF AMERICA, N.A., a national
banking association ("B of A"), whose street address is 901 Main Street, Dallas,
Texas 75202, not in its individual capacity but solely as administrative agent
for itself and each of the other banks or lending institutions (each, a "Lender"
and collectively, the "Lender") which is or may from time to time become a party
to the Loan Agreement (as hereinbelow defined) (in such capacity, together with
its successors in such capacity, the "Administrative Agent").
R E C I T A L S:
A. Prime Medical Services, Inc., a Delaware corporation ("Borrower"), has
entered into that certain Fourth Amended and Restated Loan Agreement dated as of
the date hereof with B of A as Administrative Agent and as a Lender, BankBoston,
N.A., as Documentation Agent and as a Lender, and the other Lenders from time to
time party thereto, as amended, waived, restated, and supplemented from time to
time ("Loan Agreement").
B. Pledgor and certain other guarantors have executed that certain
Guaranty Agreement dated as of the date hereof (as the same may be amended,
supplemented or modified from time to time, the "Guaranty"), pursuant to which
Pledgor has guaranteed to the Agents (as defined in the Loan Agreement) and the
Lenders the full and complete payment and performance of the liabilities,
obligations, and indebtedness of the Borrower to the Agents and the Lenders
under the Loan Documents (as defined in the Loan Agreement).
C. As a condition to entering into the Loan Agreement, Pledgor must execute
and deliver this Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor agrees with the Administrative Agent as follows:
ARTICLE I
DEFINITIONS
(a) Each term used herein and defined in the Loan Agreement shall have
the meaning assigned to it in the Loan Agreement, unless otherwise defined
herein or the context otherwise requires.
(b) In addition, as used herein, the following terms shall, unless
otherwise indicated, have the following meanings:
"Borrower" has the meaning set forth in the recitals.
"Code" shall mean the Uniform Commercial Code as in effect in the State
of Texas.
<PAGE>
Pledge and Security Agreement
3
"Collateral" shall mean the assets and interests of Pledgor identified
in Section 2.1 hereof.
"Event of Default" shall have the meaning assigned to such term in
Section 5.1.
"Guaranty" shall mean that certain Guaranty Agreement dated as of the
date hereof, executed by Pledgor and certain other guarantors for the benefit of
the Agents and the Lenders, guaranteeing the full payment and performance of the
Obligations, as amended, modified, confirmed, and extended from time to time.
"Partnerships" shall mean (a) those partnerships and limited liability
companies listed on Exhibit A attached hereto and incorporated herein by
reference, as such partnerships or limited liability companies exist or may
hereinafter be restated, amended or restructured, (b) any partnership, joint
venture, or limited liability company in which Pledgor shall, at any time,
become a limited or general partner, venturer, or member, or (c) any
partnership, joint venture or corporation formed as a result of the restructure,
reorganization or amendment of the Partnerships.
"Partnership Agreements" shall mean (a) those agreements listed on
Exhibit B attached hereto and incorporated herein by reference (together with
any modifications, amendments or restatements thereof), and (b) partnership
agreements, joint venture agreements, or organizational agreements for any of
the partnerships, joint ventures, or limited liability companies described in
clause (b) of the definition of "Partnerships" above (together with any
modifications, amendments or restatements thereof), and "Partnership Agreement"
means any one of the Partnership Agreements.
"Pledged Partnership Interests" shall mean all of Pledgor's partnership
interests, whether general or limited, venture, or membership interests, in the
Partnerships, including, without limitation, all of Pledgor's right, title and
interest now or hereafter accruing under the Partnership Agreements with respect
to any interest now owned or hereafter acquired or owned by Pledgor in the
Partnerships, and including all distributions, allocations, proceeds, fees,
preferences, payments or other benefits, which Pledgor now is or may hereafter
become entitled to receive with respect to such interests in the Partnerships
and with respect to the repayment of all loans now or hereafter made by Pledgor
to the Partnerships, and Pledgor's undivided percentage interest in the assets
of the Partnerships.
"Secured Indebtedness" shall have the meaning assigned to such term in
Section 2.1(c) hereof.
"Security Interests" shall mean the pledge, collateral assignment, and
security interests securing the Secured Indebtedness, including (i) the pledge
and security interest in the Pledged Partnership Interests granted in this
Agreement and (ii) all other security interests created or assigned as
additional security for the Secured Indebtedness pursuant to the provisions of
this Agreement.
(c) Whenever the context so requires, the neuter gender includes the
masculine and feminine, and the singular number includes the plural and vice
versa.
<PAGE>
ARTICLE II
COLLATERAL AND OBLIGATION
SECTION 2.1 Grant of Security Interest.
--------------------------
(a) As collateral security for Secured Indebtedness, Pledgor hereby
pledges and grants to the Administrative Agent, for the benefit of the Lenders,
a first priority lien on and security interest in and to, and agrees and
acknowledges that the Administrative Agent has, and shall continue to have, a
security interest in and to, and assigns, transfers, pledges and conveys to the
Administrative Agent, all of Pledgor's right, title and interest in and to the
following described collateral (the "Collateral") now owned or hereafter
acquired, wherever located, howsoever arising or created, and whether now
existing or hereafter arising, existing or created:
(i) the Pledged Partnership Interests and all rights of
Pledgor with respect thereto and all proceeds, income
and profits therefrom;
(ii) all of Pledgor's distribution rights, income rights,
liquidation interest, accounts, contract rights,
general intangibles, notes, instruments, drafts and
documents relating to the Pledged Partnership
Interests;
(iii) to the extent attributable to the Pledged Partnership
Interests, all promissory notes, notes receivable,
accounts, accounts receivable and instruments owned
or held by Pledgor or, in which Pledgor owns or holds
an interest, evidencing obligations of the
Partnerships;
(iv) all liens, security interests, collateral, property
and assets securing any of the promissory notes,
notes receivables, instruments, accounts receivable
and other claims and interest described in clause
(iii) above;
(v) all books, files, computer records, computer software,
electronic information and other files, records or
information relating to any or all of the foregoing;
and
(vi) all substitutions, replacements, products, proceeds,
income and profits arising from any of the foregoing;
including without limitation insurance proceeds.
(b) The Security Interests are granted and the Collateral is
collaterally assigned as security only and shall not subject the Administrative
Agent or any holder of the Secured Indebtedness to, or transfer or in any way
affect or modify, any obligation or liability of Pledgor with respect to any of
the Collateral.
(c) The Collateral shall secure the following obligations,
indebtedness, and liabilities (whether at stated maturity, by acceleration or
otherwise) (all such obligations, indebtedness, and liabilities being
hereinafter sometimes called the "Secured Indebtedness"):
(i) the Obligations and the obligations, liabilities and
indebtedness of Pledgor to the Agents and the Lenders
under the Guaranty;
<PAGE>
(ii) all reasonable costs and expenses, including, without
limitation, all reasonable attorneys' fees and legal
expenses, incurred by any of the Agents or any Lender
to preserve and maintain the Collateral, collect the
obligations herein described, and enforce this
Agreement; and
(iii)all extensions, renewals, and modifications of any of the
foregoing.
SECTION 2.2 Consent. To the extent any Partnership Agreement requires the
consent or agreement of Pledgor to the transfer, conveyance, or encumbrance as
security for the Secured Indebtedness of all or any portion of the Pledged
Partnership Interests, Pledgor hereby irrevocably consents to (a) the grant of
the security interest described in Section 2.1 of this Agreement, and (b) any
transfer or conveyance of the Pledged Partnership Interests pursuant to the
Administrative Agent's exercise of its rights and remedies under Section 5.4 of
this Agreement or under any other Loan Document.
SECTION 2.3 Pledgor Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) Pledgor shall remain liable under the Partnership
Agreements to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed (b) the exercise by the Administrative Agent of any of its rights
hereunder shall not release Pledgor from any of its duties or obligations under
the contracts and agreements included in the Collateral, and (c) neither the
Administrative Agent nor any Lender shall have any obligation or liability under
the Partnership Agreements by reason of this Agreement, nor shall the
Administrative Agent or any Lender be obligated to perform any of the
obligations or duties of Pledgor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Pledgor hereby represents and warrants to the Administrative Agent as
follows:
(a) Pledgor has good and indefeasible title to the Pledged Partnership
Interests and other Collateral free and clear of any Lien except for the
Security Interests created by this Agreement and the security interests granted
in favor of Bank of America, N.A., as Administrative Agent ("Refractive
Administrative Agent") under the Loan Agreement dated the date hereof (the
"Refractive Loan Agreement") among Prime Refractive Management, L.L.C.,
Refractive Administrative Agent, BankBoston, N.A., as documentation agent, and
the lenders from time to time party thereto ("Refractive Lenders"), and has all
necessary authority to pledge and collaterally assign the Pledged Partnership
Interests and other Collateral as security for the Secured Obligations and such
assignment and transfer is not contrary to or in conflict with the Partnership
Agreements or any other agreement;
(b) No financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording office,
except such as may have been filed in favor of the Administrative Agent relating
to this Agreement or those in favor of Refractive Administrative Agent;
(c) This Agreement has been duly executed and delivered by Pledgor and is
the legal and binding obligation of Pledgor enforceable in accordance with its
terms;
<PAGE>
(d) Upon execution of this Agreement and an appropriate financing
statement by Pledgor and the recording of the financing statement in the
appropriate office, the Administrative Agent will have a valid, first and prior
perfected security interest in the Collateral;
(e) Neither the execution and delivery of this Agreement, nor the
consummation of any of the transactions hereby contemplated, nor compliance with
the terms and provisions hereof, will contravene or materially conflict with (i)
any material provision of law, statute or regulation to which Pledgor or the
Partnerships is subject or (ii) any judgment, license, order or permit
applicable to Pledgor or the Partnerships. No consent, approval, authorization
or order of any court, governmental authority, partner or third party is
required that has not been received or taken (i) for the grant by Pledgor of the
Security Interests, (ii) for the execution, delivery or performance of this
Agreement by Pledgor, (iii) for the perfection of the Security Interests, or
(iv) except for such notices as are required by the Code or the Loan Agreement,
for the exercise by the Administrative Agent of its rights and remedies
hereunder (provided, however, that the purchaser of the Collateral at any sale
thereof pursuant to Section 5.4 hereof may be required to obtain the consent of
the partners in the Partnerships and/or satisfy other conditions set forth in
the Partnership Agreements prior to such purchaser's admission as a partner in
the Partnership);
(f) The chief executive office and principal place of business of Pledgor
is in Austin, Travis County, Texas; and
(g) To the best knowledge and belief of Pledgor, Pledgor has fully
performed each and every one of his obligations and duties under the Partnership
Agreements on or prior to the date due; Pledgor has not received any notice of
any default in the performance of his obligations under the Partnership
Agreements or of any situation which could give rise to such an event of default
thereunder.
ARTICLE IV
PLEDGOR'S COVENANTS
Pledgor hereby covenants and agrees with the Administrative Agent that
until the Secured Indebtedness is paid and performed in full:
(a) Pledgor will not cause, permit or consent to any amendment or
modification to the Partnership Agreements in effect as of the date hereof
except as permitted in the Loan Agreement;
(b) Pledgor will pay and discharge promptly when due all taxes,
assessments, forced contributions, governmental charges, fines, penalties, and
any other lawful claims, of every description, payable by Pledgor with respect
to (or which, if not paid could result in an encumbrance upon) any of the
Collateral, except as otherwise permitted by the terms of the Loan Agreement. In
the event that Pledgor should, for any reason, fail to pay and discharge
promptly any taxes, assessments, forced contributions, governmental charges,
fines, or penalties when due (subject to the provisions of the Loan Agreement),
then the Administrative Agent shall be authorized, but shall not be obligated,
to pay the same, with full subrogation to all rights of any Person by reason of
such payment, and the amounts so paid, together with interest thereon as
provided herein, shall be secured by the Security Interests;
<PAGE>
(c) Pledgor will not sell, transfer, mortgage or otherwise encumber any
Collateral in any manner, except for the security interest in favor of
Refractive Administrative Agent, without first obtaining the written consent of
the Administrative Agent. Any written consent to any such sale, mortgage,
transfer or encumbrance shall not be construed to be a waiver of this provision
in respect of any subsequent proposed sale, mortgage, transfer or encumbrance;
(d) Pledgor will, at its expense and in such manner and form as the
Administrative Agent may from time to time reasonably require, execute, deliver,
file and record any financing statement, specific assignment or other
instruments, certificates or papers and take any other action that may be
necessary or desirable, or that the Administrative Agent may from time to time
reasonably request, in order to create, preserve, perfect or validate any
Security Interest or to enable the Administrative Agent to exercise and enforce
its rights hereunder with respect to any of the Collateral. In the event, for
any reason, that the law of any jurisdiction other than the State of Texas
becomes or is applicable to the Collateral, or any part thereof, Pledgor agrees
to execute and deliver all such instruments and to do all such other things that
may be necessary or appropriate to preserve, protect and enforce the Security
Interests of the Administrative Agent under the law of such other jurisdiction,
to at least the same extent that the Security Interests would be protected under
the Code. To the extent permitted by applicable law, Pledgor hereby authorizes
the Administrative Agent to execute and file, in the name of Pledgor or
otherwise, Uniform Commercial Code financing statements that the Administrative
Agent in its sole discretion may deem necessary or appropriate to further
perfect the Security Interests;
(e) If Pledgor receives, by virtue of being or having been an owner of
any of the Collateral, any notes, other instruments, options, cash distributions
or any other distribution, resulting from a Capital Event (hereinafter defined)
Pledgor shall receive the same in trust for the benefit of the Administrative
Agent, shall immediately notify the Administrative Agent of such receipt and
shall immediately take all such actions and execute all such documents as the
Administrative Agent deems necessary or appropriate to continue or create as
first and prior perfected Liens, in favor of the Administrative Agent covering
such notes, other instruments, options, cash distributions. As used herein, the
term "Capital Event" shall mean any event generating or resulting in revenues
not attributable to the normal business operations of the Partnerships including
without limitation, any mortgaging of assets, refinancing of existing
indebtedness of any Partnership, condemnation of any assets of any Partnership,
sale or transfer of any assets of any Partnership outside the ordinary course of
business, or payment of insurance proceeds. At all times other than during the
continuance of an Event of Default, Pledgor shall be entitled to receive free
from the security interest hereof any note, other instrument, option, cash
distribution or any other distribution resulting from any event other than a
Capital Event;
(f) Pledgor will notify the Administrative Agent in writing prior to
the removal of Pledgor's chief executive office or principal place of business
from the State of Texas;
(g) Pledgor shall cause to be obtained any and all waivers and consents
necessary to make effective the grant contained in and to perfect the security
interest granted to the Administrative Agent pursuant to Section 2.1 hereof,
including without limitation, all necessary waivers and consents from the other
partners, if any, of each Partnership;
(h) Pledgor shall perform fully all obligations imposed upon it by any
agreements or instruments concerning all or any part of the Collateral,
including without limitation the Partnership Agreements and shall maintain in
full force and effect all such agreements and instruments, and shall not amend
or modify, or consent to the amendment or modification of such agreements or
instruments, without the prior written consent of the Administrative Agent; and
<PAGE>
(i) Pledgor shall promptly notify the Administrative Agent of any
material adverse change in any material fact or material circumstance warranted
or represented by Pledgor in this Agreement or in any other writing furnished by
Pledgor to the Administrative Agent in connection with the Collateral or the
Secured Indebtedness, and shall promptly notify the Administrative Agent of any
claim, action or proceeding affecting title to the Collateral, or any part
thereof, or the Security Interests herein, and, at the request of the
Administrative Agent, shall appear and defend, at Pledgor's expense, any such
action or proceeding.
ARTICLE V
GENERAL AUTHORITY AND POWERS AND REMEDIES
SECTION 5.1 Events of Default.
-----------------
Pledgor shall be in default under this Agreement upon the happening of
any of the following events or conditions (hereinafter called an "Event of
Default"):
(a) An Event of Default under the Loan Agreement shall occur; or
(b) The ownership of any of the Collateral becomes vested in a person or
entity other than Pledgor, except as permitted hereunder; or
(c) The Administrative Agent's Liens in any of the Collateral should become
unenforceable, or cease to be first priority Liens.
SECTION 5.2 Right to Receive Distributions. The Administrative Agent
shall have the right, at any time following the occurrence and during the
continuation of an Event of Default, to receive all payments and distributions
made to Pledgor upon or with respect to the Collateral and Pledgor agrees to
take all such action as the Administrative Agent may reasonably deem necessary
or appropriate to give effect to such right.
SECTION 5.3 General Authority. Pledgor hereby irrevocably appoints the
Administrative Agent, and its successors and assigns, the true and lawful
attorney-in-fact of Pledgor, with full power of substitution, in the name of
Pledgor, for the sole use and benefit of the Administrative Agent, but at
Pledgor's expense, to the extent permitted by law to exercise, at any time and
from time to time following the occurrence and during the continuance of an
Event of Default, all or any of the following powers with respect to all or any
of the Collateral:
(a) to ask, demand, sue for, collect, receive and give acquittance and
receipts for any and all monies due or to become due upon or by virtue thereof;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper,
in connection with clause (a) preceding;
(c) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto;
<PAGE>
(d) subject to Section 5.4 hereof, to sell, transfer, assign or
otherwise deal in or with the same or the proceeds thereof as fully and
effectually as if the Administrative Agent were the absolute owner thereof; and
(e) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto.
In addition, the Administrative Agent, at any time, either before or after an
Event of Default, shall have the right, together with such accountants and other
agents or representatives as they may from time to time designate, to visit and
inspect the Partnerships' properties, assets, books, records and documents and
to discuss the Partnerships' affairs, finances and accounts with Pledgor's and
the Partnerships' representatives, officers or directors, during all business
hours as the Administrative Agent may designate, and to make and take away
copies of the Partnerships' records at the Administrative Agent's expense.
Pledgor shall furnish to Administrative Agent any information reasonably
requested by the Administrative Agent in connection with the Collateral. Pledgor
will maintain complete and accurate books and records regarding the Collateral.
SECTION 5.4 Remedies Upon Default.
---------------------
(a) If any Event of Default shall have occurred and is continuing, the
Administrative Agent, at its option, without demand, presentment, notice of
acceleration, intention to accelerate or other notice (which are fully waived)
may:
(1) exercise all the rights of a secured party under the Code
(whether or not the Code is in effect in the jurisdiction where such
rights are exercise, unless prohibited by applicable law).
(2) apply the cash, if any, then held by the Administrative Agent
as Collateral as specified in Section 5.6.
(3) sell all of the Collateral or any part thereof at public
or private sale or at any broker's board or on any securities exchange,
for cash, upon credit or for future delivery, and at such price or
prices as the Administrative Agent may reasonably deem satisfactory.
Upon the Administrative Agent's demand, Pledgor will take all steps
necessary to prepare the Collateral for and otherwise assist in any
proposed disposition of the Collateral. Any holder of the Secured
Indebtedness may be the purchaser of any or all of the Collateral so
sold at any public sale (or, if the Collateral is of a type customarily
sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, at any private sale) and
thereafter hold the same absolutely, free from any right or claim of
whatsoever kind. Any holder of the Secured Indebtedness shall have the
right to offset the amount of its bid against an equal amount of the
Secured Indebtedness held by such holder.
<PAGE>
Pledgor agrees that, because of the Securities Act of 1933, as amended,
or any other laws or regulations, and for other reasons, there may be
legal and/or practical restrictions or limitations affecting the
Administrative Agent in any attempts to dispose of certain portions of
the Collateral and for the enforcement of their rights. For these
reasons, the Administrative Agent is hereby authorized by Pledgor, but
not obligated, upon the occurrence and during the continuation of an
Event of Default, to sell all or any part of the Collateral at private
sale, subject to investment letter or in any other manner which will
not require the Collateral, or any part thereof, to be registered in
accordance with the Securities Act of 1933, as amended, or the rules
and regulations promulgated thereunder, or any other laws or
regulations, at a reasonable price at such private sale or other
distribution in the manner mentioned above. Pledgor understands that
the Administrative Agent may in its discretion approach a limited
number of potential purchasers and that a sale under such circumstances
may yield a lower price for the Collateral, or any part or party
thereof, than would otherwise be obtainable if such collateral were
either afforded to a larger number or potential purchasers, or
registered or sold in the open market. Pledgor agrees that such private
sale shall be deemed to have been made in a commercially reasonable
manner, and that the Administrative Agent has no obligation to delay
sale of any Collateral to permit the issuer thereof to register it for
public sale under any applicable federal or state securities laws.
The Administrative Agent is authorized, in connection with any such
sale (i) to restrict the prospective bidders on or purchasers of any of
the Collateral to a limited number of sophisticated investors who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of
such Collateral and (ii) to impose such other limitations or conditions
in connection with any such sale as the Administrative Agent reasonably
deems necessary in order to comply with applicable law. Pledgor
covenants and agrees that it will execute and deliver such documents
and take such other action as the Administrative Agent reasonably deems
necessary in order that any such sale may be made in compliance with
applicable law. Upon any such sale the Administrative Agent shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely, free from any claim or right of Pledgor
of whatsoever kind, including any equity or right of redemption of
Pledgor. Pledgor, to the extent permitted by applicable law, hereby
specifically waives all rights of redemption, stay or appraisal which
it has or may have under any law now existing or hereafter enacted.
Pledgor agrees that five (5) days' written notice from the
Administrative Agent to Pledgor of the Administrative Agent's intention
to make any such public or private sale or sale at a broker's board or
on a securities exchange shall constitute "reasonable notification"
within the meaning of Section 9-504(c) of the Code. Such notice shall
(1) in case of a public sale, state the time and place fixed for such
sale, (2) in case of sale at a broker's board or on a securities
exchange, state the board or exchange at which such a sale is to be
made and the day on which the Collateral, or the portion thereof so
being sold, will first be offered to sale at such board or exchange and
(3) in the case of a private sale, state the day after which such sale
may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Administrative Agent may fix in the notice of such sale. At any such
sale, the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Administrative Agent may reasonably determine.
The Administrative Agent shall not be obligated to make any such sale
pursuant to any such notice. The Administrative Agent may, without
notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned.
<PAGE>
In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the selling price is paid by the purchaser
thereof, but the Administrative Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the
Collateral so sold and in case of any such failure, such Collateral may
again be sold upon like notice. The Administrative Agent, instead of
exercising the power of sale herein conferred upon it, may proceed by a
suit or suits at law or in equity to foreclose the Security Interests
and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(b) Without the limiting the foregoing, or imposing upon the
Administrative Agent any obligations or duties not required by applicable law,
Pledgor acknowledges and agrees that, in foreclosing upon any of the Collateral,
or exercising any other rights or remedies provided the Administrative Agent
hereunder or under applicable law, the Administrative Agent may, but shall not
be required to (1) qualify or restrict prospective purchasers of the Collateral
by requiring evidence of sophistication and/or creditworthiness, and requiring
the execution and delivery of confidentiality agreements or other documents and
agreements as a condition to such prospective purchasers' receipt of information
regarding the Collateral or participation in any public or private foreclosure
sale process; (2) provide to prospective purchasers the Partnership Agreements
and business and financial information regarding the Partnerships available in
the files of the Administrative Agent at the time of commencing the foreclosure
process, without the requirement that the Administrative Agent obtain, or seek
to obtain, any updated business or financial information or Partnership
Agreements, or verify, or certify to prospective purchasers, the accuracy of any
such business or financial information or Partnership Agreements; (3) sell at
foreclosure all, or a portion but not all, of the rights, titles and interests
of Pledgor in a particular Partnership or group of Partnerships; it being
further specifically acknowledged by Pledgor that limitations or potential
limitations on the transfer of certain Collateral under the Partnership
Agreements or other applicable agreements or law may limit the Administrative
Agent's right or ability to foreclose upon or sell certain rights, titles and
interests of Pledgor in the Partnerships; (4) offer for sale, and sell,
partnership interests either with, or without, first employing an appraiser,
investment banker, or broker with respect to the evaluation of Collateral, the
solicitation of purchasers for Collateral, or the manner of sale of Collateral.
(c) The Administrative Agent shall have all rights, remedies and
recourse granted in the Loan Agreement and the other Loan Documents or existing
at common law or equity (including specifically those granted by the Code), and
such rights and remedies (1) shall be cumulative and concurrent, (2) may be
pursued separately, successively or concurrently against Pledgor and any party
obligated to pay or perform the Obligations, any of the Collateral, or any other
security for any of the Obligations, at the sole discretion of the
Administrative Agent, and (3) may be exercised as often as occasion therefor
shall arise, it being agreed by Pledgor that the exercise or failure to exercise
any such rights or remedies shall in no event be construed as a waiver or
release thereof or of any other right, remedy or recourse.
(d) Notwithstanding a foreclosure upon any of the Collateral or
exercise of any other remedy by the Administrative Agent in connection with an
Event of Default, Pledgor shall not be subrogated thereby to any rights of the
Administrative Agent against the Collateral or any other security for any of the
Obligations. Pledgor shall not be deemed to be the owner of any interest in any
of the Obligations until all of the Obligations have been paid to the
Administrative Agent and are fully performed and discharged.
(e) All recitals in any instrument of assignment or any other
instrument executed by the Administrative Agent incident to the sale, transfer,
assignment or other disposition or utilization of the Collateral or any part
thereof hereunder shall be presumptive evidence of the matters stated therein
and all prerequisites of such sale or other action contained in such recitals
shall be presumed to have been performed or to have occurred.
<PAGE>
SECTION 5.5 Waivers by Pledgor. In case of any Event of Default,
neither Pledgor nor anyone claiming by, through or under Pledgor, to the extent
Pledgor may lawfully so agree, shall or will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension or redemption law now
or hereafter in force in any locality where any of the Collateral is situated
for purposes of applicable law, in order to prevent or hinder the enforcement of
this Agreement, or the absolute sale of the Collateral, or the final and
absolute putting into possession thereof, immediately after such sale, of the
purchaser thereof; and Pledgor in Pledgor's own right and for all who may claim
under Pledgor, hereby waives, to the fullest extent that Pledgor may lawfully do
so, the benefit of any and all right to have the Collateral marshaled upon any
enforcement of the Security Interests herein granted, and Pledgor agrees that
the Administrative Agent or any court having jurisdiction to enforce the
Security Interests may sell the Collateral in parts or as an entirety.
SECTION 5.6 Application of Proceeds. The Administrative Agent shall
apply the proceeds of any foreclosure sale or other realization upon the
Collateral as follows (as modified, if necessary, by the requirements of
applicable law):
(a) First, to the payment of all reasonable costs and expenses of any
foreclosure and collection hereunder and all proceedings in connection
therewith, including reasonable compensation to Administrative Agent's counsel;
(b) Then, to the reimbursement of the Administrative Agent for all
disbursements made by the Administrative Agent for taxes, assessments or liens
superior to the Security Interests and which the Administrative Agent shall deem
expedient to pay;
(c) Then, to the reimbursement of the Administrative Agent for any other
disbursements made by, or reasonable expenses incurred by, the Administrative
Agent in accordance with the terms hereof;
(d) Then, to the Secured Indebtedness, in any manner determined by the
Administrative Agent in its sole discretion;
(e) Then, to the Refractive Administrative Agent until all secured
obligations of Pledgor to it and Refractive Lenders have been paid; and
(f) The remainder of such proceeds, if any, shall be paid to Pledgor.
The foregoing application provisions shall apply not only to proceeds
resulting from foreclosure but also to proceeds or distributions resulting from
any other claim, (including claims made in bankruptcy proceedings), action or
proceeding to enforce or protect the Administrative Agent's lien in the
Collateral.
SECTION 5.7 Enforcement of Secured Indebtedness. Nothing in this
Agreement shall affect or impair the unconditional and absolute right of the
Administrative Agent to enforce the Secured Indebtedness as and when the same
shall become due in accordance with the terms of the Loan Documents whether by
acceleration or otherwise.
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Terms Commercially Reasonable. The terms of this Agreement
shall be deemed commercially reasonable within the meaning of the Uniform
Commercial Code in effect and applicable hereto.
SECTION 6.2 Headings. The headings of articles and sections herein are
inserted only for convenience and shall in no way define, describe or limit the
scope or intent of any provision of this Agreement.
SECTION 6.3 Amendments. No change, amendment, modification,
cancellation or discharge of any provision of this Agreement shall be valid
unless consented to in writing by the Administrative Agent and Pledgor (subject
to the terms of the Loan Agreement).
SECTION 6.4 Assignment of the Administrative Agent's Rights. The
Administrative Agent shall have the right to assign all or any portion of its
rights under this Agreement to any subsequent holder or holders of the
Obligations.
SECTION 6.5 Parties in Interest. As and when used herein, the term
"Pledgor" shall mean and include Pledgor herein named and his successors and
permitted assigns, and the term "Administrative Agent" shall mean and include
the Administrative Agent herein named and his successors and assigns, and all
covenants and agreements herein shall be binding upon and inure to the benefit
of Pledgor and the Administrative Agent and their respective assigns, provided
that Pledgor shall have no right to assign his rights hereunder to any other
Person except in connection with a transfer of the Collateral permitted
hereunder.
SECTION 6.6 APPLICABLE LAWS. THIS AGREEMENT SHALL BE CONSTRUED,
INTERPRETED AND ENFORCED UNDER AND PURSUANT TO THE LAWS OF THE STATE OF TEXAS
AND APPLICABLE FEDERAL LAW. IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE
INVALID OR UNENFORCEABLE, THE VALIDITY AND ENFORCEABILITY OF THE OTHER
PROVISIONS OF THIS AGREEMENT SHALL REMAIN UNAFFECTED.
SECTION 6.7 Notices. Any notices or other communications required or
permitted to be given by this Agreement or any other documents and instruments
referred to herein must be given in accordance with Section 11 of the Loan
Agreement, to the address of such party as follows:
If to the Administrative Agent:
515 Congress Avenue, 11th Floor
Austin, Texas 78701
Attn: Wade Morgan
If to Pledgor:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746-6550
Attn: Treasurer
<PAGE>
SECTION 6.8 Financing Statement. The Administrative Agent shall be
entitled at any time to file a photographic or other reproduction of this
Agreement as a financing statement, but the failure of the Administrative Agent
to do so shall not impair the validity or enforceability of this Agreement.
SECTION 6.9 Obligations Absolute. All rights and remedies of the
Administrative Agent hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan Agreement or
any of the other Loan Documents or any other agreement or instrument
relating to any of the foregoing;
(b) any change in the time, manner, or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Loan Agreement or any of
the other Loan Documents;
(c) any exchange, release, or nonperfection of any Collateral, or any
release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Obligations; or
(d) any other circumstance (other than payment in full of the
Obligations) that might otherwise constitute a defense available to, or
a discharge of, Pledgor.
SECTION 6.10 Confirmation of Liens. Pledgor acknowledges that this
Agreement has been given in amendment, renewal, restatement, and confirmation of
Pledgor's obligations, covenants, and agreements contained in the Pledge and
Security Agreements previously executed by Pledgor in favor of Administrative
Agent and the Lenders, including, without limitation, that dated April 26, 1996
(the "Previous Pledge"). Pledgor further confirms and agrees that neither the
execution of the Loan Agreement or any other Loan Document, or the consummation
of the transactions described therein, shall in any way affect the liens granted
under the Previous Pledge or the perfection or priority thereof, and the
obligations evidenced by the Previous Pledge shall continue in full force and
effect as modified, amended and restated by the terms contained herein.
SECTION 6.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument, and in making proof of this
Agreement it shall not be necessary to produce or account for more than one such
counterpart.
<PAGE>
SECTION 6.12 ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE FINAL,
ENTIRE AGREEMENT OF PLEDGOR, THE AGENTS AND THE LENDERS WITH RESPECT TO
PLEDGOR'S PLEDGE OF THE PLEDGED PARTNERSHIP INTERESTS AND RESTATES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS AGREEMENT IS
INTENDED BY PLEDGOR, THE AGENTS AND THE LENDERS AS A FINAL AND COMPLETE
EXPRESSION OF THE TERMS OF THIS AGREEMENT, AND NO COURSE OF DEALING BETWEEN
PLEDGOR, THE AGENTS OR THE LENDERS, NO COURSE OF PERFORMANCE, NO TRADE
PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS AGREEMENT. THERE
ARE NO ORAL AGREEMENTS AMONG PLEDGOR, THE AGENTS AND THE LENDERS.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
<PAGE>
Pledge and Security Agreement
IN WITNESS WHEREOF, Pledgor has executed this Agreement as of the day
and year first above written.
PLEDGOR:
OHIO LITHO, INC.,
a Delaware corporation
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
<PAGE>
Exhibit A
EXHIBIT A
PARTNERSHIPS
Ohio Mobile Lithotripter, Ltd.
Ohio Mobile Lithotripter II, Ltd.
<PAGE>
Exhibit B
EXHIBIT B
PARTNERSHIP AGREEMENTS
First Amended and Restated Agreement of Limited Partnership of Ohio Mobile
Lithotripter, Ltd. dated August 1, 1991, as amended by First Amendment to First
Amended and Restated Agreement of Limited Partnership dated as of December 31,
1992
Certificate of Limited Partnership of Ohio Mobile Lithotripter, Ltd. dated May
21, 1991
First Amended and Restated Agreement of Limited Partnership of Ohio Mobile
Lithotripter II, Ltd.
Certificate of Limited Partnership of Ohio Mobile Lithotripter II, Ltd. dated
August 23, 1995
Pledge and Security Agreement
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the "Agreement") dated as of
January 31, 2000, is by and between OHIO LITHO, INC., a Delaware corporation
("Pledgor"), whose street address is 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746-6550, for the benefit of BANK OF AMERICA, N.A., a national
banking association ("B of A"), whose street address is 901 Main Street, Dallas,
Texas 75202, not in its individual capacity but solely as administrative agent
for itself and each of the other banks or lending institutions (each, a "Lender"
and collectively, the "Lender") which is or may from time to time become a party
to the Loan Agreement (as hereinbelow defined) (in such capacity, together with
its successors in such capacity, the "Administrative Agent").
R E C I T A L S:
A. Prime Refractive Management, L.L.C., a Delaware limited liability
company ("Borrower"), has entered into that certain Loan Agreement dated as of
the date hereof with B of A as Administrative Agent and as a Lender, BankBoston,
N.A., as Documentation Agent and as a Lender, and the other Lenders from time to
time party thereto, as amended, waived, restated, and supplemented from time to
time ("Loan Agreement").
B. Pledgor and certain other guarantors have executed that certain
Guaranty Agreement dated as of the date hereof (as the same may be amended,
supplemented or modified from time to time, the "Guaranty"), pursuant to which
Pledgor has guaranteed to the Agents (as defined in the Loan Agreement) and the
Lenders the full and complete payment and performance of the liabilities,
obligations, and indebtedness of the Borrower to the Agents and the Lenders
under the Loan Documents (as defined in the Loan Agreement).
C. As a condition to entering into the Loan Agreement, Pledgor must execute
and deliver this Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor agrees with the Administrative Agent as follows:
ARTICLE I
DEFINITIONS
(a) Each term used herein and defined in the Loan Agreement shall have
the meaning assigned to it in the Loan Agreement, unless otherwise defined
herein or the context otherwise requires.
(b) In addition, as used herein, the following terms shall, unless
otherwise indicated, have the following meanings:
"Borrower" has the meaning set forth in the recitals.
"Code" shall mean the Uniform Commercial Code as in effect in the State
of Texas.
"Collateral" shall mean the assets and interests of Pledgor identified
in Section 2.1 hereof.
<PAGE>
Pledge and Security Agreement
12
"Event of Default" shall have the meaning assigned to such term in
Section 5.1.
"Guaranty" shall mean that certain Guaranty Agreement dated as of the
date hereof, executed by Pledgor and certain other guarantors for the benefit of
the Agents and the Lenders, guaranteeing the full payment and performance of the
Obligations, as amended, modified, confirmed, and extended from time to time.
"Partnerships" shall mean (a) those partnerships and limited liability
companies listed on Exhibit A attached hereto and incorporated herein by
reference, as such partnerships or limited liability companies exist or may
hereinafter be restated, amended or restructured, (b) any partnership, joint
venture, or limited liability company in which Pledgor shall, at any time,
become a limited or general partner, venturer, or member, or (c) any
partnership, joint venture or corporation formed as a result of the restructure,
reorganization or amendment of the Partnerships.
"Partnership Agreements" shall mean (a) those agreements listed on
Exhibit B attached hereto and incorporated herein by reference (together with
any modifications, amendments or restatements thereof), and (b) partnership
agreements, joint venture agreements, or organizational agreements for any of
the partnerships, joint ventures, or limited liability companies described in
clause (b) of the definition of "Partnerships" above (together with any
modifications, amendments or restatements thereof), and "Partnership Agreement"
means any one of the Partnership Agreements.
"Pledged Partnership Interests" shall mean all of Pledgor's partnership
interests, whether general or limited, venture, or membership interests, in the
Partnerships, including, without limitation, all of Pledgor's right, title and
interest now or hereafter accruing under the Partnership Agreements with respect
to any interest now owned or hereafter acquired or owned by Pledgor in the
Partnerships, and including all distributions, allocations, proceeds, fees,
preferences, payments or other benefits, which Pledgor now is or may hereafter
become entitled to receive with respect to such interests in the Partnerships
and with respect to the repayment of all loans now or hereafter made by Pledgor
to the Partnerships, and Pledgor's undivided percentage interest in the assets
of the Partnerships.
"Secured Indebtedness" shall have the meaning assigned to such term in
Section 2.1(c) hereof.
"Security Interests" shall mean the pledge, collateral assignment, and
security interests securing the Secured Indebtedness, including (i) the pledge
and security interest in the Pledged Partnership Interests granted in this
Agreement and (ii) all other security interests created or assigned as
additional security for the Secured Indebtedness pursuant to the provisions of
this Agreement.
(c) Whenever the context so requires, the neuter gender includes the
masculine and feminine, and the singular number includes the plural and vice
versa.
<PAGE>
ARTICLE II
COLLATERAL AND OBLIGATION
SECTION 2.1 Grant of Security Interest.
--------------------------
(a) As collateral security for Secured Indebtedness, Pledgor hereby
pledges and grants to the Administrative Agent, for the benefit of the Lenders,
a lien on and security interest in and to, and agrees and acknowledges that the
Administrative Agent has, and shall continue to have, a security interest in and
to, and assigns, transfers, pledges and conveys to the Administrative Agent, all
of Pledgor's right, title and interest in and to the following described
collateral (the "Collateral") now owned or hereafter acquired, wherever located,
howsoever arising or created, and whether now existing or hereafter arising,
existing or created, subject to a first lien in favor of Bank of America, N.A.,
as Administrative Agent ("Prime Administrative Agent") under the Fourth Amended
and Restated Loan Agreement dated the date hereof (the "Prime Loan Agreement")
among Prime Medical Services, Inc., Prime Administrative Agent, BankBoston,
N.A., as documentation agent, and the lenders ("Prime Lenders") from time to
time thereunder:
(i) the Pledged Partnership Interests and all rights of
Pledgor with respect thereto and all proceeds, income
and profits therefrom;
(ii) all of Pledgor's distribution rights, income rights,
liquidation interest, accounts, contract rights,
general intangibles, notes, instruments, drafts and
documents relating to the Pledged Partnership
Interests;
(iii) to the extent attributable to the Pledged Partnership
Interests, all promissory notes, notes receivable,
accounts, accounts receivable and instruments owned
or held by Pledgor or, in which Pledgor owns or holds
an interest, evidencing obligations of the
Partnerships;
(iv) all liens, security interests, collateral, property
and assets securing any of the promissory notes,
notes receivables, instruments, accounts receivable
and other claims and interest described in clause
(iii) above;
(v) all books, files, computer records, computer software,
electronic information and other files, records or
information relating to any or all of the foregoing;
and
(vi) all substitutions, replacements, products, proceeds,
income and profits arising from any of the foregoing;
including without limitation insurance proceeds.
(b) The Security Interests are granted and the Collateral is
collaterally assigned as security only and shall not subject the Administrative
Agent or any holder of the Secured Indebtedness to, or transfer or in any way
affect or modify, any obligation or liability of Pledgor with respect to any of
the Collateral.
(c) The Collateral shall secure the following obligations,
indebtedness, and liabilities (whether at stated maturity, by acceleration or
otherwise) (all such obligations, indebtedness, and liabilities being
hereinafter sometimes called the "Secured Indebtedness"):
<PAGE>
(i) the Obligations and the obligations, liabilities and
indebtedness of Pledgor to the Agents and the Lenders
under the Guaranty;
(ii) all reasonable costs and expenses, including, without
limitation, all reasonable attorneys' fees and legal
expenses, incurred by any of the Agents or any Lender
to preserve and maintain the Collateral, collect the
obligations herein described, and enforce this
Agreement; and
(iii)all extensions, renewals, and modifications of any of
the foregoing.
SECTION 2.2 Consent. To the extent any Partnership Agreement requires
the consent or agreement of Pledgor to the transfer, conveyance, or encumbrance
as security for the Secured Indebtedness of all or any portion of the Pledged
Partnership Interests, Pledgor hereby irrevocably consents to (a) the grant of
the security interest described in Section 2.1 of this Agreement, and (b) any
transfer or conveyance of the Pledged Partnership Interests pursuant to the
Administrative Agent's exercise of its rights and remedies under Section 5.4 of
this Agreement or under any other Loan Document.
SECTION 2.3 Pledgor Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) Pledgor shall remain liable under the Partnership
Agreements to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed (b) the exercise by the Administrative Agent of any of its rights
hereunder shall not release Pledgor from any of its duties or obligations under
the contracts and agreements included in the Collateral, and (c) neither the
Administrative Agent nor any Lender shall have any obligation or liability under
the Partnership Agreements by reason of this Agreement, nor shall the
Administrative Agent or any Lender be obligated to perform any of the
obligations or duties of Pledgor thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Pledgor hereby represents and warrants to the Administrative Agent as
follows:
(a) Pledgor has good and indefeasible title to the Pledged Partnership
Interests and other Collateral free and clear of any Lien except for the
Security Interests created by this Agreement and the security interests granted
in favor of Prime Administrative Agent, and has all necessary authority to
pledge and collaterally assign the Pledged Partnership Interests and other
Collateral as security for the Secured Obligations and such assignment and
transfer is not contrary to or in conflict with the Partnership Agreements or
any other agreement;
(b) No financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording office,
except such as may have been filed in favor of the Administrative Agent relating
to this Agreement or those in favor of Prime Administrative Agent;
(c) This Agreement has been duly executed and delivered by Pledgor and is
the legal and binding obligation of Pledgor enforceable in accordance with its
terms;
<PAGE>
(d) Upon execution of this Agreement and an appropriate financing
statement by Pledgor and the recording of the financing statement in the
appropriate office, the Administrative Agent will have a valid, perfected
security interest in the Collateral, subject only to the prior lien of Prime
Administrative Agent;
(e) Neither the execution and delivery of this Agreement, nor the
consummation of any of the transactions hereby contemplated, nor compliance with
the terms and provisions hereof, will contravene or materially conflict with (i)
any material provision of law, statute or regulation to which Pledgor or the
Partnerships is subject or (ii) any judgment, license, order or permit
applicable to Pledgor or the Partnerships. No consent, approval, authorization
or order of any court, governmental authority, partner or third party is
required that has not been received or taken (i) for the grant by Pledgor of the
Security Interests, (ii) for the execution, delivery or performance of this
Agreement by Pledgor, (iii) for the perfection of the Security Interests, or
(iv) except for such notices as are required by the Code or the Loan Agreement,
for the exercise by the Administrative Agent of its rights and remedies
hereunder (provided, however, that the purchaser of the Collateral at any sale
thereof pursuant to Section 5.4 hereof may be required to obtain the consent of
the partners in the Partnerships and/or satisfy other conditions set forth in
the Partnership Agreements prior to such purchaser's admission as a partner in
the Partnership);
(f) The chief executive office and principal place of business of Pledgor
is in Austin, Travis County, Texas; and
(g) To the best knowledge and belief of Pledgor, Pledgor has fully
performed each and every one of his obligations and duties under the Partnership
Agreements on or prior to the date due; Pledgor has not received any notice of
any default in the performance of his obligations under the Partnership
Agreements or of any situation which could give rise to such an event of default
thereunder.
ARTICLE IV
PLEDGOR'S COVENANTS
Pledgor hereby covenants and agrees with the Administrative Agent that
until the Secured Indebtedness is paid and performed in full:
(a) Pledgor will not cause, permit or consent to any amendment or
modification to the Partnership Agreements in effect as of the date hereof
except as permitted in the Prime Loan Agreement;
(b) Pledgor will pay and discharge promptly when due all taxes,
assessments, forced contributions, governmental charges, fines, penalties, and
any other lawful claims, of every description, payable by Pledgor with respect
to (or which, if not paid could result in an encumbrance upon) any of the
Collateral, except as otherwise permitted by the terms of the Loan Agreement. In
the event that Pledgor should, for any reason, fail to pay and discharge
promptly any taxes, assessments, forced contributions, governmental charges,
fines, or penalties when due (subject to the provisions of the Prime Loan
Agreement), then the Administrative Agent shall be authorized, but shall not be
obligated, to pay the same, with full subrogation to all rights of any Person by
reason of such payment, and the amounts so paid, together with interest thereon
as provided herein, shall be secured by the Security Interests;
<PAGE>
(c) Pledgor will not sell, transfer, mortgage or otherwise encumber any
Collateral in any manner, except for the security interest in favor of Prime
Administrative Agent, without first obtaining the written consent of the
Administrative Agent. Any written consent to any such sale, mortgage, transfer
or encumbrance shall not be construed to be a waiver of this provision in
respect of any subsequent proposed sale, mortgage, transfer or encumbrance;
(d) Pledgor will, at its expense and in such manner and form as the
Administrative Agent may from time to time reasonably require, execute, deliver,
file and record any financing statement, specific assignment or other
instruments, certificates or papers and take any other action that may be
necessary or desirable, or that the Administrative Agent may from time to time
reasonably request, in order to create, preserve, perfect or validate any
Security Interest or to enable the Administrative Agent to exercise and enforce
its rights hereunder with respect to any of the Collateral. In the event, for
any reason, that the law of any jurisdiction other than the State of Texas
becomes or is applicable to the Collateral, or any part thereof, Pledgor agrees
to execute and deliver all such instruments and to do all such other things that
may be necessary or appropriate to preserve, protect and enforce the Security
Interests of the Administrative Agent under the law of such other jurisdiction,
to at least the same extent that the Security Interests would be protected under
the Code. To the extent permitted by applicable law, Pledgor hereby authorizes
the Administrative Agent to execute and file, in the name of Pledgor or
otherwise, Uniform Commercial Code financing statements that the Administrative
Agent in its sole discretion may deem necessary or appropriate to further
perfect the Security Interests;
(e) If Pledgor receives, by virtue of being or having been an owner of
any of the Collateral, any notes, other instruments, options, cash distributions
or any other distribution, resulting from a Capital Event (hereinafter defined)
Pledgor shall receive the same in trust for the benefit of the Administrative
Agent, shall immediately notify the Administrative Agent of such receipt and
shall immediately take all such actions and execute all such documents as the
Administrative Agent deems necessary or appropriate to continue or create as
perfected Liens, in favor of the Administrative Agent covering such notes, other
instruments, options, cash distributions, subject ony to the prior lien in favor
of the Prime Administrative Agent. As used herein, the term "Capital Event"
shall mean any event generating or resulting in revenues not attributable to the
normal business operations of the Partnerships including without limitation, any
mortgaging of assets, refinancing of existing indebtedness of any Partnership,
condemnation of any assets of any Partnership, sale or transfer of any assets of
any Partnership outside the ordinary course of business, or payment of insurance
proceeds. At all times other than during the continuance of an Event of Default,
Pledgor shall be entitled to receive free from the security interest hereof any
note, other instrument, option, cash distribution or any other distribution
resulting from any event other than a Capital Event;
(f) Pledgor will notify the Administrative Agent in writing prior to
the removal of Pledgor's chief executive office or principal place of business
from the State of Texas;
(g) Pledgor shall cause to be obtained any and all waivers and consents
necessary to make effective the grant contained in and to perfect the security
interest granted to the Administrative Agent pursuant to Section 2.1 hereof,
including without limitation, all necessary waivers and consents from the other
partners, if any, of each Partnership;
(h) Pledgor shall perform fully all obligations imposed upon it by any
agreements or instruments concerning all or any part of the Collateral,
including without limitation the Partnership Agreements and shall maintain in
full force and effect all such agreements and instruments, and shall not amend
or modify, or consent to the amendment or modification of such agreements or
instruments, without the prior written consent of the Administrative Agent; and
<PAGE>
(i) Pledgor shall promptly notify the Administrative Agent of any
material adverse change in any material fact or material circumstance warranted
or represented by Pledgor in this Agreement or in any other writing furnished by
Pledgor to the Administrative Agent in connection with the Collateral or the
Secured Indebtedness, and shall promptly notify the Administrative Agent of any
claim, action or proceeding affecting title to the Collateral, or any part
thereof, or the Security Interests herein, and, at the request of the
Administrative Agent, shall appear and defend, at Pledgor's expense, any such
action or proceeding.
ARTICLE V
GENERAL AUTHORITY AND POWERS AND REMEDIES
SECTION 5.1 Events of Default.
-----------------
Pledgor shall be in default under this Agreement upon the happening of
any of the following events or conditions (hereinafter called an "Event of
Default"):
(a) An Event of Default under the Loan Agreement shall occur; or
(b) The ownership of any of the Collateral becomes vested in a person or
entity other than Pledgor, except as permitted hereunder; or
(c) The Administrative Agent's Liens in any of the Collateral should
become unenforceable, or cease to be first priority Liens, subject only to the
prior lien of Prime Administrative Agent.
SECTION 5.2 Right to Receive Distributions. The Administrative Agent
shall have the right, at any time following the occurrence and during the
continuation of an Event of Default, to receive all payments and distributions
made to Pledgor upon or with respect to the Collateral and Pledgor agrees to
take all such action as the Administrative Agent may reasonably deem necessary
or appropriate to give effect to such right.
SECTION 5.3 General Authority. Pledgor hereby irrevocably appoints the
Administrative Agent, and its successors and assigns, the true and lawful
attorney-in-fact of Pledgor, with full power of substitution, in the name of
Pledgor, for the sole use and benefit of the Administrative Agent, but at
Pledgor's expense, to the extent permitted by law to exercise, at any time and
from time to time following the occurrence and during the continuance of an
Event of Default, all or any of the following powers with respect to all or any
of the Collateral:
(a) to ask, demand, sue for, collect, receive and give acquittance and
receipts for any and all monies due or to become due upon or by virtue thereof;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) preceding;
(c) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto;
(d) subject to Section 5.4 hereof, to sell, transfer, assign or
otherwise deal in or with the same or the proceeds thereof as fully and
effectually as if the Administrative Agent were the absolute owner thereof; and
<PAGE>
(e) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto.
In addition, the Administrative Agent, at any time, either before or after an
Event of Default, shall have the right, together with such accountants and other
agents or representatives as they may from time to time designate, to visit and
inspect the Partnerships' properties, assets, books, records and documents and
to discuss the Partnerships' affairs, finances and accounts with Pledgor's and
the Partnerships' representatives, officers or directors, during all business
hours as the Administrative Agent may designate, and to make and take away
copies of the Partnerships' records at the Administrative Agent's expense.
Pledgor shall furnish to Administrative Agent any information reasonably
requested by the Administrative Agent in connection with the Collateral. Pledgor
will maintain complete and accurate books and records regarding the Collateral.
SECTION 5.4 Remedies Upon Default.
---------------------
(a) If any Event of Default shall have occurred and is continuing, the
Administrative Agent, at its option, without demand, presentment, notice of
acceleration, intention to accelerate or other notice (which are fully waived)
may:
(1) exercise all the rights of a secured party under the Code
(whether or not the Code is in effect in the jurisdiction where such
rights are exercise, unless prohibited by applicable law).
(2) apply the cash, if any, then held by the Administrative Agent as
Collateral as specified in Section 5.6.
(3) sell all of the Collateral or any part thereof at public
or private sale or at any broker's board or on any securities exchange,
for cash, upon credit or for future delivery, and at such price or
prices as the Administrative Agent may reasonably deem satisfactory.
Upon the Administrative Agent's demand, Pledgor will take all steps
necessary to prepare the Collateral for and otherwise assist in any
proposed disposition of the Collateral. Any holder of the Secured
Indebtedness may be the purchaser of any or all of the Collateral so
sold at any public sale (or, if the Collateral is of a type customarily
sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, at any private sale) and
thereafter hold the same absolutely, free from any right or claim of
whatsoever kind. Any holder of the Secured Indebtedness shall have the
right to offset the amount of its bid against an equal amount of the
Secured Indebtedness held by such holder.
<PAGE>
Pledgor agrees that, because of the Securities Act of 1933, as amended,
or any other laws or regulations, and for other reasons, there may be
legal and/or practical restrictions or limitations affecting the
Administrative Agent in any attempts to dispose of certain portions of
the Collateral and for the enforcement of their rights. For these
reasons, the Administrative Agent is hereby authorized by Pledgor, but
not obligated, upon the occurrence and during the continuation of an
Event of Default, to sell all or any part of the Collateral at private
sale, subject to investment letter or in any other manner which will
not require the Collateral, or any part thereof, to be registered in
accordance with the Securities Act of 1933, as amended, or the rules
and regulations promulgated thereunder, or any other laws or
regulations, at a reasonable price at such private sale or other
distribution in the manner mentioned above. Pledgor understands that
the Administrative Agent may in its discretion approach a limited
number of potential purchasers and that a sale under such circumstances
may yield a lower price for the Collateral, or any part or party
thereof, than would otherwise be obtainable if such collateral were
either afforded to a larger number or potential purchasers, or
registered or sold in the open market. Pledgor agrees that such private
sale shall be deemed to have been made in a commercially reasonable
manner, and that the Administrative Agent has no obligation to delay
sale of any Collateral to permit the issuer thereof to register it for
public sale under any applicable federal or state securities laws.
The Administrative Agent is authorized, in connection with any such
sale (i) to restrict the prospective bidders on or purchasers of any of
the Collateral to a limited number of sophisticated investors who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of
such Collateral and (ii) to impose such other limitations or conditions
in connection with any such sale as the Administrative Agent reasonably
deems necessary in order to comply with applicable law. Pledgor
covenants and agrees that it will execute and deliver such documents
and take such other action as the Administrative Agent reasonably deems
necessary in order that any such sale may be made in compliance with
applicable law. Upon any such sale the Administrative Agent shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely, free from any claim or right of Pledgor
of whatsoever kind, including any equity or right of redemption of
Pledgor. Pledgor, to the extent permitted by applicable law, hereby
specifically waives all rights of redemption, stay or appraisal which
it has or may have under any law now existing or hereafter enacted.
Pledgor agrees that five (5) days' written notice from the
Administrative Agent to Pledgor of the Administrative Agent's intention
to make any such public or private sale or sale at a broker's board or
on a securities exchange shall constitute "reasonable notification"
within the meaning of Section 9-504(c) of the Code. Such notice shall
(1) in case of a public sale, state the time and place fixed for such
sale, (2) in case of sale at a broker's board or on a securities
exchange, state the board or exchange at which such a sale is to be
made and the day on which the Collateral, or the portion thereof so
being sold, will first be offered to sale at such board or exchange and
(3) in the case of a private sale, state the day after which such sale
may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Administrative Agent may fix in the notice of such sale. At any such
sale, the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Administrative Agent may reasonably determine.
The Administrative Agent shall not be obligated to make any such sale
pursuant to any such notice. The Administrative Agent may, without
notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned.
In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the selling price is paid by the purchaser
thereof, but the Administrative Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the
Collateral so sold and in case of any such failure, such Collateral may
again be sold upon like notice. The Administrative Agent, instead of
exercising the power of sale herein conferred upon it, may proceed by a
suit or suits at law or in equity to foreclose the Security Interests
and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
<PAGE>
(b) Without the limiting the foregoing, or imposing upon the
Administrative Agent any obligations or duties not required by applicable law,
Pledgor acknowledges and agrees that, in foreclosing upon any of the Collateral,
or exercising any other rights or remedies provided the Administrative Agent
hereunder or under applicable law, the Administrative Agent may, but shall not
be required to (1) qualify or restrict prospective purchasers of the Collateral
by requiring evidence of sophistication and/or creditworthiness, and requiring
the execution and delivery of confidentiality agreements or other documents and
agreements as a condition to such prospective purchasers' receipt of information
regarding the Collateral or participation in any public or private foreclosure
sale process; (2) provide to prospective purchasers the Partnership Agreements
and business and financial information regarding the Partnerships available in
the files of the Administrative Agent at the time of commencing the foreclosure
process, without the requirement that the Administrative Agent obtain, or seek
to obtain, any updated business or financial information or Partnership
Agreements, or verify, or certify to prospective purchasers, the accuracy of any
such business or financial information or Partnership Agreements; (3) sell at
foreclosure all, or a portion but not all, of the rights, titles and interests
of Pledgor in a particular Partnership or group of Partnerships; it being
further specifically acknowledged by Pledgor that limitations or potential
limitations on the transfer of certain Collateral under the Partnership
Agreements or other applicable agreements or law may limit the Administrative
Agent's right or ability to foreclose upon or sell certain rights, titles and
interests of Pledgor in the Partnerships; (4) offer for sale, and sell,
partnership interests either with, or without, first employing an appraiser,
investment banker, or broker with respect to the evaluation of Collateral, the
solicitation of purchasers for Collateral, or the manner of sale of Collateral.
(c) The Administrative Agent shall have all rights, remedies and
recourse granted in the Loan Agreement and the other Loan Documents or existing
at common law or equity (including specifically those granted by the Code), and
such rights and remedies (1) shall be cumulative and concurrent, (2) may be
pursued separately, successively or concurrently against Pledgor and any party
obligated to pay or perform the Obligations, any of the Collateral, or any other
security for any of the Obligations, at the sole discretion of the
Administrative Agent, and (3) may be exercised as often as occasion therefor
shall arise, it being agreed by Pledgor that the exercise or failure to exercise
any such rights or remedies shall in no event be construed as a waiver or
release thereof or of any other right, remedy or recourse.
(d) Notwithstanding a foreclosure upon any of the Collateral or
exercise of any other remedy by the Administrative Agent in connection with an
Event of Default, Pledgor shall not be subrogated thereby to any rights of the
Administrative Agent against the Collateral or any other security for any of the
Obligations. Pledgor shall not be deemed to be the owner of any interest in any
of the Obligations until all of the Obligations have been paid to the
Administrative Agent and are fully performed and discharged.
(e) All recitals in any instrument of assignment or any other
instrument executed by the Administrative Agent incident to the sale, transfer,
assignment or other disposition or utilization of the Collateral or any part
thereof hereunder shall be presumptive evidence of the matters stated therein
and all prerequisites of such sale or other action contained in such recitals
shall be presumed to have been performed or to have occurred.
<PAGE>
SECTION 5.5 Waivers by Pledgor. In case of any Event of Default,
neither Pledgor nor anyone claiming by, through or under Pledgor, to the extent
Pledgor may lawfully so agree, shall or will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension or redemption law now
or hereafter in force in any locality where any of the Collateral is situated
for purposes of applicable law, in order to prevent or hinder the enforcement of
this Agreement, or the absolute sale of the Collateral, or the final and
absolute putting into possession thereof, immediately after such sale, of the
purchaser thereof; and Pledgor in Pledgor's own right and for all who may claim
under Pledgor, hereby waives, to the fullest extent that Pledgor may lawfully do
so, the benefit of any and all right to have the Collateral marshaled upon any
enforcement of the Security Interests herein granted, and Pledgor agrees that
the Administrative Agent or any court having jurisdiction to enforce the
Security Interests may sell the Collateral in parts or as an entirety.
SECTION 5.6 Application of Proceeds. The Administrative Agent shall
apply the proceeds of any foreclosure sale or other realization upon the
Collateral as follows (as modified, if necessary, by the requirements of
applicable law):
(a) First, to the payment of all reasonable costs and expenses of any
foreclosure and collection hereunder and all proceedings in connection
therewith, including reasonable compensation to Administrative Agent's counsel;
(b) Then, to the reimbursement of the Administrative Agent for all
disbursements made by the Administrative Agent for taxes, assessments or liens
superior to the Security Interests and which the Administrative Agent shall deem
expedient to pay;
(c) Then, to the reimbursement of the Administrative Agent for any other
disbursements made by, or reasonable expenses incurred by, the Administrative
Agent in accordance with the terms hereof;
(d) Then, to the Prime Administrative Agent until all secured obligations
of Pledgor to it and the Prime Lenders are paid;
(e) Then, to the Secured Indebtedness, in any manner determined by the
Administrative Agent in its sole discretion; and
(f) The remainder of such proceeds, if any, shall be paid to Pledgor.
The foregoing application provisions shall apply not only to proceeds
resulting from foreclosure but also to proceeds or distributions resulting from
any other claim, (including claims made in bankruptcy proceedings), action or
proceeding to enforce or protect the Administrative Agent's lien in the
Collateral.
SECTION 5.7 Enforcement of Secured Indebtedness. Nothing in this
Agreement shall affect or impair the unconditional and absolute right of the
Administrative Agent to enforce the Secured Indebtedness as and when the same
shall become due in accordance with the terms of the Loan Documents whether by
acceleration or otherwise.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Terms Commercially Reasonable. The terms of this Agreement
shall be deemed commercially reasonable within the meaning of the Uniform
Commercial Code in effect and applicable hereto.
SECTION 6.2 Headings. The headings of articles and sections herein are
inserted only for convenience and shall in no way define, describe or limit the
scope or intent of any provision of this Agreement.
<PAGE>
SECTION 6.3 Amendments. No change, amendment, modification,
cancellation or discharge of any provision of this Agreement shall be valid
unless consented to in writing by the Administrative Agent and Pledgor (subject
to the terms of the Loan Agreement).
SECTION 6.4 Assignment of the Administrative Agent's Rights. The
Administrative Agent shall have the right to assign all or any portion of its
rights under this Agreement to any subsequent holder or holders of the
Obligations.
SECTION 6.5 Parties in Interest. As and when used herein, the term
"Pledgor" shall mean and include Pledgor herein named and his successors and
permitted assigns, and the term "Administrative Agent" shall mean and include
the Administrative Agent herein named and his successors and assigns, and all
covenants and agreements herein shall be binding upon and inure to the benefit
of Pledgor and the Administrative Agent and their respective assigns, provided
that Pledgor shall have no right to assign his rights hereunder to any other
Person except in connection with a transfer of the Collateral permitted
hereunder.
SECTION 6.6 APPLICABLE LAWS. THIS AGREEMENT SHALL BE CONSTRUED,
INTERPRETED AND ENFORCED UNDER AND PURSUANT TO THE LAWS OF THE STATE OF TEXAS
AND APPLICABLE FEDERAL LAW. IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE
INVALID OR UNENFORCEABLE, THE VALIDITY AND ENFORCEABILITY OF THE OTHER
PROVISIONS OF THIS AGREEMENT SHALL REMAIN UNAFFECTED.
SECTION 6.7 Notices. Any notices or other communications required or
permitted to be given by this Agreement or any other documents and instruments
referred to herein must be given in accordance with Section 11 of the Loan
Agreement, to the address of such party as follows:
If to the Administrative Agent: 515 Congress Avenue, 11th Floor
Austin, Texas 78701
Attn: Wade Morgan
If to Pledgor: 1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746-6550
Attn: Treasurer
SECTION 6.8 Financing Statement. The Administrative Agent shall be
entitled at any time to file a photographic or other reproduction of this
Agreement as a financing statement, but the failure of the Administrative Agent
to do so shall not impair the validity or enforceability of this Agreement.
SECTION 6.9 Obligations Absolute. All rights and remedies of the
Administrative Agent hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan Agreement
or any of the other Loan Documents or any other agreement or
instrument relating to any of the foregoing;
(b) any change in the time, manner, or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Loan
Agreement or any of the other Loan Documents;
<PAGE>
(c) any exchange, release, or nonperfection of any Collateral, or
any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Obligations; or
(d) any other circumstance (other than payment in full of the
Obligations) that might otherwise constitute a defense available to, or
a discharge of, Pledgor.
SECTION 6.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument, and in making proof of this
Agreement it shall not be necessary to produce or account for more than one such
counterpart.
SECTION 6.11 ENTIRE AGREEMENT. THIS AGREEMENT EMBODIES THE FINAL,
ENTIRE AGREEMENT OF PLEDGOR, THE AGENTS AND THE LENDERS WITH RESPECT TO
PLEDGOR'S PLEDGE OF THE PLEDGED PARTNERSHIP INTERESTS AND RESTATES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS AGREEMENT IS
INTENDED BY PLEDGOR, THE AGENTS AND THE LENDERS AS A FINAL AND COMPLETE
EXPRESSION OF THE TERMS OF THIS AGREEMENT, AND NO COURSE OF DEALING BETWEEN
PLEDGOR, THE AGENTS OR THE LENDERS, NO COURSE OF PERFORMANCE, NO TRADE
PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS AGREEMENT. THERE
ARE NO ORAL AGREEMENTS AMONG PLEDGOR, THE AGENTS AND THE LENDERS.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
<PAGE>
Pledge and Security Agreement
IN WITNESS WHEREOF, Pledgor has executed this Agreement as of the day
and year first above written.
PLEDGOR:
OHIO LITHO, INC.,
a Delaware corporation
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
<PAGE>
Exhibit A
EXHIBIT A
PARTNERSHIPS
Ohio Mobile Lithotripter, Ltd.
Ohio Mobile Lithotripter II, Ltd.
<PAGE>
Exhibit B
EXHIBIT B
PARTNERSHIP AGREEMENTS
First Amended and Restated Agreement of Limited Partnership of Ohio Mobile
Lithotripter, Ltd. dated August 1, 1991, as amended by First Amendment to First
Amended and Restated Agreement of Limited Partnership dated as of December 31,
1992
Certificate of Limited Partnership of Ohio Mobile Lithotripter, Ltd. dated May
21, 1991
First Amended and Restated Agreement of Limited Partnership of Ohio Mobile
Lithotripter II, Ltd.
Certificate of Limited Partnership of Ohio Mobile Lithotripter II, Ltd. dated
August 23, 1995
Borrower Security Agreement
BORROWER SECURITY AGREEMENT
THIS BORROWER SECURITY AGREEMENT (the "Agreement") dated as of January
31, 2000, is executed by PRIME REFRACTIVE MANAGEMENT, L.L.C., a Delaware limited
liability company (the "Borrower"), for the benefit of BANK OF AMERICA, N.A., a
national banking association ("B of A"), not in its individual capacity but
solely as administrative agent for itself and each of the other Lenders (each, a
"Lender" and collectively, the "Lenders") as defined in the Loan Agreement (as
hereinafter defined) (in such capacity, together with its successors and assigns
in such capacity, the "Administrative Agent").
R E C I T A L S:
- - - - - - - -
A. Borrower, B of A, as administrative agent, BankBoston, N.A., as
documentation agent, and the Lenders have entered into that certain Loan
Agreement dated January __, 2000, (as the same may be amended, restated,
extended, supplemented or modified from time to time, the "Loan Agreement"),
pursuant to which the Lenders have agreed to make an advancing term loan to the
Borrower with advances thereunder not to exceed an aggregate principal amount of
Fourteen Million and 00/100 Dollars ($14,000,000.00).
B. The Agents and the Lenders have conditioned their obligations under the
Loan Agreement upon the execution and delivery of this Agreement by the
Borrower.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Terms Defined in Loan Agreement. Capitalized terms used and
not otherwise defined herein shall have the same meanings as set forth in the
Loan Agreement.
Section 1.2 Terms Defined in Uniform Commercial Code. Terms used herein
which are defined in the Uniform Commercial Code as adopted by the State of
Texas, unless otherwise defined herein or in the Loan Agreement, shall have
their meanings as set forth in the Uniform Commercial Code as adopted by the
State of Texas.
Section 1.3 Additional Definitions. As used in this Agreement, the
following terms shall have the following meanings:
<PAGE>
3
Borrower Security Agreement
"Accounts" means any "account," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Borrower, and, in
any event, shall include, without limitation, each of the following, whether now
owned or hereafter acquired by the Borrower: (a) all rights of the Borrower to
payment for goods sold or leased or services rendered, whether or not earned by
performance; (b) all accounts receivable of the Borrower; (c) all rights of the
Borrower to receive any payment of money or other form of consideration; (d) all
security pledged, assigned, or granted to or held by the Borrower to secure any
of the foregoing; (e) all guaranties of, or indemnifications with respect to,
any of the foregoing; and (f) all rights of the Borrower as an unpaid seller of
goods or services, including, but not limited to, all rights of stoppage in
transit, replevin, reclamation, and resale.
"Chattel Paper" means any "chattel paper," as such term is
defined in Article 9 of the UCC, now owned or hereafter acquired by the
Borrower.
"Collateral" has the meaning specified in Section 2.1 of this
Agreement.
"Document" means any "document," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Borrower,
including, without limitation, all documents of title and warehouse receipts of
the Borrower.
"Equipment" means any "equipment," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Borrower and, in
any event, shall include, without limitation, all machinery, equipment,
furnishings, and fixtures now owned or hereafter acquired by the Borrower and
any and all additions, substitutions, and replacements of any of the foregoing,
wherever located, together with all attachments, components, parts, equipment,
and accessories installed thereon or affixed thereto.
"General Intangibles" means any "general intangibles," as such
term is defined in Article 9 of the UCC, now owned or hereafter acquired by the
Borrower and, in any event, shall include, without limitation, each of the
following, whether now owned or hereafter acquired by the Borrower: (a) all of
the Borrower's patents, patent applications, patent rights, service marks,
trademarks, trade names, trade secrets, intellectual property, registrations,
goodwill, copyrights, franchises, licenses, permits, proprietary information,
customer lists, designs, and inventions; (b) all of the Borrower's books,
records, data, plans, manuals, computer software, and computer programs; (c) all
of the Borrower's contract rights; (d) all of the Borrower's partnership
interests, joint venture, limited liability company,and membership interests
(but only to the extent not otherwise pledged to the Administrative Agent
pursuant to a separate pledge or security agreement), deposit accounts,
investment accounts, and certificates of deposit; (e) all rights of the Borrower
to payment under letters of credit and similar agreements; (f) all tax refunds
and tax refund claims of the Borrower; (g) all choses in action and causes of
action of the Borrower (whether arising in contract, tort, or otherwise and
whether or not currently in litigation) and all judgments in favor of the
Borrower; (h) all rights and claims of the Borrower under warranties and
indemnities; and (i) all rights of the Borrower under any insurance, surety, or
similar contract or arrangement.
"Instrument" means any "instrument," as such term is defined
in Article 9 of the UCC and any note payable to Borrower or its order together
with all collateral securing such note and all agreements and documents related
thereto or arising therefrom, now owned or hereafter acquired by the Borrower.
"Inventory" means any "inventory," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Borrower, and, in
any event, shall include, without limitation, each of the following, whether now
owned or hereafter acquired by the Borrower: (a) all goods and other personal
property of the Borrower that are held for sale or lease or to be furnished
under any contract of service; (b) all raw materials, work-in-process, finished
goods, inventory, supplies, and materials of the Borrower; (c) all wrapping,
packaging, advertising, and shipping materials of the Borrower; (d) all goods
that have been returned to, repossessed by, or stopped in transit by the
Borrower; and (e) all Documents evidencing any of the foregoing.
"Investment Property" means "investment property," as such
term is defined in Section 9.115(a)(6) of the Texas Business and Commerce Code.
<PAGE>
"Motor Vehicle" means all cars, trucks, vans and other motor
vehicles now owned or hereafter acquired by the Borrower which are used by the
Borrower for the transfer of lithotripters and lithotripsy related equipment,
including without limitation, those motor vehicles listed on Schedule 1 hereto,
and any and all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
"Proceeds" means any "proceeds," as such term is defined in
Article 9 of the UCC and, in any event, shall include, but not be limited to,
(a) any and all proceeds of any insurance, indemnity, warranty, or guaranty
payable to the Borrower from time to time with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and payable to the
Borrower from time to time in connection with any requisition, confiscation,
condemnation, seizure, or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Securities" means all shares of stock of any Person now owned
or hereafter acquired by the Borrower including, without limitation, each of the
shares listed on Schedule 2 hereto, and all dividends, cash, stock dividends,
instruments and other investment property from time to time received, receivable
by, or otherwise distributed to the Borrower for its own account in respect of
or in exchange for any or all of such shares, and the certificates representing
such shares.
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas or, if so required with respect to any particular Collateral by
mandatory provisions of applicable law, as in effect in the jurisdiction in
which such Collateral is located.
ARTICLE II
Security Interest and Pledge
Section 2.1 Security Interest and Pledge. The Borrower hereby pledges
and grants to the Administrative Agent, for the pro rata benefit of the Lenders,
a lien on and security interest in all of the Borrower's right, title, and
interest in and to the following, whether now owned or hereafter arising or
acquired and wherever located (collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Instruments;
(d) all General Intangibles and all Securities;
(e) all Investment Property;
(f) all Documents;
(g) all Equipment, including, without limitation, all Motor Vehicles;
(h) all Inventory;
<PAGE>
(i) all other goods and personal property of the Borrower whether tangible
or intangible; and
(j) all Proceeds and products of any or all of the foregoing.
Section 2.2 Secured Indebtedness. The Collateral shall secure the
following obligations, indebtedness, and liabilities (whether at stated
maturity, by acceleration or otherwise) (all such obligations, indebtedness, and
liabilities being hereinafter sometimes called the "Secured Indebtedness"):
(a) the Obligations;
(b) all reasonable costs and expenses, including, without
limitation, all reasonable attorneys' fees and legal expenses, incurred by any
of the Agents or any Lender to preserve and maintain the Collateral, collect the
obligations herein described, and enforce this Agreement; and
(c) all extensions, renewals, and modifications of any of the foregoing.
Section 2.3 Borrower Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) the Borrower shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent of any of its rights hereunder shall not release the
Borrower from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (c) neither the Administrative Agent
nor any Lender shall have any obligation or liability under any of the contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
the Administrative Agent or any Lender be obligated to perform any of the
obligations or duties of the Borrower thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
ARTICLE III
Representations and Warranties
To induce the Administrative Agent to enter into this Agreement and the
Agents and the Lenders to enter into the Loan Agreement, the Borrower represents
and warrants to the Administrative Agent that:
Section 3.1 Title. The Borrower is, and with respect to Collateral
acquired after the date hereof the Borrower will be, the legal and beneficial
owner of the Collateral free and clear of any Lien, security interest, pledge,
claim or other encumbrance (except for Liens permitted by Section 9.2 of the
Loan Agreement and liens in favor of the Prime Administrative Agent (as
hereinafter defined)) or, with respect to the Securities, any right or option on
the part of any Person (other than the Lenders) to purchase or otherwise acquire
the Securities or any part thereof, except for the security interests granted
hereunder, Liens permitted by Section 9.2 of the Loan Agreement, and liens in
favor of the Prime Administrative Agent (as hereinafter defined). The liens and
security interests granted herein are subject and subordinate to the liens
granted in favor of Bank of America, N.A., as Administrative Agent under the
Fourth Amended and Restated Loan Agreement dated as of the date hereof (the
"Prime Loan Agreement") among Prime Medical Services, Inc., Bank of America,
N.A., as Administrative Agent (the "Prime Administrative Agent"), BankBoston,
N.A., as Documentation Agent, and the lenders from time to time party thereto.
<PAGE>
Section 3.2 Accounts. Unless the Borrower has given the Administrative
Agent written notice to the contrary, whenever the security interest granted
hereunder attaches to an Account, the Borrower shall be deemed to have
represented and warranted to the Administrative Agent as to each and all of its
Accounts that (a) each Account is genuine and in all respects what it purports
to be, (b) each Account represents the legal, valid, and binding obligation of
the account Borrower evidencing indebtedness unpaid and owed by such account
Borrower arising out of the performance of labor or services by the Borrower or
the sale or lease of goods by the Borrower, (c) the amount of each Account
represented as owing is the correct amount actually and unconditionally owing
except for normal trade discounts granted in the ordinary course of business,
and (d) no Account is subject to any offset, counterclaim, or other defense.
Section 3.3 Rule 144 Securities. With respect to all Collateral that is
Securities which are subject to Rule 144 under the Securities Act of 1933, as
such rule and act are amended at the time in question and any successor in whole
or in part thereto, (a) the Borrower is the beneficial and record owner thereof,
free and clear of any Liens or transfer restrictions (other than restrictions on
the amount thereof which may be sold, and the manner in which sales may be made,
imposed by such Rule 144), (b) the Borrower acquired such Securities directly
from the issuer thereof more than two (2) years prior to the date hereof in
transactions not involving any public offering, (c) the Borrower paid the
purchase price therefor in cash more than two (2) years prior to the date
hereof, (d) since such date of acquisition, the Borrower has not had a short
position in, or any put or option to dispose of, any capital stock of any issuer
thereof or Securities convertible into capital stock of any issuer thereof, (e)
neither the Borrower, nor any person or entity, the sales of which are required
by Rule 144 to be aggregated with the sales of the Borrower, has sold any
capital stock of any issuer of such Securities during the period of six (6)
months prior to the date hereof, other than sales pursuant to an effective
registration statement under the Securities Act of 1933, as amended, and (f) to
the Borrower's best knowledge, each issuer of such Securities has timely filed
all reports required to be filed by it under the Securities Exchange Act of
1934, as amended.
Section 3.4 Financing Statements. No financing statement, security
agreement, or other Lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of the
Prime Administrative Agent, any lender under the Prime Agreement, Administrative
Agent, or any Lender pursuant to this Agreement. The Borrower has not within the
past five (5) years had a trade name or done business under any name other than
its legal name set forth at the beginning of this Agreement.
Section 3.5 Principal Place of Business. The principal place of
business and chief executive office of the Borrower, and the office where the
Borrower keeps its books and records, is located at the address of the Borrower
shown on the signature pages of this Agreement.
Section 3.6 Location of Collateral. All Inventory and Equipment of the
Borrower are located at the places specified on Schedule 3 hereto. The Borrower
has exclusive possession and control of its Inventory and Equipment. None of the
Inventory or Equipment of the Borrower is evidenced by a Document (including,
without limitation, a negotiable document of title). All Instruments, Chattel
Paper, Securities and certificates of title of the Borrower have been delivered
to the Prime Administrative Agent, to perfect on its behalf and on behalf of the
Administrative Agent.
<PAGE>
Section 3.7 Perfection. Upon the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule 4 attached hereto,
and upon the Administrative Agent's obtaining possession of all Documents,
Instruments, Chattel Paper, Securities and certificates of title of the
Borrower, and upon the Administrative Agent's obtaining control of all
Investment Property, the security interest in favor of the Administrative Agent
created herein will constitute a valid and perfected Lien upon and security
interest in the Collateral, subject to no equal or prior Lien, except in favor
of the Prime Administrative Agent and as permitted by Section 9.2 of the Loan
Agreement.
Section 3.8 Independent Investigation. The Borrower has, independently
and without reliance upon any of the Agents or any Lender and based upon such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. There are no conditions
precedent to the full effectiveness of this Agreement that have not been fully
and permanently satisfied.
Section 3.9 Litigation. Except as disclosed on Schedule 7.5 to the
Prime Agreement, there is no litigation, investigation, or governmental
proceeding threatened against the Borrower or any of its properties which if
adversely determined would have a material adverse effect on the Collateral or
the financial condition, operations, or business of the Borrower, any Material
Subsidiary or the Companies taken as a whole.
ARTICLE IV
Covenants
The Borrower covenants and agrees with the Administrative Agent that
until the Secured Indebtedness is paid and performed in full and the Commitments
have terminated:
Section 4.1 Encumbrances. Except as permitted by Section 9.2 of the
Loan Agreement and liens in favor of the Prime Administrative Agent, the
Borrower shall not create, permit, or suffer to exist, and shall defend the
Collateral against, any Lien, security interest, or other encumbrance on the
Collateral, and shall defend the Borrower's rights in the Collateral and the
Administrative Agent's security interest in the Collateral against the claims
and demands of all Persons. The Borrower shall do nothing to impair the rights
of the Administrative Agent in the Collateral.
Section 4.2 Delivery. Prior to or concurrently with the execution and
delivery of this Agreement, Borrower shall deliver to the Prime Administrative
Agent to acknowledge the Administrative Agent's lien and security interest in
all certificates identified on Schedule 2 hereto, with all Chattel Paper,
Instruments and Documents of the Borrower.
<PAGE>
Section 4.3 Modification of Accounts. The Borrower shall, in accordance
with prudent business practices, endeavor to collect or cause to be collected
from each account Borrower under its Accounts, as and when due, any and all
amounts owing under such Accounts. Without the prior written consent of the
Administrative Agent, the Borrower shall not (a) grant any extension of time on
any Account for any payment or grant extensions of time for payments on its
Accounts which cause the aggregate amount of all payments extended by the
Borrower on its Accounts during any fiscal year of the Borrower to exceed
$150,000.00, (b) compromise, compound, or settle any of the Accounts for less
than the full amount thereof; provided, however, that the Borrower may
compromise, compound or settle any Account which is an amount less than
$50,000.00, provided the aggregate amount compromised, compounded or settled
during any fiscal year of the Borrower shall not exceed $150,000.00, (c)
release, in whole or in part, any Person liable for payment of an Account in
excess of $50,000.00, (d) allow any credit or discount for payment with respect
to any Account in excess of $50,000.00, other than trade discounts granted in
the ordinary course of business; provided, however, that the aggregate amount of
all credits or discounts granted during any fiscal year of the Borrower shall
not exceed $150,000.00, or (e) release any Lien, security interest, or guaranty
securing any Account in excess of $50,000.00.
Section 4.4 Disposition of Collateral. The Borrower shall not sell,
lease, assign (by operation of law or otherwise), or otherwise dispose of, or
grant any option with respect to, the Collateral or any part thereof without the
prior written consent of the Administrative Agent, except the Borrower may sell
Inventory in the ordinary course of business.
Section 4.5 Distributions. If the Borrower shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or distribution in connection with
any reclassification, increase, or reduction of capital or issued in connection
with any reorganization), option or rights, whether as an addition to, in
substitution of, or an exchange for any Collateral or otherwise, the Borrower
agrees to accept the same as the Administrative Agent's agent and to hold the
same in trust for the Administrative Agent and to deliver the same forthwith to
the Prime Administrative Agent in the exact form received, with the appropriate
endorsement of the Borrower when necessary and/or appropriate undated stock
powers duly executed in blank, to be held by the Prime Administrative Agent on
its own behalf and on behalf of Administrative Agent as additional Collateral
for the Secured Indebtedness, subject to the terms hereof. Any sums paid upon or
in respect of the Securities upon the liquidation or dissolution of the issuer
thereof shall be paid over to the Prime Administrative Agent to be held by it as
additional Collateral for the Secured Indebtedness subject to the terms hereof;
and in case any distribution of capital shall be made on or in respect of the
Securities or any property shall be distributed upon or with respect to the
Securities pursuant to any recapitalization or reclassification of the capital
of the issuer thereof or pursuant to any reorganization of the issuer thereof,
the property so distributed shall be delivered to the Prime Administrative Agent
to be held by it, as additional Collateral for the Secured Indebtedness, subject
to the terms hereof. All sums of money and property so paid or distributed in
respect of the Securities that are received by the Borrower shall, until paid or
delivered to the Administrative Agent (or the Prime Administrative Agent, so
long as it has a prior lien), be held by the Borrower in trust as additional
security for the Secured Indebtedness.
<PAGE>
Section 4.6 Further Assurances. At any time and from time to time, upon
the request of the Administrative Agent, and at the sole expense of the
Borrower, the Borrower shall promptly execute and deliver all such further
instruments, agreements, and documents and take such further action as the
Administrative Agent may reasonably deem necessary or desirable to preserve and
perfect its security interest in the Collateral and carry out the provisions and
purposes of this Agreement. Without limiting the generality of the foregoing,
the Borrower shall: (a) execute and deliver to the Administrative Agent such
financing statements as the Administrative Agent may from time to time require;
(b) deliver and pledge to the Administrative Agent (or the Prime Administrative
Agent, so long as it has a prior lien) all Documents (including, without
limitation, negotiable documents of title) evidencing Inventory or Equipment;
(c) deliver and pledge to the Administrative Agent (or the Prime Administrative
Agent, so long as it has a prior lien) all certificates of title required by the
Loan Agreement, Instruments and Chattel Paper of the Borrower with any necessary
endorsements; and (d) execute and deliver to the Administrative Agent such other
documents, instruments, and agreements as the Administrative Agent may
reasonably require to perfect and maintain the validity, effectiveness, and
priority of the Loan Documents and the Liens intended to be created thereby. The
Borrower authorizes the Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, relating to all or any part of
the Collateral without the signature of the Borrower where permitted by law. A
carbon, photographic, or other reproduction of this Agreement or of any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement.
Section 4.7 Risk of Loss; Insurance. The Agents and the Lenders shall
not be responsible for any loss or damage to the Collateral. The Borrower shall,
at its own expense, maintain 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 Borrower operates consistent
with past practices and to the extent available on commercially reasonable
terms, provided that in any event the Borrower will maintain workmen's
compensation insurance, property insurance, comprehensive general liability
insurance, professional liability insurance and business interruption insurance
reasonably satisfactory to the Administrative Agent. Each insurance policy
covering Collateral shall name the Administrative Agent as loss payee for the
benefit of the Lenders as its interest 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.
Section 4.8 Inspection Rights. The Borrower shall permit the
Administrative Agent and each Lender and their respective representatives to
examine, inspect, and audit the Collateral and to examine, inspect, and copy the
Borrower's books and records at any reasonable time and as often as the
Administrative Agent or any such Lender may desire. The Administrative Agent and
each Lender may at any time and from time to time contact account Borrowers and
other obligors to verify the existence, amounts, and terms of the Borrower's
Accounts.
Section 4.9 Corporate Changes. The Borrower shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
the Borrower shall have given the Administrative Agent thirty (30) days prior
written notice thereof and shall have taken all action reasonably deemed
necessary or desirable by the Administrative Agent to make each financing
statement not seriously misleading. The Borrower shall not change its principal
place of business, chief executive office, or the place where it keeps its books
and records unless it shall have given the Administrative Agent thirty (30) days
prior written notice thereof and shall have taken all action reasonably deemed
necessary or desirable by the Administrative Agent to cause its security
interest in the Collateral to be perfected with the priority required by this
Agreement.
Section 4.10 Books and Records; Information. The Borrower shall keep
accurate and complete books and records of the Collateral and the Borrower's
business and financial condition in accordance with GAAP. The Borrower shall
from time to time at the request of the Administrative Agent deliver to the
Administrative Agent such information regarding the Collateral and the Borrower
as the Administrative Agent may reasonably request, including, without
limitation, lists and descriptions of the Collateral and evidence of the
identity and existence of the Collateral. The Borrower shall mark its records to
reflect the security interest of the Administrative Agent hereunder.
Section 4.11 Equipment and Inventory.
-----------------------
(a) The Borrower shall keep the Equipment and Inventory at the
locations specified on Schedule 3 hereto or, upon thirty (30) days
prior written notice to the Administrative Agent, at such other places
within the United States of America where all action required to
perfect the Administrative Agent's security interest in the Equipment
and Inventory with the priority required by this Agreement shall have
been taken.
<PAGE>
(b) The Borrower shall maintain the Equipment and Inventory in accordance
with Section 8.3 of the Loan Agreement.
Section 4.12 Warehouse Receipts Non-Negotiable. The Borrower agrees
that if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any of the Collateral, such warehouse receipt or receipt in
the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under relevant law).
Section 4.13 Taxes and Claims. The Borrower shall pay and discharge,
before the same become delinquent, (a) all material taxes, assessments, and
governmental charges imposed upon it or upon any of its property, and (b) all
material lawful claims that, if unpaid, might become a Lien upon any of its
property; provided, however, that the Borrower shall not be required to pay or
discharge any such tax, assessment, or governmental charge which is being
contested in good faith by proper proceedings being diligently pursued and for
which adequate reserves have been established in accordance with GAAP.
Section 4.14 Compliance with Laws. The Borrower shall comply in all
material respects with all material applicable laws, rules, regulations, orders,
and decrees of any Governmental Authority or arbitrator.
Section 4.15 Compliance with Agreements. The Borrower shall comply in
all material respects with all agreements, contracts, and instruments binding on
it or affecting its properties or businesses, 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 Borrower, any Material Subsidiary
or the Companies (taken as a whole).
Section 4.16 Notification. Except as permitted by Section 9.2 of the
Loan Agreement and Section 9.2 of the Prime Loan Agreement, the Borrower shall
promptly notify the Administrative Agent of (a) any Lien, security interest,
encumbrance, or claim that has attached to or been made or asserted against any
of the Collateral, (b) any material change in any of the Collateral, including,
without limitation, any material damage to or loss of any material portion of
the Collateral, (c) the occurrence of any other event that could have a material
adverse effect on the Collateral or the security interest created hereunder, and
(d) the occurrence or existence of any Default.
Section 4.17 Collection of Accounts. Except as otherwise provided in
this Section or in any other Loan Document, the Borrower shall have the right to
collect and receive payments on the Accounts. In connection with such
collections, the Borrower may take (and, at the Administrative Agent's
direction, shall take) such actions as the Borrower or the Administrative Agent
may reasonably deem necessary or advisable to enforce collection of the
Accounts.
Section 4.18 Additional Securities. The Borrower shall not consent to
or approve the issuance of any additional shares of any class of capital stock
of the issuers of any of the Securities, or any securities convertible into, or
exchangeable for, any such shares or any warrants, options, rights, or other
commitments entitling any Person to purchase or otherwise acquire any such
shares.
<PAGE>
Section 4.19 Provide Information. The Borrower shall fully cooperate,
to the extent reasonably requested by the Administrative Agent, in the
completion of any notice, form, schedule, or other document filed by the
Administrative Agent on its own behalf or on behalf of the Borrower, including,
without limitation, any required notice or statement of beneficial ownership or
of the acquisition of beneficial ownership of the Securities and any notice of
proposed sale of such Securities pursuant to Rule 144 as promulgated by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended. Without limiting the generality of the foregoing, the Borrower shall
furnish to the Administrative Agent any and all information which the
Administrative Agent may reasonably request for purposes of any such filing,
regarding the Borrower, the Securities, and any issuer of any of the Securities,
and the Borrower shall disclose to the Administrative Agent all material adverse
information known by the Borrower with respect to the operations of any issuer
of any of the Securities.
Section 4.20 Notification of Changes in Beneficial Ownership. The
Borrower shall promptly notify the Administrative Agent of any sale of
securities of any Subsidiary of the Borrower or by any Person named on the
Borrower's Rule 144 questionnaire and shall furnish promptly to the
Administrative Agent a copy of any Form 144 filed in respect of any such sale.
In addition, if the Borrower or any other Person named in the Borrower's Rule
144 questionnaire shall file with the SEC a form or other document reporting any
change in the beneficial ownership of the common stock of any Subsidiary of the
Borrower, the Borrower shall promptly furnish to the Administrative Agent a copy
of such form or document.
Section 4.21 Restriction on Sales after Default. The Borrower shall not
sell or suffer or permit any Person named in the accompanying Rule 144
questionnaire to sell any shares of the same class of securities as the
Securities at any time after any Event of Default shall have occurred.
Section 4.22 Fixtures. For any Collateral that is a fixture or an
accession which has been attached to real estate or other goods prior to the
perfection of the security interest granted in Section 2.1 hereof, the Borrower
shall furnish to Administrative Agent, upon demand, a disclaimer of interest in
each such fixture or accession and a consent in writing to the security interest
of Administrative Agent therein, signed by all persons and entities having any
interest in such fixture or accession by virtue of any interest in the real
estate or other goods to which such fixture or accession has been attached.
Section 4.23 Notation on Title Certificates. If certificates of title
are issued or outstanding with respect to any of the Collateral, the Borrower
shall cause the security interest granted in Section 2.1 hereof to be properly
noted thereon.
ARTICLE V
Rights of the Administrative Agent
Section 5.1 Power of Attorney. The Borrower hereby irrevocably
constitutes and appoints the Administrative Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the name of the
Borrower or in its own name, to take any and all action and to execute any and
all documents and instruments which the Administrative Agent at any time and
from time to time deems reasonably necessary or desirable to accomplish the
purposes of this Agreement if an Event of Default shall have occurred and be
continuing, and, without limiting the generality of the foregoing, the Borrower
hereby gives the Administrative Agent the power and right on behalf of the
Borrower and in its own name to do any of the following (subject to the rights
of the Borrower under Sections 5.2 and 5.3 hereof), without notice to or the
consent of the Borrower if an Event of Default shall have occurred and be
continuing:
<PAGE>
(a) to demand, sue for, collect, or receive in the name of the
Borrower or in its own name, any money or property at any time payable
or receivable on account of or in exchange for any of the Collateral
and, in connection therewith, endorse checks, notes, drafts,
acceptances, money orders, documents of title, or any other instruments
for the payment of money under the Collateral or any policy of
insurance;
(b) to pay or discharge taxes, Liens, or other encumbrances levied or
placed on or threatened against the Collateral;
(c) to notify post office authorities to change the address for delivery of
mail of the Borrower to an address designated by the Administrative Agent and to
receive, open. and subsequently deliver to the Borrower mail addressed to the
Borrower; and
(d) (i) to direct account Borrowers and any other parties
liable for any payment under any of the Collateral to make payment of
any and all monies due and to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall direct; (ii)
to receive payment of and receipt for any and all monies, claims, and
other amounts due and to become due at any time in respect of or
arising out of any Collateral; (iii) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against Borrowers, assignments, proxies, stock powers,
verifications, and notices in connection with accounts and other
documents relating to the Collateral; (vi) to commence and prosecute
any suit, action, or proceeding at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof
and to enforce any other right in respect of any Collateral; (v) to
defend any suit, action, or proceeding brought against the Borrower
with respect to any Collateral; (vi) to settle, compromise, or adjust
any suit, action, or proceeding described above and, in connection
therewith, to give such discharges or releases as the Administrative
Agent may deem appropriate; (vii) to exchange any of the Collateral for
other property upon any merger, consolidation, reorganization,
recapitalization, or other readjustment of the issuer thereof and, in
connection therewith, deposit any of the Collateral with any committee,
depositary, transfer agent, registrar, or other designated agency upon
such terms as the Administrative Agent may determine; (viii) to add or
release any guarantor, indorser, surety, or other party to any of the
Collateral; (ix) to renew, extend, or otherwise change the terms and
conditions of any of the Collateral; (x) to make, settle, compromise,
or adjust claims under any insurance policy covering any of the
Collateral; (xi) to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and to do, at the Administrative Agent's
option and the Borrower's expense, at any time, or from time to time,
all acts and things which the Administrative Agent deems necessary to
protect, preserve, or realize upon the Collateral and the
Administrative Agent's security interest therein; and (xii) to
complete, execute and file with the SEC one or more notices of proposed
sale of securities pursuant to Rule 144.
<PAGE>
This power of attorney is a power coupled with an interest and shall be
irrevocable. Neither the Administrative Agent nor any Lender shall be under any
duty to exercise or withhold the exercise of any of the rights, powers,
privileges, and options expressly or implicitly granted to the Administrative
Agent in this Agreement, and shall not be liable for any failure to do so or any
delay in doing so. Neither the Administrative Agent nor any Lender shall be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Administrative Agent
solely to protect, preserve, and realize upon its security interest in the
Collateral. Neither the Administrative Agent nor any Lender shall be responsible
for any decline in the value of the Collateral and shall not be required to take
any steps to preserve rights against prior parties or to protect, preserve, or
maintain any security interest or Lien given to secure the Collateral.
Section 5.2 Voting Rights. Unless and until an Event of Default shall
have occurred and be continuing, the Borrower shall be entitled to exercise any
and all voting rights pertaining to the Securities or any part thereof for any
purpose not inconsistent with the terms of this Agreement or the Loan Agreement.
The Administrative Agent shall execute and deliver to the Borrower all such
proxies and other instruments as the Borrower may reasonably request for the
purpose of enabling the Borrower to exercise the voting rights which it is
entitled to exercise pursuant to this Section.
Section 5.3 Dividends. Unless and until an Event of Default shall have
occurred and be continuing, the Borrower shall be entitled to receive and retain
the dividends on the Securities paid in cash out of earned surplus to the extent
and only to the extent that such dividends are permitted by the Loan Agreement.
Section 5.4 Setoff, Property Held by the Lenders. The Administrative
Agent and each Lender shall have the right to set off and apply against the
Secured Indebtedness, at any time and without notice to the Borrower, any and
all deposits (general or special, time or demand, provisional or final) or other
sums at any time credited by or owing from the Administrative Agent or any
Lender to the Borrower whether or not the Secured Indebtedness is then due. As
additional security for the Secured Indebtedness, the Borrower hereby grants the
Administrative Agent and each Lender a security interest in all money,
instruments, and other property of the Borrower now or hereafter held by the
Administrative Agent or any Lender, including without limitation, property held
in safekeeping. In addition to the Administrative Agent's and each Lender's
right of setoff and as further security for the Secured Indebtedness, the
Borrower hereby grants to each of them a security interest in all deposits
(general or special, time or demand, provisional or final) of the Borrower now
or hereafter on deposit with or held by any of them and all other sums at any
time credited by or owing from the any of them to the Borrower. The rights and
remedies of the Administrative Agent and each Lender hereunder are in addition
to other rights and remedies (including, without limitation, other rights of
setoff) which any of them may have.
Section 5.5 Performance by the Secured Party. If the Borrower shall
fail to perform any covenant or agreement contained in this Agreement, the
Administrative Agent, may, at the direction of the Required Lenders, perform or
attempt to perform such covenant or agreement on behalf of the Borrower. In such
event, the Borrower shall, at the request of the Administrative Agent, promptly
pay any amount expended by the Administrative Agent or any Lender in connection
with such performance or attempted performance to the Administrative Agent,
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 obligations of the Borrower under this Agreement.
ARTICLE VI
Default
Section 6.1 Rights and Remedies. If an Event of Default shall have
occurred and be continuing, the Administrative Agent shall have the following
rights and remedies:
<PAGE>
(a) In addition to all other rights and remedies granted to
the Administrative Agent in this Agreement or in any other Loan
Document or by applicable law, the Administrative Agent shall have all
of the rights and remedies of a secured party under the UCC (whether or
not the UCC applies to the affected Collateral). Without limiting the
generality of the foregoing, the Administrative Agent may (i) without
demand or notice to the Borrower, collect, receive, or take possession
of the Collateral or any part thereof and for that purpose the
Administrative Agent may enter upon any premises on which the
Collateral is located and remove the Collateral therefrom or render it
inoperable, and/or (ii) sell, lease, or otherwise dispose of the
Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at the Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Administrative Agent may deem commercially
reasonable. The Administrative Agent shall have the right at any public
sale or sales, and, to the extent permitted by applicable law, at any
private sale or sales, to bid and become a purchaser of the Collateral
or any part thereof free of any right or equity of redemption on the
part of the Borrower, which right or equity of redemption is hereby
expressly waived and released by the Borrower. Upon the request of the
Administrative Agent, the Borrower shall assemble the Collateral and
make it available to the Administrative Agent at any place designated
by the Administrative Agent that is reasonably convenient to the
Borrower and the Administrative Agent. The Borrower agrees that the
Administrative Agent shall not be obligated to give more than five (5)
days written notice of the time and place of any public sale or of the
time after which any private sale may take place and that such notice
shall constitute reasonable notice of such matters. The Administrative
Agent shall not be obligated to make any sale of Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of
Collateral may have been given. The Administrative Agent may, without
notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be
made at the time and place to which the same was so adjourned. The
Borrower shall be liable for all expenses of retaking, holding,
preparing for sale, or the like, and all attorneys' fees, legal
expenses, and all other costs and expenses incurred by the
Administrative Agent or any Lender in connection with the collection of
the Secured Indebtedness and the enforcement of the Administrative
Agent's and the Lender's rights under this Agreement. The Borrower
shall remain liable for any deficiency if the Proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Secured
Indebtedness in full. The Administrative Agent and the Lenders may
apply the Collateral against the Secured Indebtedness in such order and
manner as the Administrative Agent and the Lenders may elect. The
Borrower waives all rights of marshaling, valuation, and appraisal in
respect of the Collateral.
(b) The Administrative Agent may cause any or all of the
Collateral held by it to be transferred into the name of the
Administrative Agent or the name or names of the Administrative Agent's
nominee or nominees.
(c) The Administrative Agent may exercise or cause to be
exercised all voting, consensual and other powers of ownership in
respect of the Collateral and the Borrower shall deliver to the
Administrative Agent, if requested by the Administrative Agent,
irrevocable proxies with respect to the Securities in form satisfactory
to the Administrative Agent.
(d) The Administrative Agent may collect or receive all money
or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to
do so.
<PAGE>
(e) On any sale of the Collateral, the Administrative Agent is
hereby authorized to comply with any limitation or restriction with
which compliance is necessary, in the view of the Administrative
Agent's counsel, in order to avoid any violation of applicable law or
in order to obtain any required approval of the purchaser or purchasers
by any applicable Governmental Authority.
(f) The Borrower agrees that, because of the Securities Act of
1933, as amended, or any other laws or regulations, and for other
reasons, there may be legal and/or practical restrictions or
limitations affecting the Administrative Agent in any attempts to
dispose of certain portions of the Securities and for the enforcement
of their rights. For these reasons, the Administrative Agent is hereby
authorized by the Borrower, but not obligated, upon the occurrence and
during the continuation of an Event of Default, to sell all or any part
of the Securities at private sale, subject to investment letter or in
any other manner which will not require the Securities, or any part
thereof, to be registered in accordance with the Securities Act of
1933, as amended, or the rules and regulations promulgated thereunder,
or any other laws or regulations, at a reasonable price at such private
sale or other distribution in the manner mentioned above. The Borrower
understands that the Administrative Agent may in its discretion
approach a limited number of potential purchasers and that a sale under
such circumstances may yield a lower price for the Securities, or any
part or party thereof, than would otherwise be obtainable if such
collateral were either afforded to a larger number or potential
purchasers, or registered or sold in the open market. The Borrower
agrees that such private sale shall be deemed to have been made in a
commercially reasonable manner, and that the Administrative Agent has
no obligation to delay sale of any Securities to permit the issuer
thereof to register it for public sale under any applicable federal or
state securities laws. The Administrative Agent is authorized, in
connection with any such sale (a) to restrict the prospective bidders
on or purchasers of any of the Securities to a limited number of
sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to
the distribution or sale of any of such Securities and (b) to impose
such other limitations or conditions in connection with any such sale
as the Administrative Agent reasonably deems necessary in order to
comply with applicable law. The Borrower covenants and agrees that it
will execute and deliver such documents and take such other action as
the Administrative Agent reasonably deems necessary in order that any
such sale may be made in compliance with applicable law. Upon any such
sale the Administrative Agent shall have the right to deliver, assign
and transfer to the purchaser thereof the Securities so sold. Each
purchaser at any such sale shall hold the Securities so sold
absolutely, free from any claim or right of the Borrower of whatsoever
kind, including any equity or right of redemption of the Borrower. The
Borrower, to the extent permitted by applicable law, hereby
specifically waives all rights of redemption, stay or appraisal which
it has or may have under any law now existing or hereafter enacted.
<PAGE>
ARTICLE VII
Miscellaneous
Section 7.1 Indemnification. The Borrower hereby agrees to indemnify
each Agent, each Lender and each Affiliate thereof and their respective
officers, directors, employees, attorneys, and agents (collectively the
"Indemnified Parties") 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
this Agreement or any other Loan Document, (b) any of the transactions
contemplated by this Agreement or any other Loan Document, (c) any breach by the
Borrower of any representation, warranty, covenant, or other agreement contained
in this Agreement or any other Loan Document, or (d) any investigation,
litigation, or other proceeding, including, without limitation, any threatened
investigation, litigation, or other proceeding relating to any of the foregoing,
INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF ANY INDEMNIFIED PARTY.
Section 7.2 No Waiver; Cumulative Remedies. No failure on the part of
any Agent or the 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 are cumulative
and not exclusive of any rights and remedies provided by law.
Section 7.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Agents, the Lenders and their
respective heirs, successors, and assigns, except that the Borrower may not
assign any of its rights or obligations under this Agreement without the prior
written consent of the Administrative Agent.
Section 7.4 Amendment; Entire Agreement. THIS AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES 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. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 7.5 Notices. All notices and other communications provided for
in this Agreement shall be given or made in accordance with Section 13.11 of the
Loan Agreement 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 the other party
given in accordance with this Section.
Section 7.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.
<PAGE>
Section 7.7 Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
Section 7.8 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by any Agent or any Lender shall affect the
representations and warranties or the right of any Agent or any Lender to rely
upon them.
Section 7.9 Waiver of Bond. In the event the Administrative Agent seeks
to take possession of any or all of the Collateral by judicial process, the
Borrower hereby irrevocably waives any bonds and any surety or security relating
thereto that may be required by applicable law as an incident to such
possession, and waives any demand for possession prior to the commencement of
any such suit or action.
Section 7.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.11 Construction. The Borrower and the Administrative Agent
acknowledge 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 with its
legal counsel.
Section 7.12 Obligations Absolute. All rights and remedies of the
Administrative Agent hereunder, and all obligations of the Borrower hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan Agreement or any of
the other Loan Documents or any other agreement or instrument relating to any of
the foregoing;
(b) any change in the time, manner, or place of payment of,
or in any other term of, all or any of the Secured Indebtedness, any or
all of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Loan Agreement or any of the other
Loan Documents;
(c) any exchange, release, or nonperfection of any Collateral, or any
release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Indebtedness; or
(d) any other circumstance (other than payment in full of the
Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Borrower.
<PAGE>
Section 7.13 Termination. If all of the Secured Indebtedness shall have
been paid and performed in full and the Commitments shall have expired or
terminated, the Administrative Agent shall, upon the written request of the
Borrower and in accordance with applicable provisions of the Loan Agreement,
promptly execute and deliver to the Borrower a proper instrument or instruments
acknowledging the release and termination of the security interests created by
this Agreement as the Borrower may reasonably deem necessary or desirable, and
shall duly assign and deliver to the Borrower (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Administrative Agent and has not previously been sold or otherwise
applied pursuant to this Agreement.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
<PAGE>
Borrower Security Agreement
IN WITNESS WHEREOF, the Borrower has duly executed this Agreement as of
the day and year first written above.
BORROWER:
--------
PRIME REFRACTIVE MANAGEMENT, L.L.C.,
a Delaware limited liability company
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attn: Treasurer
Fax Number: (512) 328-8510
Telephone Number: (512) 314-4554
<PAGE>
21
Borrower Security Agreement
SCHEDULE 1
MOTOR VEHICLES
None
<PAGE>
SCHEDULE 2
SECURITIES
Pledged Stock
None
Pledged Limited Liability Company Interests
Prime Refractive, L.L.C., a Delaware limited liabilty company
- 60% membership interest
<PAGE>
SCHEDULE 3
LOCATION OF COLLATERAL
Location of Equipment and Inventory
1301 Capital of Texas Highway
Suite C-300
Austin, Travis County, Texas 78746-6550
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SCHEDULE 4
JURISDICTIONS FOR FILING
Jurisdictions for Filing UCC-1 Financing Statements
Texas
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BORROWER'S SECURITY AGREEMENT
BORROWER SECURITY AGREEMENT
THIS BORROWER SECURITY AGREEMENT (the "Agreement") dated as of January
31, 2000, is executed by PRIME MEDICAL SERVICES, INC., a Delaware corporation
(the "Debtor"), for the benefit of BANK OF AMERICA, N.A., a national banking
association ("B of A"), not in its individual capacity but solely as
administrative agent for itself and each of the other Lenders (each, a "Lender"
and collectively, the "Lenders") as defined in the Loan Agreement (as
hereinafter defined) (in such capacity, together with its successors and assigns
in such capacity, the "Administrative Agent").
R E C I T A L S:
- - - - - - - -
A. The Debtor, B of A, as administrative agent, BankBoston, N.A., as
documentation agent, and the Lenders have entered into that certain Fourth
Amended and Restated Loan Agreement dated January __, 2000, (as the same may be
amended, restated, extended, supplemented or modified from time to time, the
"Loan Agreement"), pursuant to which the Lenders have agreed to make a revolving
loan to the Borrower with advances thereunder not to exceed an aggregate
principal amount of Eighty-Six Million and 00/100 Dollars ($86,000,000.00) at
any one time outstanding.
B. The Agents and the Lenders have conditioned their obligations under the
Loan Agreement upon the execution and delivery of this Agreement by the Debtor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Terms Defined in Loan Agreement. Capitalized terms used and
not otherwise defined herein shall have the same meanings as set forth in the
Loan Agreement.
Section 1.2 Terms Defined in Uniform Commercial Code. Terms used herein
which are defined in the Uniform Commercial Code as adopted by the State of
Texas, unless otherwise defined herein or in the Loan Agreement, shall have
their meanings as set forth in the Uniform Commercial Code as adopted by the
State of Texas.
Section 1.3 Additional Definitions. As used in this Agreement, the
following terms shall have the following meanings:
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16
BORROWER'S SECURITY AGREEMENT
"Accounts" means any "account," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor, and, in any
event, shall include, without limitation, each of the following, whether now
owned or hereafter acquired by the Debtor: (a) all rights of the Debtor to
payment for goods sold or leased or services rendered, whether or not earned by
performance; (b) all accounts receivable of the Debtor; (c) all rights of the
Debtor to receive any payment of money or other form of consideration; (d) all
security pledged, assigned, or granted to or held by the Debtor to secure any of
the foregoing; (e) all guaranties of, or indemnifications with respect to, any
of the foregoing; and (f) all rights of the Debtor as an unpaid seller of goods
or services, including, but not limited to, all rights of stoppage in transit,
replevin, reclamation, and resale.
"Chattel Paper" means any "chattel paper," as such term is
defined in Article 9 of the UCC, now owned or hereafter acquired by the Debtor.
"Collateral" has the meaning specified in Section 2.1 of this
Agreement.
"Document" means any "document," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor, including,
without limitation, all documents of title and warehouse receipts of the Debtor.
"Equipment" means any "equipment," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor and, in any
event, shall include, without limitation, all machinery, equipment, furnishings,
and fixtures now owned or hereafter acquired by the Debtor and any and all
additions, substitutions, and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment, and
accessories installed thereon or affixed thereto.
"General Intangibles" means any "general intangibles," as such
term is defined in Article 9 of the UCC, now owned or hereafter acquired by the
Debtor and, in any event, shall include, without limitation, each of the
following, whether now owned or hereafter acquired by the Debtor: (a) all of the
Debtor's patents, patent applications, patent rights, service marks, trademarks,
trade names, trade secrets, intellectual property, registrations, goodwill,
copyrights (including without limitation, those copyrights listed on Item A of
Schedule 1 attached hereto), franchises, licenses (including without limitation,
those copyright licenses listed on Item B of Schedule 1 attached hereto),
permits, proprietary information, customer lists, designs, and inventions; (b)
all of the Debtor's books, records, data, plans, manuals, computer software, and
computer programs; (c) all of the Debtor's contract rights, including without
limitation, (i) all of the Debtor's right, title and interest in that certain
Stock Purchase Agreement dated as of April 26, 1996, executed by and between
Lithotripters, Inc., the Debtor, and the sellers named therein; (d) all of the
Debtor's partnership interests, joint venture, limited liability company,and
membership interests (but only to the extent not otherwise pledged to the
Administrative Agent pursuant to a separate pledge or security agreement),
deposit accounts, investment accounts, and certificates of deposit; (e) all
rights of the Debtor to payment under letters of credit and similar agreements;
(f) all tax refunds and tax refund claims of the Debtor; (g) all choses in
action and causes of action of the Debtor (whether arising in contract, tort, or
otherwise and whether or not currently in litigation) and all judgments in favor
of the Debtor; (h) all rights and claims of the Debtor under warranties and
indemnities; and (i) all rights of the Debtor under any insurance, surety, or
similar contract or arrangement.
"Instrument" means any "instrument," as such term is defined
in Article 9 of the UCC and any note payable to Debtor or its order together
with all collateral securing such note and all agreements and documents related
thereto or arising therefrom, now owned or hereafter acquired by the Debtor.
<PAGE>
"Inventory" means any "inventory," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor, and, in any
event, shall include, without limitation, each of the following, whether now
owned or hereafter acquired by the Debtor: (a) all goods and other personal
property of the Debtor that are held for sale or lease or to be furnished under
any contract of service; (b) all raw materials, work-in-process, finished goods,
inventory, supplies, and materials of the Debtor; (c) all wrapping, packaging,
advertising, and shipping materials of the Debtor; (d) all goods that have been
returned to, repossessed by, or stopped in transit by the Debtor; and (e) all
Documents evidencing any of the foregoing.
"Investment Property" means "investment property," as such
term is defined in Section 9.115(a)(6) of the Texas Business and Commerce Code.
"Motor Vehicle" means all cars, trucks, vans and other motor
vehicles now owned or hereafter acquired by the Debtor which are used by the
Debtor for the transfer of lithotripters and lithotripsy related equipment,
including without limitation, those motor vehicles listed on Schedule 2 hereto,
and any and all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
"Proceeds" means any "proceeds," as such term is defined in
Article 9 of the UCC and, in any event, shall include, but not be limited to,
(a) any and all proceeds of any insurance, indemnity, warranty, or guaranty
payable to the Debtor from time to time with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and payable to the
Debtor from time to time in connection with any requisition, confiscation,
condemnation, seizure, or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Securities" means all shares of stock of any Person now owned
or hereafter acquired by the Debtor including, without limitation, each of the
shares listed on Schedule 3 hereto, and all dividends, cash, stock dividends,
instruments and other investment property from time to time received, receivable
by, or otherwise distributed to the Debtor for its own account in respect of or
in exchange for any or all of such shares, and the certificates representing
such shares.
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas or, if so required with respect to any particular Collateral by
mandatory provisions of applicable law, as in effect in the jurisdiction in
which such Collateral is located.
ARTICLE II
Security Interest and Pledge
Section 2.1 Security Interest and Pledge. The Debtor hereby pledges and
grants to the Administrative Agent, for the pro rata benefit of the Lenders, a
lien on and security interest in all of the Debtor's right, title, and interest
in and to the following, whether now owned or hereafter arising or acquired and
wherever located (collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Instruments;
(d) all General Intangibles and all Securities;
(e) all Investment Property;
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(f) all Documents;
(g) all Equipment, including, without limitation, all Motor
Vehicles;
(h) all Inventory;
(i) all other goods and personal property of the Debtor
whether tangible or intangible; and
(j) all Proceeds and products of any or all of the
foregoing.
Section 2.2 Secured Indebtedness. The Collateral shall secure the
following obligations, indebtedness, and liabilities (whether at stated
maturity, by acceleration or otherwise) (all such obligations, indebtedness, and
liabilities being hereinafter sometimes called the "Secured Indebtedness"):
(a) the Obligations;
(b) all reasonable costs and expenses, including, without
limitation, all reasonable attorneys' fees and legal expenses, incurred by any
of the Agents or any Lender to preserve and maintain the Collateral, collect the
obligations herein described, and enforce this Agreement; and
(c) all extensions, renewals, and modifications of any of the foregoing.
Section 2.3 Debtor Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) the Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent of any of its rights hereunder shall not release the Debtor
from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) neither the Administrative Agent nor any
Lender shall have any obligation or liability under any of the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall the
Administrative Agent or any Lender be obligated to perform any of the
obligations or duties of the Debtor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
ARTICLE III
Representations and Warranties
To induce the Administrative Agent to enter into this Agreement and the
Agents and the Lenders to enter into the Loan Agreement, the Debtor represents
and warrants to the Administrative Agent that:
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Section 3.1 Title. The Debtor is, and with respect to Collateral
acquired after the date hereof the Debtor will be, the legal and beneficial
owner of the Collateral free and clear of any Lien, security interest, pledge,
claim or other encumbrance (except for Liens permitted by Section 9.2 of the
Loan Agreement and liens in favor of the Refractive Administrative Agent (as
hereinafter defined)) or, with respect to the Securities, any right or option on
the part of any Person (other than the Lenders) to purchase or otherwise acquire
the Securities or any part thereof, except for the security interests granted
hereunder, Liens permitted by Section 9.2 of the Loan Agreement, and liens in
favor of the Prime Administrative Agent (as hereinafter defined). Debtor has
granted subordinate liens and security interests in the Collateral in favor of
Bank of America, N.A., as Administrative Agent under the Loan Agreement dated as
of the date hereof (the "Refractive Loan Agreement") among Prime Refractive
Management, L.L.C., a Delaware limited liability company, Bank of America, N.A.,
as Administrative Agent (the "Refractive Administrative Agent"), BankBoston,
N.A., as Documentation Agent, and the lenders from time to time party thereto
("Refractive Lenders").
Section 3.2 Accounts. Unless the Debtor has given the Administrative
Agent written notice to the contrary, whenever the security interest granted
hereunder attaches to an Account, the Debtor shall be deemed to have represented
and warranted to the Administrative Agent as to each and all of its Accounts
that (a) each Account is genuine and in all respects what it purports to be, (b)
each Account represents the legal, valid, and binding obligation of the account
debtor evidencing indebtedness unpaid and owed by such account debtor arising
out of the performance of labor or services by the Debtor or the sale or lease
of goods by the Debtor, (c) the amount of each Account represented as owing is
the correct amount actually and unconditionally owing except for normal trade
discounts granted in the ordinary course of business, and (d) no Account is
subject to any offset, counterclaim, or other defense.
Section 3.3 Rule 144 Securities. With respect to all Collateral that is
Securities which are subject to Rule 144 under the Securities Act of 1933, as
such rule and act are amended at the time in question and any successor in whole
or in part thereto, (a) the Debtor is the beneficial and record owner thereof,
free and clear of any Liens or transfer restrictions (other than restrictions on
the amount thereof which may be sold, and the manner in which sales may be made,
imposed by such Rule 144), (b) the Debtor acquired such Securities directly from
the issuer thereof more than two (2) years prior to the date hereof in
transactions not involving any public offering, (c) the Debtor paid the purchase
price therefor in cash more than two (2) years prior to the date hereof, (d)
since such date of acquisition, the Debtor has not had a short position in, or
any put or option to dispose of, any capital stock of any issuer thereof or
Securities convertible into capital stock of any issuer thereof, (e) neither the
Debtor, nor any person or entity, the sales of which are required by Rule 144 to
be aggregated with the sales of the Debtor, has sold any capital stock of any
issuer of such Securities during the period of six (6) months prior to the date
hereof, other than sales pursuant to an effective registration statement under
the Securities Act of 1933, as amended, and (f) to the Debtor's best knowledge,
each issuer of such Securities has timely filed all reports required to be filed
by it under the Securities Exchange Act of 1934, as amended.
Section 3.4 Financing Statements. No financing statement, security
agreement, or other Lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of the
Refractive Administrative Agent, any lender under the Refractive Agreement,
Administrative Agent, or any Lender pursuant to this Agreement. The Debtor has
not within the past five (5) years had a trade name or done business under any
name other than its legal name set forth at the beginning of this Agreement.
Section 3.5 Principal Place of Business. The principal place of
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is located at the address of the Debtor
shown on the signature pages of this Agreement.
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Section 3.6 Location of Collateral. All Inventory and Equipment of the
Debtor are located at the places specified on Schedule 4 hereto. The Debtor has
exclusive possession and control of its Inventory and Equipment. None of the
Inventory or Equipment of the Debtor is evidenced by a Document (including,
without limitation, a negotiable document of title). All Instruments, Chattel
Paper, Securities and certificates of title of the Debtor have been delivered to
the Administrative Agent.
Section 3.7 Perfection. Upon the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule 5 attached hereto,
and upon the Administrative Agent's obtaining possession of all Documents,
Instruments, Chattel Paper, Securities and certificates of title of the Debtor,
and upon the Administrative Agent's obtaining control of all Investment
Property, the security interest in favor of the Administrative Agent created
herein will constitute a valid and perfected Lien upon and security interest in
the Collateral, subject to no equal or prior Lien, except as permitted by
Section 9.2 of the Loan Agreement.
ARTICLE IV
Covenants
The Debtor covenants and agrees with the Administrative Agent that
until the Secured Indebtedness is paid and performed in full and the Commitments
have terminated:
Section 4.1 Encumbrances. Except as permitted by Section 9.2 of the
Loan Agreement, the Debtor shall not create, permit, or suffer to exist, and
shall defend the Collateral against, any Lien, security interest, or other
encumbrance on the Collateral, and shall defend the Debtor's rights in the
Collateral and the Administrative Agent's security interest in the Collateral
against the claims and demands of all Persons. The Debtor shall do nothing to
impair the rights of the Administrative Agent in the Collateral.
Section 4.2 Delivery. Prior to or concurrently with the execution and
delivery of this Agreement, Debtor shall deliver to the Administrative Agent to
acknowledge all certificates identified on Schedule 4 hereto, with all Chattel
Paper, Instruments and Documents of the Debtor.
Section 4.3 Modification of Accounts. The Debtor shall, in accordance
with prudent business practices, endeavor to collect or cause to be collected
from each account debtor under its Accounts, as and when due, any and all
amounts owing under such Accounts. Without the prior written consent of the
Administrative Agent, the Debtor shall not (a) grant any extension of time on
any Account for any payment or grant extensions of time for payments on its
Accounts which cause the aggregate amount of all payments extended by the Debtor
on its Accounts during any fiscal year of the Debtor to exceed $150,000.00, (b)
compromise, compound, or settle any of the Accounts for less than the full
amount thereof; provided, however, that the Debtor may compromise, compound or
settle any Account which is an amount less than $50,000.00, provided the
aggregate amount compromised, compounded or settled during any fiscal year of
the Debtor shall not exceed $150,000.00, (c) release, in whole or in part, any
Person liable for payment of an Account in excess of $50,000.00, (d) allow any
credit or discount for payment with respect to any Account in excess of
$50,000.00, other than trade discounts granted in the ordinary course of
business; provided, however, that the aggregate amount of all credits or
discounts granted during any fiscal year of the Debtor shall not exceed
$150,000.00, or (e) release any Lien, security interest, or guaranty securing
any Account in excess of $50,000.00.
<PAGE>
Section 4.4 Disposition of Collateral. The Debtor shall not sell,
lease, assign (by operation of law or otherwise), or otherwise dispose of, or
grant any option with respect to, the Collateral or any part thereof without the
prior written consent of the Administrative Agent, except the Debtor may sell
Inventory in the ordinary course of business.
Section 4.5 Distributions. If the Debtor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or distribution in connection with
any reclassification, increase, or reduction of capital or issued in connection
with any reorganization), option or rights, whether as an addition to, in
substitution of, or an exchange for any Collateral or otherwise, the Debtor
agrees to accept the same as the Administrative Agent's agent and to hold the
same in trust for the Administrative Agent and to deliver the same forthwith to
the Administrative Agent in the exact form received, with the appropriate
endorsement of the Debtor when necessary and/or appropriate undated stock powers
duly executed in blank, to be held by the Administrative Agent on its own behalf
and on behalf of Refractive Administrative Agent as additional Collateral for
the Secured Indebtedness, subject to the terms hereof. Any sums paid upon or in
respect of the Securities upon the liquidation or dissolution of the issuer
thereof shall be paid over to the Administrative Agent to be held by it as
additional Collateral for the Secured Indebtedness subject to the terms hereof;
and in case any distribution of capital shall be made on or in respect of the
Securities or any property shall be distributed upon or with respect to the
Securities pursuant to any recapitalization or reclassification of the capital
of the issuer thereof or pursuant to any reorganization of the issuer thereof,
the property so distributed shall be delivered to the Administrative Agent to be
held by it, as additional Collateral for the Secured Indebtedness, subject to
the terms hereof. All sums of money and property so paid or distributed in
respect of the Securities that are received by the Debtor shall, until paid or
delivered to the Administrative Agent, be held by the Debtor in trust as
additional security for the Secured Indebtedness.
Section 4.6 Further Assurances. At any time and from time to time, upon
the request of the Administrative Agent, and at the sole expense of the Debtor,
the Debtor shall promptly execute and deliver all such further instruments,
agreements, and documents and take such further action as the Administrative
Agent may reasonably deem necessary or desirable to preserve and perfect its
security interest in the Collateral and carry out the provisions and purposes of
this Agreement. Without limiting the generality of the foregoing, the Debtor
shall: (a) execute and deliver to the Administrative Agent such financing
statements as the Administrative Agent may from time to time require; (b)
deliver and pledge to the Administrative Agent all Documents (including, without
limitation, negotiable documents of title) evidencing Inventory or Equipment;
(c) deliver and pledge to the Administrative Agent all certificates of title
required by the Loan Agreement, Instruments and Chattel Paper of the Debtor with
any necessary endorsements; and (d) execute and deliver to the Administrative
Agent such other documents, instruments, and agreements as the Administrative
Agent may reasonably require to perfect and maintain the validity,
effectiveness, and priority of the Loan Documents and the Liens intended to be
created thereby. The Debtor authorizes the Administrative Agent to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of the Debtor where
permitted by law. A carbon, photographic, or other reproduction of this
Agreement or of any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement and may be filed as a
financing statement.
<PAGE>
Section 4.7 Risk of Loss; Insurance. The Agents and the Lenders shall
not be responsible for any loss or damage to the Collateral. The Debtor shall,
at its own expense, maintain 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 Debtor operates consistent
with past practices and to the extent available on commercially reasonable
terms, provided that in any event the Debtor will maintain workmen's
compensation insurance, property insurance, comprehensive general liability
insurance, professional liability insurance and business interruption insurance
reasonably satisfactory to the Administrative Agent. Each insurance policy
covering Collateral shall name the Administrative Agent as loss payee for the
benefit of the Lenders as its interest 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.
Section 4.8 Inspection Rights. The Debtor shall permit the
Administrative Agent and each Lender and their respective representatives to
examine, inspect, and audit the Collateral and to examine, inspect, and copy the
Debtor's books and records at any reasonable time and as often as the
Administrative Agent or any such Lender may desire. The Administrative Agent and
each Lender may at any time and from time to time contact account debtors and
other obligors to verify the existence, amounts, and terms of the Debtor's
Accounts.
Section 4.9 Corporate Changes. The Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
the Debtor shall have given the Administrative Agent thirty (30) days prior
written notice thereof and shall have taken all action reasonably deemed
necessary or desirable by the Administrative Agent to make each financing
statement not seriously misleading. The Debtor shall not change its principal
place of business, chief executive office, or the place where it keeps its books
and records unless it shall have given the Administrative Agent thirty (30) days
prior written notice thereof and shall have taken all action reasonably deemed
necessary or desirable by the Administrative Agent to cause its security
interest in the Collateral to be perfected with the priority required by this
Agreement.
Section 4.10 Books and Records; Information. The Debtor shall keep
accurate and complete books and records of the Collateral and the Debtor's
business and financial condition in accordance with GAAP. The Debtor shall from
time to time at the request of the Administrative Agent deliver to the
Administrative Agent such information regarding the Collateral and the Debtor as
the Administrative Agent may reasonably request, including, without limitation,
lists and descriptions of the Collateral and evidence of the identity and
existence of the Collateral. The Debtor shall mark its records to reflect the
security interest of the Administrative Agent hereunder.
Section 4.11 Equipment and Inventory.
-----------------------
(a) The Debtor shall keep the Equipment and Inventory at the
locations specified on Schedule 5 hereto or, upon thirty (30) days
prior written notice to the Administrative Agent, at such other places
within the United States of America where all action required to
perfect the Administrative Agent's security interest in the Equipment
and Inventory with the priority required by this Agreement shall have
been taken.
(b) The Debtor shall maintain the Equipment and Inventory in
accordance with Section 8.3 of the Loan Agreement.
Section 4.12 Warehouse Receipts Non-Negotiable. The Debtor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any of the Collateral, such warehouse receipt or receipt in
the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under relevant law).
<PAGE>
Section 4.13 Taxes and Claims. The Debtor shall pay and discharge,
before the same become delinquent, (a) all material taxes, assessments, and
governmental charges imposed upon it or upon any of its property, and (b) all
material lawful claims that, if unpaid, might become a Lien upon any of its
property; provided, however, that the Debtor shall not be required to pay or
discharge any such tax, assessment, or governmental charge which is being
contested in good faith by proper proceedings being diligently pursued and for
which adequate reserves have been established in accordance with GAAP.
Section 4.14 Compliance with Laws. The Debtor shall comply in all
material respects with all material applicable laws, rules, regulations, orders,
and decrees of any Governmental Authority or arbitrator.
Section 4.15 Compliance with Agreements. The Debtor shall comply in all
material respects with all agreements, contracts, and instruments binding on it
or affecting its properties or businesses, 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 Borrower, any Material Subsidiary
or the Companies (taken as a whole).
Section 4.16 Notification. Except as permitted by Section 9.2 of the
Loan Agreement, the Debtor shall promptly notify the Administrative Agent of (a)
any Lien, security interest, encumbrance, or claim that has attached to or been
made or asserted against any of the Collateral, (b) any material change in any
of the Collateral, including, without limitation, any material damage to or loss
of any material portion of the Collateral, (c) the occurrence of any other event
that could have a material adverse effect on the Collateral or the security
interest created hereunder, and (d) the occurrence or existence of any Default.
Section 4.17 Collection of Accounts. Except as otherwise provided in
this Section or in any other Loan Document, the Debtor shall have the right to
collect and receive payments on the Accounts. In connection with such
collections, the Debtor may take (and, at the Administrative Agent's direction,
shall take) such actions as the Debtor or the Administrative Agent may
reasonably deem necessary or advisable to enforce collection of the Accounts.
Section 4.18 Additional Securities. The Debtor shall not consent to or
approve the issuance of any additional shares of any class of capital stock of
the issuers of any of the Securities, or any securities convertible into, or
exchangeable for, any such shares or any warrants, options, rights, or other
commitments entitling any Person to purchase or otherwise acquire any such
shares.
Section 4.19 Provide Information. The Debtor shall fully cooperate, to
the extent reasonably requested by the Administrative Agent, in the completion
of any notice, form, schedule, or other document filed by the Administrative
Agent on its own behalf or on behalf of the Debtor, including, without
limitation, any required notice or statement of beneficial ownership or of the
acquisition of beneficial ownership of the Securities and any notice of proposed
sale of such Securities pursuant to Rule 144 as promulgated by the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended. Without limiting the generality of the foregoing, the Debtor shall
furnish to the Administrative Agent any and all information which the
Administrative Agent may reasonably request for purposes of any such filing,
regarding the Debtor, the Securities, and any issuer of any of the Securities,
and the Debtor shall disclose to the Administrative Agent all material adverse
information known by the Debtor with respect to the operations of any issuer of
any of the Securities.
<PAGE>
Section 4.20 Notification of Changes in Beneficial Ownership. The
Debtor shall promptly notify the Administrative Agent of any sale of securities
of any Subsidiary of the Debtor or by any Person named on the Debtor's Rule 144
questionnaire and shall furnish promptly to the Administrative Agent a copy of
any Form 144 filed in respect of any such sale. In addition, if the Debtor or
any other Person named in the Debtor's Rule 144 questionnaire shall file with
the SEC a form or other document reporting any change in the beneficial
ownership of the common stock of any Subsidiary of the Debtor, the Debtor shall
promptly furnish to the Administrative Agent a copy of such form or document.
Section 4.21 Restriction on Sales after Default. The Debtor shall not
sell or suffer or permit any Person named in the accompanying Rule 144
questionnaire to sell any shares of the same class of securities as the
Securities at any time after any Event of Default shall have occurred.
Section 4.22 Fixtures. For any Collateral that is a fixture or an
accession which has been attached to real estate or other goods prior to the
perfection of the security interest granted in Section 2.1 hereof, the Debtor
shall furnish to Administrative Agent, upon demand, a disclaimer of interest in
each such fixture or accession and a consent in writing to the security interest
of Administrative Agent therein, signed by all persons and entities having any
interest in such fixture or accession by virtue of any interest in the real
estate or other goods to which such fixture or accession has been attached.
Section 4.23 Notation on Title Certificates. If certificates of title
are issued or outstanding with respect to any of the Collateral, the Debtor
shall cause the security interest granted in Section 2.1 hereof to be properly
noted thereon.
ARTICLE V
Rights of the Administrative Agent
Section 5.1 Power of Attorney. The Debtor hereby irrevocably
constitutes and appoints the Administrative Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the name of the
Debtor or in its own name, to take any and all action and to execute any and all
documents and instruments which the Administrative Agent at any time and from
time to time deems reasonably necessary or desirable to accomplish the purposes
of this Agreement if an Event of Default shall have occurred and be continuing,
and, without limiting the generality of the foregoing, the Debtor hereby gives
the Administrative Agent the power and right on behalf of the Debtor and in its
own name to do any of the following (subject to the rights of the Debtor under
Sections 5.2 and 5.3 hereof), without notice to or the consent of the Debtor if
an Event of Default shall have occurred and be continuing:
(a) to demand, sue for, collect, or receive in the name of the
Debtor or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and,
in connection therewith, endorse checks, notes, drafts, acceptances,
money orders, documents of title, or any other instruments for the
payment of money under the Collateral or any policy of insurance;
(b) to pay or discharge taxes, Liens, or other encumbrances
levied or placed on or threatened against the Collateral;
(c) to notify post office authorities to change the address for
delivery of mail of the Debtor to an address designated by the
Administrative Agent and to receive, open. and subsequently deliver to
the Debtor mail addressed to the Debtor; and
<PAGE>
(d) (i) to direct account debtors and any other parties liable
for any payment under any of the Collateral to make payment of any and
all monies due and to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall direct; (ii)
to receive payment of and receipt for any and all monies, claims, and
other amounts due and to become due at any time in respect of or
arising out of any Collateral; (iii) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, proxies, stock powers,
verifications, and notices in connection with accounts and other
documents relating to the Collateral; (vi) to commence and prosecute
any suit, action, or proceeding at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof
and to enforce any other right in respect of any Collateral; (v) to
defend any suit, action, or proceeding brought against the Debtor with
respect to any Collateral; (vi) to settle, compromise, or adjust any
suit, action, or proceeding described above and, in connection
therewith, to give such discharges or releases as the Administrative
Agent may deem appropriate; (vii) to exchange any of the Collateral for
other property upon any merger, consolidation, reorganization,
recapitalization, or other readjustment of the issuer thereof and, in
connection therewith, deposit any of the Collateral with any committee,
depositary, transfer agent, registrar, or other designated agency upon
such terms as the Administrative Agent may determine; (viii) to add or
release any guarantor, indorser, surety, or other party to any of the
Collateral; (ix) to renew, extend, or otherwise change the terms and
conditions of any of the Collateral; (x) to make, settle, compromise,
or adjust claims under any insurance policy covering any of the
Collateral; (xi) to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and to do, at the Administrative Agent's
option and the Debtor's expense, at any time, or from time to time, all
acts and things which the Administrative Agent deems necessary to
protect, preserve, or realize upon the Collateral and the
Administrative Agent's security interest therein; and (xii) to
complete, execute and file with the SEC one or more notices of proposed
sale of securities pursuant to Rule 144.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Neither the Administrative Agent nor any Lender shall be under any
duty to exercise or withhold the exercise of any of the rights, powers,
privileges, and options expressly or implicitly granted to the Administrative
Agent in this Agreement, and shall not be liable for any failure to do so or any
delay in doing so. Neither the Administrative Agent nor any Lender shall be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Administrative Agent
solely to protect, preserve, and realize upon its security interest in the
Collateral. Neither the Administrative Agent nor any Lender shall be responsible
for any decline in the value of the Collateral and shall not be required to take
any steps to preserve rights against prior parties or to protect, preserve, or
maintain any security interest or Lien given to secure the Collateral.
Section 5.2 Voting Rights. Unless and until an Event of Default shall
have occurred and be continuing, the Debtor shall be entitled to exercise any
and all voting rights pertaining to the Securities or any part thereof for any
purpose not inconsistent with the terms of this Agreement or the Loan Agreement.
The Administrative Agent shall execute and deliver to the Debtor all such
proxies and other instruments as the Debtor may reasonably request for the
purpose of enabling the Debtor to exercise the voting rights which it is
entitled to exercise pursuant to this Section.
<PAGE>
Section 5.3 Dividends. Unless and until an Event of Default shall have
occurred and be continuing, the Debtor shall be entitled to receive and retain
the dividends on the Securities paid in cash out of earned surplus to the extent
and only to the extent that such dividends are permitted by the Loan Agreement.
Section 5.4 Setoff, Property Held by the Lenders. The Administrative
Agent and each Lender shall have the right to set off and apply against the
Secured Indebtedness, at any time and without notice to the Debtor, any and all
deposits (general or special, time or demand, provisional or final) or other
sums at any time credited by or owing from the Administrative Agent or any
Lender to the Debtor whether or not the Secured Indebtedness is then due. As
additional security for the Secured Indebtedness, the Debtor hereby grants the
Administrative Agent and each Lender a security interest in all money,
instruments, and other property of the Debtor now or hereafter held by the
Administrative Agent or any Lender, including without limitation, property held
in safekeeping. In addition to the Administrative Agent's and each Lender's
right of setoff and as further security for the Secured Indebtedness, the Debtor
hereby grants to each of them a security interest in all deposits (general or
special, time or demand, provisional or final) of the Debtor now or hereafter on
deposit with or held by any of them and all other sums at any time credited by
or owing from the any of them to the Debtor. The rights and remedies of the
Administrative Agent and each Lender hereunder are in addition to other rights
and remedies (including, without limitation, other rights of setoff) which any
of them may have.
Section 5.5 Performance by the Secured Party. If the Debtor shall fail
to perform any covenant or agreement contained in this Agreement, the
Administrative Agent, may, at the direction of the Required Lenders, perform or
attempt to perform such covenant or agreement on behalf of the Debtor. In such
event, the Debtor shall, at the request of the Administrative Agent, promptly
pay any amount expended by the Administrative Agent or any Lender in connection
with such performance or attempted performance to the Administrative Agent,
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 obligations of the Debtor under this Agreement.
ARTICLE VI
Default
Section 6.1 Rights and Remedies. If an Event of Default shall have
occurred and be continuing, the Administrative Agent shall have the following
rights and remedies:
<PAGE>
(a) In addition to all other rights and remedies granted to
the Administrative Agent in this Agreement or in any other Loan
Document or by applicable law, the Administrative Agent shall have all
of the rights and remedies of a secured party under the UCC (whether or
not the UCC applies to the affected Collateral). Without limiting the
generality of the foregoing, the Administrative Agent may (i) without
demand or notice to the Debtor, collect, receive, or take possession of
the Collateral or any part thereof and for that purpose the
Administrative Agent may enter upon any premises on which the
Collateral is located and remove the Collateral therefrom or render it
inoperable, and/or (ii) sell, lease, or otherwise dispose of the
Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at the Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Administrative Agent may deem commercially
reasonable. The Administrative Agent shall have the right at any public
sale or sales, and, to the extent permitted by applicable law, at any
private sale or sales, to bid and become a purchaser of the Collateral
or any part thereof free of any right or equity of redemption on the
part of the Debtor, which right or equity of redemption is hereby
expressly waived and released by the Debtor. Upon the request of the
Administrative Agent, the Debtor shall assemble the Collateral and make
it available to the Administrative Agent at any place designated by the
Administrative Agent that is reasonably convenient to the Debtor and
the Administrative Agent. The Debtor agrees that the Administrative
Agent shall not be obligated to give more than five (5) days written
notice of the time and place of any public sale or of the time after
which any private sale may take place and that such notice shall
constitute reasonable notice of such matters. The Administrative Agent
shall not be obligated to make any sale of Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of
Collateral may have been given. The Administrative Agent may, without
notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be
made at the time and place to which the same was so adjourned. The
Debtor shall be liable for all expenses of retaking, holding, preparing
for sale, or the like, and all attorneys' fees, legal expenses, and all
other costs and expenses incurred by the Administrative Agent or any
Lender in connection with the collection of the Secured Indebtedness
and the enforcement of the Administrative Agent's and the Lender's
rights under this Agreement. The Debtor shall remain liable for any
deficiency if the Proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Secured Indebtedness in full.
The Administrative Agent and the Lenders may apply the Collateral
against the Secured Indebtedness in such order and manner as the
Administrative Agent and the Lenders may elect. The Debtor waives all
rights of marshaling, valuation, and appraisal in respect of the
Collateral.
(b) The Administrative Agent may cause any or all of the
Collateral held by it to be transferred into the name of the
Administrative Agent or the name or names of the Administrative Agent's
nominee or nominees.
(c) The Administrative Agent may exercise or cause to be
exercised all voting, consensual and other powers of ownership in
respect of the Collateral and the Debtor shall deliver to the
Administrative Agent, if requested by the Administrative Agent,
irrevocable proxies with respect to the Securities in form satisfactory
to the Administrative Agent.
(d) The Administrative Agent may collect or receive all money
or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to
do so.
(e) On any sale of the Collateral, the Administrative Agent is
hereby authorized to comply with any limitation or restriction with
which compliance is necessary, in the view of the Administrative
Agent's counsel, in order to avoid any violation of applicable law or
in order to obtain any required approval of the purchaser or purchasers
by any applicable Governmental Authority.
<PAGE>
(f) The Debtor agrees that, because of the Securities Act of
1933, as amended, or any other laws or regulations, and for other
reasons, there may be legal and/or practical restrictions or
limitations affecting the Administrative Agent in any attempts to
dispose of certain portions of the Securities and for the enforcement
of their rights. For these reasons, the Administrative Agent is hereby
authorized by the Debtor, but not obligated, upon the occurrence and
during the continuation of an Event of Default, to sell all or any part
of the Securities at private sale, subject to investment letter or in
any other manner which will not require the Securities, or any part
thereof, to be registered in accordance with the Securities Act of
1933, as amended, or the rules and regulations promulgated thereunder,
or any other laws or regulations, at a reasonable price at such private
sale or other distribution in the manner mentioned above. The Debtor
understands that the Administrative Agent may in its discretion
approach a limited number of potential purchasers and that a sale under
such circumstances may yield a lower price for the Securities, or any
part or party thereof, than would otherwise be obtainable if such
collateral were either afforded to a larger number or potential
purchasers, or registered or sold in the open market. The Debtor agrees
that such private sale shall be deemed to have been made in a
commercially reasonable manner, and that the Administrative Agent has
no obligation to delay sale of any Securities to permit the issuer
thereof to register it for public sale under any applicable federal or
state securities laws. The Administrative Agent is authorized, in
connection with any such sale (a) to restrict the prospective bidders
on or purchasers of any of the Securities to a limited number of
sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to
the distribution or sale of any of such Securities and (b) to impose
such other limitations or conditions in connection with any such sale
as the Administrative Agent reasonably deems necessary in order to
comply with applicable law. The Debtor covenants and agrees that it
will execute and deliver such documents and take such other action as
the Administrative Agent reasonably deems necessary in order that any
such sale may be made in compliance with applicable law. Upon any such
sale the Administrative Agent shall have the right to deliver, assign
and transfer to the purchaser thereof the Securities so sold. Each
purchaser at any such sale shall hold the Securities so sold
absolutely, free from any claim or right of the Debtor of whatsoever
kind, including any equity or right of redemption of the Debtor. The
Debtor, to the extent permitted by applicable law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may
have under any law now existing or hereafter enacted.
ARTICLE VII
Miscellaneous
Section 7.1 Indemnification. The Debtor hereby agrees to indemnify each
Agent, each Lender and each Affiliate thereof and their respective officers,
directors, employees, attorneys, and agents (collectively the "Indemnified
Parties") 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
this Agreement or any other Loan Document, (b) any of the transactions
contemplated by this Agreement or any other Loan Document, (c) any breach by the
Debtor of any representation, warranty, covenant, or other agreement contained
in this Agreement or any other Loan Document, or (d) any investigation,
litigation, or other proceeding, including, without limitation, any threatened
investigation, litigation, or other proceeding relating to any of the foregoing,
INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF ANY INDEMNIFIED PARTY.
Section 7.2 No Waiver; Cumulative Remedies. No failure on the part of
any Agent or the 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 are cumulative
and not exclusive of any rights and remedies provided by law.
<PAGE>
Section 7.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Debtor, the Agents, the Lenders and their
respective heirs, successors, and assigns, except that the Debtor may not assign
any of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent.
Section 7.4 Amendment; Entire Agreement. THIS AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES 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. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 7.5 Notices. All notices and other communications provided for
in this Agreement shall be given or made in accordance with Section 13.11 of the
Loan Agreement 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 the other party
given in accordance with this Section.
Section 7.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.
Section 7.7 Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
Section 7.8 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by any Agent or any Lender shall affect the
representations and warranties or the right of any Agent or any Lender to rely
upon them.
Section 7.9 Waiver of Bond. In the event the Administrative Agent seeks
to take possession of any or all of the Collateral by judicial process, the
Debtor hereby irrevocably waives any bonds and any surety or security relating
thereto that may be required by applicable law as an incident to such
possession, and waives any demand for possession prior to the commencement of
any such suit or action.
Section 7.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.11 Construction. The Debtor and the Administrative Agent
acknowledge 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 with its
legal counsel.
<PAGE>
Section 7.12 Obligations Absolute. All rights and remedies of the
Administrative Agent hereunder, and all obligations of the Debtor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan Agreement
or any of the other Loan Documents or any other agreement or
instrument relating to any of the foregoing;
(b) any change in the time, manner, or place of payment of,
or in any other term of, all or any of the Secured Indebtedness, any or
all of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Loan Agreement or any of the other
Loan Documents;
(c) any exchange, release, or nonperfection of any Collateral, or
any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Indebtedness; or
(d) any other circumstance (other than payment in full of the
Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Debtor.
Section 7.13 Renewal. Debtor acknowledges that this Agreement has been
given in amendment, renewal, restatement and confirmation of Debtor's
obligations, covenants, and agreements contained in the Guarantor Security
Agreement previously executed by Debtor in favor of Administrative Agent and the
Lenders, dated April 26, 1996, as amended, confirmed, and renewed from time to
time (the "Previous Agreement"). Debtor further confirms and agrees that neither
the execution of the Loan Agreement or any other Loan Document, nor the
consummation of the transactions described therein, shall in any way affect the
liens under the Previous Agreement, and the obligations, liens, and security
interests evidenced by the Previous Agreement continue in full force and effect
as modified, amended, and restated by the terms contained herein.
Section 7.14 Termination. If all of the Secured Indebtedness shall have
been paid and performed in full and the Commitments shall have expired or
terminated, the Administrative Agent shall, upon the written request of the
Debtor and in accordance with applicable provisions of the Loan Agreement,
promptly execute and deliver to the Debtor a proper instrument or instruments
acknowledging the release and termination of the security interests created by
this Agreement as the Debtor may reasonably deem necessary or desirable, and
shall duly assign and deliver to the Debtor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Administrative Agent and has not previously been sold or otherwise
applied pursuant to this Agreement.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
<PAGE>
BORROWER'S SECURITY AGREEMENT
IN WITNESS WHEREOF, the Debtor has duly executed this Agreement as of
the day and year first written above.
DEBTOR:
PRIME MEDICAL SERVICES, INC.,
a Delaware corporation
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attn: Treasurer
Fax Number: (512) 328-8510
Telephone Number: (512) 314-4554
<PAGE>
22
BORROWER'S SECURITY AGREEMENT
SCHEDULE 1
Item A
Intellectual Property
None
Item B
Copyrights
None
<PAGE>
SCHEDULE 2
MOTOR VEHICLES
None.
<PAGE>
SCHEDULE 3
SECURITIES
SHARES OF SUBSIDIARIES
Pledged Stock
Prime Medical Operating, Inc., a Delaware - 1,000 shares of common stock
corporation
Ohio Litho, Inc., a Delaware corporation - 1,000 shares of common stock
R.R. Litho, Inc., a Delaware corporation - 1,000 shares of common stock
Lithotripters, Inc., a North Carolina corporation -40,000 shares of common stock
FastStart, Inc., a North Carolina corporation -10,000 shares of common stock
National Lithotripters Association, Inc., a North
Carolina corporation 100 shares of common stock
Prostatherapies, Inc., a Delaware corporation 100 shares of common stock
MedTech Investments, Inc., a North Carolina
corporation 5,375 shares of common stock
SHARES OF NON-SUBSIDIARIES
Pledged Stock
American Physicians Service Group, Inc. -50,000 shares of Common Stock
<PAGE>
SCHEDULE 4
LOCATION OF COLLATERAL
Location of Equipment and Inventory
1301 Capital of Texas Highway
Suite C-300
Austin, Travis County, Texas 78746-6550
<PAGE>
SCHEDULE 5
JURISDICTIONS FOR FILING
Jurisdictions for Filing UCC-1 Financing Statements
Texas
Guarantor Security Agreement
GUARANTOR SECURITY AGREEMENT
THIS GUARANTOR SECURITY AGREEMENT (the "Agreement") dated as of January
31, 2000, is executed by PRIME PRACTICE MANAGEMENT, INC., a New York corporation
(the "Debtor"), for the benefit of BANK OF AMERICA, N.A., a national banking
association ("B of A"), not in its individual capacity but solely as
administrative agent for itself and each of the other Lenders (each, a "Lender"
and collectively, the "Lenders") as defined in the Loan Agreement (as
hereinafter defined) (in such capacity, together with its successors and assigns
in such capacity, the "Administrative Agent").
R E C I T A L S:
- - - - - - - -
A. Prime Refractive Management, L.L.C., a Delaware limited liability
company (the "Borrower"), B of A, as administrative agent, BankBoston, N.A., as
documentation agent, and the Lenders have entered into that certain Loan
Agreement dated January 31, 2000, (as the same may be amended, restated,
extended, supplemented or modified from time to time, the "Loan Agreement"),
pursuant to which the Lenders have agreed to make an advancing term loan to the
Borrower with advances thereunder not to exceed an aggregate principal amount of
Fourteen Million and 00/100 Dollars ($14,000,000.00).
B. The Debtor, together with other guarantors, has executed that
certain Guaranty Agreement of even date herewith (as the same may be amended,
supplemented or modified from time to time, the "Guaranty"), pursuant to which
the Debtor has guaranteed to the Agents (as defined in the Loan Agreement) and
the Lenders the full and complete payment and performance of the Obligations (as
defined in the Loan Agreement).
C. The Agents and the Lenders have conditioned their obligations under the
Loan Agreement upon the execution and delivery of this Agreement by the Debtor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Terms Defined in Loan Agreement. Capitalized terms used and
not otherwise defined herein shall have the same meanings as set forth in the
Loan Agreement.
Section 1.2 Terms Defined in Uniform Commercial Code. Terms used herein
which are defined in the Uniform Commercial Code as adopted by the State of
Texas, unless otherwise defined herein or in the Loan Agreement, shall have
their meanings as set forth in the Uniform Commercial Code as adopted by the
State of Texas.
Section 1.3 Additional Definitions. As used in this Agreement, the
following terms shall have the following meanings:
<PAGE>
13
Guarantor Security Agreement
"Accounts" means any "account," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor, and, in any
event, shall include, without limitation, each of the following, whether now
owned or hereafter acquired by the Debtor: (a) all rights of the Debtor to
payment for goods sold or leased or services rendered, whether or not earned by
performance; (b) all accounts receivable of the Debtor; (c) all rights of the
Debtor to receive any payment of money or other form of consideration; (d) all
security pledged, assigned, or granted to or held by the Debtor to secure any of
the foregoing; (e) all guaranties of, or indemnifications with respect to, any
of the foregoing; and (f) all rights of the Debtor as an unpaid seller of goods
or services, including, but not limited to, all rights of stoppage in transit,
replevin, reclamation, and resale.
"Chattel Paper" means any "chattel paper," as such term is
defined in Article 9 of the UCC, now owned or hereafter acquired by the Debtor.
"Collateral" has the meaning specified in Section 2.1 of this
Agreement.
"Document" means any "document," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor, including,
without limitation, all documents of title and warehouse receipts of the Debtor.
"Equipment" means any "equipment," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor and, in any
event, shall include, without limitation, all machinery, equipment, furnishings,
and fixtures now owned or hereafter acquired by the Debtor and any and all
additions, substitutions, and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment, and
accessories installed thereon or affixed thereto.
"General Intangibles" means any "general intangibles," as such
term is defined in Article 9 of the UCC, now owned or hereafter acquired by the
Debtor and, in any event, shall include, without limitation, each of the
following, whether now owned or hereafter acquired by the Debtor: (a) all of the
Debtor's patents, patent applications, patent rights, service marks, trademarks,
trade names, trade secrets, intellectual property, registrations, goodwill,
copyrights, franchises, licenses, permits, proprietary information, customer
lists, designs, and inventions; (b) all of the Debtor's books, records, data,
plans, manuals, computer software, and computer programs; (c) all of the
Debtor's contract rights, partnership interests, joint venture, limited
liability company, and membership interests (but only to the extent not
otherwise pledged to the Administrative Agent pursuant to a separate pledge or
security agreement), deposit accounts, investment accounts, and certificates of
deposit; (d) all rights of the Debtor to payment under letters of credit and
similar agreements; (e) all tax refunds and tax refund claims of the Debtor; (g)
all choses in action and causes of action of the Debtor (whether arising in
contract, tort, or otherwise and whether or not currently in litigation) and all
judgments in favor of the Debtor; (g) all rights and claims of the Debtor under
warranties and indemnities; and (h) all rights of the Debtor under any
insurance, surety, or similar contract or arrangement.
"Instrument" means any "instrument," as such term is defined
in Article 9 of the UCC and any note payable to Debtor or its order together
with all collateral securing such note and all agreements and documents related
thereto or arising therefrom, now owned or hereafter acquired by the Debtor.
"Inventory" means any "inventory," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor, and, in any
event, shall include, without limitation, each of the following, whether now
owned or hereafter acquired by the Debtor: (a) all goods and other personal
property of the Debtor that are held for sale or lease or to be furnished under
any contract of service; (b) all raw materials, work-in-process, finished goods,
inventory, supplies, and materials of the Debtor; (c) all wrapping, packaging,
advertising, and shipping materials of the Debtor; (d) all goods that have been
returned to, repossessed by, or stopped in transit by the Debtor; and (e) all
Documents evidencing any of the foregoing.
"Investment Property" means "investment property," as such
term is defined in Section 9.115(a)(6) of the Texas Business and Commerce Code.
<PAGE>
"Motor Vehicle" means all cars, trucks, vans and other motor
vehicles now owned or hereafter acquired by the Debtor which are used by the
Debtor for the transfer of lithotripters and lithotripsy related equipment,
including without limitation, those motor vehicles listed on Schedule 1 hereto,
and any and all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
"Proceeds" means any "proceeds," as such term is defined in
Article 9 of the UCC and, in any event, shall include, but not be limited to,
(a) any and all proceeds of any insurance, indemnity, warranty, or guaranty
payable to the Debtor from time to time with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and payable to the
Debtor from time to time in connection with any requisition, confiscation,
condemnation, seizure, or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Securities" means all shares of stock of any Person now owned
or hereafter acquired by the Debtor including, without limitation, each of the
shares listed on Schedule 2 hereto, and all dividends, cash, stock dividends,
instruments and other investment property from time to time received, receivable
by, or otherwise distributed to the Debtor for its own account in respect of or
in exchange for any or all of such shares, and the certificates representing
such shares.
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas or, if so required with respect to any particular Collateral by
mandatory provisions of applicable law, as in effect in the jurisdiction in
which such Collateral is located.
ARTICLE II
Security Interest and Pledge
Section 2.1 Security Interest and Pledge. The Debtor hereby pledges and
grants to the Administrative Agent, for the pro rata benefit of the Lenders, a
lien on and security interest in all of the Debtor's right, title, and interest
in and to the following, whether now owned or hereafter arising or acquired and
wherever located (collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Instruments;
(d) all General Intangibles and all Securities;
(e) all Investment Property;
(f) all Documents;
(g) all Equipment, including, without limitation, all Motor Vehicles;
(h) all Inventory;
(i) all other goods and personal property of the Debtor
whether tangible or intangible; and
(j) all Proceeds and products of any or all of the
foregoing.
<PAGE>
Section 2.2 Secured Indebtedness. The Collateral shall secure the
following obligations, indebtedness, and liabilities (whether at stated
maturity, by acceleration or otherwise) (all such obligations, indebtedness, and
liabilities being hereinafter sometimes called the "Secured Indebtedness"):
(a) the Obligations and the obligations, liabilities and indebtedness of
the Debtor to the Agents and the Lenders under the Guaranty;
(b) all reasonable costs and expenses, including, without
limitation, all reasonable attorneys' fees and legal expenses, incurred by any
of the Agents or any Lender to preserve and maintain the Collateral, collect the
obligations herein described, and enforce this Agreement; and
(c) all extensions, renewals, and modifications of any of the foregoing.
Section 2.3 Debtor Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) the Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent of any of its rights hereunder shall not release the Debtor
from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) neither the Administrative Agent nor any
Lender shall have any obligation or liability under any of the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall the
Administrative Agent or any Lender be obligated to perform any of the
obligations or duties of the Debtor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
ARTICLE III
Representations and Warranties
To induce the Administrative Agent to enter into this Agreement and the
Agents and the Lenders to enter into the Loan Agreement, the Debtor represents
and warrants to the Administrative Agent that:
Section 3.1 Corporate Existence. The Debtor: (a) is a corporation
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 Debtor. The Debtor 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.
Section 3.2 Corporate Action; No Breach. The execution, delivery, and
performance by the Debtor of this Agreement and the other Loan Documents to
which the Debtor 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 on the part of the Debtor 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 the Debtor, (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 the Debtor is a party or by which it or any of its property
is bound or subject, or (b) constitute a material default under any material
agreement or instrument, or result in the creation or imposition of any Lien
(except as provided in Section 2.1 hereof) upon any of the revenues or assets of
the Debtor.
<PAGE>
Section 3.3 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 the Debtor of
this Agreement and the other Loan Documents to which the Debtor is or may become
a party or the validity or enforceability thereof.
Section 3.4 Enforceability. This Agreement constitutes, and the other
Loan Documents to which the Debtor is party, when delivered, shall constitute
legal, valid, and binding obligations of the Debtor, enforceable against the
Debtor 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 3.5 Title. The Debtor is, and with respect to Collateral
acquired after the date hereof the Debtor will be, the legal and beneficial
owner of the Collateral free and clear of any Lien, security interest, pledge,
claim or other encumbrance (except for Liens permitted by Section 9.2 of the
Loan Agreement and liens in favor of the Prime Administrative Agent (as
hereinafter defined)) or, with respect to the Securities, any right or option on
the part of any Person (other than the Lenders) to purchase or otherwise acquire
the Securities or any part thereof, except for the security interests granted
hereunder, Liens permitted by Section 9.2 of the Loan Agreement, and liens in
favor of the Prime Administrative Agent (as hereinafter defined). The liens and
security interests granted herein are subject and subordinate to the liens
granted in favor of Bank of America, N.A., as Administrative Agent under the
Fourth Amended and Restated Loan Agreement dated as of the date hereof (the
"Prime Loan Agreement") among Prime Medical Services, Inc., Bank of America,
N.A., as Administrative Agent (the "Prime Administrative Agent"), BankBoston,
N.A., as Documentation Agent, and the lenders from time to time party thereto.
Section 3.6 Accounts. Unless the Debtor has given the Administrative
Agent written notice to the contrary, whenever the security interest granted
hereunder attaches to an Account, the Debtor shall be deemed to have represented
and warranted to the Administrative Agent as to each and all of its Accounts
that (a) each Account is genuine and in all respects what it purports to be, (b)
each Account represents the legal, valid, and binding obligation of the account
debtor evidencing indebtedness unpaid and owed by such account debtor arising
out of the performance of labor or services by the Debtor or the sale or lease
of goods by the Debtor, (c) the amount of each Account represented as owing is
the correct amount actually and unconditionally owing except for normal trade
discounts granted in the ordinary course of business, and (d) no Account is
subject to any offset, counterclaim, or other defense.
Section 3.7 Rule 144 Securities. With respect to all Collateral that is
Securities which are subject to Rule 144 under the Securities Act of 1933, as
such rule and act are amended at the time in question and any successor in whole
or in part thereto, (a) the Debtor is the beneficial and record owner thereof,
free and clear of any Liens or transfer restrictions (other than restrictions on
the amount thereof which may be sold, and the manner in which sales may be made,
imposed by such Rule 144), (b) the Debtor acquired such Securities directly from
the issuer thereof more than two (2) years prior to the date hereof in
transactions not involving any public offering, (c) the Debtor paid the purchase
price therefor in cash more than two (2) years prior to the date hereof, (d)
since such date of acquisition, the Debtor has not had a short position in, or
any put or option to dispose of, any capital stock of any issuer thereof or
Securities convertible into capital stock of any issuer thereof, (e) neither the
Debtor, nor any person or entity, the sales of which are required by Rule 144 to
be aggregated with the sales of the Debtor, has sold any capital stock of any
issuer of such Securities during the period of six (6) months prior to the date
hereof, other than sales pursuant to an effective registration statement under
the Securities Act of 1933, as amended, and (f) to the Debtor's best knowledge,
each issuer of such Securities has timely filed all reports required to be filed
by it under the Securities Exchange Act of 1934, as amended.
<PAGE>
Section 3.8 Financing Statements. No financing statement, security
agreement, or other Lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of the
Prime Administrative Agent, any lender under the Prime Agreement, Administrative
Agent, or any Lender pursuant to this Agreement. The Debtor has not within the
past five (5) years had a trade name or done business under any name other than
its legal name set forth at the beginning of this Agreement.
Section 3.9 Principal Place of Business. The principal place of
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is located at the address of the Debtor
shown on the signature pages of this Agreement.
Section 3.10 Location of Collateral. All Inventory and Equipment of the
Debtor are located at the places specified on Schedule 3 hereto. The Debtor has
exclusive possession and control of its Inventory and Equipment. None of the
Inventory or Equipment of the Debtor is evidenced by a Document (including,
without limitation, a negotiable document of title). All Instruments, Chattel
Paper, Securities and certificates of title of the Debtor have been delivered to
the Prime Administrative Agent, to perfect on its behalf and on behalf of the
Administrative Agent.
Section 3.11 Perfection. Upon the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule 4 attached hereto,
and upon the Administrative Agent's obtaining possession of all Documents,
Instruments, Chattel Paper, Securities and certificates of title of the Debtor,
and upon the Administrative Agent's obtaining control of all Investment
Property, the security interest in favor of the Administrative Agent created
herein will constitute a valid and perfected Lien upon and security interest in
the Collateral, subject to no equal or prior Lien, except in favor of the Prime
Administrative Agent and as permitted by Section 9.2 of the Loan Agreement.
Section 3.12 Independent Investigation. The Debtor has, independently
and without reliance upon any of the Agents or any Lender and based upon such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. There are no conditions
precedent to the full effectiveness of this Agreement that have not been fully
and permanently satisfied.
Section 3.13 Litigation. Except as disclosed on Schedule 7.5 to the
Prime Agreement, there is no litigation, investigation, or governmental
proceeding threatened against the Debtor or any of its properties which if
adversely determined would have a material adverse effect on the Collateral or
the financial condition, operations, or business of the Borrower, any Material
Subsidiary or the Companies taken as a whole.
Section 3.14 Benefit to Debtor. The value of the consideration received
and to be received by the Debtor as a result of the Borrower, the Agents and the
Lenders entering into the Loan Agreement and the Debtor executing and delivering
this Agreement is reasonably worth at least as much as the liability and
obligation of the Debtor hereunder, and such liability and obligation and the
Borrower's entering into the Loan Agreement have benefited and may reasonably be
expected to benefit the Debtor directly and indirectly.
ARTICLE IV
Covenants
The Debtor covenants and agrees with the Administrative Agent that
until the Secured Indebtedness is paid and performed in full and the Commitments
have terminated:
Section 4.1 Encumbrances. Except as permitted by Section 9.2 of the
Loan Agreement and liens in favor of the Prime Administrative Agent, the Debtor
shall not create, permit, or suffer to exist, and shall defend the Collateral
against, any Lien, security interest, or other encumbrance on the Collateral,
and shall defend the Debtor's rights in the Collateral and the Administrative
Agent's security interest in the Collateral against the claims and demands of
all Persons. The Debtor shall do nothing to impair the rights of the
Administrative Agent in the Collateral.
<PAGE>
Section 4.2 Delivery. Prior to or concurrently with the execution and
delivery of this Agreement, Debtor shall deliver to the Prime Administrative
Agent to acknowledge the Administrative Agent's lien and security interest in
all certificates identified on Schedule 2 hereto, with all Chattel Paper,
Instruments and Documents of the Debtor.
Section 4.3 Modification of Accounts. The Debtor shall, in accordance
with prudent business practices, endeavor to collect or cause to be collected
from each account debtor under its Accounts, as and when due, any and all
amounts owing under such Accounts. Without the prior written consent of the
Administrative Agent, the Debtor shall not (a) grant any extension of time on
any Account for any payment or grant extensions of time for payments on its
Accounts which cause the aggregate amount of all payments extended by the Debtor
on its Accounts during any fiscal year of the Debtor to exceed $150,000.00, (b)
compromise, compound, or settle any of the Accounts for less than the full
amount thereof; provided, however, that the Debtor may compromise, compound or
settle any Account which is an amount less than $50,000.00, provided the
aggregate amount compromised, compounded or settled during any fiscal year of
the Debtor shall not exceed $150,000.00, (c) release, in whole or in part, any
Person liable for payment of an Account in excess of $50,000.00, (d) allow any
credit or discount for payment with respect to any Account in excess of
$50,000.00, other than trade discounts granted in the ordinary course of
business; provided, however, that the aggregate amount of all credits or
discounts granted during any fiscal year of the Debtor shall not exceed
$150,000.00, or (e) release any Lien, security interest, or guaranty securing
any Account in excess of $50,000.00.
Section 4.4 Disposition of Collateral. The Debtor shall not sell,
lease, assign (by operation of law or otherwise), or otherwise dispose of, or
grant any option with respect to, the Collateral or any part thereof without the
prior written consent of the Administrative Agent, except the Debtor may sell
Inventory in the ordinary course of business.
Section 4.5 Distributions. If the Debtor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or distribution in connection with
any reclassification, increase, or reduction of capital or issued in connection
with any reorganization), option or rights, whether as an addition to, in
substitution of, or an exchange for any Collateral or otherwise, the Debtor
agrees to accept the same as the Administrative Agent's agent and to hold the
same in trust for the Administrative Agent and to deliver the same forthwith to
the Prime Administrative Agent in the exact form received, with the appropriate
endorsement of the Debtor when necessary and/or appropriate undated stock powers
duly executed in blank, to be held by the Prime Administrative Agent on its own
behalf and on behalf of Administrative Agent as additional Collateral for the
Secured Indebtedness, subject to the terms hereof. Any sums paid upon or in
respect of the Securities upon the liquidation or dissolution of the issuer
thereof shall be paid over to the Prime Administrative Agent to be held by it as
additional Collateral for the Secured Indebtedness subject to the terms hereof;
and in case any distribution of capital shall be made on or in respect of the
Securities or any property shall be distributed upon or with respect to the
Securities pursuant to any recapitalization or reclassification of the capital
of the issuer thereof or pursuant to any reorganization of the issuer thereof,
the property so distributed shall be delivered to the Prime Administrative Agent
to be held by it, as additional Collateral for the Secured Indebtedness, subject
to the terms hereof. All sums of money and property so paid or distributed in
respect of the Securities that are received by the Debtor shall, until paid or
delivered to the Administrative Agent (or the Prime Administrative Agent, so
long as it has a prior lien), be held by the Debtor in trust as additional
security for the Secured Indebtedness.
<PAGE>
Section 4.6 Further Assurances. At any time and from time to time, upon
the request of the Administrative Agent, and at the sole expense of the Debtor,
the Debtor shall promptly execute and deliver all such further instruments,
agreements, and documents and take such further action as the Administrative
Agent may reasonably deem necessary or desirable to preserve and perfect its
security interest in the Collateral and carry out the provisions and purposes of
this Agreement. Without limiting the generality of the foregoing, the Debtor
shall: (a) execute and deliver to the Administrative Agent such financing
statements as the Administrative Agent may from time to time require; (b)
deliver and pledge to the Administrative Agent (or the Prime Administrative
Agent, so long as it has a prior lien) all Documents (including, without
limitation, negotiable documents of title) evidencing Inventory or Equipment;
(c) deliver and pledge to the Administrative Agent (or the Prime Administrative
Agent, so long as it has a prior lien) all certificates of title required by the
Loan Agreement, Instruments and Chattel Paper of the Debtor with any necessary
endorsements; and (d) execute and deliver to the Administrative Agent such other
documents, instruments, and agreements as the Administrative Agent may
reasonably require to perfect and maintain the validity, effectiveness, and
priority of the Loan Documents and the Liens intended to be created thereby. The
Debtor authorizes the Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, relating to all or any part of
the Collateral without the signature of the Debtor where permitted by law. A
carbon, photographic, or other reproduction of this Agreement or of any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement.
Section 4.7 Risk of Loss; Insurance. The Agents and the Lenders shall
not be responsible for any loss or damage to the Collateral. The Debtor shall,
at its own expense, maintain 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 Debtor operates consistent
with past practices and to the extent available on commercially reasonable
terms, provided that in any event the Debtor will maintain workmen's
compensation insurance, property insurance, comprehensive general liability
insurance, professional liability insurance and business interruption insurance
reasonably satisfactory to the Administrative Agent. Each insurance policy
covering Collateral shall name the Administrative Agent as loss payee for the
benefit of the Lenders as its interest 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.
Section 4.8 Inspection Rights. The Debtor shall permit the
Administrative Agent and each Lender and their respective representatives to
examine, inspect, and audit the Collateral and to examine, inspect, and copy the
Debtor's books and records at any reasonable time and as often as the
Administrative Agent or any such Lender may desire. The Administrative Agent and
each Lender may at any time and from time to time contact account debtors and
other obligors to verify the existence, amounts, and terms of the Debtor's
Accounts.
Section 4.9 Corporate Changes. The Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
the Debtor shall have given the Administrative Agent thirty (30) days prior
written notice thereof and shall have taken all action reasonably deemed
necessary or desirable by the Administrative Agent to make each financing
statement not seriously misleading. The Debtor shall not change its principal
place of business, chief executive office, or the place where it keeps its books
and records unless it shall have given the Administrative Agent thirty (30) days
prior written notice thereof and shall have taken all action reasonably deemed
necessary or desirable by the Administrative Agent to cause its security
interest in the Collateral to be perfected with the priority required by this
Agreement.
Section 4.10 Books and Records; Information. The Debtor shall keep
accurate and complete books and records of the Collateral and the Debtor's
business and financial condition in accordance with GAAP. The Debtor shall from
time to time at the request of the Administrative Agent deliver to the
Administrative Agent such information regarding the Collateral and the Debtor as
the Administrative Agent may reasonably request, including, without limitation,
lists and descriptions of the Collateral and evidence of the identity and
existence of the Collateral. The Debtor shall mark its records to reflect the
security interest of the Administrative Agent hereunder.
<PAGE>
Section 4.11 Equipment and Inventory.
-----------------------
(a) The Debtor shall keep the Equipment and Inventory at the
locations specified on Schedule 3 hereto or, upon thirty (30) days
prior written notice to the Administrative Agent, at such other places
within the United States of America where all action required to
perfect the Administrative Agent's security interest in the Equipment
and Inventory with the priority required by this Agreement shall have
been taken.
(b) The Debtor shall maintain the Equipment and Inventory in accordance
with Section 8.3 of the Loan Agreement.
Section 4.12 Warehouse Receipts Non-Negotiable. The Debtor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any of the Collateral, such warehouse receipt or receipt in
the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under relevant law).
Section 4.13 Taxes and Claims. The Debtor shall pay and discharge,
before the same become delinquent, (a) all material taxes, assessments, and
governmental charges imposed upon it or upon any of its property, and (b) all
material lawful claims that, if unpaid, might become a Lien upon any of its
property; provided, however, that the Debtor shall not be required to pay or
discharge any such tax, assessment, or governmental charge which is being
contested in good faith by proper proceedings being diligently pursued and for
which adequate reserves have been established in accordance with GAAP.
Section 4.14 Compliance with Laws. The Debtor shall comply in all
material respects with all material applicable laws, rules, regulations, orders,
and decrees of any Governmental Authority or arbitrator.
Section 4.15 Compliance with Agreements. The Debtor shall comply in all
material respects with all agreements, contracts, and instruments binding on it
or affecting its properties or businesses, 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 Borrower, any Material Subsidiary
or the Companies (taken as a whole).
Section 4.16 Notification. Except as permitted by Section 9.2 of the
Loan Agreement and Section 9.2 of the Prime Loan Agreement, the Debtor shall
promptly notify the Administrative Agent of (a) any Lien, security interest,
encumbrance, or claim that has attached to or been made or asserted against any
of the Collateral, (b) any material change in any of the Collateral, including,
without limitation, any material damage to or loss of any material portion of
the Collateral, (c) the occurrence of any other event that could have a material
adverse effect on the Collateral or the security interest created hereunder, and
(d) the occurrence or existence of any Default.
Section 4.17 Collection of Accounts. Except as otherwise provided in
this Section or in any other Loan Document, the Debtor shall have the right to
collect and receive payments on the Accounts. In connection with such
collections, the Debtor may take (and, at the Administrative Agent's direction,
shall take) such actions as the Debtor or the Administrative Agent may
reasonably deem necessary or advisable to enforce collection of the Accounts.
Section 4.18 Additional Securities. The Debtor shall not consent to or
approve the issuance of any additional shares of any class of capital stock of
the issuers of any of the Securities, or any securities convertible into, or
exchangeable for, any such shares or any warrants, options, rights, or other
commitments entitling any Person to purchase or otherwise acquire any such
shares.
<PAGE>
Section 4.19 Provide Information. The Debtor shall fully cooperate, to
the extent reasonably requested by the Administrative Agent, in the completion
of any notice, form, schedule, or other document filed by the Administrative
Agent on its own behalf or on behalf of the Debtor, including, without
limitation, any required notice or statement of beneficial ownership or of the
acquisition of beneficial ownership of the Securities and any notice of proposed
sale of such Securities pursuant to Rule 144 as promulgated by the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended. Without limiting the generality of the foregoing, the Debtor shall
furnish to the Administrative Agent any and all information which the
Administrative Agent may reasonably request for purposes of any such filing,
regarding the Debtor, the Securities, and any issuer of any of the Securities,
and the Debtor shall disclose to the Administrative Agent all material adverse
information known by the Debtor with respect to the operations of any issuer of
any of the Securities.
Section 4.20 Notification of Changes in Beneficial Ownership. The
Debtor shall promptly notify the Administrative Agent of any sale of securities
of any Subsidiary of the Debtor or by any Person named on the Debtor's Rule 144
questionnaire and shall furnish promptly to the Administrative Agent a copy of
any Form 144 filed in respect of any such sale. In addition, if the Debtor or
any other Person named in the Debtor's Rule 144 questionnaire shall file with
the SEC a form or other document reporting any change in the beneficial
ownership of the common stock of any Subsidiary of the Debtor, the Debtor shall
promptly furnish to the Administrative Agent a copy of such form or document.
Section 4.21 Restriction on Sales after Default. The Debtor shall not
sell or suffer or permit any Person named in the accompanying Rule 144
questionnaire to sell any shares of the same class of securities as the
Securities at any time after any Event of Default shall have occurred.
Section 4.22 Fixtures. For any Collateral that is a fixture or an
accession which has been attached to real estate or other goods prior to the
perfection of the security interest granted in Section 2.1 hereof, the Debtor
shall furnish to Administrative Agent, upon demand, a disclaimer of interest in
each such fixture or accession and a consent in writing to the security interest
of Administrative Agent therein, signed by all persons and entities having any
interest in such fixture or accession by virtue of any interest in the real
estate or other goods to which such fixture or accession has been attached.
Section 4.23 Notation on Title Certificates. If certificates of title
are issued or outstanding with respect to any of the Collateral, the Debtor
shall cause the security interest granted in Section 2.1 hereof to be properly
noted thereon.
ARTICLE V
Rights of the Administrative Agent
Section 5.1 Power of Attorney. The Debtor hereby irrevocably
constitutes and appoints the Administrative Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the name of the
Debtor or in its own name, to take any and all action and to execute any and all
documents and instruments which the Administrative Agent at any time and from
time to time deems reasonably necessary or desirable to accomplish the purposes
of this Agreement if an Event of Default shall have occurred and be continuing,
and, without limiting the generality of the foregoing, the Debtor hereby gives
the Administrative Agent the power and right on behalf of the Debtor and in its
own name to do any of the following (subject to the rights of the Debtor under
Sections 5.2 and 5.3 hereof), without notice to or the consent of the Debtor if
an Event of Default shall have occurred and be continuing:
<PAGE>
(a) to demand, sue for, collect, or receive in the name of the
Debtor or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and,
in connection therewith, endorse checks, notes, drafts, acceptances,
money orders, documents of title, or any other instruments for the
payment of money under the Collateral or any policy of insurance;
(b) to pay or discharge taxes, Liens, or other encumbrances
levied or placed on or threatened against the Collateral;
(c) to notify post office authorities to change the address for
delivery of mail of the Debtor to an address designated by the
Administrative Agent and to receive, open. and subsequently deliver to
the Debtor mail addressed to the Debtor; and
(d) (i) to direct account debtors and any other parties liable
for any payment under any of the Collateral to make payment of any and
all monies due and to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall direct; (ii)
to receive payment of and receipt for any and all monies, claims, and
other amounts due and to become due at any time in respect of or
arising out of any Collateral; (iii) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, proxies, stock powers,
verifications, and notices in connection with accounts and other
documents relating to the Collateral; (vi) to commence and prosecute
any suit, action, or proceeding at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof
and to enforce any other right in respect of any Collateral; (v) to
defend any suit, action, or proceeding brought against the Debtor with
respect to any Collateral; (vi) to settle, compromise, or adjust any
suit, action, or proceeding described above and, in connection
therewith, to give such discharges or releases as the Administrative
Agent may deem appropriate; (vii) to exchange any of the Collateral for
other property upon any merger, consolidation, reorganization,
recapitalization, or other readjustment of the issuer thereof and, in
connection therewith, deposit any of the Collateral with any committee,
depositary, transfer agent, registrar, or other designated agency upon
such terms as the Administrative Agent may determine; (viii) to add or
release any guarantor, indorser, surety, or other party to any of the
Collateral; (ix) to renew, extend, or otherwise change the terms and
conditions of any of the Collateral; (x) to make, settle, compromise,
or adjust claims under any insurance policy covering any of the
Collateral; (xi) to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and to do, at the Administrative Agent's
option and the Debtor's expense, at any time, or from time to time, all
acts and things which the Administrative Agent deems necessary to
protect, preserve, or realize upon the Collateral and the
Administrative Agent's security interest therein; and (xii) to
complete, execute and file with the SEC one or more notices of proposed
sale of securities pursuant to Rule 144.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Neither the Administrative Agent nor any Lender shall be under any
duty to exercise or withhold the exercise of any of the rights, powers,
privileges, and options expressly or implicitly granted to the Administrative
Agent in this Agreement, and shall not be liable for any failure to do so or any
delay in doing so. Neither the Administrative Agent nor any Lender shall be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Administrative Agent
solely to protect, preserve, and realize upon its security interest in the
Collateral. Neither the Administrative Agent nor any Lender shall be responsible
for any decline in the value of the Collateral and shall not be required to take
any steps to preserve rights against prior parties or to protect, preserve, or
maintain any security interest or Lien given to secure the Collateral.
<PAGE>
Section 5.2 Voting Rights. Unless and until an Event of Default shall
have occurred and be continuing, the Debtor shall be entitled to exercise any
and all voting rights pertaining to the Securities or any part thereof for any
purpose not inconsistent with the terms of this Agreement or the Loan Agreement.
The Administrative Agent shall execute and deliver to the Debtor all such
proxies and other instruments as the Debtor may reasonably request for the
purpose of enabling the Debtor to exercise the voting rights which it is
entitled to exercise pursuant to this Section.
Section 5.3 Dividends. Unless and until an Event of Default shall have
occurred and be continuing, the Debtor shall be entitled to receive and retain
the dividends on the Securities paid in cash out of earned surplus to the extent
and only to the extent that such dividends are permitted by the Loan Agreement.
Section 5.4 Setoff, Property Held by the Lenders. The Administrative
Agent and each Lender shall have the right to set off and apply against the
Secured Indebtedness, at any time and without notice to the Debtor, any and all
deposits (general or special, time or demand, provisional or final) or other
sums at any time credited by or owing from the Administrative Agent or any
Lender to the Debtor whether or not the Secured Indebtedness is then due. As
additional security for the Secured Indebtedness, the Debtor hereby grants the
Administrative Agent and each Lender a security interest in all money,
instruments, and other property of the Debtor now or hereafter held by the
Administrative Agent or any Lender, including without limitation, property held
in safekeeping. In addition to the Administrative Agent's and each Lender's
right of setoff and as further security for the Secured Indebtedness, the Debtor
hereby grants to each of them a security interest in all deposits (general or
special, time or demand, provisional or final) of the Debtor now or hereafter on
deposit with or held by any of them and all other sums at any time credited by
or owing from the any of them to the Debtor. The rights and remedies of the
Administrative Agent and each Lender hereunder are in addition to other rights
and remedies (including, without limitation, other rights of setoff) which any
of them may have.
Section 5.5 Performance by the Secured Party. If the Debtor shall fail
to perform any covenant or agreement contained in this Agreement, the
Administrative Agent, may, at the direction of the Required Lenders, perform or
attempt to perform such covenant or agreement on behalf of the Debtor. In such
event, the Debtor shall, at the request of the Administrative Agent, promptly
pay any amount expended by the Administrative Agent or any Lender in connection
with such performance or attempted performance to the Administrative Agent,
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 obligations of the Debtor under this Agreement.
ARTICLE VI
Default
Section 6.1 Rights and Remedies. If an Event of Default shall have
occurred and be continuing, the Administrative Agent shall have the following
rights and remedies:
<PAGE>
(a) In addition to all other rights and remedies granted to
the Administrative Agent in this Agreement or in any other Loan
Document or by applicable law, the Administrative Agent shall have all
of the rights and remedies of a secured party under the UCC (whether or
not the UCC applies to the affected Collateral). Without limiting the
generality of the foregoing, the Administrative Agent may (i) without
demand or notice to the Debtor, collect, receive, or take possession of
the Collateral or any part thereof and for that purpose the
Administrative Agent may enter upon any premises on which the
Collateral is located and remove the Collateral therefrom or render it
inoperable, and/or (ii) sell, lease, or otherwise dispose of the
Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at the Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Administrative Agent may deem commercially
reasonable. The Administrative Agent shall have the right at any public
sale or sales, and, to the extent permitted by applicable law, at any
private sale or sales, to bid and become a purchaser of the Collateral
or any part thereof free of any right or equity of redemption on the
part of the Debtor, which right or equity of redemption is hereby
expressly waived and released by the Debtor. Upon the request of the
Administrative Agent, the Debtor shall assemble the Collateral and make
it available to the Administrative Agent at any place designated by the
Administrative Agent that is reasonably convenient to the Debtor and
the Administrative Agent. The Debtor agrees that the Administrative
Agent shall not be obligated to give more than five (5) days written
notice of the time and place of any public sale or of the time after
which any private sale may take place and that such notice shall
constitute reasonable notice of such matters. The Administrative Agent
shall not be obligated to make any sale of Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of
Collateral may have been given. The Administrative Agent may, without
notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be
made at the time and place to which the same was so adjourned. The
Debtor shall be liable for all expenses of retaking, holding, preparing
for sale, or the like, and all attorneys' fees, legal expenses, and all
other costs and expenses incurred by the Administrative Agent or any
Lender in connection with the collection of the Secured Indebtedness
and the enforcement of the Administrative Agent's and the Lender's
rights under this Agreement. The Debtor shall remain liable for any
deficiency if the Proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Secured Indebtedness in full.
The Administrative Agent and the Lenders may apply the Collateral
against the Secured Indebtedness in such order and manner as the
Administrative Agent and the Lenders may elect. The Debtor waives all
rights of marshaling, valuation, and appraisal in respect of the
Collateral.
(b) The Administrative Agent may cause any or all of the
Collateral held by it to be transferred into the name of the
Administrative Agent or the name or names of the Administrative Agent's
nominee or nominees.
(c) The Administrative Agent may exercise or cause to be
exercised all voting, consensual and other powers of ownership in
respect of the Collateral and the Debtor shall deliver to the
Administrative Agent, if requested by the Administrative Agent,
irrevocable proxies with respect to the Securities in form satisfactory
to the Administrative Agent.
(d) The Administrative Agent may collect or receive all money
or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to
do so.
(e) On any sale of the Collateral, the Administrative Agent is
hereby authorized to comply with any limitation or restriction with
which compliance is necessary, in the view of the Administrative
Agent's counsel, in order to avoid any violation of applicable law or
in order to obtain any required approval of the purchaser or purchasers
by any applicable Governmental Authority.
<PAGE>
(f) The Debtor agrees that, because of the Securities Act of
1933, as amended, or any other laws or regulations, and for other
reasons, there may be legal and/or practical restrictions or
limitations affecting the Administrative Agent in any attempts to
dispose of certain portions of the Securities and for the enforcement
of their rights. For these reasons, the Administrative Agent is hereby
authorized by the Debtor, but not obligated, upon the occurrence and
during the continuation of an Event of Default, to sell all or any part
of the Securities at private sale, subject to investment letter or in
any other manner which will not require the Securities, or any part
thereof, to be registered in accordance with the Securities Act of
1933, as amended, or the rules and regulations promulgated thereunder,
or any other laws or regulations, at a reasonable price at such private
sale or other distribution in the manner mentioned above. The Debtor
understands that the Administrative Agent may in its discretion
approach a limited number of potential purchasers and that a sale under
such circumstances may yield a lower price for the Securities, or any
part or party thereof, than would otherwise be obtainable if such
collateral were either afforded to a larger number or potential
purchasers, or registered or sold in the open market. The Debtor agrees
that such private sale shall be deemed to have been made in a
commercially reasonable manner, and that the Administrative Agent has
no obligation to delay sale of any Securities to permit the issuer
thereof to register it for public sale under any applicable federal or
state securities laws. The Administrative Agent is authorized, in
connection with any such sale (a) to restrict the prospective bidders
on or purchasers of any of the Securities to a limited number of
sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to
the distribution or sale of any of such Securities and (b) to impose
such other limitations or conditions in connection with any such sale
as the Administrative Agent reasonably deems necessary in order to
comply with applicable law. The Debtor covenants and agrees that it
will execute and deliver such documents and take such other action as
the Administrative Agent reasonably deems necessary in order that any
such sale may be made in compliance with applicable law. Upon any such
sale the Administrative Agent shall have the right to deliver, assign
and transfer to the purchaser thereof the Securities so sold. Each
purchaser at any such sale shall hold the Securities so sold
absolutely, free from any claim or right of the Debtor of whatsoever
kind, including any equity or right of redemption of the Debtor. The
Debtor, to the extent permitted by applicable law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may
have under any law now existing or hereafter enacted.
ARTICLE VII
Miscellaneous
Section 7.1 Indemnification. The Debtor hereby agrees to indemnify each
Agent, each Lender and each Affiliate thereof and their respective officers,
directors, employees, attorneys, and agents (collectively the "Indemnified
Parties") 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
this Agreement or any other Loan Document, (b) any of the transactions
contemplated by this Agreement or any other Loan Document, (c) any breach by the
Debtor of any representation, warranty, covenant, or other agreement contained
in this Agreement or any other Loan Document, or (d) any investigation,
litigation, or other proceeding, including, without limitation, any threatened
investigation, litigation, or other proceeding relating to any of the foregoing,
INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF ANY INDEMNIFIED PARTY.
Section 7.2 No Waiver; Cumulative Remedies. No failure on the part of
any Agent or the 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 are cumulative
and not exclusive of any rights and remedies provided by law.
Section 7.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Debtor, the Agents, the Lenders and their
respective heirs, successors, and assigns, except that the Debtor may not assign
any of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent.
<PAGE>
Section 7.4 Amendment; Entire Agreement. THIS AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES 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. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 7.5 Notices. All notices and other communications provided for
in this Agreement shall be given or made in accordance with Section 13.11 of the
Loan Agreement 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 the other party
given in accordance with this Section.
Section 7.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.
Section 7.7 Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
Section 7.8 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by any Agent or any Lender shall affect the
representations and warranties or the right of any Agent or any Lender to rely
upon them.
Section 7.9 Waiver of Bond. In the event the Administrative Agent seeks
to take possession of any or all of the Collateral by judicial process, the
Debtor hereby irrevocably waives any bonds and any surety or security relating
thereto that may be required by applicable law as an incident to such
possession, and waives any demand for possession prior to the commencement of
any such suit or action.
Section 7.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.11 Construction. The Debtor and the Administrative Agent
acknowledge 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 with its
legal counsel.
Section 7.12 Obligations Absolute. All rights and remedies of the
Administrative Agent hereunder, and all obligations of the Debtor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan Agreement
or any of the other Loan Documents or any other agreement or
instrument relating to any of the foregoing;
(b) any change in the time, manner, or place of payment of,
or in any other term of, all or any of the Secured Indebtedness, any or
all of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Loan Agreement or any of the other
Loan Documents;
<PAGE>
(c) any exchange, release, or nonperfection of any Collateral, or
any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Indebtedness; or
(d) any other circumstance (other than payment in full of the
Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Debtor.
Section 7.13 Limitations. Notwithstanding any contrary provision, it is
the intention of Debtor, Lenders, and Administrative Agent that the granting of
the liens set forth in this Agreement shall not constitute a fraudulent
conveyance, fraudulent transfer, or similar Laws applicable to Debtor.
Accordingly, notwithstanding anything to the contrary contained in this
Agreement or any other agreement or instrument executed in connection herewith,
granting of liens set forth in this Agreement shall be limited to an aggregate
amount equal to the largest amount that would not render such Debtor's
obligations hereunder subject to avoidance under Section 548 of the United
Stated Bankruptcy Code or any comparable provision of any applicable state law.
Section 7.14 Termination. If all of the Secured Indebtedness shall have
been paid and performed in full and the Commitments shall have expired or
terminated, the Administrative Agent shall, upon the written request of the
Debtor and in accordance with applicable provisions of the Loan Agreement,
promptly execute and deliver to the Debtor a proper instrument or instruments
acknowledging the release and termination of the security interests created by
this Agreement as the Debtor may reasonably deem necessary or desirable, and
shall duly assign and deliver to the Debtor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Administrative Agent and has not previously been sold or otherwise
applied pursuant to this Agreement.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
<PAGE>
Guarantor Security Agreement
IN WITNESS WHEREOF, the Debtor has duly executed this Agreement as of
the day and year first written above.
DEBTOR:
------
PRIME PRACTICE MANAGEMENT, INC.
a New York corporation
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attn: Treasurer
Fax Number: (512) 328-8510
Telephone Number: (512) 314-4554
<PAGE>
20
Guarantor Security Agreement
SCHEDULE 1
MOTOR VEHICLES
None.
<PAGE>
SCHEDULE 2
SECURITIES
Pledged Stock
None.
<PAGE>
SCHEDULE 3
LOCATION OF COLLATERAL
Location of Equipment and Inventory
1301 Capital of Texas Highway
Suite C-300
Austin, Travis County, Texas 78746-6550
<PAGE>
SCHEDULE 4
JURISDICTIONS FOR FILING
Jurisdictions for Filing UCC-1 Financing Statements
Texas
<PAGE>
Guarantor Security Agreement
GUARANTOR SECURITY AGREEMENT
THIS GUARANTOR SECURITY AGREEMENT (the "Agreement") dated as of January
31, 2000, is executed by FASTSTART, INC., a North Carolina corporation (the
"Debtor"), for the benefit of BANK OF AMERICA, N.A., a national banking
association ("B of A"), not in its individual capacity but solely as
administrative agent for itself and each of the other Lenders (each, a "Lender"
and collectively, the "Lenders") as defined in the Loan Agreement (as
hereinafter defined) (in such capacity, together with its successors and assigns
in such capacity, the "Administrative Agent").
R E C I T A L S:
- - - - - - - -
A. Prime Medical Services, Inc., a Delaware corporation (the "Borrower"), B
of A, as administrative agent, BankBoston, N.A., as documentation agent, and the
Lenders have entered into that certain Fourth Amended and Restated Loan
Agreement dated January 31, 2000, (as the same may be amended, restated,
extended, supplemented or modified from time to time, the "Loan Agreement"),
pursuant to which the Lenders have agreed to make a revolving loan to the
Borrower with advances thereunder not to exceed an aggregate principal amount of
Eighty-Six Million and 00/100 Dollars ($86,000,000.00) at any one time
outstanding.
B. The Debtor, together with other guarantors, has executed that
certain Guaranty Agreement of even date herewith (as the same may be amended,
supplemented or modified from time to time, the "Guaranty"), pursuant to which
the Debtor has guaranteed to the Agents (as defined in the Loan Agreement) and
the Lenders the full and complete payment and performance of the Obligations (as
defined in the Loan Agreement).
C. The Agents and the Lenders have conditioned their obligations under the
Loan Agreement upon the execution and delivery of this Agreement by the Debtor.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Terms Defined in Loan Agreement. Capitalized terms used and
not otherwise defined herein shall have the same meanings as set forth in the
Loan Agreement.
Section 1.2 Terms Defined in Uniform Commercial Code. Terms used herein
which are defined in the Uniform Commercial Code as adopted by the State of
Texas, unless otherwise defined herein or in the Loan Agreement, shall have
their meanings as set forth in the Uniform Commercial Code as adopted by the
State of Texas.
Section 1.3 Additional Definitions. As used in this Agreement, the
following terms shall have the following meanings:
<PAGE>
16
Guarantor Security Agreement
"Accounts" means any "account," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor, and, in any
event, shall include, without limitation, each of the following, whether now
owned or hereafter acquired by the Debtor: (a) all rights of the Debtor to
payment for goods sold or leased or services rendered, whether or not earned by
performance; (b) all accounts receivable of the Debtor; (c) all rights of the
Debtor to receive any payment of money or other form of consideration; (d) all
security pledged, assigned, or granted to or held by the Debtor to secure any of
the foregoing; (e) all guaranties of, or indemnifications with respect to, any
of the foregoing; and (f) all rights of the Debtor as an unpaid seller of goods
or services, including, but not limited to, all rights of stoppage in transit,
replevin, reclamation, and resale.
"Chattel Paper" means any "chattel paper," as such term is
defined in Article 9 of the UCC, now owned or hereafter acquired by the Debtor.
"Collateral" has the meaning specified in Section 2.1 of this
Agreement.
"Document" means any "document," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor, including,
without limitation, all documents of title and warehouse receipts of the Debtor.
"Equipment" means any "equipment," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor and, in any
event, shall include, without limitation, all machinery, equipment, furnishings,
and fixtures now owned or hereafter acquired by the Debtor and any and all
additions, substitutions, and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment, and
accessories installed thereon or affixed thereto.
"General Intangibles" means any "general intangibles," as such
term is defined in Article 9 of the UCC, now owned or hereafter acquired by the
Debtor and, in any event, shall include, without limitation, each of the
following, whether now owned or hereafter acquired by the Debtor: (a) all of the
Debtor's patents, patent applications, patent rights, service marks, trademarks,
trade names, trade secrets, intellectual property, registrations, goodwill,
copyrights, franchises, licenses, permits, proprietary information, customer
lists, designs, and inventions; (b) all of the Debtor's books, records, data,
plans, manuals, computer software, and computer programs; (c) all of the
Debtor's contract rights, partnership interests, joint venture, limited
liability company, and membership interests (but only to the extent not
otherwise pledged to the Administrative Agent pursuant to a separate pledge or
security agreement), deposit accounts, investment accounts, and certificates of
deposit; (d) all rights of the Debtor to payment under letters of credit and
similar agreements; (e) all tax refunds and tax refund claims of the Debtor; (g)
all choses in action and causes of action of the Debtor (whether arising in
contract, tort, or otherwise and whether or not currently in litigation) and all
judgments in favor of the Debtor; (g) all rights and claims of the Debtor under
warranties and indemnities; and (h) all rights of the Debtor under any
insurance, surety, or similar contract or arrangement.
"Instrument" means any "instrument," as such term is defined
in Article 9 of the UCC and any note payable to Debtor or its order together
with all collateral securing such note and all agreements and documents related
thereto or arising therefrom, now owned or hereafter acquired by the Debtor.
"Inventory" means any "inventory," as such term is defined in
Article 9 of the UCC, now owned or hereafter acquired by the Debtor, and, in any
event, shall include, without limitation, each of the following, whether now
owned or hereafter acquired by the Debtor: (a) all goods and other personal
property of the Debtor that are held for sale or lease or to be furnished under
any contract of service; (b) all raw materials, work-in-process, finished goods,
inventory, supplies, and materials of the Debtor; (c) all wrapping, packaging,
advertising, and shipping materials of the Debtor; (d) all goods that have been
returned to, repossessed by, or stopped in transit by the Debtor; and (e) all
Documents evidencing any of the foregoing.
"Investment Property" means "investment property," as such
term is defined in Section 9.115(a)(6) of the Texas Business and Commerce Code.
<PAGE>
"Motor Vehicle" means all cars, trucks, vans and other motor
vehicles now owned or hereafter acquired by the Debtor which are used by the
Debtor for the transfer of lithotripters and lithotripsy related equipment,
including without limitation, those motor vehicles listed on Schedule 1 hereto,
and any and all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
"Proceeds" means any "proceeds," as such term is defined in
Article 9 of the UCC and, in any event, shall include, but not be limited to,
(a) any and all proceeds of any insurance, indemnity, warranty, or guaranty
payable to the Debtor from time to time with respect to any of the Collateral,
(b) any and all payments (in any form whatsoever) made or due and payable to the
Debtor from time to time in connection with any requisition, confiscation,
condemnation, seizure, or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any person acting under color of Governmental
Authority), and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Securities" means all shares of stock of any Person now owned
or hereafter acquired by the Debtor including, without limitation, each of the
shares listed on Schedule 2 hereto, and all dividends, cash, stock dividends,
instruments and other investment property from time to time received, receivable
by, or otherwise distributed to the Debtor for its own account in respect of or
in exchange for any or all of such shares, and the certificates representing
such shares.
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas or, if so required with respect to any particular Collateral by
mandatory provisions of applicable law, as in effect in the jurisdiction in
which such Collateral is located.
ARTICLE II
Security Interest and Pledge
Section 2.1 Security Interest and Pledge. The Debtor hereby pledges and
grants to the Administrative Agent, for the pro rata benefit of the Lenders, a
lien on and security interest in all of the Debtor's right, title, and interest
in and to the following, whether now owned or hereafter arising or acquired and
wherever located (collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Instruments;
(d) all General Intangibles and all Securities;
(e) all Investment Property;
(f) all Documents;
(g) all Equipment, including, without limitation, all Motor
Vehicles;
(h) all Inventory;
(i) all other goods and personal property of the Debtor whether
tangible or intangible; and
<PAGE>
(j) all Proceeds and products of any or all of the foregoing.
Section 2.2 Secured Indebtedness. The Collateral shall secure the
following obligations, indebtedness, and liabilities (whether at stated
maturity, by acceleration or otherwise) (all such obligations, indebtedness, and
liabilities being hereinafter sometimes called the "Secured Indebtedness"):
(a) the Obligations and the obligations, liabilities and
indebtedness of the Debtor to the Agents and the Lenders under the
Guaranty;
(b) all reasonable costs and expenses, including, without
limitation, all reasonable attorneys' fees and legal expenses, incurred by any
of the Agents or any Lender to preserve and maintain the Collateral, collect the
obligations herein described, and enforce this Agreement; and
(c) all extensions, renewals, and modifications of any of the
foregoing.
Section 2.3 Debtor Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) the Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent of any of its rights hereunder shall not release the Debtor
from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) neither the Administrative Agent nor any
Lender shall have any obligation or liability under any of the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall the
Administrative Agent or any Lender be obligated to perform any of the
obligations or duties of the Debtor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
ARTICLE III
Representations and Warranties
To induce the Administrative Agent to enter into this Agreement and the
Agents and the Lenders to enter into the Loan Agreement, the Debtor represents
and warrants to the Administrative Agent that:
Section 3.1 Corporate Existence. The Debtor: (a) is a corporation
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 Debtor. The Debtor 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; provided that Debtor may not be in good standing under the laws of North
Carolina, and Debtor makes no representations concerning the impact of its
status as a North Carolina nonprofit corporation on the representations set
forth herein.
<PAGE>
Section 3.2 Corporate Action; No Breach. The execution, delivery, and
performance by the Debtor of this Agreement and the other Loan Documents to
which the Debtor 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 on the part of the Debtor 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 the Debtor, (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 the Debtor is a party or by which it or any of its property
is bound or subject, or (b) constitute a material default under any material
agreement or instrument, or result in the creation or imposition of any Lien
(except as provided in Section 2.1 hereof) upon any of the revenues or assets of
the Debtor.
Section 3.3 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 the Debtor of
this Agreement and the other Loan Documents to which the Debtor is or may become
a party or the validity or enforceability thereof.
Section 3.4 Enforceability. This Agreement constitutes, and the other
Loan Documents to which the Debtor is party, when delivered, shall constitute
legal, valid, and binding obligations of the Debtor, enforceable against the
Debtor 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 3.5 Title. The Debtor is, and with respect to Collateral
acquired after the date hereof the Debtor will be, the legal and beneficial
owner of the Collateral free and clear of any Lien, security interest, pledge,
claim or other encumbrance (except for Liens permitted by Section 9.2 of the
Loan Agreement and liens in favor of the Refractive Administrative Agent (as
hereinafter defined)) or, with respect to the Securities, any right or option on
the part of any Person (other than the Lenders) to purchase or otherwise acquire
the Securities or any part thereof, except for the security interests granted
hereunder, Liens permitted by Section 9.2 of the Loan Agreement, and liens in
favor of the Refractive Administrative Agent (as hereinafter defined). Debtor
has granted subordinate liens and security interests in the Collateral in favor
of Bank of America, N.A., as Administrative Agent under the Loan Agreement dated
as of the date hereof (the "Refractive Loan Agreement") among Prime Refractive
Management, L.L.C., a Delaware limited liability company, Bank of America, N.A.,
as Administrative Agent (the "Refractive Administrative Agent"), BankBoston,
N.A., as Documentation Agent, and the lenders from time to time party thereto.
Section 3.6 Accounts. Unless the Debtor has given the Administrative
Agent written notice to the contrary, whenever the security interest granted
hereunder attaches to an Account, the Debtor shall be deemed to have represented
and warranted to the Administrative Agent as to each and all of its Accounts
that (a) each Account is genuine and in all respects what it purports to be, (b)
each Account represents the legal, valid, and binding obligation of the account
debtor evidencing indebtedness unpaid and owed by such account debtor arising
out of the performance of labor or services by the Debtor or the sale or lease
of goods by the Debtor, (c) the amount of each Account represented as owing is
the correct amount actually and unconditionally owing except for normal trade
discounts granted in the ordinary course of business, and (d) no Account is
subject to any offset, counterclaim, or other defense.
Section 3.7 Rule 144 Securities. With respect to all Collateral that is
Securities which are subject to Rule 144 under the Securities Act of 1933, as
such rule and act are amended at the time in question and any successor in whole
or in part thereto, (a) the Debtor is the beneficial and record owner thereof,
free and clear of any Liens or transfer restrictions (other than restrictions on
the amount thereof which may be sold, and the manner in which sales may be made,
imposed by such Rule 144), (b) the Debtor acquired such Securities directly from
the issuer thereof more than two (2) years prior to the date hereof in
transactions not involving any public offering, (c) the Debtor paid the purchase
price therefor in cash more than two (2) years prior to the date hereof, (d)
since such date of acquisition, the Debtor has not had a short position in, or
any put or option to dispose of, any capital stock of any issuer thereof or
Securities convertible into capital stock of any issuer thereof, (e) neither the
Debtor, nor any person or entity, the sales of which are required by Rule 144 to
be aggregated with the sales of the Debtor, has sold any capital stock of any
issuer of such Securities during the period of six (6) months prior to the date
hereof, other than sales pursuant to an effective registration statement under
the Securities Act of 1933, as amended, and (f) to the Debtor's best knowledge,
each issuer of such Securities has timely filed all reports required to be filed
by it under the Securities Exchange Act of 1934, as amended.
<PAGE>
Section 3.8 Financing Statements. No financing statement, security
agreement, or other Lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in favor of the
Refractive Administrative Agent, any lender under the Refractive Agreement,
Administrative Agent, or any Lender pursuant to this Agreement. The Debtor has
not within the past five (5) years had a trade name or done business under any
name other than its legal name set forth at the beginning of this Agreement.
Section 3.9 Principal Place of Business. The principal place of
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is located at the address of the Debtor
shown on the signature pages of this Agreement.
Section 3.10 Location of Collateral. All Inventory and Equipment of the
Debtor are located at the places specified on Schedule 3 hereto. The Debtor has
exclusive possession and control of its Inventory and Equipment. None of the
Inventory or Equipment of the Debtor is evidenced by a Document (including,
without limitation, a negotiable document of title). All Instruments, Chattel
Paper, Securities and certificates of title of the Debtor have been delivered to
the Administrative Agent.
Section 3.11 Perfection. Upon the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule 4 attached hereto,
and upon the Administrative Agent's obtaining possession of all Documents,
Instruments, Chattel Paper, Securities and certificates of title of the Debtor,
and upon the Administrative Agent's obtaining control of all Investment
Property, the security interest in favor of the Administrative Agent created
herein will constitute a valid and perfected Lien upon and security interest in
the Collateral, subject to no equal or prior Lien, except as permitted by
Section 9.2 of the Loan Agreement.
Section 3.12 Independent Investigation. The Debtor has, independently
and without reliance upon any of the Agents or any Lender and based upon such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. There are no conditions
precedent to the full effectiveness of this Agreement that have not been fully
and permanently satisfied.
Section 3.13 Litigation. Except as disclosed on Schedule 7.5 to the
Loan Agreement, there is no litigation, investigation, or governmental
proceeding threatened against the Debtor or any of its properties which if
adversely determined would have a material adverse effect on the Collateral or
the financial condition, operations, or business of the Borrower, any Material
Subsidiary or the Companies taken as a whole.
Section 3.14 Benefit to Debtor. The value of the consideration received
and to be received by the Debtor as a result of the Borrower, the Agents and the
Lenders entering into the Loan Agreement and the Debtor executing and delivering
this Agreement is reasonably worth at least as much as the liability and
obligation of the Debtor hereunder, and such liability and obligation and the
Borrower's entering into the Loan Agreement have benefited and may reasonably be
expected to benefit the Debtor directly and indirectly.
ARTICLE IV
Covenants
The Debtor covenants and agrees with the Administrative Agent that
until the Secured Indebtedness is paid and performed in full and the Commitments
have terminated:
<PAGE>
Section 4.1 Encumbrances. Except as permitted by Section 9.2 of the
Loan Agreement, the Debtor shall not create, permit, or suffer to exist, and
shall defend the Collateral against, any Lien, security interest, or other
encumbrance on the Collateral, and shall defend the Debtor's rights in the
Collateral and the Administrative Agent's security interest in the Collateral
against the claims and demands of all Persons. The Debtor shall do nothing to
impair the rights of the Administrative Agent in the Collateral.
Section 4.2 Delivery. Prior to or concurrently with the execution and
delivery of this Agreement, Debtor shall deliver to the Administrative Agent to
acknowledge all certificates identified on Schedule 2 hereto, with all Chattel
Paper, Instruments and Documents of the Debtor.
Section 4.3 Modification of Accounts. The Debtor shall, in accordance
with prudent business practices, endeavor to collect or cause to be collected
from each account debtor under its Accounts, as and when due, any and all
amounts owing under such Accounts. Without the prior written consent of the
Administrative Agent, the Debtor shall not (a) grant any extension of time on
any Account for any payment or grant extensions of time for payments on its
Accounts which cause the aggregate amount of all payments extended by the Debtor
on its Accounts during any fiscal year of the Debtor to exceed $150,000.00, (b)
compromise, compound, or settle any of the Accounts for less than the full
amount thereof; provided, however, that the Debtor may compromise, compound or
settle any Account which is an amount less than $50,000.00, provided the
aggregate amount compromised, compounded or settled during any fiscal year of
the Debtor shall not exceed $150,000.00, (c) release, in whole or in part, any
Person liable for payment of an Account in excess of $50,000.00, (d) allow any
credit or discount for payment with respect to any Account in excess of
$50,000.00, other than trade discounts granted in the ordinary course of
business; provided, however, that the aggregate amount of all credits or
discounts granted during any fiscal year of the Debtor shall not exceed
$150,000.00, or (e) release any Lien, security interest, or guaranty securing
any Account in excess of $50,000.00.
Section 4.4 Disposition of Collateral. The Debtor shall not sell,
lease, assign (by operation of law or otherwise), or otherwise dispose of, or
grant any option with respect to, the Collateral or any part thereof without the
prior written consent of the Administrative Agent, except the Debtor may sell
Inventory in the ordinary course of business.
Section 4.5 Distributions. If the Debtor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or distribution in connection with
any reclassification, increase, or reduction of capital or issued in connection
with any reorganization), option or rights, whether as an addition to, in
substitution of, or an exchange for any Collateral or otherwise, the Debtor
agrees to accept the same as the Administrative Agent's agent and to hold the
same in trust for the Administrative Agent and to deliver the same forthwith to
the Administrative Agent in the exact form received, with the appropriate
endorsement of the Debtor when necessary and/or appropriate undated stock powers
duly executed in blank, to be held by the Administrative Agent on its own behalf
and on behalf of Refractive Administrative Agent as additional Collateral for
the Secured Indebtedness, subject to the terms hereof. Any sums paid upon or in
respect of the Securities upon the liquidation or dissolution of the issuer
thereof shall be paid over to the Administrative Agent to be held by it as
additional Collateral for the Secured Indebtedness subject to the terms hereof;
and in case any distribution of capital shall be made on or in respect of the
Securities or any property shall be distributed upon or with respect to the
Securities pursuant to any recapitalization or reclassification of the capital
of the issuer thereof or pursuant to any reorganization of the issuer thereof,
the property so distributed shall be delivered to the Administrative Agent to be
held by it, as additional Collateral for the Secured Indebtedness, subject to
the terms hereof. All sums of money and property so paid or distributed in
respect of the Securities that are received by the Debtor shall, until paid or
delivered to the Administrative Agent, be held by the Debtor in trust as
additional security for the Secured Indebtedness.
<PAGE>
Section 4.6 Further Assurances. At any time and from time to time, upon
the request of the Administrative Agent, and at the sole expense of the Debtor,
the Debtor shall promptly execute and deliver all such further instruments,
agreements, and documents and take such further action as the Administrative
Agent may reasonably deem necessary or desirable to preserve and perfect its
security interest in the Collateral and carry out the provisions and purposes of
this Agreement. Without limiting the generality of the foregoing, the Debtor
shall: (a) execute and deliver to the Administrative Agent such financing
statements as the Administrative Agent may from time to time require; (b)
deliver and pledge to the Administrative Agent all Documents (including, without
limitation, negotiable documents of title) evidencing Inventory or Equipment;
(c) deliver and pledge to the Administrative Agent all certificates of title
required by the Loan Agreement, Instruments and Chattel Paper of the Debtor with
any necessary endorsements; and (d) execute and deliver to the Administrative
Agent such other documents, instruments, and agreements as the Administrative
Agent may reasonably require to perfect and maintain the validity,
effectiveness, and priority of the Loan Documents and the Liens intended to be
created thereby. The Debtor authorizes the Administrative Agent to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of the Debtor where
permitted by law. A carbon, photographic, or other reproduction of this
Agreement or of any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement and may be filed as a
financing statement.
Section 4.7 Risk of Loss; Insurance. The Agents and the Lenders shall
not be responsible for any loss or damage to the Collateral. The Debtor shall,
at its own expense, maintain 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 Debtor operates consistent
with past practices and to the extent available on commercially reasonable
terms, provided that in any event the Debtor will maintain workmen's
compensation insurance, property insurance, comprehensive general liability
insurance, professional liability insurance and business interruption insurance
reasonably satisfactory to the Administrative Agent. Each insurance policy
covering Collateral shall name the Administrative Agent as loss payee for the
benefit of the Lenders as its interest 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.
Section 4.8 Inspection Rights. The Debtor shall permit the
Administrative Agent and each Lender and their respective representatives to
examine, inspect, and audit the Collateral and to examine, inspect, and copy the
Debtor's books and records at any reasonable time and as often as the
Administrative Agent or any such Lender may desire. The Administrative Agent and
each Lender may at any time and from time to time contact account debtors and
other obligors to verify the existence, amounts, and terms of the Debtor's
Accounts.
Section 4.9 Corporate Changes. The Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
the Debtor shall have given the Administrative Agent thirty (30) days prior
written notice thereof and shall have taken all action reasonably deemed
necessary or desirable by the Administrative Agent to make each financing
statement not seriously misleading. The Debtor shall not change its principal
place of business, chief executive office, or the place where it keeps its books
and records unless it shall have given the Administrative Agent thirty (30) days
prior written notice thereof and shall have taken all action reasonably deemed
necessary or desirable by the Administrative Agent to cause its security
interest in the Collateral to be perfected with the priority required by this
Agreement.
Section 4.10 Books and Records; Information. The Debtor shall keep
accurate and complete books and records of the Collateral and the Debtor's
business and financial condition in accordance with GAAP. The Debtor shall from
time to time at the request of the Administrative Agent deliver to the
Administrative Agent such information regarding the Collateral and the Debtor as
the Administrative Agent may reasonably request, including, without limitation,
lists and descriptions of the Collateral and evidence of the identity and
existence of the Collateral. The Debtor shall mark its records to reflect the
security interest of the Administrative Agent hereunder.
<PAGE>
Section 4.11 Equipment and Inventory.
-----------------------
(a) The Debtor shall keep the Equipment and Inventory at the
locations specified on Schedule 3 hereto or, upon thirty (30) days
prior written notice to the Administrative Agent, at such other places
within the United States of America where all action required to
perfect the Administrative Agent's security interest in the Equipment
and Inventory with the priority required by this Agreement shall have
been taken.
(b) The Debtor shall maintain the Equipment and Inventory in
accordance with Section 8.3 of the Loan Agreement.
Section 4.12 Warehouse Receipts Non-Negotiable. The Debtor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any of the Collateral, such warehouse receipt or receipt in
the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under relevant law).
Section 4.13 Taxes and Claims. The Debtor shall pay and discharge,
before the same become delinquent, (a) all material taxes, assessments, and
governmental charges imposed upon it or upon any of its property, and (b) all
material lawful claims that, if unpaid, might become a Lien upon any of its
property; provided, however, that the Debtor shall not be required to pay or
discharge any such tax, assessment, or governmental charge which is being
contested in good faith by proper proceedings being diligently pursued and for
which adequate reserves have been established in accordance with GAAP.
Section 4.14 Compliance with Laws. The Debtor shall comply in all
material respects with all material applicable laws, rules, regulations, orders,
and decrees of any Governmental Authority or arbitrator.
Section 4.15 Compliance with Agreements. The Debtor shall comply in all
material respects with all agreements, contracts, and instruments binding on it
or affecting its properties or businesses, 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 Borrower, any Material Subsidiary
or the Companies (taken as a whole).
Section 4.16 Notification. Except as permitted by Section 9.2 of the
Loan Agreement, the Debtor shall promptly notify the Administrative Agent of (a)
any Lien, security interest, encumbrance, or claim that has attached to or been
made or asserted against any of the Collateral, (b) any material change in any
of the Collateral, including, without limitation, any material damage to or loss
of any material portion of the Collateral, (c) the occurrence of any other event
that could have a material adverse effect on the Collateral or the security
interest created hereunder, and (d) the occurrence or existence of any Default.
Section 4.17 Collection of Accounts. Except as otherwise provided in
this Section or in any other Loan Document, the Debtor shall have the right to
collect and receive payments on the Accounts. In connection with such
collections, the Debtor may take (and, at the Administrative Agent's direction,
shall take) such actions as the Debtor or the Administrative Agent may
reasonably deem necessary or advisable to enforce collection of the Accounts.
Section 4.18 Additional Securities. The Debtor shall not consent to or
approve the issuance of any additional shares of any class of capital stock of
the issuers of any of the Securities, or any securities convertible into, or
exchangeable for, any such shares or any warrants, options, rights, or other
commitments entitling any Person to purchase or otherwise acquire any such
shares.
<PAGE>
Section 4.19 Provide Information. The Debtor shall fully cooperate, to
the extent reasonably requested by the Administrative Agent, in the completion
of any notice, form, schedule, or other document filed by the Administrative
Agent on its own behalf or on behalf of the Debtor, including, without
limitation, any required notice or statement of beneficial ownership or of the
acquisition of beneficial ownership of the Securities and any notice of proposed
sale of such Securities pursuant to Rule 144 as promulgated by the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended. Without limiting the generality of the foregoing, the Debtor shall
furnish to the Administrative Agent any and all information which the
Administrative Agent may reasonably request for purposes of any such filing,
regarding the Debtor, the Securities, and any issuer of any of the Securities,
and the Debtor shall disclose to the Administrative Agent all material adverse
information known by the Debtor with respect to the operations of any issuer of
any of the Securities.
Section 4.20 Notification of Changes in Beneficial Ownership. The
Debtor shall promptly notify the Administrative Agent of any sale of securities
of any Subsidiary of the Debtor or by any Person named on the Debtor's Rule 144
questionnaire and shall furnish promptly to the Administrative Agent a copy of
any Form 144 filed in respect of any such sale. In addition, if the Debtor or
any other Person named in the Debtor's Rule 144 questionnaire shall file with
the SEC a form or other document reporting any change in the beneficial
ownership of the common stock of any Subsidiary of the Debtor, the Debtor shall
promptly furnish to the Administrative Agent a copy of such form or document.
Section 4.21 Restriction on Sales after Default. The Debtor shall not
sell or suffer or permit any Person named in the accompanying Rule 144
questionnaire to sell any shares of the same class of securities as the
Securities at any time after any Event of Default shall have occurred.
Section 4.22 Fixtures. For any Collateral that is a fixture or an
accession which has been attached to real estate or other goods prior to the
perfection of the security interest granted in Section 2.1 hereof, the Debtor
shall furnish to Administrative Agent, upon demand, a disclaimer of interest in
each such fixture or accession and a consent in writing to the security interest
of Administrative Agent therein, signed by all persons and entities having any
interest in such fixture or accession by virtue of any interest in the real
estate or other goods to which such fixture or accession has been attached.
Section 4.23 Notation on Title Certificates. If certificates of title
are issued or outstanding with respect to any of the Collateral, the Debtor
shall cause the security interest granted in Section 2.1 hereof to be properly
noted thereon.
ARTICLE V
Rights of the Administrative Agent
Section 5.1 Power of Attorney. The Debtor hereby irrevocably
constitutes and appoints the Administrative Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the name of the
Debtor or in its own name, to take any and all action and to execute any and all
documents and instruments which the Administrative Agent at any time and from
time to time deems reasonably necessary or desirable to accomplish the purposes
of this Agreement if an Event of Default shall have occurred and be continuing,
and, without limiting the generality of the foregoing, the Debtor hereby gives
the Administrative Agent the power and right on behalf of the Debtor and in its
own name to do any of the following (subject to the rights of the Debtor under
Sections 5.2 and 5.3 hereof), without notice to or the consent of the Debtor if
an Event of Default shall have occurred and be continuing:
<PAGE>
(a) to demand, sue for, collect, or receive in the name of the
Debtor or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and,
in connection therewith, endorse checks, notes, drafts, acceptances,
money orders, documents of title, or any other instruments for the
payment of money under the Collateral or any policy of insurance;
(b) to pay or discharge taxes, Liens, or other encumbrances
levied or placed on or threatened against the Collateral;
(c) to notify post office authorities to change the address for
delivery of mail of the Debtor to an address designated by the
Administrative Agent and to receive, open. and subsequently deliver to
the Debtor mail addressed to the Debtor; and
(d) (i) to direct account debtors and any other parties liable
for any payment under any of the Collateral to make payment of any and
all monies due and to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall direct; (ii)
to receive payment of and receipt for any and all monies, claims, and
other amounts due and to become due at any time in respect of or
arising out of any Collateral; (iii) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, proxies, stock powers,
verifications, and notices in connection with accounts and other
documents relating to the Collateral; (vi) to commence and prosecute
any suit, action, or proceeding at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof
and to enforce any other right in respect of any Collateral; (v) to
defend any suit, action, or proceeding brought against the Debtor with
respect to any Collateral; (vi) to settle, compromise, or adjust any
suit, action, or proceeding described above and, in connection
therewith, to give such discharges or releases as the Administrative
Agent may deem appropriate; (vii) to exchange any of the Collateral for
other property upon any merger, consolidation, reorganization,
recapitalization, or other readjustment of the issuer thereof and, in
connection therewith, deposit any of the Collateral with any committee,
depositary, transfer agent, registrar, or other designated agency upon
such terms as the Administrative Agent may determine; (viii) to add or
release any guarantor, indorser, surety, or other party to any of the
Collateral; (ix) to renew, extend, or otherwise change the terms and
conditions of any of the Collateral; (x) to make, settle, compromise,
or adjust claims under any insurance policy covering any of the
Collateral; (xi) to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and to do, at the Administrative Agent's
option and the Debtor's expense, at any time, or from time to time, all
acts and things which the Administrative Agent deems necessary to
protect, preserve, or realize upon the Collateral and the
Administrative Agent's security interest therein; and (xii) to
complete, execute and file with the SEC one or more notices of proposed
sale of securities pursuant to Rule 144.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Neither the Administrative Agent nor any Lender shall be under any
duty to exercise or withhold the exercise of any of the rights, powers,
privileges, and options expressly or implicitly granted to the Administrative
Agent in this Agreement, and shall not be liable for any failure to do so or any
delay in doing so. Neither the Administrative Agent nor any Lender shall be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Administrative Agent
solely to protect, preserve, and realize upon its security interest in the
Collateral. Neither the Administrative Agent nor any Lender shall be responsible
for any decline in the value of the Collateral and shall not be required to take
any steps to preserve rights against prior parties or to protect, preserve, or
maintain any security interest or Lien given to secure the Collateral.
<PAGE>
Section 5.2 Voting Rights. Unless and until an Event of Default shall
have occurred and be continuing, the Debtor shall be entitled to exercise any
and all voting rights pertaining to the Securities or any part thereof for any
purpose not inconsistent with the terms of this Agreement or the Loan Agreement.
The Administrative Agent shall execute and deliver to the Debtor all such
proxies and other instruments as the Debtor may reasonably request for the
purpose of enabling the Debtor to exercise the voting rights which it is
entitled to exercise pursuant to this Section.
Section 5.3 Dividends. Unless and until an Event of Default shall have
occurred and be continuing, the Debtor shall be entitled to receive and retain
the dividends on the Securities paid in cash out of earned surplus to the extent
and only to the extent that such dividends are permitted by the Loan Agreement.
Section 5.4 Setoff, Property Held by the Lenders. The Administrative
Agent and each Lender shall have the right to set off and apply against the
Secured Indebtedness, at any time and without notice to the Debtor, any and all
deposits (general or special, time or demand, provisional or final) or other
sums at any time credited by or owing from the Administrative Agent or any
Lender to the Debtor whether or not the Secured Indebtedness is then due. As
additional security for the Secured Indebtedness, the Debtor hereby grants the
Administrative Agent and each Lender a security interest in all money,
instruments, and other property of the Debtor now or hereafter held by the
Administrative Agent or any Lender, including without limitation, property held
in safekeeping. In addition to the Administrative Agent's and each Lender's
right of setoff and as further security for the Secured Indebtedness, the Debtor
hereby grants to each of them a security interest in all deposits (general or
special, time or demand, provisional or final) of the Debtor now or hereafter on
deposit with or held by any of them and all other sums at any time credited by
or owing from the any of them to the Debtor. The rights and remedies of the
Administrative Agent and each Lender hereunder are in addition to other rights
and remedies (including, without limitation, other rights of setoff) which any
of them may have.
Section 5.5 Performance by the Secured Party. If the Debtor shall fail
to perform any covenant or agreement contained in this Agreement, the
Administrative Agent, may, at the direction of the Required Lenders, perform or
attempt to perform such covenant or agreement on behalf of the Debtor. In such
event, the Debtor shall, at the request of the Administrative Agent, promptly
pay any amount expended by the Administrative Agent or any Lender in connection
with such performance or attempted performance to the Administrative Agent,
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 obligations of the Debtor under this Agreement.
ARTICLE VI
Default
Section 6.1 Rights and Remedies. If an Event of Default shall have
occurred and be continuing, the Administrative Agent shall have the following
rights and remedies:
<PAGE>
(a) In addition to all other rights and remedies granted to
the Administrative Agent in this Agreement or in any other Loan
Document or by applicable law, the Administrative Agent shall have all
of the rights and remedies of a secured party under the UCC (whether or
not the UCC applies to the affected Collateral). Without limiting the
generality of the foregoing, the Administrative Agent may (i) without
demand or notice to the Debtor, collect, receive, or take possession of
the Collateral or any part thereof and for that purpose the
Administrative Agent may enter upon any premises on which the
Collateral is located and remove the Collateral therefrom or render it
inoperable, and/or (ii) sell, lease, or otherwise dispose of the
Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at the Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Administrative Agent may deem commercially
reasonable. The Administrative Agent shall have the right at any public
sale or sales, and, to the extent permitted by applicable law, at any
private sale or sales, to bid and become a purchaser of the Collateral
or any part thereof free of any right or equity of redemption on the
part of the Debtor, which right or equity of redemption is hereby
expressly waived and released by the Debtor. Upon the request of the
Administrative Agent, the Debtor shall assemble the Collateral and make
it available to the Administrative Agent at any place designated by the
Administrative Agent that is reasonably convenient to the Debtor and
the Administrative Agent. The Debtor agrees that the Administrative
Agent shall not be obligated to give more than five (5) days written
notice of the time and place of any public sale or of the time after
which any private sale may take place and that such notice shall
constitute reasonable notice of such matters. The Administrative Agent
shall not be obligated to make any sale of Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of
Collateral may have been given. The Administrative Agent may, without
notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be
made at the time and place to which the same was so adjourned. The
Debtor shall be liable for all expenses of retaking, holding, preparing
for sale, or the like, and all attorneys' fees, legal expenses, and all
other costs and expenses incurred by the Administrative Agent or any
Lender in connection with the collection of the Secured Indebtedness
and the enforcement of the Administrative Agent's and the Lender's
rights under this Agreement. The Debtor shall remain liable for any
deficiency if the Proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Secured Indebtedness in full.
The Administrative Agent and the Lenders may apply the Collateral
against the Secured Indebtedness in such order and manner as the
Administrative Agent and the Lenders may elect. The Debtor waives all
rights of marshaling, valuation, and appraisal in respect of the
Collateral.
(b) The Administrative Agent may cause any or all of the
Collateral held by it to be transferred into the name of the
Administrative Agent or the name or names of the Administrative Agent's
nominee or nominees.
(c) The Administrative Agent may exercise or cause to be
exercised all voting, consensual and other powers of ownership in
respect of the Collateral and the Debtor shall deliver to the
Administrative Agent, if requested by the Administrative Agent,
irrevocable proxies with respect to the Securities in form satisfactory
to the Administrative Agent.
(d) The Administrative Agent may collect or receive all money
or property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to
do so.
(e) On any sale of the Collateral, the Administrative Agent is
hereby authorized to comply with any limitation or restriction with
which compliance is necessary, in the view of the Administrative
Agent's counsel, in order to avoid any violation of applicable law or
in order to obtain any required approval of the purchaser or purchasers
by any applicable Governmental Authority.
<PAGE>
(f) The Debtor agrees that, because of the Securities Act of
1933, as amended, or any other laws or regulations, and for other
reasons, there may be legal and/or practical restrictions or
limitations affecting the Administrative Agent in any attempts to
dispose of certain portions of the Securities and for the enforcement
of their rights. For these reasons, the Administrative Agent is hereby
authorized by the Debtor, but not obligated, upon the occurrence and
during the continuation of an Event of Default, to sell all or any part
of the Securities at private sale, subject to investment letter or in
any other manner which will not require the Securities, or any part
thereof, to be registered in accordance with the Securities Act of
1933, as amended, or the rules and regulations promulgated thereunder,
or any other laws or regulations, at a reasonable price at such private
sale or other distribution in the manner mentioned above. The Debtor
understands that the Administrative Agent may in its discretion
approach a limited number of potential purchasers and that a sale under
such circumstances may yield a lower price for the Securities, or any
part or party thereof, than would otherwise be obtainable if such
collateral were either afforded to a larger number or potential
purchasers, or registered or sold in the open market. The Debtor agrees
that such private sale shall be deemed to have been made in a
commercially reasonable manner, and that the Administrative Agent has
no obligation to delay sale of any Securities to permit the issuer
thereof to register it for public sale under any applicable federal or
state securities laws. The Administrative Agent is authorized, in
connection with any such sale (a) to restrict the prospective bidders
on or purchasers of any of the Securities to a limited number of
sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to
the distribution or sale of any of such Securities and (b) to impose
such other limitations or conditions in connection with any such sale
as the Administrative Agent reasonably deems necessary in order to
comply with applicable law. The Debtor covenants and agrees that it
will execute and deliver such documents and take such other action as
the Administrative Agent reasonably deems necessary in order that any
such sale may be made in compliance with applicable law. Upon any such
sale the Administrative Agent shall have the right to deliver, assign
and transfer to the purchaser thereof the Securities so sold. Each
purchaser at any such sale shall hold the Securities so sold
absolutely, free from any claim or right of the Debtor of whatsoever
kind, including any equity or right of redemption of the Debtor. The
Debtor, to the extent permitted by applicable law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may
have under any law now existing or hereafter enacted.
ARTICLE VII
Miscellaneous
Section 7.1 Indemnification. The Debtor hereby agrees to indemnify each
Agent, each Lender and each Affiliate thereof and their respective officers,
directors, employees, attorneys, and agents (collectively the "Indemnified
Parties") 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
this Agreement or any other Loan Document, (b) any of the transactions
contemplated by this Agreement or any other Loan Document, (c) any breach by the
Debtor of any representation, warranty, covenant, or other agreement contained
in this Agreement or any other Loan Document, or (d) any investigation,
litigation, or other proceeding, including, without limitation, any threatened
investigation, litigation, or other proceeding relating to any of the foregoing,
INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF ANY INDEMNIFIED PARTY.
Section 7.2 No Waiver; Cumulative Remedies. No failure on the part of
any Agent or the 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 are cumulative
and not exclusive of any rights and remedies provided by law.
Section 7.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Debtor, the Agents, the Lenders and their
respective heirs, successors, and assigns, except that the Debtor may not assign
any of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent.
<PAGE>
Section 7.4 Amendment; Entire Agreement. THIS AGREEMENT EMBODIES THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES 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. The provisions of this Agreement may be amended or
waived only by an instrument in writing signed by the parties hereto.
Section 7.5 Notices. All notices and other communications provided for
in this Agreement shall be given or made in accordance with Section 13.11 of the
Loan Agreement 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 the other party
given in accordance with this Section.
Section 7.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.
Section 7.7 Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
Section 7.8 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by any Agent or any Lender shall affect the
representations and warranties or the right of any Agent or any Lender to rely
upon them.
Section 7.9 Waiver of Bond. In the event the Administrative Agent seeks
to take possession of any or all of the Collateral by judicial process, the
Debtor hereby irrevocably waives any bonds and any surety or security relating
thereto that may be required by applicable law as an incident to such
possession, and waives any demand for possession prior to the commencement of
any such suit or action.
Section 7.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.11 Construction. The Debtor and the Administrative Agent
acknowledge 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 with its
legal counsel.
Section 7.12 Obligations Absolute. All rights and remedies of the
Administrative Agent hereunder, and all obligations of the Debtor hereunder,
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan Agreement
or any of the other Loan Documents or any other agreement or
instrument relating to any of the foregoing;
(b) any change in the time, manner, or place of payment of,
or in any other term of, all or any of the Secured Indebtedness, any or
all of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Loan Agreement or any of the other
Loan Documents;
<PAGE>
(c) any exchange, release, or nonperfection of any Collateral, or
any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Indebtedness; or
(d) any other circumstance (other than payment in full of the
Secured Indebtedness) that might otherwise constitute a defense
available to, or a discharge of, the Debtor.
Section 7.13 Limitations. Notwithstanding any contrary provision, it is
the intention of Debtor, Lenders, and Administrative Agent that the granting of
the liens set forth in this Agreement shall not constitute a fraudulent
conveyance, fraudulent transfer, or similar Laws applicable to Debtor.
Accordingly, notwithstanding anything to the contrary contained in this
Agreement or any other agreement or instrument executed in connection herewith,
granting of liens set forth in this Agreement shall be limited to an aggregate
amount equal to the largest amount that would not render such Debtor's
obligations hereunder subject to avoidance under Section 548 of the United
Stated Bankruptcy Code or any comparable provision of any applicable state law.
Section 7.14 Renewal. Debtor acknowledges that this Agreement has been
given in amendment, renewal, restatement and confirmation of Debtor's
obligations, covenants, and agreements contained in the Guarantor Security
Agreement previously executed by Debtor in favor of Administrative Agent and the
Lenders, dated April 20, 1998, as amended, confirmed, and renewed from time to
time (the "Previous Agreement"). Debtor further confirms and agrees that neither
the execution of the Loan Agreement or any other Loan Document, nor the
consummation of the transactions described therein, shall in any way affect the
liens under the Previous Agreement, and the obligations, liens, and security
interests evidenced by the Previous Agreement continue in full force and effect
as modified, amended, and restated by the terms contained herein.
Section 7.15 Termination. If all of the Secured Indebtedness shall have
been paid and performed in full and the Commitments shall have expired or
terminated, the Administrative Agent shall, upon the written request of the
Debtor and in accordance with applicable provisions of the Loan Agreement,
promptly execute and deliver to the Debtor a proper instrument or instruments
acknowledging the release and termination of the security interests created by
this Agreement as the Debtor may reasonably deem necessary or desirable, and
shall duly assign and deliver to the Debtor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Administrative Agent and has not previously been sold or otherwise
applied pursuant to this Agreement.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
<PAGE>
Guarantor Security Agreement
IN WITNESS WHEREOF, the Debtor has duly executed this Agreement as of
the day and year first written above.
DEBTOR:
FASTSTART, INC.,
a North Carolina corporation
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attn: Treasurer
Fax Number: (512) 328-8510
Telephone Number: (512) 314-4554
<PAGE>
21
Guarantor Security Agreement
SCHEDULE 1
MOTOR VEHICLES
None
<PAGE>
SCHEDULE 2
SECURITIES
Pledged Stock
None
<PAGE>
SCHEDULE 3
LOCATION OF COLLATERAL
Location of Equipment and Inventory
1301 Capital of Texas Highway
Suite C-300
Austin, Travis County, Texas 78746-6550
<PAGE>
SCHEDULE 4
JURISDICTIONS FOR FILING
Jurisdictions for Filing UCC-1 Financing Statements
Texas
North Carolina
Copyright Security Agreement
GUARANTOR COPYRIGHT SECURITY AGREEMENT
THIS GUARANTOR COPYRIGHT SECURITY AGREEMENT (the "Agreement") dated as
of January 31, 2000, is executed by LITHOTRIPTERS, INC., a North Carolina
corporation (the "Debtor"), for the benefit of BANK OF AMERICA, N.A., a national
banking association ("B of A"), not in its individual capacity but solely as
administrative agent for itself and each of the other banks or lending
institutions (each, a "Lender" and collectively, the "Lenders") which is or may
from time to time become a party to the Loan Agreement (as hereinbelow defined)
(in such capacity, together with its successors in such capacity, the
"Administrative Agent").
R E C I T A L S:
A. Prime Medical Services, Inc., a Delaware corporation (the "Borrower"),
B of A as administrative agent, BankBoston, N.A., as documentation agent, and
the Lenders have entered into that certain Fourth Amended and Restated Loan
Agreement dated as of the date hereof, (as the same may be amended, restated,
extended, supplemented or modified from time to time, the "Loan Agreement"),
pursuant to which the Lenders have agreed to make a revolving credit loan to the
Borrower with advances thereunder not to exceed an aggregate principal amount of
Eighty-Six Million and 00/100 Dollars ($86,000,000.00) at any time outstanding.
B. The Debtor and certain other guarantors have executed that certain
Guaranty Agreement of even date herewith (as the same may be amended,
supplemented or modified from time to time, the "Guaranty"), pursuant to which
the Debtor has guaranteed to the Agents (as defined in the Loan Agreement) and
the Lenders the full and complete payment and performance of the Obligations (as
defined in the Loan Agreement).
C. The Debtor has executed that certain Guarantor Security Agreement of
even date herewith (as the same may be amended, supplemented or modified from
time to time, the "Security Agreement") pursuant to which the Debtor has granted
to the Administrative Agent for the benefit of the Lenders a continuing security
interest in certain personal property of the Debtor.
D. The Agents and the Lenders have conditioned their obligations under the
Loan Agreement upon the execution and delivery of this Agreement by the Debtor.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1.1 Terms Defined in Loan Agreement. Capitalized terms used and
not otherwise defined herein shall have the same meanings as set forth in the
Loan Agreement.
SECTION 1.2 Terms Defined in Uniform Commercial Code. Terms used herein
which are defined in the Uniform Commercial Code as adopted by the State of
Texas, unless otherwise defined herein or in the Loan Agreement, shall have
their meanings as set forth in the Uniform Commercial Code as adopted by the
State of Texas.
<PAGE>
D-737397.1
- 3 -
Copyright Security Agreement
SECTION 2. Grant of Security Interest. The Debtor hereby pledges and
grants to the Administrative Agent, for the benefit of the Lenders, a first
priority lien on and security interest in all of the Debtor's right, title, and
interest in and to the following property (the "Copyright Collateral"), whether
now owned or hereafter arising or acquired, being all copyrights of the Debtor,
whether statutory or common law, registered or unregistered, now or hereafter in
force throughout the world including, without limitation, all of the Debtor's
right, title and interest in and to all copyrights registered in the United
States Copyright Office or anywhere else in the world and also including,
without limitation, the copyrights referred to in Item A of Schedule 1 attached
hereto, and all applications for registration thereof, whether pending or in
preparation, all copyright licenses, including each copyright license referred
to in Item B of Schedule 1 attached hereto, the right to sue for past, present
and future infringements of any of the foregoing, all rights corresponding
thereto throughout the world, all extensions and renewals of any of the
foregoing, and all proceeds of the foregoing, including, without limitation,
licenses, royalties, income, payments, claims, damages and proceeds of suit.
SECTION 3. Secured Indebtedness. The Copyright Collateral shall secure
the following obligations, indebtedness, and liabilities (whether at stated
maturity, by acceleration or otherwise) (all such obligations, indebtedness, and
liabilities being hereinafter sometimes called the "Secured Indebtedness"):
(a) the Obligations and the obligations, liabilities and indebtedness of
the Debtor to the Agents and the Lenders under the Guaranty;
(b) all reasonable costs and expenses, including, without
limitation, all reasonable attorneys' fees and legal expenses, incurred by any
of the Agents or any Lender to preserve and maintain the Collateral (as defined
in the Security Agreement), collect the obligations described herein and in the
Security Agreement, and enforce this Agreement and the Security Agreement; and
(c) all extensions, renewals, and modifications of any of the foregoing.
SECTION 4. Security Agreement. This Agreement has been executed and
delivered by the Debtor for the purpose of registering the security interest of
Administrative Agent in the Copyright Collateral with the United States
Copyright Office and corresponding offices in other countries of the world. The
security interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to Administrative Agent for its
benefit and the benefit of the Lenders under the Security Agreement. The
Security Agreement (and all rights and remedies of Administrative Agent and the
Lenders thereunder) shall remain in full force and effect in accordance with its
terms.
SECTION 5. Termination. If all of the Secured Indebtedness shall have
been paid and performed in full and the Commitments shall have expired or
terminated, the Administrative Agent shall, upon the written request of the
Debtor and in accordance with applicable provisions of the Loan Agreement,
promptly execute and deliver to the Debtor a proper instrument or instruments
acknowledging the release and termination of the security interests created by
this Agreement as the Debtor may reasonably deem necessary or desirable, and
shall duly assign and deliver to the Debtor (without recourse and without any
representation or warranty) such of the Copyright Collateral as may be in the
possession of the Administrative Agent and has not previously been sold or
otherwise applied pursuant to this Agreement.
<PAGE>
SECTION 6. Acknowledgment. The Debtor does hereby further acknowledge
and affirm that the rights and remedies of Administrative Agent with respect to
the security interest in the Copyright Collateral granted hereby are more fully
set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.
SECTION 7. Loan Document, etc. This Agreement is a Loan Document
executed pursuant to the Loan Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Loan Agreement.
SECTION 8. Counterparts. This Agreement may be executed by parties hereto
in several counterparts, each of which shall be deemed to be an original and all
of which shall constitute together but one and the same agreement.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
<PAGE>
Copyright Security Agreement
IN WITNESS WHEREOF, the Debtor has duly executed this Agreement as of
the day and year first written above.
LITHOTRIPTERS, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
Address: 2008 Litho Place
Fayetteville, NC 28304
Attention: Treasurer
<PAGE>
Copyright Security Agreement
IN WITNESS WHEREOF, B of A has duly executed this Agreement as of the
day and year first written above.
BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ Daniel H. Penkar
Daniel H. Penkar
Senior Vice President
Address: 515 Congress Avenue, 11th Floor
Austin, Texas 78701
Attention: Wade Morgan
<PAGE>
Copyright Security Agreement
SCHEDULE 1
Item A: Registered Copyrights
Title Registration No.
- ----- ---------------
Generic Quality Assurance Plan: Lithotripsy Unit TX 3124352
Generic Hospital Lithostar Service Quality Assessment Plan TX 3124351
Lithotripters, Inc., Quality Assurance Plan TX 2792856
Introduction to the Lithostar and Guide to its Use TX 2670895
Item B: Copyright License Rights
Title Licensor
Scheduling, Billing and Accounts
Receivable Computer System Omni-Medical Systems, Inc.
QA Outcome Analysis Computer System MEDformatics, Inc.
<PAGE>
Copyright Security Agreement
GUARANTOR COPYRIGHT SECURITY AGREEMENT
THIS GUARANTOR COPYRIGHT SECURITY AGREEMENT (the "Agreement") dated as
of January 31, 2000, is executed by LITHOTRIPTERS, INC., a North Carolina
corporation (the "Debtor"), for the benefit of BANK OF AMERICA, N.A., a national
banking association ("B of A"), not in its individual capacity but solely as
administrative agent for itself and each of the other banks or lending
institutions (each, a "Lender" and collectively, the "Lenders") which is or may
from time to time become a party to the Loan Agreement (as hereinbelow defined)
(in such capacity, together with its successors in such capacity, the
"Administrative Agent").
R E C I T A L S:
- - - - - - - -
A.. Prime Refractive Management, L.L.C., a Delaware limited liability
company (the "Borrower"), B of A, as administrative agent, BankBoston, N.A., as
documentation agent, and the Lenders have entered into that certain Loan
Agreement dated as of the date hereof, (as the same may be amended, restated,
extended, supplemented or modified from time to time, the "Loan Agreement"),
pursuant to which the Lenders have agreed to make an advancing term loan to the
Borrower with advances thereunder not to exceed an aggregate principal amount of
Fourteen Million and 00/100 Dollars ($14,000,000.00).
B. The Debtor and certain other guarantors have executed that certain
Guaranty Agreement of even date herewith (as the same may be amended,
supplemented or modified from time to time, the "Guaranty"), pursuant to which
the Debtor has guaranteed to the Agents (as defined in the Loan Agreement) and
the Lenders the full and complete payment and performance of the Obligations (as
defined in the Loan Agreement).
C. The Debtor has executed that certain Guarantor Security Agreement of
even date herewith (as the same may be amended, supplemented or modified from
time to time, the "Security Agreement") pursuant to which the Debtor has granted
to the Administrative Agent for the benefit of the Lenders a continuing security
interest in certain personal property of the Debtor.
D. The Agents and the Lenders have conditioned their obligations under the
Loan Agreement upon the execution and delivery of this Agreement by the Debtor.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1.1 Terms Defined in Loan Agreement. Capitalized terms used and
not otherwise defined herein shall have the same meanings as set forth in the
Loan Agreement.
SECTION 1.2 Terms Defined in Uniform Commercial Code. Terms used herein
which are defined in the Uniform Commercial Code as adopted by the State of
Texas, unless otherwise defined herein or in the Loan Agreement, shall have
their meanings as set forth in the Uniform Commercial Code as adopted by the
State of Texas.
<PAGE>
- 3 -
Copyright Security Agreement
<PAGE>
SECTION 2. Grant of Security Interest. The Debtor hereby pledges and
grants to the Administrative Agent, for the benefit of the Lenders, a lien on
and security interest in all of the Debtor's right, title, and interest in and
to the following property (the "Copyright Collateral"), whether now owned or
hereafter arising or acquired, being all copyrights of the Debtor, whether
statutory or common law, registered or unregistered, now or hereafter in force
throughout the world including, without limitation, all of the Debtor's right,
title and interest in and to all copyrights registered in the United States
Copyright Office or anywhere else in the world and also including, without
limitation, the copyrights referred to in Item A of Schedule 1 attached hereto,
and all applications for registration thereof, whether pending or in
preparation, all copyright licenses, including each copyright license referred
to in Item B of Schedule 1 attached hereto, the right to sue for past, present
and future infringements of any of the foregoing, all rights corresponding
thereto throughout the world, all extensions and renewals of any of the
foregoing, and all proceeds of the foregoing, including, without limitation,
licenses, royalties, income, payments, claims, damages and proceeds of suit.
Such lien and security interest shall be subordinate only to the lien and
security interest granted in favor of Bank of America, N.A., as Administrative
Agent ("Prime Administrative Agent") under the Fourth Amended and Restated Loan
Agreement dated as of the date hereof among Prime Medical Services, Inc., Bank
of America, N.A., as administrative agent, BankBoston, N.A., as documentation
agent, and the lenders from time to time thereunder.
SECTION 3. Secured Indebtedness. The Copyright Collateral shall secure
the following obligations, indebtedness, and liabilities (whether at stated
maturity, by acceleration or otherwise) (all such obligations, indebtedness, and
liabilities being hereinafter sometimes called the "Secured Indebtedness"):
(a) the Obligations and the obligations, liabilities and indebtedness of
the Debtor to the Agents and the Lenders under the Guaranty;
(b) all reasonable costs and expenses, including, without
limitation, all reasonable attorneys' fees and legal expenses, incurred by any
of the Agents or any Lender to preserve and maintain the Collateral (as defined
in the Security Agreement), collect the obligations described herein and in the
Security Agreement, and enforce this Agreement and the Security Agreement; and
(c) all extensions, renewals, and modifications of any of the foregoing.
SECTION 4. Security Agreement. This Agreement has been executed and
delivered by the Debtor for the purpose of registering the security interest of
Administrative Agent in the Copyright Collateral with the United States
Copyright Office and corresponding offices in other countries of the world. The
security interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to Administrative Agent for its
benefit and the benefit of the Lenders under the Security Agreement. The
Security Agreement (and all rights and remedies of Administrative Agent and the
Lenders thereunder) shall remain in full force and effect in accordance with its
terms.
SECTION 5. Termination. If all of the Secured Indebtedness shall have
been paid and performed in full and the Commitments shall have expired or
terminated, the Administrative Agent shall, upon the written request of the
Debtor and in accordance with applicable provisions of the Loan Agreement,
promptly execute and deliver to the Debtor a proper instrument or instruments
acknowledging the release and termination of the security interests created by
this Agreement as the Debtor may reasonably deem necessary or desirable, and
shall duly assign and deliver to the Debtor (without recourse and without any
representation or warranty) such of the Copyright Collateral as may be in the
possession of the Administrative Agent and has not previously been sold or
otherwise applied pursuant to this Agreement.
<PAGE>
SECTION 6. Acknowledgment. The Debtor does hereby further acknowledge
and affirm that the rights and remedies of Administrative Agent with respect to
the security interest in the Copyright Collateral granted hereby are more fully
set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.
SECTION 7. Loan Document, etc. This Agreement is a Loan Document
executed pursuant to the Loan Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Loan Agreement.
SECTION 8. Counterparts. This Agreement may be executed by parties hereto
in several counterparts, each of which shall be deemed to be an original and all
of which shall constitute together but one and the same agreement.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
<PAGE>
Copyright Security Agreement
IN WITNESS WHEREOF, the Debtor has duly executed this Agreement as of
the day and year first written above.
LITHOTRIPTERS, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
Address: 2008 Litho Place
Fayetteville, NC 28304
Attention: Treasurer
<PAGE>
Copyright Security Agreement
IN WITNESS WHEREOF, B of A has duly executed this Agreement as of the
day and year first written above.
BANK OF AMERICA, N.A.,
as Administrative Agent
By:/s/ Daniel H. Penkar
Daniel H. Penkar
Senior Vice President
Address: 515 Congress Avenue, 11th Floor
Austin, Texas 78701
Attention: Wade Morgan
<PAGE>
Copyright Security Agreement
SCHEDULE 1
Item A: Registered Copyrights
Title Registration No.
- ----- ----------------
Generic Quality Assurance Plan: Lithotripsy Unit TX 3124352
Generic Hospital Lithostar Service Quality Assessment Plan TX 3124351
Lithotripters, Inc., Quality Assurance Plan TX 2792856
Introduction to the Lithostar and Guide to its Use TX 2670895
Item B: Copyright License Rights
Title Licensor
Scheduling, Billing and Accounts Receivable
Computer System Omni-Medical Systems, Inc.
QA Outcome Analysis Computer System MEDformatics, Inc.
GUARANTY AGREEMENT
WHEREAS, PRIME REFRACTIVE MANAGEMENT, L.L.C., a Delaware limited
liability company ("Borrower"), has entered into a Loan Agreement of even date
herewith with certain banks and other lending institutions which are or may from
time to time become signatories thereto, BANKBOSTON, N.A., a national banking
association, as documentation agent for itself and the other Lenders, BANK OF
AMERICA, N.A. ("B of A"), 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"), pursuant to which the
Lenders have agreed to make an advancing term loan to the Borrower with advances
thereunder not to exceed an aggregate principal amount of Fourteen Million and
00/100 Dollars at any time outstanding ($14,000,000.00) (such Loan Agreement, as
may be amended, extended, restated, supplemented or modified from time to time,
the "Loan Agreement"); terms defined in the Loan Agreement and not otherwise
defined herein are used herein as defined therein; and
WHEREAS, the Agents and the Lenders have conditioned their obligations
under the Loan Agreement upon the execution and delivery by Guarantors
(hereinafter defined) of this Guaranty Agreement (this "Guaranty");
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, each of the undersigned (individually, a
"Guarantor" and collectively, the "Guarantors"), hereby jointly and severally,
irrevocably and unconditionally guarantees to the Agents, and to the Lenders,
the full and prompt payment and performance of the Guaranteed Indebtedness
(hereinafter defined), this Guaranty being upon the following terms:
1 . The term "Guaranteed Indebtedness", as used herein means all of the
Obligations and shall include any and all post-petition interest and expenses
(including attorneys' fees) whether or not allowed under any bankruptcy,
insolvency, or other similar law.
2. This Guaranty shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and each Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Indebtedness and
termination of the Commitments. No set-off, counterclaim, recoupment, reduction,
or diminution of any obligation, or any defense of any kind or nature which
Borrower may have against any Agent, any Lender or any other party, or which any
Guarantor may have against Borrower or any other party (other than the Agents or
any Lender), shall be available to, or shall be asserted by, any Guarantor
against any Agent, any Lender or any subsequent holder of the Guaranteed
Indebtedness or any part thereof or against payment of the Guaranteed
Indebtedness or any part thereof.
<PAGE>
7
3. Notwithstanding any contrary provision, it is the intention of each
Guarantor, Lenders, and Agents that the amount of the Guaranteed Indebtedness
guaranteed by each Guarantor by this Guaranty shall be, but not in excess of,
the maximum amount permitted by fraudulent conveyance, fraudulent transfer, or
similar Laws applicable to such Guarantor. Accordingly, notwithstanding anything
to the contrary contained in this Guaranty or any other agreement or instrument
executed in connection with the payment of any of the Guaranteed Indebtedness,
the amount of the Guaranteed Indebtedness guaranteed by any Guarantor by this
Guaranty shall be limited to an aggregate amount equal to the largest amount
that would not render such Guarantor's obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provision of any applicable state law.
<PAGE>
4. If any Guarantor becomes liable for any indebtedness owing by
Borrower to any Agent or any Lender by endorsement or otherwise, other than
under this Guaranty, such liability shall not be in any manner impaired or
affected hereby, and the rights of the Agents and the Lenders hereunder shall be
cumulative of any and all other rights that the Agents and the Lenders may ever
have against such Guarantor. The exercise by the Agents or any Lender of any
right or remedy hereunder or under any other instrument, or at law or in equity,
shall not preclude the concurrent or subsequent exercise of any other right or
remedy.
5. In the event of default by Borrower in payment or performance of the
Guaranteed Indebtedness, or any part thereof, when such Guaranteed Indebtedness
becomes due, whether by its terms, by acceleration, or otherwise, Guarantors
shall promptly pay the amount due thereon to the Administrative Agent, for the
benefit of the Lenders, upon demand in lawful currency of the United States of
America and it shall not be necessary for the Administrative Agent, in order to
enforce such payment by Guarantors, first to institute suit or exhaust its
remedies against Borrower or others liable on such Guaranteed Indebtedness, or
to enforce any rights against any collateral which shall ever have been given to
secure such Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantors hereunder forthwith on demand by the Administrative Agent.
<PAGE>
7. Each Guarantor hereby agrees that its obligations under this
Guaranty shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of such Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the sale, release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of any Guarantor hereunder, or the full or partial release of
Borrower or any other guarantor from liability for any or all of the Guaranteed
Indebtedness; (c) the dissolution, insolvency, or bankruptcy of Borrower, any
Guarantor, or any other party at any time liable for the payment of any or all
of the Guaranteed Indebtedness; (d) any renewal, extension, modification,
waiver, amendment, or rearrangement of any or all of the Guaranteed Indebtedness
or any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Indebtedness; (e) any adjustment,
indulgence, forbearance, waiver, settlement, or compromise that may be granted
or given by any Agent or any Lender to Borrower, any Guarantor, or any other
party ever liable for any or all of the Guaranteed Indebtedness; (f) the
subordination of the payment of all or any part of the Guaranteed Indebtedness
to the payment of any obligations, indebtedness, or liabilities which may be due
or become due to any of the Agents, any of the Lenders or others; (g) the
application of any deposit balance, fund, payment, collections through process
of law or otherwise, or other collateral of Borrower to the satisfaction and
liquidation of the indebtedness or obligations of Borrower to Agents or any of
the Lenders, if any, not guaranteed under this Guaranty; (h) the application of
any sums paid to any of the Agents or any of the Lenders by any Guarantor, any
other guarantor of all or any part of the Guaranteed Indebtedness, Borrower or
others to the Guaranteed Indebtedness in such order and manner as any Agent may
determine in accordance with the Loan Agreement; (i) any neglect, delay,
omission, failure, or refusal of any Agent or any Lender to take or prosecute
any action for the collection of any of the Guaranteed Indebtedness or to
foreclose or take or prosecute any action in connection with any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed Indebtedness; (j) the unenforceability or invalidity of any or
all of the Guaranteed Indebtedness or of any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (k) any payment by Borrower or any other party to any Agent or any
Lender is held to constitute a preference under applicable bankruptcy or
insolvency law or if for any other reason any Agent or any Lender is required to
refund any payment or pay the amount thereof to someone else; (l) the settlement
or compromise of any of the Guaranteed Indebtedness; (m) the non-perfection of
any security interest or lien securing any or all of the Guaranteed
Indebtedness; (n) any impairment of any collateral securing any or all of the
Guaranteed Indebtedness; (o) the failure of any Agent or any Lender to sell any
collateral securing any or all of the Guaranteed Indebtedness in a commercially
reasonable manner or as otherwise required by law; (p) any change in the
corporate existence, structure, or ownership of Borrower; (q) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower; (r) the unenforceability of all or any part of the
Guaranteed Indebtedness against Borrower by reason of the fact that the
Guaranteed Indebtedness exceeds the amount permitted by law; (s) the act of
creating all or any part of the Guaranteed Indebtedness is ultra vires; or (t)
the officers creating all or any part of the Guaranteed Indebtedness acted in
excess of their authority.
8. Each Guarantor hereby represents and warrants to the Agents and the
Lenders the following:
(a) This Guaranty may reasonably be expected to benefit, directly
or indirectly, each Guarantor.
(b) Each Guarantor is familiar with, and has independently
reviewed the books and records regarding, the financial condition of
Borrower and is familiar with the value of any and all collateral
intended to be security for the payment of all or any part of the
Guaranteed Indebtedness. However, no Guarantor is relying on such
financial condition or collateral as an inducement to enter into this
Guaranty.
(c) Each Guarantor has adequate means to obtain from Borrower
on a continuing basis information concerning the financial condition of
Borrower, and no Guarantor is relying on the Agents or the Lenders to
provide such information to any Guarantor either now or in the future.
(d) Each Guarantor has the power and authority to execute,
deliver, and perform this Guaranty and any other agreements executed by
such Guarantor contemporaneously herewith, and the execution, delivery,
and performance of this Guaranty and any other agreements executed by
each Guarantor contemporaneously herewith do not and will not violate
(i) any agreement or instrument to which any Guarantor is a party, or
(ii) any law, rule, regulation, or order of any Governmental Authority
to which any Guarantor is subject.
(e) Neither the Agents, the Lenders, nor any other party has
made any representation, warranty, or statement to any Guarantor in
order to induce any Guarantor to execute this Guaranty.
(f) The financial statements and other financial information
regarding Guarantors heretofore and hereafter delivered to any Agent or
any Lender are and shall be true and correct in all material respects
and fairly present the financial position of Guarantors as of the dates
thereof, and no material adverse change has occurred in the financial
condition of any Guarantor as reflected in those financial disclosures.
(g) As of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) each Guarantor is
and will be Solvent (to the extent necessary, taking into account any
rights of contribution, reimbursement and subrogation), (ii) the fair
saleable value of each Guarantor's assets exceeds and will continue to
exceed its liabilities (both fixed and contingent), (iii) each
Guarantor is and will continue to be able to pay its debts as they
mature, and (iv) each Guarantor has and will continue to have
sufficient capital to carry on its business and all businesses in which
it is about to engage.
<PAGE>
(h) All representations and warranties about each Guarantor made
in the Loan Agreement are true and correct.
9. Each Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Lender has any Commitment
under the Loan Agreement:
(a) No Guarantor shall, so long as its obligations under this
Guaranty continue, transfer or pledge any material portion of its
assets for less than full and adequate consideration.
(b) Each Guarantor shall promptly furnish to the
Administrative Agent at any time and from time to time such financial
statements and other financial information as the Administrative Agent
may require, in form and substance satisfactory to the Administrative
Agent.
(c) Each Guarantor shall comply with all terms and provisions
of the Loan Documents that apply to such Guarantor.
(d) Each Guarantor shall promptly inform the Administrative
Agent of (i) any litigation or governmental investigation against such
Guarantor or affecting any security for all or any part of the
Guaranteed Indebtedness or this Guaranty which, if determined
adversely, might have a material adverse effect upon the financial
condition of such Guarantor or upon such security or might cause a
default under any of the Loan Documents, (ii) any claim or controversy
which might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the financial
condition of Guarantor.
10. (a) Each Guarantor hereby agrees that the Subordinated Indebtedness
(hereinafter defined) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness, and each Guarantor hereby
assigns the Subordinated Indebtedness to the Administrative Agent, for the
benefit of the Lenders, as security for the Guaranteed Indebtedness. If any sums
shall be paid to any Guarantor by Borrower or any other person or entity on
account of the Subordinated Indebtedness, such sums shall be held in trust by
such Guarantor for the benefit of the Administrative Agent and shall forthwith
be paid to the Administrative Agent without affecting the liability of any
Guarantor under this Guaranty and may be applied by the Administrative Agent and
the Lenders against the Guaranteed Indebtedness in such order and manner as the
Administrative Agent and the Lenders may determine in their sole discretion.
Upon the request of the Administrative Agent, each Guarantor shall execute,
deliver, and endorse to the Administrative Agent such documents and instruments
as the Administrative Agent may request to perfect, preserve, and enforce its
rights hereunder. For purposes of this Guaranty, the term "Subordinated
Indebtedness" means all indebtedness, liabilities, and obligations of Borrower
to any Guarantor, whether such indebtedness, liabilities, and obligations now
exist or are hereafter incurred or arise, or whether the obligations of Borrower
thereon are direct, indirect, contingent, primary, secondary, several, joint and
several, or otherwise, and irrespective of whether such indebtedness,
liabilities, or obligations are evidenced by a note, contract, open account, or
otherwise, and irrespective of the person or persons in whose favor such
indebtedness, obligations, or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by any Guarantor.
<PAGE>
(b) Each Guarantor agrees that any and all liens, security
interests, judgment liens, charges, or other encumbrances upon Borrower's assets
securing payment of any Subordinated Indebtedness shall be and remain inferior
and subordinate to any and all liens, security interests, judgment liens,
charges, or other encumbrances upon Borrower's assets securing payment of the
Guaranteed Indebtedness or any part thereof, regardless of whether such
encumbrances in favor of any Guarantor or the Administrative Agent presently
exist or are hereafter created or attached. Without the prior written consent of
the Lenders, no Guarantor shall (i) file suit against Borrower or exercise or
enforce any other creditor's right it may have against Borrower, or (ii)
foreclose, repossess, sequester, or otherwise take steps or institute any action
or proceedings judicial or otherwise, including without limitation the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor's relief or insolvency proceeding) to enforce any liens, security
interests, collateral rights, judgments or other encumbrances held by any
Guarantor on assets of Borrower.
(c) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency proceeding
involving Borrower as debtor, the Administrative Agent shall have the right to
prove and vote any claim under the Subordinated Indebtedness and to receive
directly from the receiver, trustee or other court custodian all dividends,
distributions, and payments made in respect of the Subordinated Indebtedness.
The Administrative Agent and the Lenders may apply any such dividends,
distributions, and payments against the Guaranteed Indebtedness in such order
and manner as the Administrative Agent and the Lenders may determine in their
sole discretion.
(d) Each Guarantor agrees that all promissory notes, accounts
receivable, ledgers, records, or any other evidence of Subordinated Indebtedness
shall contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under the terms of this Guaranty.
11. Each Guarantor waives (a) promptness, diligence, and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness, or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice of
protest, notice of intent to accelerate, notice of acceleration, notice of
dishonor, diligence in enforcement, and indulgences of every kind, and (b) the
taking of any other action by the Administrative Agent, including without
limitation, giving any notice of default or any other notice to, or making any
demand on, Borrower, any other guarantor of all or any part of the Guaranteed
Indebtedness or any other party. To the maximum extent lawful, each Guarantor
waives all rights by which it might be entitled to require suit on an accrued
right of action in respect of any Guaranteed Indebtedness or require suit
against Borrower or others, whether arising under ss. 34.02 of the Texas
Business and Commerce Code, as amended (regarding its right to require
Administrative Agent or Lenders to sue Borrower on accrued right of action
following its written notice to Administrative Agent or Lenders), ss. 17.001 of
the Texas Civil Practice and Remedies Code, as amended (allowing suit against it
without suit against Borrower, but precluding entry of judgment against it
before entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil
Procedure, as amended (requiring Administrative Agent or Lenders to join
Borrower in any suit against it unless judgment has been previously entered
against Borrower), or otherwise.
12. In addition to any other waivers, agreements and covenants of
Guarantors set forth herein, each Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or omission of
the Administrative Agent, its directors, officers, employees, representatives or
agents in connection with the Administrative Agent's administration of the
Guaranteed Indebtedness, except for the Administrative Agent's willful
misconduct and gross negligence.
13. This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of all or any part of the Guaranteed
Indebtedness is rescinded or must otherwise be returned by any Agent or any
Lender upon the insolvency, bankruptcy, or reorganization of Borrower, any
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
<PAGE>
14. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by Borrower or others (including
Guarantors), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of any Guarantor against the Administrative
Agent or any Lender shall have commenced to run, toll the running of such
statute of limitations and, if the period of such statute of limitations shall
have expired, prevent the operation of such statute of limitations.
15. This Guaranty is for the benefit of the Agents and the Lenders and
their respective successors and assigns, and in the event of an assignment of
the Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty is binding not only on
Guarantors, but on each Guarantor's successors and assigns.
16. Each Guarantor recognizes that the Agents and the Lenders are
relying upon this Guaranty and the undertakings of each Guarantor hereunder in
making extensions of credit to Borrower under the Loan Agreement and further
recognizes that the execution and delivery of this Guaranty is a material
inducement to the Agents and the Lenders in entering into the Loan Agreement.
Each Guarantor hereby acknowledges that there are no conditions to the full
effectiveness of this Guaranty.
17. This Guaranty is a Loan Document and, therefore, this Guaranty is
subject to the applicable provisions of the Loan Agreement, all of which
applicable provisions are incorporated herein by reference the same as if set
forth herein verbatim. Moreover, each Guarantor acknowledges and agrees that
this Guaranty is subject to the offset provisions in favor of the Lenders in the
Loan Agreement.
18. Each Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Loan Agreement and the other Loan
Documents to which it is a party or (b) any collateral securing all or any part
of the Guaranteed Indebtedness.
19. In the event that any Guarantor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall be
deemed given when such notice is deposited in the United States mail, postage
prepaid, at the address for Guarantor set forth on the signature page of this
Guaranty, five days prior to the date any public sale, or after which any
private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
20. No delay on the part of the Administrative Agent in exercising any
right hereunder or failure to exercise the same shall operate as a waiver of
such right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties in
accordance with the Loan Agreement, and then only in the specific instance and
for the purpose given.
21. Nothing contained herein shall be construed as an obligation on the
part of the Agents or the Lenders to extend or continue to extend credit to
Borrower.
<PAGE>
22. Notwithstanding any other provision of this Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of the
Guaranteed Indebtedness, each Guarantor and the Administrative Agent by its
acceptance hereof agree that no Guarantor shall ever be required or obligated to
pay interest in excess of the maximum nonusurious interest rate as may be
authorized by applicable law for the written contracts which constitute the
Guaranteed Indebtedness. It is the intention of Guarantors, the Agents, and the
Lenders to conform strictly to the applicable laws which limit interest rates,
and any of the aforesaid contracts for interest, if and to the extent payable by
Guarantors, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
23. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING
TRANSACTION CONSUMMATED AND PERFORMABLE IN TRAVIS COUNTY, TEXAS, AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
24. Each Guarantor shall pay on demand all reasonable attorneys' fees
and all other costs and expenses incurred by the Agents or any Lender in
connection with the enforcement or collection of this Guaranty.
25. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTORS,
THE AGENTS AND THE LENDERS WITH RESPECT TO GUARANTORS' GUARANTY OF THE
GUARANTEED INDEBTEDNESS AND RESTATES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTORS, THE AGENTS AND
THE LENDERS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND
NO COURSE OF DEALING BETWEEN ANY GUARANTOR, THE AGENTS OR THE LENDERS, NO COURSE
OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
GUARANTY. THERE ARE NO ORAL AGREEMENTS AMONG GUARANTORS, THE AGENTS AND THE
LENDERS.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
<PAGE>
EXECUTED as of the 31st day of January, 2000.
GUARANTORS:
----------
PROSTATHERAPIES, INC.,
a Delaware corporation
LITHOTRIPTORS, INC.,
a North Carolina corporation
FASTSTART, INC.,
a North Carolina corporation
NATIONAL LITHOTRIPTORS ASSOCIATION,
a North Carolina corporation
R.R. LITHO, INC.,
a Delaware corporation
OHIO LITHO, INC.,
a Delaware corporation
MEDTECH INVESTMENT, INC.,
a North Carolina corporation
PRIME MEDICAL OPERATING, INC.,
a Delaware corporation
PRIME MANAGEMENT, INC.,
a Nevada corporation
PRIME LITHOTRIPTER OPERATIONS, INC.,
a New York corporation
PRIME DIAGNOSTIC SERVICES, INC.,
a Delaware corporation
PRIME LITHOTRIPSY SERVICES, INC.,
a New York corporation
PRIME DIAGNOSTIC CORP. OF FLORIDA,
a Delaware corporation
SUN MEDICAL TECHNOLOGIES, INC.,
a California corporation
PRIME PRACTICE MANAGEMENT, INC.,
a New York corporation
PRIME CARDIAC REHABILITATION SERVICES,
INC., a Delaware corporation
ALABAMA RENAL STONE INSTITUTE, INC.,
an Alabama corporation
PRIME KIDNEY STONE TREATMENT, INC.,
a New Jersey corporation
SUN ACQUISITION, INC.,
a California corporation
EXECUTIVE MEDICAL ENTERPRISES, INC.,
a Delaware corporation
<PAGE>
PRIME RVC, INC.,
a Delaware corporation
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
PRIME MEDICAL MANAGEMENT, L.P.,
a Delaware limited partnership
By: Prime Medical Operating, Inc.,
a Delaware corporation, its
General Partner
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
PRIME REFRACTIVE, L.L.C.
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attn: President
Fax Number: (512) 328-8510
Telephone Number: (512) 328-2892
<PAGE>
GUARANTY AGREEMENT
WHEREAS, PRIME REFRACTIVE MANAGEMENT, L.L.C., a Delaware limited
liability company ("Borrower"), has entered into a Loan Agreement of even date
herewith with certain banks and other lending institutions which are or may from
time to time become signatories thereto, BANKBOSTON, N.A., a national banking
association, as documentation agent for itself and the other Lenders, BANK OF
AMERICA, N.A. ("B of A"), 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"), pursuant to which the
Lenders have agreed to make an advancing term loan to the Borrower with advances
thereunder not to exceed an aggregate principal amount of Fourteen Million and
00/100 Dollars ($14,000,000.00) (such Loan Agreement, as may be amended,
extended, restated, supplemented or modified from time to time, the "Loan
Agreement"); terms defined in the Loan Agreement and not otherwise defined
herein are used herein as defined therein; and
WHEREAS, the Agents and the Lenders have conditioned their obligations
under the Loan Agreement upon the execution and delivery by Guarantor
(hereinafter defined) of this Guaranty Agreement (this "Guaranty");
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the undersigned ("Guarantor"), hereby irrevocably
and unconditionally guarantees to the Agents, and to the Lenders, the full and
prompt payment and performance of the Guaranteed Indebtedness (hereinafter
defined), this Guaranty being upon the following terms:
1 . The term "Guaranteed Indebtedness", as used herein means all of the
Obligations and shall include any and all post-petition interest and expenses
(including attorneys' fees) whether or not allowed under any bankruptcy,
insolvency, or other similar law.
2. This Guaranty shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder until
the payment and performance in full of the Guaranteed Indebtedness and
termination of the Commitments. No set-off, counterclaim, recoupment, reduction,
or diminution of any obligation, or any defense of any kind or nature which
Borrower may have against any Agent, any Lender or any other party, or which
Guarantor may have against Borrower or any other party (other than the Agents or
any Lender), shall be available to, or shall be asserted by, Guarantor against
any Agent, any Lender or any subsequent holder of the Guaranteed Indebtedness or
any part thereof or against payment of the Guaranteed Indebtedness or any part
thereof.
3. Notwithstanding any contrary provision, it is the intention of
Guarantor, Lenders, and Agents that the amount of the Guaranteed Indebtedness
guaranteed by Guarantor by this Guaranty shall be, but not in excess of, the
maximum amount permitted by fraudulent conveyance, fraudulent transfer, or
similar Laws applicable to Guarantor. Accordingly, notwithstanding anything to
the contrary contained in this Guaranty or any other agreement or instrument
executed in connection with the payment of any of the Guaranteed Indebtedness,
the amount of the Guaranteed Indebtedness guaranteed by Guarantor by this
Guaranty shall be limited to an aggregate amount equal to the largest amount
that would not render Guarantor's obligations hereunder subject to avoidance
under Section 548 of the United States Bankruptcy Code or any comparable
provision of any applicable state law.
<PAGE>
12
<PAGE>
4. If Guarantor becomes liable for any indebtedness owing by Borrower
to any Agent or any Lender by endorsement or otherwise, other than under this
Guaranty, such liability shall not be in any manner impaired or affected hereby,
and the rights of the Agents and the Lenders hereunder shall be cumulative of
any and all other rights that the Agents and the Lenders may ever have against
Guarantor. The exercise by the Agents or any Lender of any right or remedy
hereunder or under any other instrument, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
5. In the event of default by Borrower in payment or performance of the
Guaranteed Indebtedness, or any part thereof, when such Guaranteed Indebtedness
becomes due, whether by its terms, by acceleration, or otherwise, Guarantor
shall promptly pay the amount due thereon to the Administrative Agent, for the
benefit of the Lenders, upon demand in lawful currency of the United States of
America and it shall not be necessary for the Administrative Agent, in order to
enforce such payment by Guarantor, first to institute suit or exhaust its
remedies against Borrower or others liable on such Guaranteed Indebtedness, or
to enforce any rights against any collateral which shall ever have been given to
secure such Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantor hereunder forthwith on demand by the Administrative Agent.
<PAGE>
7. Guarantor hereby agrees that its obligations under this Guaranty
shall not be released, discharged, diminished, impaired, reduced, or affected
for any reason or by the occurrence of any event, including, without limitation,
one or more of the following events, whether or not with notice to or the
consent of Guarantor: (a) the taking or accepting of collateral as security for
any or all of the Guaranteed Indebtedness or the sale, release, surrender,
exchange, or subordination of any collateral now or hereafter securing any or
all of the Guaranteed Indebtedness; (b) any partial release of the liability of
Guarantor hereunder, or the full or partial release of Borrower or any other
guarantor from liability for any or all of the Guaranteed Indebtedness; (c) the
dissolution, insolvency, or bankruptcy of Borrower, Guarantor, or any other
party at any time liable for the payment of any or all of the Guaranteed
Indebtedness; (d) any renewal, extension, modification, waiver, amendment, or
rearrangement of any or all of the Guaranteed Indebtedness or any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed Indebtedness; (e) any adjustment, indulgence, forbearance,
waiver, settlement, or compromise that may be granted or given by any Agent or
any Lender to Borrower, Guarantor, or any other party ever liable for any or all
of the Guaranteed Indebtedness; (f) the subordination of the payment of all or
any part of the Guaranteed Indebtedness to the payment of any obligations,
indebtedness, or liabilities which may be due or become due to any of the
Agents, any of the Lenders or others; (g) the application of any deposit
balance, fund, payment, collections through process of law or otherwise, or
other collateral of Borrower to the satisfaction and liquidation of the
indebtedness or obligations of Borrower to Agents or any of the Lenders, if any,
not guaranteed under this Guaranty; (h) the application of any sums paid to any
of the Agents or any of the Lenders by Guarantor, any other guarantor of all or
any part of the Guaranteed Indebtedness, Borrower or others to the Guaranteed
Indebtedness in such order and manner as any Agent may determine in accordance
with the Loan Agreement; (i) any neglect, delay, omission, failure, or refusal
of any Agent or any Lender to take or prosecute any action for the collection of
any of the Guaranteed Indebtedness or to foreclose or take or prosecute any
action in connection with any instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all of the Guaranteed Indebtedness;
(j) the unenforceability or invalidity of any or all of the Guaranteed
Indebtedness or of any instrument, document, or agreement evidencing, securing,
or otherwise relating to any or all of the Guaranteed Indebtedness; (k) any
payment by Borrower or any other party to any Agent or any Lender is held to
constitute a preference under applicable bankruptcy or insolvency law or if for
any other reason any Agent or any Lender is required to refund any payment or
pay the amount thereof to someone else; (l) the settlement or compromise of any
of the Guaranteed Indebtedness; (m) the non-perfection of any security interest
or lien securing any or all of the Guaranteed Indebtedness; (n) any impairment
of any collateral securing any or all of the Guaranteed Indebtedness; (o) the
failure of any Agent or any Lender to sell any collateral securing any or all of
the Guaranteed Indebtedness in a commercially reasonable manner or as otherwise
required by law; (p) any change in the corporate existence, structure, or
ownership of Borrower; (q) any other circumstance which might otherwise
constitute a defense available to, or discharge of, Borrower; (r) the
unenforceability of all or any part of the Guaranteed Indebtedness against
Borrower by reason of the fact that the Guaranteed Indebtedness exceeds the
amount permitted by law; (s) the act of creating all or any part of the
Guaranteed Indebtedness is ultra vires; or (t) the officers creating all or any
part of the Guaranteed Indebtedness acted in excess of their authority.
8. Guarantor hereby represents and warrants to the Agents and the Lenders
the following:
(a) This Guaranty may reasonably be expected to benefit, directly
or indirectly, Guarantor.
(b) Guarantor is familiar with, and has independently reviewed
the books and records regarding, the financial condition of Borrower
and is familiar with the value of any and all collateral intended to be
security for the payment of all or any part of the Guaranteed
Indebtedness. However, Guarantor is not relying on such financial
condition or collateral as an inducement to enter into this Guaranty.
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower, and Guarantor is not relying on the Agents or the Lenders to
provide such information to Guarantor either now or in the future.
(d) Guarantor has the power and authority to execute, deliver,
and perform this Guaranty and any other agreements executed by such
Guarantor contemporaneously herewith, and the execution, delivery, and
performance of this Guaranty and any other agreements executed by
Guarantor contemporaneously herewith do not and will not violate (i)
any agreement or instrument to which Guarantor is a party, or (ii) any
law, rule, regulation, or order of any Governmental Authority to which
Guarantor is subject.
(e) Neither the Agents, the Lenders, nor any other party has
made any representation, warranty, or statement to Guarantor in order
to induce any Guarantor to execute this Guaranty.
(f) The financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to any Agent or
any Lender are and shall be true and correct in all material respects
and fairly present the financial position of Guarantor as of the dates
thereof, and no material adverse change has occurred in the financial
condition of Guarantor as reflected in those financial disclosures.
(g) As of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and
will be Solvent (to the extent necessary, taking into account any
rights of contribution, reimbursement and subrogation), (ii) the fair
saleable value of Guarantor's assets exceeds and will continue to
exceed its liabilities (both fixed and contingent), (iii) Guarantor is
and will continue to be able to pay its debts as they mature, and (iv)
Guarantor has and will continue to have sufficient capital to carry on
its business and all businesses in which it is about to engage.
(h) All representations and warranties about Guarantor made in
the Loan Agreement are true and correct.
<PAGE>
9. Guarantor hereby represents and warrants to the Agents and the
Lenders that (for purposes of Sections 9 and 10, all capitalized terms not
otherwise defined shall have the meanings assigned thereto in the Fourth Amended
and Restated Loan Agreement dated the date hereof (the "Prime Agreement") among
Guarantor, B of A, as administrative agent, BankBoston, N.A., as documentation
agent, and the lenders from time to time defined therein; provided, that the
terms "Loan Documents", "Obligations", "Agents", "Lenders", "Guarantors",
"Administrative Agent", "Agent", "Collateral", "Guaranty
Agreement","Commitment", shall have the meaning assigned thereto in the Loan
Agreement):
9.1 Existence.
(a) Corporate Existence. Each of the Companies (other than the Excepted
Subsidiaries and 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,
Guarantor, or any Material Subsidiary. Each Company (other than the Excepted
Subsidiaries) has the corporate power and authority to execute, deliver, and
perform its obligations under this Guaranty 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 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,
Guarantor, or any Material Subsidiary.
9.2 Financial Statements. Guarantor has delivered to the Administrative
Agent audited consolidated financial statements of the Companies as of and for
the fiscal year ended December 31, 1998, and unaudited consolidated financial
statements of Guarantor for the nine (9) month period ended September 30, 1999.
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, Guarantor, or any Material Subsidiary since the effective date of the
most recent financial statements referred to in this Section.
9.3 Corporate Action: No Breach. The execution, delivery, and performance
by each Company of the 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 of
the Prime Agreement) upon any of the revenues or assets of any of the Companies.
<PAGE>
9.4 Operation of Business. Each of the Companies (other than the
Excepted Subsidiaries) 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, Guarantor, or any Material Subsidiary).
9.5 Litigation and Judgments. As of the date hereof, except as
disclosed on Schedule 7.5 to the Prime Agreement, there is no action, suit,
investigation, or proceeding before or by any Governmental Authority or
arbitrator pending, or to the knowledge of Guarantor, 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, Guarantor, or any
Material Subsidiary or the ability of Guarantor to pay and perform the
Obligations. There are no outstanding judgments against any Company.
9.6 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
9.2, and none of the properties, assets, or leasehold interests of any Company
is subject to any Lien, except as permitted by Section 9.2 of the Prime
Agreement.
9.7 Enforceability. This Guaranty Agreement constitutes, and the other
Loan Documents to which Guarantor is a party, when delivered, shall constitute
the legal, valid, and binding obligations of Borrower, enforceable against
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. The Loan Documents to which each other Company
is a party, when delivered, shall constitute the legal, valid, and binding
obligations of such Company, enforceable against such Company 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.
9.8 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 Guarantor or any
Company of this Guaranty Agreement and the other Loan Documents to which
Guarantor or any Company is or may become a party or for the validity or
enforceability thereof.
9.9 Debt. As of the date hereof, the Companies have no Debt, except as
disclosed on Schedule 7.9 to the Prime Agreement.
9.10 Taxes. The Companies (other than the Excepted Subsidiaries) 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
other than certain state tax returns required to be filed on or before the date
hereof. 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, except
relating to the Excepted Subsidiaries.
<PAGE>
9.11 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 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 Guarantor's
capital stock permitted by Section 9.4 of the Prime Agreement.
9.12 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.
9.13 Disclosure. All factual information (taken as a whole) furnished
by or on behalf of Guarantor 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 Guaranty Agreement, the other Loan
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 Guarantor 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.
9.14 Subsidiaries; Partnerships. Each of the Guarantors is a direct or
indirect wholly-owned Subsidiary of Guarantor, and as of the date hereof,
together with the Partnerships listed on Schedule 3 to the Prime Agreement,
constitute all of the Subsidiaries of Guarantor. Schedule 7.14.1 to the Prime
Agreement, 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 Guarantor. All of the outstanding capital stock of Guarantor and
each of its Subsidiaries has been validly issued, is fully paid, and is
nonassessable. Schedule 7.14.2 to the Prime Agreement, as the same may be
amended from time to time to reflect transactions permitted by this Guaranty
Agreement, sets forth the outstanding partnership interests of the Partnerships
owned by each of the Companies.
9.15 Agreements. Except for the Senior Subordinated Indenture, the
Senior Subordinated Notes, and as set forth on Schedule 7.15 to the Prime
Agreement, 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, Guarantor, or any
Material Subsidiary or the ability of Guarantor 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, Guarantor, or any Material
Subsidiary.
9.16 Compliance with Legal Requirements; Governmental Authorizations.
<PAGE>
(a) Except for the Excepted Subsidiaries and as set forth in Schedule
7.16.1 to the Prime Agreement: (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 for the Excepted Subsidiaries and as set forth in Schedule
7.16 to the Prime Agreement: (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
Authorizations have been duly 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 for the
Excepted Subsidiaries and as set forth on Schedule 7.16 to the Prime Agreement,
each of 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, Guarantor, or any
Material Subsidiary.
9.17 Investment Company Act. No Company is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
9.18 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.
9.19 Environmental Matters. Except as disclosed on Schedule 7.19 to the
Prime Agreement, 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.
<PAGE>
9.20 Year 2000 Compliance. Guarantor represents that it is aware of the
possible impact of the year 2000 problem (that is, the risk that computer
applications may not be able to properly perform date-sensitive functions after
December 31, 1999) upon its computer applications and on-going business.
Borrower represents that any corrective action necessary will be taken and that
the year 2000 problem will not result in a material adverse change in the
Companies' business condition (financial or otherwise), operations, properties
or prospects, or ability to repay the Obligations.
10. Guarantor agrees to deliver to Administrative Agent each of the
items described in Section 8.1 of the Prime Agreement on the same dates required
by the Prime Agreement. In addition, Guarantor will perform and observe each of
the following positive covenants so long as the Obligations or any part thereof
are outstanding or any Lender has any Commitment under the Loan Agreement:
10.1 Maintenance of Existence; Conduct of Business. Guarantor 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. Guarantor will cause each of
its Subsidiaries other than the Excepted 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, Guarantor, or any Material Subsidiary. Guarantor
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.
10.2 Maintenance of Properties. Guarantor will maintain, keep, and
preserve, and cause each of its Subsidiaries to maintain, keep, and preserve,
all of its properties (tangible and intangible) necessary 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 of the Prime Agreement or 9.9 of the
Prime Agreement 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, Guarantor, or any Material
Subsidiary.
10.3 Taxes and Claims. Guarantor will pay or discharge, and will cause
each of its Subsidiaries other than the Excepted 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.
10.4 Insurance. Guarantor will maintain, and will cause each of its
Subsidiaries to maintain (except in the case of the Partnerships, in which case
Guarantor 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 Guarantor will maintain and cause
each of its Subsidiaries (except in the case of the Partnerships, in which case
Guarantor 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. Guarantor will annually provide the Administrative Agent
with all certificates of insurance evidencing all policies of insurance of
Guarantor and its Subsidiaries.
<PAGE>
10.5 Inspection Rights. At any reasonable time and from time to time
after reasonable notice to Guarantor, Guarantor 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.
10.6 Keeping Books and Records. Guarantor 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.
10.7 Compliance with Laws. Guarantor 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.
10.8 Compliance with Agreements. Guarantor 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
effect on the business, condition (financial or otherwise), operations or
properties of the Companies taken as a whole, Guarantor, or any Material
Subsidiary.
10.9 Further Assurances. Guarantor 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 Guaranty 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.
10.10 ERISA. Guarantor 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.
10.11 Information Relating to Proposed Acquisitions. Guarantor 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 Permitted Refractive
Acquisition with respect to which Guarantor or any Subsidiary enters into a
letter of intent or acquisition agreement, during the term of this Guaranty
Agreement.
11. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Lender has any Commitment
under the Loan Agreement:
(a) No Guarantor shall, so long as its obligations under this
Guaranty continue, transfer or pledge any material portion of its
assets for less than full and adequate consideration.
(b) Each Guarantor shall promptly furnish to the
Administrative Agent at any time and from time to time such financial
statements and other financial information as the Administrative Agent
may require, in form and substance satisfactory to the Administrative
Agent.
<PAGE>
(c) Each Guarantor shall comply with all terms and provisions
of the Loan Documents that apply to such Guarantor.
(d) Each Guarantor shall promptly inform the Administrative
Agent of (i) any litigation or governmental investigation against such
Guarantor or affecting any security for all or any part of the
Guaranteed Indebtedness or this Guaranty which, if determined
adversely, might have a material adverse effect upon the financial
condition of such Guarantor or upon such security or might cause a
default under any of the Loan Documents, (ii) any claim or controversy
which might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the financial
condition of Guarantor.
12. (a) Guarantor hereby agrees that the Subordinated Indebtedness
(hereinafter defined) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness, and Guarantor hereby
assigns the Subordinated Indebtedness to the Administrative Agent, for the
benefit of the Lenders, as security for the Guaranteed Indebtedness. If any sums
shall be paid to Guarantor by Borrower or any other person or entity on account
of the Subordinated Indebtedness, such sums shall be held in trust by Guarantor
for the benefit of the Administrative Agent and shall forthwith be paid to the
Administrative Agent without affecting the liability of Guarantor under this
Guaranty and may be applied by the Administrative Agent and the Lenders against
the Guaranteed Indebtedness in such order and manner as the Administrative Agent
and the Lenders may determine in their sole discretion. Upon the request of the
Administrative Agent, Guarantor shall execute, deliver, and endorse to the
Administrative Agent such documents and instruments as the Administrative Agent
may request to perfect, preserve, and enforce its rights hereunder. For purposes
of this Guaranty, the term "Subordinated Indebtedness" means all indebtedness,
liabilities, and obligations of Borrower to Guarantor, whether such
indebtedness, liabilities, and obligations now exist or are hereafter incurred
or arise, or whether the obligations of Guarantor thereon are direct, indirect,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such indebtedness, liabilities, or obligations are
evidenced by a note, contract, open account, or otherwise, and irrespective of
the person or persons in whose favor such indebtedness, obligations, or
liabilities may, at their inception, have been, or may hereafter be created, or
the manner in which they have been or may hereafter be acquired by Guarantor.
(b) Guarantor agrees that any and all liens, security
interests, judgment liens, charges, or other encumbrances upon Borrower's assets
securing payment of any Subordinated Indebtedness shall be and remain inferior
and subordinate to any and all liens, security interests, judgment liens,
charges, or other encumbrances upon Borrower's assets securing payment of the
Guaranteed Indebtedness or any part thereof, regardless of whether such
encumbrances in favor of Guarantor or the Administrative Agent presently exist
or are hereafter created or attached. Without the prior written consent of the
Lenders, Guarantor shall not (i) file suit against Guarantor or exercise or
enforce any other creditor's right it may have against Guarantor, or (ii)
foreclose, repossess, sequester, or otherwise take steps or institute any action
or proceedings judicial or otherwise, including without limitation the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor's relief or insolvency proceeding) to enforce any liens, security
interests, collateral rights, judgments or other encumbrances held by Guarantor
on assets of Borrower.
(c) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency proceeding
involving Guarantor as debtor, the Administrative Agent shall have the right to
prove and vote any claim under the Subordinated Indebtedness and to receive
directly from the receiver, trustee or other court custodian all dividends,
distributions, and payments made in respect of the Subordinated Indebtedness.
The Administrative Agent and the Lenders may apply any such dividends,
distributions, and payments against the Guaranteed Indebtedness in such order
and manner as the Administrative Agent and the Lenders may determine in their
sole discretion.
<PAGE>
(d) Guarantor agrees that all promissory notes, accounts
receivable, ledgers, records, or any other evidence of Subordinated Indebtedness
shall contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under the terms of this Guaranty.
13. Guarantor waives (a) promptness, diligence, and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness, or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice of
protest, notice of intent to accelerate, notice of acceleration, notice of
dishonor, diligence in enforcement, and indulgences of every kind, and (b) the
taking of any other action by the Administrative Agent, including without
limitation, giving any notice of default or any other notice to, or making any
demand on, Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness or any other party. To the maximum extent lawful, each Guarantor
waives all rights by which it might be entitled to require suit on an accrued
right of action in respect of any Guaranteed Indebtedness or require suit
against Guarantor or others, whether arising under ss. 34.02 of the Texas
Business and Commerce Code, as amended (regarding its right to require
Administrative Agent or Lenders to sue Guarantor on accrued right of action
following its written notice to Administrative Agent or Lenders), ss. 17.001 of
the Texas Civil Practice and Remedies Code, as amended (allowing suit against it
without suit against Guarantor, but precluding entry of judgment against it
before entry of judgment against Guarantor), Rule 31 of the Texas Rules of Civil
Procedure, as amended (requiring Administrative Agent or Lenders to join
Guarantor in any suit against it unless judgment has been previously entered
against Guarantor), or otherwise.
14. In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases all
claims, causes of action, defenses and offsets for any act or omission of the
Administrative Agent, its directors, officers, employees, representatives or
agents in connection with the Administrative Agent's administration of the
Guaranteed Indebtedness, except for the Administrative Agent's willful
misconduct and gross negligence.
15. This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of all or any part of the Guaranteed
Indebtedness is rescinded or must otherwise be returned by any Agent or any
Lender upon the insolvency, bankruptcy, or reorganization of Guarantor,
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
16. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by Guarantor or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against the Administrative Agent or
any Lender shall have commenced to run, toll the running of such statute of
limitations and, if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
17. This Guaranty is for the benefit of the Agents and the Lenders and
their respective successors and assigns, and in the event of an assignment of
the Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty is binding not only on
Guarantor, but on Guarantor's successors and assigns.
18. Guarantor recognizes that the Agents and the Lenders are relying
upon this Guaranty and the undertakings of Guarantor hereunder in making
extensions of credit to Guarantor under the Loan Agreement and further
recognizes that the execution and delivery of this Guaranty is a material
inducement to the Agents and the Lenders in entering into the Loan Agreement.
Guarantor hereby acknowledges that there are no conditions to the full
effectiveness of this Guaranty.
<PAGE>
19. This Guaranty is a Loan Document and, therefore, this Guaranty is
subject to the applicable provisions of the Loan Agreement, all of which
applicable provisions are incorporated herein by reference the same as if set
forth herein verbatim. Moreover, Guarantor acknowledges and agrees that this
Guaranty is subject to the offset provisions in favor of the Lenders in the Loan
Agreement.
20. Guarantor expressly assumes all responsibilities to remain informed
of the financial condition of Guarantor and any circumstances affecting (a)
Guarantor's ability to perform under the Loan Agreement and the other Loan
Documents to which it is a party or (b) any collateral securing all or any part
of the Guaranteed Indebtedness.
21. In the event that Guarantor is entitled to receive any notice under
the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall be
deemed given when such notice is deposited in the United States mail, postage
prepaid, at the address for Guarantor set forth on the signature page of this
Guaranty, five days prior to the date any public sale, or after which any
private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
22. No delay on the part of the Administrative Agent in exercising any
right hereunder or failure to exercise the same shall operate as a waiver of
such right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties in
accordance with the Loan Agreement, and then only in the specific instance and
for the purpose given.
23. Nothing contained herein shall be construed as an obligation on the
part of the Agents or the Lenders to extend or continue to extend credit to
Guarantor.
24. Notwithstanding any other provision of this Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of the
Guaranteed Indebtedness, Guarantor and the Administrative Agent by its
acceptance hereof agree that no Guarantor shall ever be required or obligated to
pay interest in excess of the maximum nonusurious interest rate as may be
authorized by applicable law for the written contracts which constitute the
Guaranteed Indebtedness. It is the intention of Guarantor, the Agents, and the
Lenders to conform strictly to the applicable laws which limit interest rates,
and any of the aforesaid contracts for interest, if and to the extent payable by
Guarantor, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
25. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING
TRANSACTION CONSUMMATED AND PERFORMABLE IN TRAVIS COUNTY, TEXAS, AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
26. Guarantor shall pay on demand all reasonable attorneys' fees and
all other costs and expenses incurred by the Agents or any Lender in connection
with the enforcement or collection of this Guaranty.
<PAGE>
27. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTOR,
THE AGENTS AND THE LENDERS WITH RESPECT TO GUARANTOR'S GUARANTY OF THE
GUARANTEED INDEBTEDNESS AND RESTATES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR, THE AGENTS AND
THE LENDERS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND
NO COURSE OF DEALING BETWEEN GUARANTOR, THE AGENTS OR THE LENDERS, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
GUARANTY. THERE ARE NO ORAL AGREEMENTS AMONG GUARANTOR, THE AGENTS AND THE
LENDERS.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
<PAGE>
EXECUTED as of the 31st day of January, 2000.
GUARANTOR:
---------
PRIME MEDICAL SERVICES, INC.
a Delaware corporation
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attn: Treasurer
Fax Number: (512) 328-8510
Telephone Number: (512) 328-4554
<PAGE>
GUARANTY AGREEMENT
WHEREAS, PRIME MEDICAL SERVICES, INC., a Delaware corporation
("Borrower"), has entered into a Fourth Amended and Restated Loan Agreement of
even date herewith with certain banks and other lending institutions which are
or may from time to time become signatories thereto, BANKBOSTON, N.A., a
national banking association, as documentation agent for itself and the other
Lenders, BANK OF AMERICA, N.A. ("B of A"), 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"),
pursuant to which the Lenders have agreed to make a revolving credit loan to the
Borrower with advances thereunder not to exceed an aggregate principal amount of
Eighty-Six Million and 00/100 Dollars at any time outstanding ($86,000,000.00)
(such Fourth Amended and Restated Loan Agreement, as may be amended, extended,
restated, supplemented or modified from time to time, the "Loan Agreement");
terms defined in the Loan Agreement and not otherwise defined herein are used
herein as defined therein; and
WHEREAS, the Agents and the Lenders have conditioned their obligations
under the Loan Agreement upon the execution and delivery by Guarantors
(hereinafter defined) of this Guaranty Agreement (this "Guaranty");
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, each of the undersigned (individually, a
"Guarantor" and collectively, the "Guarantors"), hereby jointly and severally,
irrevocably and unconditionally guarantees to the Agents, and to the Lenders,
the full and prompt payment and performance of the Guaranteed Indebtedness
(hereinafter defined), this Guaranty being upon the following terms:
1 . The term "Guaranteed Indebtedness", as used herein means all of the
Obligations and shall include any and all post-petition interest and expenses
(including attorneys' fees) whether or not allowed under any bankruptcy,
insolvency, or other similar law.
2. This Guaranty shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and each Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Indebtedness and
termination of the Commitments. No set-off, counterclaim, recoupment, reduction,
or diminution of any obligation, or any defense of any kind or nature which
Borrower may have against any Agent, any Lender or any other party, or which any
Guarantor may have against Borrower or any other party (other than the Agents or
any Lender), shall be available to, or shall be asserted by, any Guarantor
against any Agent, any Lender or any subsequent holder of the Guaranteed
Indebtedness or any part thereof or against payment of the Guaranteed
Indebtedness or any part thereof.
3. Notwithstanding any contrary provision, it is the intention of each
Guarantor, Lenders, and Agents that the amount of the Guaranteed Indebtedness
guaranteed by each Guarantor by this Guaranty shall be, but not in excess of,
the maximum amount permitted by fraudulent conveyance, fraudulent transfer, or
similar Laws applicable to such Guarantor. Accordingly, notwithstanding anything
to the contrary contained in this Guaranty or any other agreement or instrument
executed in connection with the payment of any of the Guaranteed Indebtedness,
the amount of the Guaranteed Indebtedness guaranteed by any Guarantor by this
Guaranty shall be limited to an aggregate amount equal to the largest amount
that would not render such Guarantor's obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provision of any applicable state law.
<PAGE>
7
<PAGE>
4. If any Guarantor becomes liable for any indebtedness owing by
Borrower to any Agent or any Lender by endorsement or otherwise, other than
under this Guaranty, such liability shall not be in any manner impaired or
affected hereby, and the rights of the Agents and the Lenders hereunder shall be
cumulative of any and all other rights that the Agents and the Lenders may ever
have against such Guarantor. The exercise by the Agents or any Lender of any
right or remedy hereunder or under any other instrument, or at law or in equity,
shall not preclude the concurrent or subsequent exercise of any other right or
remedy.
5. In the event of default by Borrower in payment or performance of the
Guaranteed Indebtedness, or any part thereof, when such Guaranteed Indebtedness
becomes due, whether by its terms, by acceleration, or otherwise, Guarantors
shall promptly pay the amount due thereon to the Administrative Agent, for the
benefit of the Lenders, upon demand in lawful currency of the United States of
America and it shall not be necessary for the Administrative Agent, in order to
enforce such payment by Guarantors, first to institute suit or exhaust its
remedies against Borrower or others liable on such Guaranteed Indebtedness, or
to enforce any rights against any collateral which shall ever have been given to
secure such Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantors hereunder forthwith on demand by the Administrative Agent.
<PAGE>
7. Each Guarantor hereby agrees that its obligations under this
Guaranty shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of such Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the sale, release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of any Guarantor hereunder, or the full or partial release of
Borrower or any other guarantor from liability for any or all of the Guaranteed
Indebtedness; (c) the dissolution, insolvency, or bankruptcy of Borrower, any
Guarantor, or any other party at any time liable for the payment of any or all
of the Guaranteed Indebtedness; (d) any renewal, extension, modification,
waiver, amendment, or rearrangement of any or all of the Guaranteed Indebtedness
or any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Guaranteed Indebtedness; (e) any adjustment,
indulgence, forbearance, waiver, settlement, or compromise that may be granted
or given by any Agent or any Lender to Borrower, any Guarantor, or any other
party ever liable for any or all of the Guaranteed Indebtedness; (f) the
subordination of the payment of all or any part of the Guaranteed Indebtedness
to the payment of any obligations, indebtedness, or liabilities which may be due
or become due to any of the Agents, any of the Lenders or others; (g) the
application of any deposit balance, fund, payment, collections through process
of law or otherwise, or other collateral of Borrower to the satisfaction and
liquidation of the indebtedness or obligations of Borrower to Agents or any of
the Lenders, if any, not guaranteed under this Guaranty; (h) the application of
any sums paid to any of the Agents or any of the Lenders by any Guarantor, any
other guarantor of all or any part of the Guaranteed Indebtedness, Borrower or
others to the Guaranteed Indebtedness in such order and manner as any Agent may
determine in accordance with the Loan Agreement; (i) any neglect, delay,
omission, failure, or refusal of any Agent or any Lender to take or prosecute
any action for the collection of any of the Guaranteed Indebtedness or to
foreclose or take or prosecute any action in connection with any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed Indebtedness; (j) the unenforceability or invalidity of any or
all of the Guaranteed Indebtedness or of any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Indebtedness; (k) any payment by Borrower or any other party to any Agent or any
Lender is held to constitute a preference under applicable bankruptcy or
insolvency law or if for any other reason any Agent or any Lender is required to
refund any payment or pay the amount thereof to someone else; (l) the settlement
or compromise of any of the Guaranteed Indebtedness; (m) the non-perfection of
any security interest or lien securing any or all of the Guaranteed
Indebtedness; (n) any impairment of any collateral securing any or all of the
Guaranteed Indebtedness; (o) the failure of any Agent or any Lender to sell any
collateral securing any or all of the Guaranteed Indebtedness in a commercially
reasonable manner or as otherwise required by law; (p) any change in the
corporate existence, structure, or ownership of Borrower; (q) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower; (r) the unenforceability of all or any part of the
Guaranteed Indebtedness against Borrower by reason of the fact that the
Guaranteed Indebtedness exceeds the amount permitted by law; (s) the act of
creating all or any part of the Guaranteed Indebtedness is ultra vires; or (t)
the officers creating all or any part of the Guaranteed Indebtedness acted in
excess of their authority.
8. Each Guarantor hereby represents and warrants to the Agents and the
Lenders the following:
(a) This Guaranty may reasonably be expected to benefit, directly
or indirectly, each Guarantor.
(b) Each Guarantor is familiar with, and has independently
reviewed the books and records regarding, the financial condition of
Borrower and is familiar with the value of any and all collateral
intended to be security for the payment of all or any part of the
Guaranteed Indebtedness. However, no Guarantor is relying on such
financial condition or collateral as an inducement to enter into this
Guaranty.
(c) Each Guarantor has adequate means to obtain from Borrower
on a continuing basis information concerning the financial condition of
Borrower, and no Guarantor is relying on the Agents or the Lenders to
provide such information to any Guarantor either now or in the future.
(d) Each Guarantor has the power and authority to execute,
deliver, and perform this Guaranty and any other agreements executed by
such Guarantor contemporaneously herewith, and the execution, delivery,
and performance of this Guaranty and any other agreements executed by
each Guarantor contemporaneously herewith do not and will not violate
(i) any agreement or instrument to which any Guarantor is a party, or
(ii) any law, rule, regulation, or order of any Governmental Authority
to which any Guarantor is subject.
(e) Neither the Agents, the Lenders, nor any other party has
made any representation, warranty, or statement to any Guarantor in
order to induce any Guarantor to execute this Guaranty.
(f) The financial statements and other financial information
regarding Guarantors heretofore and hereafter delivered to any Agent or
any Lender are and shall be true and correct in all material respects
and fairly present the financial position of Guarantors as of the dates
thereof, and no material adverse change has occurred in the financial
condition of any Guarantor as reflected in those financial disclosures.
(g) As of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) each Guarantor is
and will be Solvent (to the extent necessary, taking into account any
rights of contribution, reimbursement and subrogation), (ii) the fair
saleable value of each Guarantor's assets exceeds and will continue to
exceed its liabilities (both fixed and contingent), (iii) each
Guarantor is and will continue to be able to pay its debts as they
mature, and (iv) each Guarantor has and will continue to have
sufficient capital to carry on its business and all businesses in which
it is about to engage.
(h) All representations and warranties about each Guarantor made
in the Loan Agreement are true and correct.
9. Each Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Lender has any Commitment
under the Loan Agreement:
<PAGE>
(a) No Guarantor shall, so long as its obligations under this
Guaranty continue, transfer or pledge any material portion of its
assets for less than full and adequate consideration.
(b) Each Guarantor shall promptly furnish to the
Administrative Agent at any time and from time to time such financial
statements and other financial information as the Administrative Agent
may require, in form and substance satisfactory to the Administrative
Agent.
(c) Each Guarantor shall comply with all terms and provisions
of the Loan Documents that apply to such Guarantor.
(d) Each Guarantor shall promptly inform the Administrative
Agent of (i) any litigation or governmental investigation against such
Guarantor or affecting any security for all or any part of the
Guaranteed Indebtedness or this Guaranty which, if determined
adversely, might have a material adverse effect upon the financial
condition of such Guarantor or upon such security or might cause a
default under any of the Loan Documents, (ii) any claim or controversy
which might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the financial
condition of Guarantor.
10. (a) Each Guarantor hereby agrees that the Subordinated Indebtedness
(hereinafter defined) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness, and each Guarantor hereby
assigns the Subordinated Indebtedness to the Administrative Agent, for the
benefit of the Lenders, as security for the Guaranteed Indebtedness. If any sums
shall be paid to any Guarantor by Borrower or any other person or entity on
account of the Subordinated Indebtedness, such sums shall be held in trust by
such Guarantor for the benefit of the Administrative Agent and shall forthwith
be paid to the Administrative Agent without affecting the liability of any
Guarantor under this Guaranty and may be applied by the Administrative Agent and
the Lenders against the Guaranteed Indebtedness in such order and manner as the
Administrative Agent and the Lenders may determine in their sole discretion.
Upon the request of the Administrative Agent, each Guarantor shall execute,
deliver, and endorse to the Administrative Agent such documents and instruments
as the Administrative Agent may request to perfect, preserve, and enforce its
rights hereunder. For purposes of this Guaranty, the term "Subordinated
Indebtedness" means all indebtedness, liabilities, and obligations of Borrower
to any Guarantor, whether such indebtedness, liabilities, and obligations now
exist or are hereafter incurred or arise, or whether the obligations of Borrower
thereon are direct, indirect, contingent, primary, secondary, several, joint and
several, or otherwise, and irrespective of whether such indebtedness,
liabilities, or obligations are evidenced by a note, contract, open account, or
otherwise, and irrespective of the person or persons in whose favor such
indebtedness, obligations, or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by any Guarantor.
(b) Each Guarantor agrees that any and all liens, security
interests, judgment liens, charges, or other encumbrances upon Borrower's assets
securing payment of any Subordinated Indebtedness shall be and remain inferior
and subordinate to any and all liens, security interests, judgment liens,
charges, or other encumbrances upon Borrower's assets securing payment of the
Guaranteed Indebtedness or any part thereof, regardless of whether such
encumbrances in favor of any Guarantor or the Administrative Agent presently
exist or are hereafter created or attached. Without the prior written consent of
the Lenders, no Guarantor shall (i) file suit against Borrower or exercise or
enforce any other creditor's right it may have against Borrower, or (ii)
foreclose, repossess, sequester, or otherwise take steps or institute any action
or proceedings judicial or otherwise, including without limitation the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor's relief or insolvency proceeding) to enforce any liens, security
interests, collateral rights, judgments or other encumbrances held by any
Guarantor on assets of Borrower.
<PAGE>
(c) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency proceeding
involving Borrower as debtor, the Administrative Agent shall have the right to
prove and vote any claim under the Subordinated Indebtedness and to receive
directly from the receiver, trustee or other court custodian all dividends,
distributions, and payments made in respect of the Subordinated Indebtedness.
The Administrative Agent and the Lenders may apply any such dividends,
distributions, and payments against the Guaranteed Indebtedness in such order
and manner as the Administrative Agent and the Lenders may determine in their
sole discretion.
(d) Each Guarantor agrees that all promissory notes, accounts
receivable, ledgers, records, or any other evidence of Subordinated Indebtedness
shall contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under the terms of this Guaranty.
11. Each Guarantor waives (a) promptness, diligence, and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness, or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice of
protest, notice of intent to accelerate, notice of acceleration, notice of
dishonor, diligence in enforcement, and indulgences of every kind, and (b) the
taking of any other action by the Administrative Agent, including without
limitation, giving any notice of default or any other notice to, or making any
demand on, Borrower, any other guarantor of all or any part of the Guaranteed
Indebtedness or any other party. To the maximum extent lawful, each Guarantor
waives all rights by which it might be entitled to require suit on an accrued
right of action in respect of any Guaranteed Indebtedness or require suit
against Borrower or others, whether arising under ss. 34.02 of the Texas
Business and Commerce Code, as amended (regarding its right to require
Administrative Agent or Lenders to sue Borrower on accrued right of action
following its written notice to Administrative Agent or Lenders), ss. 17.001 of
the Texas Civil Practice and Remedies Code, as amended (allowing suit against it
without suit against Borrower, but precluding entry of judgment against it
before entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil
Procedure, as amended (requiring Administrative Agent or Lenders to join
Borrower in any suit against it unless judgment has been previously entered
against Borrower), or otherwise.
12. In addition to any other waivers, agreements and covenants of
Guarantors set forth herein, each Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or omission of
the Administrative Agent, its directors, officers, employees, representatives or
agents in connection with the Administrative Agent's administration of the
Guaranteed Indebtedness, except for the Administrative Agent's willful
misconduct and gross negligence.
13. This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of all or any part of the Guaranteed
Indebtedness is rescinded or must otherwise be returned by any Agent or any
Lender upon the insolvency, bankruptcy, or reorganization of Borrower, any
Guarantor, any other guarantor of all or any part of the Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.
14. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by Borrower or others (including
Guarantors), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of any Guarantor against the Administrative
Agent or any Lender shall have commenced to run, toll the running of such
statute of limitations and, if the period of such statute of limitations shall
have expired, prevent the operation of such statute of limitations.
<PAGE>
15. This Guaranty is for the benefit of the Agents and the Lenders and
their respective successors and assigns, and in the event of an assignment of
the Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty is binding not only on
Guarantors, but on each Guarantor's successors and assigns.
16. Each Guarantor recognizes that the Agents and the Lenders are
relying upon this Guaranty and the undertakings of each Guarantor hereunder in
making extensions of credit to Borrower under the Loan Agreement and further
recognizes that the execution and delivery of this Guaranty is a material
inducement to the Agents and the Lenders in entering into the Loan Agreement.
Each Guarantor hereby acknowledges that there are no conditions to the full
effectiveness of this Guaranty.
17. This Guaranty is a Loan Document and, therefore, this Guaranty is
subject to the applicable provisions of the Loan Agreement, all of which
applicable provisions are incorporated herein by reference the same as if set
forth herein verbatim. Moreover, each Guarantor acknowledges and agrees that
this Guaranty is subject to the offset provisions in favor of the Lenders in the
Loan Agreement.
18. Each Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances affecting
(a) Borrower's ability to perform under the Loan Agreement and the other Loan
Documents to which it is a party or (b) any collateral securing all or any part
of the Guaranteed Indebtedness.
19. In the event that any Guarantor is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall be
deemed given when such notice is deposited in the United States mail, postage
prepaid, at the address for Guarantor set forth on the signature page of this
Guaranty, five days prior to the date any public sale, or after which any
private sale, of any such collateral is to be held; provided, however, that
notice given in any other reasonable manner or at any other reasonable time
shall be sufficient.
20. No delay on the part of the Administrative Agent in exercising any
right hereunder or failure to exercise the same shall operate as a waiver of
such right. In no event shall any waiver of the provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties in
accordance with the Loan Agreement, and then only in the specific instance and
for the purpose given.
21. Nothing contained herein shall be construed as an obligation on the
part of the Agents or the Lenders to extend or continue to extend credit to
Borrower.
22. Notwithstanding any other provision of this Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of the
Guaranteed Indebtedness, each Guarantor and the Administrative Agent by its
acceptance hereof agree that no Guarantor shall ever be required or obligated to
pay interest in excess of the maximum nonusurious interest rate as may be
authorized by applicable law for the written contracts which constitute the
Guaranteed Indebtedness. It is the intention of Guarantors, the Agents, and the
Lenders to conform strictly to the applicable laws which limit interest rates,
and any of the aforesaid contracts for interest, if and to the extent payable by
Guarantors, shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.
23. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING
TRANSACTION CONSUMMATED AND PERFORMABLE IN TRAVIS COUNTY, TEXAS, AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
<PAGE>
24. Each Guarantor shall pay on demand all reasonable attorneys' fees
and all other costs and expenses incurred by the Agents or any Lender in
connection with the enforcement or collection of this Guaranty.
25. Guarantors (other than Prime RVC, Inc., which has not previously
executed any guaranty of the Guaranteed Indebtedness) acknowledge that this
Guaranty has been given in amendment, renewal, restatement and confirmation of
Guarantor's obligations, covenants, and agreements contained in the Guaranty
Agreements previously executed by certain Guarantors in favor of Administrative
Agent and the Lenders, including, without limitation, those dated August 17,
1995, April 26, 1996, March 31, 1997, and April 20, 1998 (the "Previous
Guaranties"). Guarantors further confirm and agree that neither the execution of
the Loan Agreement or any other Loan Document, nor the consummation of the
transactions described therein, shall in any way affect the liability of certain
Guarantors under the Previous Guaranties, and the obligations evidenced by the
Previous Guaranties continue in full force and effect as modified, amended and
restated by the terms contained herein.
26. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTORS,
THE AGENTS AND THE LENDERS WITH RESPECT TO GUARANTORS' GUARANTY OF THE
GUARANTEED INDEBTEDNESS AND RESTATES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTORS, THE AGENTS AND
THE LENDERS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND
NO COURSE OF DEALING BETWEEN ANY GUARANTOR, THE AGENTS OR THE LENDERS, NO COURSE
OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
GUARANTY. THERE ARE NO ORAL AGREEMENTS AMONG GUARANTORS, THE AGENTS AND THE
LENDERS.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
<PAGE>
EXECUTED as of the 31st day of January, 2000.
GUARANTORS:
- ----------
PROSTATHERAPIES, INC.,
a Delaware corporation
LITHOTRIPTORS, INC.,
a North Carolina corporation
FASTSTART, INC.,
a North Carolina corporation
NATIONAL LITHOTRIPTORS ASSOCIATION,
a North Carolina corporation
R.R. LITHO, INC.,
a Delaware corporation
OHIO LITHO, INC.,
a Delaware corporation
MEDTECH INVESTMENT, INC.,
a North Carolina corporation
PRIME MEDICAL OPERATING, INC.,
a Delaware corporation
PRIME MANAGEMENT, INC.,
a Nevada corporation
PRIME LITHOTRIPTER OPERATIONS, INC.,
a New York corporation
PRIME DIAGNOSTIC SERVICES, INC.,
a Delaware corporation
PRIME LITHOTRIPSY SERVICES, INC.,
a New York corporation
PRIME DIAGNOSTIC CORP. OF FLORIDA,
a Delaware corporation
SUN MEDICAL TECHNOLOGIES, INC.,
a California corporation
PRIME PRACTICE MANAGEMENT, INC.,
a New York corporation
PRIME CARDIAC REHABILITATION SERVICES,
INC., a Delaware corporation
ALABAMA RENAL STONE INSTITUTE, INC.,
an Alabama corporation
PRIME KIDNEY STONE TREATMENT, INC.,
a New Jersey corporation
SUN ACQUISITION, INC.,
a California corporation
EXECUTIVE MEDICAL ENTERPRISES, INC.,
a Delaware corporation
PRIME RVC, INC.,
a Delaware corporation
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
<PAGE>
PRIME MEDICAL MANAGEMENT, L.P.,
a Delaware limited partnership
By: Prime Medical Operating, Inc.,
a Delaware corporation, its
General Partner
By: /s/ Teena E. Belcik
Teena E. Belcik
Treasurer
Address for Notices:
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attn: President
Fax Number: (512) 328-8510
Telephone Number: (512) 328-2892
Note
NOTE
$1,050,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME REFRACTIVE MANAGEMENT,
L.L.C., a Delaware limited liability company ("Maker"), hereby promises to pay
to the order of GUARANTY FEDERAL BANK, F.S.B. ("Payee"), at the offices of Bank
of America, N.A., as Administrative Agent (together with any successor as
provided in the Agreement, hereinbelow defined, the "Administrative Agent") at
901 Main Street, Dallas, Texas 75202, on April 21, 2003, in lawful money of the
United States of America, the principal sum of ONE MILLION FIFTY THOUSAND AND
NO/100 DOLLARS ($1,050,000.00), 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 Loan Agreement of even date herewith among Maker, Payee,
the Administrative Agent, BankBoston, N.A., as Documentation 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 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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
PRIME REFRACTIVE MANAGEMENT, L.L.C.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$1,575,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME REFRACTIVE MANAGEMENT,
L.L.C., a Delaware limited liability company ("Maker"), hereby promises to pay
to the order of FLEET NATIONAL BANK ("Payee"), at the offices of Bank of
America, N.A., as Administrative Agent (together with any successor as provided
in the Agreement, hereinbelow defined, the "Administrative Agent") at 901 Main
Street, Dallas, Texas 75202, on April 21, 2003, in lawful money of the United
States of America, the principal sum of ONE MILLION FIVE HUNDRED SEVENTY-FIVE
THOUSAND AND NO/100 DOLLARS ($1,575,000.00), 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 Loan Agreement of even date herewith among Maker, Payee,
the Administrative Agent, BankBoston, N.A., as Documentation 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 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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
PRIME REFRACTIVE MANAGEMENT, L.L.C.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$3,150,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME REFRACTIVE MANAGEMENT,
L.L.C., a Delaware limited liability company ("Maker"), hereby promises to pay
to the order of BANKBOSTON, N.A. ("Payee"), at the offices of Bank of America,
N.A., as Administrative Agent (together with any successor as provided in the
Agreement, hereinbelow defined, the "Administrative Agent") at 901 Main Street,
Dallas, Texas 75202, on April 21, 2003, in lawful money of the United States of
America, the principal sum of THREE MILLION ONE HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($3,150,000.00), 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 Loan Agreement of even date herewith among Maker, Payee,
the Administrative Agent, BankBoston, N.A., as Documentation 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 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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
PRIME REFRACTIVE MANAGEMENT, L.L.C.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$4,725,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME REFRACTIVE MANAGEMENT,
L.L.C., a Delaware limited liability company ("Maker"), hereby promises to pay
to the order of BANK OF AMERICA, N.A. ("Payee"), at the offices of Bank of
America, N.A., as Administrative Agent (together with any successor as provided
in the Agreement, hereinbelow defined, the "Administrative Agent") at 901 Main
Street, Dallas, Texas 75202, on April 21, 2003, in lawful money of the United
States of America, the principal sum of FOUR MILLION SEVEN HUNDRED TWENTY-FIVE
THOUSAND AND NO/100 DOLLARS ($4,725,000.00), 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 Loan Agreement of even date herewith among Maker, Payee,
the Administrative Agent, BankBoston, N.A., as Documentation 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 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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
PRIME REFRACTIVE MANAGEMENT, L.L.C.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$2,100,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME REFRACTIVE MANAGEMENT,
L.L.C., a Delaware limited liability company ("Maker"), hereby promises to pay
to the order of BANK ONE, TEXAS, N.A. ("Payee"), at the offices of Bank of
America, N.A., as Administrative Agent (together with any successor as provided
in the Agreement, hereinbelow defined, the "Administrative Agent") at 901 Main
Street, Dallas, Texas 75202, on April 21, 2003, in lawful money of the United
States of America, the principal sum of TWO MILLION ONE HUNDRED THOUSAND AND
NO/100 DOLLARS ($2,100,000.00), 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 Loan Agreement of even date herewith among Maker, Payee,
the Administrative Agent, BankBoston, N.A., as Documentation 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 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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
PRIME REFRACTIVE MANAGEMENT, L.L.C.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$12,900,000.00 Dallas, Texas January 31, 2000
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 Bank of America, N.A., as
Administrative Agent (together with any successor as provided in the Agreement,
hereinbelow defined, the "Administrative Agent") at 901 Main Street, Dallas,
Texas 75202, on April 21, 2003, in lawful money of the United States of America,
the principal sum of TWELVE MILLION NINE HUNDERD THOUSAND AND NO/100 DOLLARS
($12,900,000.00), 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 Fourth Amended and Restated Loan Agreement of even date
herewith among Maker, Payee, the Administrative Agent, BankBoston, N.A., as
Documentation 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
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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
This Note, together with all the other Notes issued on the date hereof
are given in renewal, amendment, and restatement, but not extinguishment, of the
Revolving Credit Notes issued under the Third Amended and Restated Loan
Agreement, dated as of April 20, 1998, among Maker, Administrative Agent,
BankBoston, N.A., as Documentation Agent, and each of the other lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Second Amended
and Restated Loan Agreement dated as of March 31, 1997 among Maker, NationsBank
as predecessor Documentation Agent, BankBoston, as predecessor Administrative
Agent, and each of the other lenders party thereto, which were 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 as predecessor Documentation Agent,
BankBoston, as predecessor Administrative Agent, and each of the lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Loan Agreement
dated as of November 28, 1994 among Maker, BankBoston, as predecessor
Administrative Agent and the banks named therein.
PRIME MEDICAL SERVICES, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$8,600,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of LASALLE
BANK, NATIONAL ASSOCIATION ("Payee"), at the offices of Bank of America, N.A.,
as Administrative Agent (together with any successor as provided in the
Agreement, hereinbelow defined, the "Administrative Agent") at 901 Main Street,
Dallas, Texas 75202, on April 21, 2003, in lawful money of the United States of
America, the principal sum of EIGHT MILLION SIX HUNDERD THOUSAND AND NO/100
DOLLARS ($8,600,000.00), 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 Fourth Amended and Restated Loan Agreement of even date
herewith among Maker, Payee, the Administrative Agent, BankBoston, N.A., as
Documentation 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
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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
This Note, together with all the other Notes issued on the date hereof
are given in renewal, amendment, and restatement, but not extinguishment, of the
Revolving Credit Notes issued under the Third Amended and Restated Loan
Agreement, dated as of April 20, 1998, among Maker, Administrative Agent,
BankBoston, N.A., as Documentation Agent, and each of the other lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Second Amended
and Restated Loan Agreement dated as of March 31, 1997 among Maker, NationsBank
as predecessor Documentation Agent, BankBoston, as predecessor Administrative
Agent, and each of the other lenders party thereto, which were 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 as predecessor Documentation Agent,
BankBoston, as predecessor Administrative Agent, and each of the lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Loan Agreement
dated as of November 28, 1994 among Maker, BankBoston, as predecessor
Administrative Agent and the banks named therein.
PRIME MEDICAL SERVICES, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$8,600,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
COOPERATIVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW
YORK BRANCH ("Payee"), at the offices of Bank of America, N.A., as
Administrative Agent (together with any successor as provided in the Agreement,
hereinbelow defined, the "Administrative Agent") at 901 Main Street, Dallas,
Texas 75202, on April 21, 2003, in lawful money of the United States of America,
the principal sum of EIGHT MILLION SIX HUNDERD THOUSAND AND NO/100 DOLLARS
($8,600,000.00), 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 Fourth Amended and Restated Loan Agreement of even date
herewith among Maker, Payee, the Administrative Agent, BankBoston, N.A., as
Documentation 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
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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
This Note, together with all the other Notes issued on the date hereof
are given in renewal, amendment, and restatement, but not extinguishment, of the
Revolving Credit Notes issued under the Third Amended and Restated Loan
Agreement, dated as of April 20, 1998, among Maker, Administrative Agent,
BankBoston, N.A., as Documentation Agent, and each of the other lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Second Amended
and Restated Loan Agreement dated as of March 31, 1997 among Maker, NationsBank
as predecessor Documentation Agent, BankBoston, as predecessor Administrative
Agent, and each of the other lenders party thereto, which were 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 as predecessor Documentation Agent,
BankBoston, as predecessor Administrative Agent, and each of the lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Loan Agreement
dated as of November 28, 1994 among Maker, BankBoston, as predecessor
Administrative Agent and the banks named therein.
PRIME MEDICAL SERVICES, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$8,600,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of CREDIT
LYONNAIS NEW YORK BRANCH ("Payee"), at the offices of Bank of America, N.A., as
Administrative Agent (together with any successor as provided in the Agreement,
hereinbelow defined, the "Administrative Agent") at 901 Main Street, Dallas,
Texas 75202, on April 21, 2003, in lawful money of the United States of America,
the principal sum of EIGHT MILLION SIX HUNDERD THOUSAND AND NO/100 DOLLARS
($8,600,000.00), 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 Fourth Amended and Restated Loan Agreement of even date
herewith among Maker, Payee, the Administrative Agent, BankBoston, N.A., as
Documentation 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
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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
This Note, together with all the other Notes issued on the date hereof
are given in renewal, amendment, and restatement, but not extinguishment, of the
Revolving Credit Notes issued under the Third Amended and Restated Loan
Agreement, dated as of April 20, 1998, among Maker, Administrative Agent,
BankBoston, N.A., as Documentation Agent, and each of the other lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Second Amended
and Restated Loan Agreement dated as of March 31, 1997 among Maker, NationsBank
as predecessor Documentation Agent, BankBoston, as predecessor Administrative
Agent, and each of the other lenders party thereto, which were 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 as predecessor Documentation Agent,
BankBoston, as predecessor Administrative Agent, and each of the lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Loan Agreement
dated as of November 28, 1994 among Maker, BankBoston, as predecessor
Administrative Agent and the banks named therein.
PRIME MEDICAL SERVICES, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$5,375,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of FLEET
NATIONAL BANK ("Payee"), at the offices of Bank of America, N.A., as
Administrative Agent (together with any successor as provided in the Agreement,
hereinbelow defined, the "Administrative Agent") at 901 Main Street, Dallas,
Texas 75202, on April 21, 2003, in lawful money of the United States of America,
the principal sum of FIVE MILLION THREE HUNDERD SEVENTY-FIVE THOUSAND AND NO/100
DOLLARS ($5,375,000.00), 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 Fourth Amended and Restated Loan Agreement of even date
herewith among Maker, Payee, the Administrative Agent, BankBoston, N.A., as
Documentation 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
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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
This Note, together with all the other Notes issued on the date hereof
are given in renewal, amendment, and restatement, but not extinguishment, of the
Revolving Credit Notes issued under the Third Amended and Restated Loan
Agreement, dated as of April 20, 1998, among Maker, Administrative Agent,
BankBoston, N.A., as Documentation Agent, and each of the other lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Second Amended
and Restated Loan Agreement dated as of March 31, 1997 among Maker, NationsBank
as predecessor Documentation Agent, BankBoston, as predecessor Administrative
Agent, and each of the other lenders party thereto, which were 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 as predecessor Documentation Agent,
BankBoston, as predecessor Administrative Agent, and each of the lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Loan Agreement
dated as of November 28, 1994 among Maker, BankBoston, as predecessor
Administrative Agent and the banks named therein.
PRIME MEDICAL SERVICES, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$8,600,000.00 Dallas, Texas January 31, 2000
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 Bank of America, N.A., as Administrative Agent
(together with any successor as provided in the Agreement, hereinbelow defined,
the "Administrative Agent") at 901 Main Street, Dallas, Texas 75202, on April
21, 2003, in lawful money of the United States of America, the principal sum of
EIGHT MILLION SIX HUNDERD THOUSAND AND NO/100 DOLLARS ($8,600,000.00), 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 Fourth Amended and Restated Loan Agreement of even date
herewith among Maker, Payee, the Administrative Agent, BankBoston, N.A., as
Documentation 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
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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
This Note, together with all the other Notes issued on the date hereof
are given in renewal, amendment, and restatement, but not extinguishment, of the
Revolving Credit Notes issued under the Third Amended and Restated Loan
Agreement, dated as of April 20, 1998, among Maker, Administrative Agent,
BankBoston, N.A., as Documentation Agent, and each of the other lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Second Amended
and Restated Loan Agreement dated as of March 31, 1997 among Maker, NationsBank
as predecessor Documentation Agent, BankBoston, as predecessor Administrative
Agent, and each of the other lenders party thereto, which were 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 as predecessor Documentation Agent,
BankBoston, as predecessor Administrative Agent, and each of the lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Loan Agreement
dated as of November 28, 1994 among Maker, BankBoston, as predecessor
Administrative Agent and the banks named therein.
PRIME MEDICAL SERVICES, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$6,450,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of GUARANTY
FEDERAL BANK, F.S.B. ("Payee"), at the offices of Bank of America, N.A., as
Administrative Agent (together with any successor as provided in the Agreement,
hereinbelow defined, the "Administrative Agent") at 901 Main Street, Dallas,
Texas 75202, on April 21, 2003, in lawful money of the United States of America,
the principal sum of SIX MILLION FOUR HUNDERD FIFTY THOUSAND AND NO/100 DOLLARS
($6,450,000.00), 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 Fourth Amended and Restated Loan Agreement of even date
herewith among Maker, Payee, the Administrative Agent, BankBoston, N.A., as
Documentation 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
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.
<PAGE>
D-736095.1
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
Note, together with all the other Notes issued on the date hereof are
given in renewal, amendment, and restatement, but not extinguishment, of the
Revolving Credit Notes issued under the Third Amended and Restated Loan
Agreement, dated as of April 20, 1998, among Maker, Administrative Agent,
BankBoston, N.A., as Documentation Agent, and each of the other lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Second Amended
and Restated Loan Agreement dated as of March 31, 1997 among Maker, NationsBank
as predecessor Documentation Agent, BankBoston, as predecessor Administrative
Agent, and each of the other lenders party thereto, which were 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 as predecessor Documentation Agent,
BankBoston, as predecessor Administrative Agent, and each of the lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Loan Agreement
dated as of November 28, 1994 among Maker, BankBoston, as predecessor
Administrative Agent and the banks named therein.
PRIME MEDICAL SERVICES, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
Note
NOTE
$16,125,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of BANK OF
AMERICA, N.A. ("Payee"), at the offices of Bank of America, N.A., as
Administrative Agent (together with any successor as provided in the Agreement,
hereinbelow defined, the "Administrative Agent") at 901 Main Street, Dallas,
Texas 75202, on April 21, 2003, in lawful money of the United States of America,
the principal sum of SIXTEEN MILLION ONE HUNDERD TWENTY-FIVE THOUSAND AND NO/100
DOLLARS ($16,125,000.00), 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 Fourth Amended and Restated Loan Agreement of even date
herewith among Maker, Payee, the Administrative Agent, BankBoston, N.A., as
Documentation 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
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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
This Note, together with all the other Notes issued on the date hereof
are given in renewal, amendment, and restatement, but not extinguishment, of the
Revolving Credit Notes issued under the Third Amended and Restated Loan
Agreement, dated as of April 20, 1998, among Maker, Administrative Agent,
BankBoston, N.A., as Documentation Agent, and each of the other lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Second Amended
and Restated Loan Agreement dated as of March 31, 1997 among Maker, NationsBank
as predecessor Documentation Agent, BankBoston, as predecessor Administrative
Agent, and each of the other lenders party thereto, which were 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 as predecessor Documentation Agent,
BankBoston, as predecessor Administrative Agent, and each of the lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Loan Agreement
dated as of November 28, 1994 among Maker, BankBoston, as predecessor
Administrative Agent and the banks named therein.
PRIME MEDICAL SERVICES, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$10,750,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME MEDICAL SERVICES, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
BANKBOSTON, N.A. ("Payee"), at the offices of Bank of America, N.A., as
Administrative Agent (together with any successor as provided in the Agreement,
hereinbelow defined, the "Administrative Agent") at 901 Main Street, Dallas,
Texas 75202, on April 21, 2003, in lawful money of the United States of America,
the principal sum of TEN MILLION SEVEN HUNDERD FIFTY THOUSAND AND NO/100 DOLLARS
($10,750,000.00), 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 Fourth Amended and Restated Loan Agreement of even date
herewith among Maker, Payee, the Administrative Agent, BankBoston, N.A., as
Documentation 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
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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
This Note, together with all the other Notes issued on the date hereof
are given in renewal, amendment, and restatement, but not extinguishment, of the
Revolving Credit Notes issued under the Third Amended and Restated Loan
Agreement, dated as of April 20, 1998, among Maker, Administrative Agent,
BankBoston, N.A., as Documentation Agent, and each of the other lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Second Amended
and Restated Loan Agreement dated as of March 31, 1997 among Maker, NationsBank
as predecessor Documentation Agent, BankBoston, as predecessor Administrative
Agent, and each of the other lenders party thereto, which were 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 as predecessor Documentation Agent,
BankBoston, as predecessor Administrative Agent, and each of the lenders party
thereto, which were given in renewal, amendment, increase, and restatement, but
not extinguishment of the Revolving Credit Notes issued under the Loan Agreement
dated as of November 28, 1994 among Maker, BankBoston, as predecessor
Administrative Agent and the banks named therein.
PRIME MEDICAL SERVICES, INC.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
NOTE
$1,400,000.00 Dallas, Texas January 31, 2000
FOR VALUE RECEIVED, the undersigned, PRIME REFRACTIVE MANAGEMENT,
L.L.C., a Delaware limited liability company ("Maker"), hereby promises to pay
to the order of LASALLE BANK, NATIONAL ASSOCIATION ("Payee"), at the offices of
Bank of America, N.A., as Administrative Agent (together with any successor as
provided in the Agreement, hereinbelow defined, the "Administrative Agent") at
901 Main Street, Dallas, Texas 75202, on April 21, 2003, in lawful money of the
United States of America, the principal sum of ONE MILLION FOUR HUNDRED THOUSAND
AND NO/100 DOLLARS ($1,400,000.00), 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 Loan Agreement of even date herewith among Maker, Payee,
the Administrative Agent, BankBoston, N.A., as Documentation 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 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.
<PAGE>
3
Regardless of any provision contained in any Loan Document, neither
Administrative Agent nor any Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on all or any part of the
Obligations, any amount in excess of the Maximum Rate, and, if Lenders ever do
so, then such excess shall be deemed a partial prepayment of principal and
treated hereunder as such and any remaining excess shall be refunded to Maker.
In determining if the interest paid or payable exceeds the Maximum Rate, Maker
and Lenders shall, to the maximum extent permitted under applicable Law, (a)
treat all Advances as but a single extension of credit (and Lenders and Maker
agree that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the Obligations.
However, if the Obligations are paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lenders shall refund
such excess, and, in such event, Lenders shall not, to the extent permitted by
Law, be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount. The "Maximum Rate" or the "Maximum Amount," mean the "weekly ceiling"
from time to time in effect under Texas Finance Code ss. 303.305, as amended.
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 State of Texas 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.
<PAGE>
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.
PRIME REFRACTIVE MANAGEMENT, L.L.C.
By: /s/ Teena E. Belcik
Teena E. Belcik
Vice President-Treasurer
CONTRIBUTION AGREEMENT
Among
BARNET DULANEY EYE CENTER, P.L.L.C.
DAVID D. DULANEY, M.D.,
RONALD W. BARNET, M.D.,
MARK ROSENBERG,
PRIME MEDICAL SERVICES, INC.,
PRIME MEDICAL OPERATING, INC.,
LASIK INVESTORS, L.L.C.,
PRIME/BDR ACQUISITION, L.L.C.,
And
PRIME/BDEC ACQUISITION, L.L.C.
Dated September 1, 1999
<PAGE>
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime Medical
Operating, Inc., a Delaware corporation ("Prime"), Prime Medical Services, Inc.
a Delaware corporation ("PMSI"), Barnet Dulaney Eye Center, P.L.L.C., an Arizona
professional limited liability company ("BDEC"), LASIK Investors, L.L.C., a
Delaware limited liability company ("LASIK"), David D. Dulaney, M.D.
("Dulaney"), Ronald W. Barnet, M.D. ("Barnet"), Mark Rosenberg ("Rosenberg"),
Prime/BDR Acquisition, L.L.C., a Delaware limited liability company ("Newco I")
and Prime/BDEC Acquisition, L.L.C., a Delaware limited liability company ("Newco
II"). BDEC, LASIK, Dulaney, Barnet and Rosenberg 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 BDEC, an
undivided sixty percent (60%) interest in (i) the Assets (as hereinafter
defined) and (ii) the business conducted using the Assets, excluding the
practice of medicine in all cases (the "Business"), for $8,807,000 in cash (the
"Purchase Price), together with warrants, in substantially the form attached
hereto as Exhibit A (the "Primary Warrants"), entitling BDEC to purchase 29,356
shares of $0.01 par value common stock of PMSI, at one hundred ten percent
(110%) of PMSI's closing share price as quoted by NASDAQ on the Closing Date;
(b) Prime agrees to contribute to Newco II, as of the Effective Time, the
undivided sixty percent (60%) interest in the Assets and Business purchased by
Prime, and will receive a sixty percent (60%) ownership interest in Newco II;
(c) BDEC agrees to contribute, as of the Effective Time, the remaining undivided
forty percent (40%) interest in the Assets and Business to Newco II; (d) Prime
shall acquire, as of the Effective Time, a sixty percent (60%) ownership
interest in Newco I; and (e) LASIK shall acquire, as of the Effective Time, a
forty percent (40%) interest in Newco I. The Purchase Price will be allocated to
the Assets in accordance with Schedule 1.1 attached hereto. The parties agree
that:
(w) immediately prior to the Closing, all of the outstanding membership
interests of Newco I shall be owned by LASIK, and, immediately after the
Closing, Prime shall own sixty percent (60%) of all of the outstanding
membership interests of Newco I, and LASIK shall own forty percent (40%) of all
of the outstanding membership interests of Newco I;
(x) immediately prior to the Closing, all of the outstanding membership
interests of Newco II shall be owned by BDEC, and, immediately after the
Closing, Prime shall own sixty percent (60%) of all of the outstanding
membership interests of Newco II, and BDEC shall own forty percent (40%) of all
of the outstanding membership interests of Newco II;
(y) prior to the Effective Time, Prime and LASIK shall have executed the
limited liability company agreement, in the form attached hereto as Exhibit B,
and any other organizational documents of Newco I. ---------
(z) prior to the Effective Time, Prime and BDEC shall have executed the
limited liability company agreement, in the form attached hereto as Exhibit C,
and any other organizational documents of Newco II; and ---------
The organizational documents of Newco I and Newco II are hereinafter
collectively referred to as the "Organizational Documents."
1.2 Closing. The closing of the transactions contemplated by Section 1.1
(the "Closing") shall take place at the offices of Akin, Gump, Strauss, 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 mean the items listed on Schedule
1.3 attached hereto, all Permits (as hereinafter defined), all business records
of Refractive Surgery (as hereinafter defined) and the Business (as hereinafter
defined), all contract rights of BDEC under leases (including rights to receive
returns of deposits under such leases) or contracts listed on Schedule 1.3 and
all of the business and goodwill of Refractive Surgery and the Business. Each of
the Sellers hereby represents and warrants that the Assets include all of the
equipment, instruments, computer software used in connection with the equipment,
Permits, personal property, furniture, business records and other assets of BDEC
that are used primarily in or are materially relied on for the conduct of
Refractive Surgery and the Business, except for those items that are part of the
ambulatory surgery center. As used in this Agreement, "Refractive Surgery" shall
mean, collectively, any current and/or future surgical procedures intended to
correct myopia, hyperopia or astigmatism of the eye, excluding procedures aimed
only at restoring accommodation (presbyopia) and procedures to treat only
cataracts, glaucoma, oculoplastics or retinal abnormality. Notwithstanding the
foregoing, the following shall not be "Assets" and shall be retained by BDEC:
(a) all activities that constitute the practice of medicine;
(b) the books of account and record books of BDEC (complete and accurate
copies of which, insofar as they relate to the Business during the calendar
years 1997, 1998 and 1999, shall be provided to Prime on or before the Closing
Date);
(c) BDEC's rights under this Agreement;
(d) assets that are neither used primarily in, nor materially relied on
for, the conduct of Refractive Surgery;
(e) that single certain laser currently being leased to a physician group
in Memphis, Tennessee, and any interest existing on the Closing Date that BDEC
may have in the current or future profits of the facility utilizing such laser;
and
(f) BDEC's ownership interest in Newco II.
1.4 Assumed Liabilities. At the Closing, Newco II shall only assume, as
of the Effective Time, lease or contract obligations of BDEC arising under lease
agreements assigned to Newco II pursuant to Section 1.3 and those liabilities
set forth on Schedule 1.4 by item and amount. Such limited assumption shall be
pursuant to that certain general conveyance, assignment and transfer of assets
and assumption of lease obligations, attached hereto as Exhibit D (the
"Assignment and Assumption Agreemen ) to be executed by Newco II, Prime and BDEC
at the Closing, effective as of the Effective Time. With respect to any lease or
other contract obligations reflected on Schedule 1.3 and assumed by Newco II, it
is agreed that Newco II 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 later of the Effective Time
or the Closing Date, or for obligations accruing prior to the Effective Time.
Except for those liabilities and contract and lease obligations specifically
assumed by Newco II as provided above, any and all debts, liabilities, and
obligations of BDEC, 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 BDEC or its
business) shall remain the sole responsibility of BDEC. Notwithstanding any
provision of this Agreement, Newco I, Newco II and Prime do not assume any
debts, obligations or liabilities of BDEC whatsoever, except for those
liabilities and contract and lease obligations described in the first sentence
of this Section.
1.5 Payment of Purchase Price. The Purchase Price shall be paid in
immediately available funds at the Closing. -------------------------
ARTICLE II t"
Representations and Warranties of Prime and PMSI t"
Prime and PMSI each, jointly and severally, represents and warrants to
BDEC, LASIK, Dulaney, Barnet and Rosenberg that each of the following matters is
true and correct in all respects as of the Closing (with the understanding that
BDEC, LASIK, Dulaney, Barnet and Rosenberg are relying materially on such
representations and warranties in entering into and performing this Agreement):
2.1 Due Organization and Principal Executive Office. PMSI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to carry on
its business as now conducted and as proposed to be conducted. Prime is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
a wholly-owned subsidiary of PMSI. The principal executive offices of PMSI and
Prime are located at 1301 Capital of Texas Highway, Austin, Texas 78746. No
other person or entity has any right to acquire any ownership interest in Prime.
Complete and accurate copies of the Articles of Incorporation, Bylaws, and all
amendments thereto, of PMSI and of Prime, have been delivered to Sellers. PMSI
and Prime are qualified to do business and are in good standing in each state
where such qualification is required for the conduct of its business as
conducted on the Closing Date.
2.2 Due Authorization. PMSI and Prime each have full power and
authority to enter into and perform this Agreement and each Transaction Document
(as hereinafter defined) required to be executed by it in connection herewith.
The execution, delivery, and performance of this Agreement and such Transaction
Documents have been duly authorized by all necessary action of PMSI, Prime and
their respective directors and shareholders. This Agreement has been duly and
validly executed and delivered by PMSI and Prime and constitutes a valid and
binding obligation of each enforceable against it in accordance with its terms.
The execution, delivery, and performance of this Agreement, and each Transaction
Document required herein to be executed by PMSI or Prime does not (a) violate
any federal, state, county, or local law, rule, or regulation applicable to it
or its business (with the understanding and agreement that this representation
does not apply to matters relating to the operation of Newco II or the Business
on and after the Closing), (b) violate or conflict with, or permit the
cancellation of, any agreement to which it is a party, or by which it 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, PMSI or Prime, or (d) violate or conflict with any provision of the
Articles of Incorporation or Bylaws of either. No action, consent, waiver or
approval of, or filing with, any federal, state, county or local governmental
authority is required by PMSI or Prime in connection with the execution,
delivery, or performance of this Agreement (or any Transaction Document).
2.3 Financial Statements. The audited balance sheet and income
statement for PMSI as of and for each of the years ended December 31, 1997 and
1998, and the unaudited balance sheets and income statements for PMSI as of and
for the six (6) months ended June 30, 1999 (collectively, the "PMSI Financial
Statements") are attached hereto as Exhibit E. The PMSI Financial Statements
have been prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP") (except as specifically noted therein or in
Schedule 2.3) and fairly present the financial position and results of
operations of PMSI, as of the indicated dates and for the indicated periods.
Except as disclosed in Schedule 2.3 and except to the extent specifically and
fully reflected in the PMSI Financial Statements (including the notes thereto),
PMSI does not have any liabilities of a type that would be required by GAAP to
be reflected as such in the PMSI Financial Statements (including the notes
thereto) other than current liabilities on open account incurred in the ordinary
course of business consistent with past practices. Except as set forth in
Schedule 2.3 hereto, since June 30, 1999 there has been no material adverse
change in the financial position, assets or results of operations of PMSI.
2.4 Permits, etc. To the best of PMSI's knowledge, PMSI, and each
subsidiary or other entity for which greater than fifty percent (50%) of the
outstanding voting equity interests are controlled by PMSI, directly or
indirectly (collectively, the "PMSI Controlled Parties"), has complied in all
material respects, and is in compliance in all material respects, with the terms
and conditions of all issued or pending federal, state, county, and local
governmental licenses, certificates, certificates of need, permits, waivers,
filings and orders (collectively, "Permits") held or applied for by it in the
conduct of its business. To PMSI's knowledge, no additional Permit is required
from any federal, state, county, or local governmental agency or body thereof in
connection with the conduct of the business (as such business has been
conducted) of PMSI or any PMSI Controlled Party. No claim has been made by any
governmental authority (and, to the knowledge of PMSI, no such claim has been
threatened) to the effect that a Permit not possessed by PMSI or any PMSI
Controlled Party is necessary in respect of the business of PMSI or such PMSI
Controlled Party.
2.5 Environmental Issues.
(a) For purposes of this Section, 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) PMSI, and each PMSI Controlled Party, has complied in all material
respects with and obtained all authorizations and made all filings required
by all environmental laws applicable to its business.
(c) Neither PMSI nor any PMSI Controlled Party 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 ("Citations") pertaining to its business 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.
2.6 Claims and Proceedings. Attached hereto as Schedule 2.6 is a list
and description of all claims, actions, suits, proceedings, and investigations
pending against PMSI or any PMSI Controlled Party, 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 2.6 attached
hereto, none of such claims, actions, suits, proceedings, or investigations will
result in any liability or loss to PMSI or such PMSI Controlled Party which
(individually or in the aggregate) is material, and neither PMSI nor any PMSI
Controlled Party has 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 threatened against either
PMSI or Prime 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.
2.7 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 PMSI
or any PMSI Controlled Party 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 PMSI or such PMSI Controlled Party.
All Taxes, assessments, penalties, and interest which have become due by PMSI
pursuant to such Returns have been paid or adequately accrued in the PMSI
Financial Statements. The provisions for Taxes reflected on the balance sheet
contained in the PMSI Financial Statements are adequate to cover all of PMSI's
estimated Tax liabilities for the respective periods then ended and all prior
periods. As of the Closing Date, PMSI will not owe any Taxes for any period
prior to the Closing which are not reflected on the PMSI Financial Statements,
except for Taxes attributable to the operations of PMSI between the date of the
PMSI Financial Statements and the Closing Date. PMSI has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes. There are no pending or threatened claims,
assessments, notices, proposals to assess, deficiencies, or audits
(collectively, "Tax Actions") against PMSI or any PMSI Controlled Party with
respect to any Taxes owed or allegedly owed by such party. There are no tax
liens on any of the assets of PMSI or any PMSI Controlled Party. Proper and
accurate amounts have been withheld and remitted by PMSI and each PMSI
Controlled Party from and in respect of all persons from whom either is required
by applicable law to withhold for all periods in compliance with the tax
withholding provisions of all applicable laws and regulations. PMSI is not a
party to any tax sharing agreement.
2.8 Certain Consents. Except as set forth on Schedule 2.8 attached
hereto, there are no consents, waivers, or approvals required to be executed
and/or obtained by PMSI or Prime from third parties in connection with the
execution, delivery, and performance of this Agreement or any of the other
contracts, documents, instruments and agreements to be executed and delivered at
the Closing, including, without limitation, those set forth in, or delivered
pursuant to, ARTICLE V hereof and the Target Center Loan Documents (all of which
are collectively referred to as the "Transaction Documents").
2.9 Brokers. Neither PMSI nor Prime has engaged, or caused any liability to
be incurred to, any finder, broker, or sales agent (or has paid, or will pay,
any finders fee or similar fee or commission to any person) in connection with
the execution, delivery, or performance of this Agreement or the transactions
contemplated hereby. ------- 2.10 Interest in Competitors, Suppliers, and
Customers. Except as set forth on Schedule
2.10 attached hereto, neither PMSI nor any PMSI Controlled Party, and to
the knowledge of PMSI no officer, director or employee of PMSI or any PMSI
Controlled Party, has any ownership interest (other than ownership of securities
of a publicly held corporation or other entity constituting less than five
percent (5%) of that class of outstanding securities) in any competitor,
customer or supplier of the -------------------------------------------------
- ------------- Refractive Surgery business.
2.11 Warranties. Except as set forth on Schedule 2.11 attached hereto, no
claims for breach of product or service warranties have been made against PMSI
or any PMSI Controlled Party since January 1, 1996. ---------- -------------
2.12 No Defaults. Neither PMSI nor Prime is aware of any breach or default
by the other of any of the representations, warranties, covenants or agreements
contained herein. -----------
2.13 Investment Representations. Each of PMSI and Prime:
(a) Is an "accredited investor," and has not retained or consulted with any
"purchaser representative" (as such terms are defined in Rule 501 of Regulation
D promulgated under the Securities Act of 1933, as amended (the "Securities
Act")) in connection with its execution of this Agreement and the consummation
of the transactions contemplated hereby;
(b) Has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in Newco
I and Newco II;
(c) Will acquire any Newco I or Newco II interests for its own
account for investment and not with the view toward resale or redistribution in
a manner which would require registration under the Securities Act, the Texas
Securities Act, as amended, or the securities laws of any other state, and has
no reason to anticipate any change in its circumstances or other particular
occasion or event which would cause it to sell its Newco I or Newco II
interests, or any part thereof or interest therein, and has no present intention
of dividing the Newco I and Newco II interests with others or reselling or
otherwise disposing of the Newco I and Newco II interests or any part thereof or
interest therein either currently or after the passage of a fixed or
determinable amount of time or upon the occurrence or nonoccurrence of any
predetermined event or circumstance;
(d) In connection with entering into this Agreement and the
Transaction Documents to which each is a party, and in making the investment
decisions associated therewith, has neither received nor relied on any
representations or warranties from Newco I, Newco II, Sellers, the affiliates of
the foregoing or the officers, directors, shareholders, employees, partners,
members, agents, consultants, personnel or similarly related parties of any of
the foregoing, other than those representations and warranties contained in this
Agreement;
(e) Is able to bear the economic risk of an investment in the Newco I and
Newco II interests and it has sufficient net worth to sustain a loss of its
entire investment without material economic hardship if such a loss should
occur; and
(f) Acknowledges that the Newco I and Newco II interests have not been
registered under the Securities Act, or the securities laws of any of the states
of the United States, that an investment in the Newco I and Newco II interests
involves a high degree of risk, and that the Newco I and Newco II interests are
an illiquid investment.
ARTICLE III "
Representations and Warranties of BDEC, LASIK, Dulaney, Barnet and Rosenberg "
Each of BDEC and LASIK, jointly and severally, hereby represents and
warrants to Prime and PMSI that each of the following matters is true and
correct in all respects. With respect to representations and warranties by the
Sellers, each of Dulaney, Barnet and Rosenberg, severally, and not jointly,
hereby makes such representations or warranties only about or with respect to
himself. Each representation and warranty contained in this ARTICLE shall
survive the Closing and shall be deemed made as of both the Closing Date and the
Effective Time (with the understanding that Prime and PMSI are relying
materially on each such representation and warranty in entering into and
performing this Agreement).
3.1 Due Organization. BDEC is an Arizona professional limited liability
company, and LASIK is a Delaware limited liability company. Each of BDEC and
LASIK is duly organized, validly existing, and in good standing under the laws
of its state of formation, and each has full power and authority to carry on its
business as now conducted and as proposed to be conducted. Dulaney, Barnet,
Scott A. Perkins, M.D. ("Perkins"), and Robert B. Pinkert, O.D. ("Pinkert") are
the only members of BDEC, and each owns that percentage of BDEC set forth
opposite his name on Schedule 3.1(a). Dulaney, Barnet, Rosenberg, Perkins and
Pinkert are the only members of LASIK, and each owns that percentage of LASIK
set forth opposite his name on Schedule 3.1(a). Immediately prior to the
Closing, BDEC is the sole, one hundred percent (100%) owner of all of the
outstanding ownership interests in Newco II, and LASIK is the sole, one hundred
percent (100%) owner of all of the outstanding ownership interests in Newco I.
Except as expressly provided in this Agreement, as of the Closing Date, no other
person or entity has any right to acquire any ownership interest in BDEC or
LASIK. As of the Closing Date, there is only one class or designation of
membership interests in each of BDEC and LASIK. Complete and correct copies of
the organizational documents, and all amendments thereto, of BDEC and LASIK have
been delivered to Prime. BDEC is qualified to do business and is in good
standing in the states set forth on Schedule 3.1(b) attached hereto, which
states represent every jurisdiction where such qualification is required for the
conduct of BDEC's business as conducted on the Closing Date.
3.2 Subsidiaries. Except as set forth on Schedule 3.2, neither BDEC nor
LASIK directly or indirectly has (or possesses any options or other rights to
acquire) any subsidiaries or any direct or indirect ownership interests in any
person, business, corporation, partnership, limited liability company,
association, joint venture, trust, or other entity. ------------ ------------
3.3 Due Authorization. Each Seller has full power and authority to
enter into and perform this Agreement and each other Transaction Document
required to be executed by such Seller in connection herewith. The execution,
delivery, and performance of this Agreement and such Transaction Documents have
been duly authorized by all necessary action of BDEC, LASIK, and all of their
respective managers and members. This Agreement has been duly and validly
executed and delivered by the Sellers and constitutes a valid and binding
obligation of the Sellers enforceable against them in accordance with its terms.
The execution, delivery, and performance of this Agreement, and each other
Transaction Document required herein to be executed by the Sellers does not (a)
violate any federal, state, county, or local law, rule, or regulation applicable
to the Sellers, the Sellers' business or the Assets (with the understanding and
agreement that this representation does not apply to matters relating to the
operation of Newco II or the Business on and after the Closing), (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, BDEC, or (d)
violate or conflict with any provision of the organizational documents of either
BDEC or LASIK. No action, consent, waiver or approval of, or filing with, any
federal, state, county or local governmental authority is required by any of the
Sellers in connection with the execution, delivery, or performance of this
Agreement (or any Transaction Document).
3.4 Financial Statements. The unaudited income statement for the
Business for the six months ended June 30, 1999 (the "BDEC Financial
Statements") is attached hereto as Exhibit F. The BDEC Financial Statements have
been prepared on the accrual basis of accounting and fairly and accurately
represent the results of operations of the Business for such six month period.
Except as set forth in Schedule 3.4 hereto, since June 30, 1999, there has been
no material adverse change in the financial position, assets or results of
operations of the Business. For each of the calendar years 1997 and 1998, and
for the six months ended June 30, 1999, Exhibit F also contains a list of the
total number of Refractive Surgery procedures performed by BDEC, and related
charges, adjustments, collections and procedures, during the respective periods,
including subtotals reflecting the numbers of each type of procedure, and a
separate listing of the percentage of procedures done at any location other than
at 4800 North 22nd Street, Phoenix, Arizona 85016. Each of the Sellers
represents and warrants that Exhibit F fairly represents the number and location
of Refractive Surgery procedures performed by BDEC, and related charges,
adjustments, collections and procedures, for the indicated periods.
3.5 Conduct of Business; Certain Actions. Except as set forth on
Schedule 3.5 attached hereto, since June 30, 1999, BDEC has conducted the
Business and operations of the Business in the ordinary course and consistent
with its past practices and has not, with respect to or in a manner affecting
the Business (a) purchased, retired, or redeemed any membership interest from
any Seller, (b) increased the compensation of any of the employees, agents,
contractors, vendors or other parties, except for wage and salary increases made
in the ordinary course of business and consistent with the past practices of
BDEC, (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 or
book value for such asset (or group of related assets) exceeded $10,000, (e)
discharged or satisfied any lien or encumbrance or paid any obligation or
liability, absolute or contingent, other than current liabilities incurred and
paid in the ordinary course of business, (f) made or guaranteed any loans or
advances to any party whatsoever, (g) suffered or permitted any lien, security
interest, claim, charge, or other encumbrance to arise or be granted or created
against or upon any of its assets, real or personal, tangible or intangible, (h)
canceled, waived, or released any of BDEC's debts, rights, or claims against
third parties, (i) made any change in its method of accounting, (j) made,
entered into, amended, or terminated any written employment contract, created,
made, amended, or terminated any bonus, stock option, pension, retirement,
profit sharing, or other employee benefit plan or arrangement, or withdrawn from
any "multi-employer plan" (as defined in the Internal Revenue Code of 1986, as
amended (the "Code")) so as to create any liability under ERISA (as hereinafter
defined) to any person or entity, (k) amended, terminated or experienced a
termination of any material contract, agreement, lease, franchise, or license to
which it is a party, (l) entered into any other material transactions except in
the ordinary course of business, (m) entered into any contract, commitment,
agreement, or understanding to do any acts described in the foregoing clauses
(a)-(l) of this Section, (n) suffered any material damage, destruction, or loss
(whether or not covered by insurance) to any assets, (o) experienced any strike,
slowdown, or demand for recognition by a labor organization by or with respect
to any of its employees, or (p) experienced or effected any shutdown, slow-down,
or cessation of any operations conducted by, or constituting part of, it.
Each of LASIK, Newco I and Newco II were formed in contemplation of the
transactions described in this Agreement, and none of them has conducted any
business since its formation (except for the authorization of and entering into
this Agreement and the Transaction Documents).
3.6 Ownership of Assets; Licenses, Permits, etc. BDEC has good and
marketable title to, or lessee's interest in, all of the Assets free and clear
of all liens, security interests, claims and encumbrances of any kind
whatsoever, including, without limitation, the Assets specifically set out on
Schedule 1.3. The Assets include all property and assets, real, personal and
mixed, tangible and intangible, including leases and other contracts, which are,
on the Closing Date, used primarily in, or materially relied on for, the
operation of the Business as then 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, on the Closing Date,
adequate for the conduct of the Business as then conducted. Attached hereto as
Schedule 3.6 is a list and description of all Permits held or applied for by
BDEC and used or relied on as of the Closing Date in connection with the Assets
or the Business. To the best of its knowledge, BDEC has complied in all material
respects, and BDEC is in compliance in all material respects, with the terms and
conditions of any such Permits. To BDEC's knowledge, no additional Permit is
required from any federal, state, county, or local governmental agency or body
thereof in connection with the conduct of the Business on the Closing Date. No
claim has been made by any governmental authority (and, to the knowledge of the
Sellers, no such claim has been threatened) to the effect that a Permit not
possessed by BDEC is necessary in respect of the Business on the Closing Date.
All of the Permits noted on the attached Schedule 3.6 are freely assignable to,
or may be acquired by, Prime and Newco II. In the event any such Permits are not
assigned to Prime or Newco II, BDEC agrees to fully cooperate (at Newco II's
expense) in any effort by Prime or Newco II to obtain a similar or replacement
Permit.
3.7 Environmental Issues.
(a) For purposes of this Section, the term "environmental laws" shall mean
all laws and regulations relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling, or the emission,
discharge, or release, of any pollutant, contaminant, chemical, or industrial
toxic or hazardous substance or waste, and any order related thereto, affecting
the Assets or the Business.
(b) BDEC has complied in all material respects with and obtained all
authorizations and made all filings required by all environmental laws
applicable to the Business. The properties occupied or used in the Business by
BDEC 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.
(c) BDEC has not received any Superfund Notice, any Citation pertaining to
its business 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 used or relied on in the Business, and no applications
therefor, owned by or registered in the name of BDEC or in which BDEC has any
right, license, or interest. With respect to the Business, BDEC is not a party
to any license agreement, either as licensor or licensee, with respect to any
patents, trademarks, trade names, or copyrights. Except as set forth on Schedule
3.13, with respect to the ---------------------------- ------------- Business,
BDEC has not received any notice that it is infringing any patent, trademark,
trade name, or copyright of others.
3.9 Compliance with Laws. With respect to the Assets and the Business, to
its knowledge, BDEC has complied in all material respects, and BDEC is in
compliance in all material respects, with all federal, state, county, and local
laws, rules, regulations and ordinances currently in effect. BDEC has not
received any notice that a claim has been made or threatened by any governmental
authority against BDEC to the effect that the Business fails to comply in any
respect with any law, rule, -------------------- regulation, or ordinance.
3.10 Insurance. Attached hereto as Schedule 3.10 is a list of all
policies of fire, liability, business interruption, and other forms of insurance
(including, without limitation, professional liability insurance) and all
fidelity bonds held in relation to or applicable to the Business 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 the
Business 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. Except as described on Schedule 3.10, there
have been no material changes in the type of insurance coverage maintained by
BDEC for the Business during the past three (3) years, including without
limitation any change which has resulted in any period during which BDEC had no
insurance coverage with respect to the Business. Except as described on Schedule
3.10, excluding insurance policies which have expired and been replaced, no
insurance policy of BDEC related to the Business has been canceled within the
last three (3) years and no threat has been made to cancel any such insurance
policy of BDEC within such period.
3.11 Employee Benefit Matters. Except as set forth on Schedule 3.11,
BDEC 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). Except as described on Schedule 3.11, BDEC does not presently
maintain and has never maintained, or had any obligation of any nature to
contribute to, a "defined benefit plan" within the meaning of the Code.
3.12 Contracts and Agreements. Attached hereto as Schedule 3.12 is a
list of all written or oral contracts, commitments, leases, and other agreements
(including, without limitation, all promissory notes, loan agreements, and other
evidences of indebtedness, mortgages, deeds of trust, security agreements,
pledge agreements, service agreements, and similar agreements and instruments
and all confidentiality agreements) that relate to or affect the Assets or the
Business, to which BDEC is a party or by which BDEC or its properties are bound,
pursuant to which the obligations thereunder of any party thereto are, or are
contemplated as being, in respect of any such individual contracts, commitments,
leases, or other agreements during any year during the term thereof, $25,000 or
greater, or which are otherwise material to the Business (collectively the
"Contracts" and individually, a "Contract"). BDEC 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 BDEC or, to the best knowledge of Sellers, by any other
party thereto) under any Contract. BDEC has not waived any material right under
any Contract, and no consents or approvals (other than those obtained in writing
and delivered to Prime prior to Closing) are required under any Contract in
connection with the sale of the Assets or the consummation of the transactions
contemplated hereby.
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 threatened in writing against BDEC, at law or in equity, or before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality, which relate to or affect the Business or the
Assets. 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 BDEC which (individually or in the aggregate) is material,
and BDEC has not been, and BDEC is not now, subject to any order, judgment,
decree, stipulation, or consent of any court, governmental body, or agency. No
inquiry, action, or proceeding has been asserted, instituted, or threatened
against BDEC 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 Returns which were required to be filed by BDEC 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
BDEC. All Taxes, assessments, penalties, and interest which have become due
pursuant to such Returns have been paid or adequately accrued in the BDEC
Financial Statements. The provisions for Taxes reflected on the balance sheet
contained in the BDEC Financial Statements are adequate to cover all of BDEC's
estimated Tax liabilities for the respective periods then ended and all prior
periods; provided, however, that BDEC is not required to pay federal income
taxes and, accordingly, has not made any allowance in the BDEC Financial
Statements for any federal income taxes. As of the Closing Date, BDEC will not
owe any Taxes for any period prior to the Closing which are not reflected on the
BDEC Financial Statements, except for Taxes attributable to the operations of
BDEC between the date of the BDEC Financial Statements and the Closing Date.
BDEC has not executed any presently effective waiver or extension of any statute
of limitations against assessments and collection of Taxes. There are no pending
or threatened Tax Actions against BDEC with respect to any Taxes owed or
allegedly owed by BDEC. There are no tax liens on any of the assets of BDEC.
Proper and accurate amounts have been withheld and remitted by BDEC 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. BDEC 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 those individuals (the "Employees") who
will be involved in the operation of the Business after the Effective Time
pursuant to the Collocation Agreement (as hereinafter defined). 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 BDEC to any Employees from December 31, 1998 through the
Closing Date. Schedule 3.15 attached hereto also contains a brief description of
all material terms of employment agreements and confidentiality agreements with
respect to the Business to which BDEC is a party and all severance benefits
which any Employee or sales representative involved in the operation of the
Business is or may be entitled to receive. BDEC 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 BDEC
is a party and under which any Employees are entitled to receive benefits of any
nature. The employee relations of BDEC are good and there is no pending or
threatened (i) union organization campaign relating to BDEC, (ii) claims against
BDEC or the Sellers by any Employees (other than those certain Workers'
Compensation claims specifically described on Schedule 3.13), or (iii) presently
anticipated terminations, resignations or retirements of any Employees. None of
the Employees are represented by any labor union or organization. There is no
unfair labor practice claim against BDEC before the National Labor Relations
Board or any strike, labor dispute, work slowdown, or work stoppage pending or
threatened against or involving BDEC.
3.16 Business Relations. Sellers have no reason to believe and have not
been notified that any supplier or customer of BDEC will cease or refuse to do
business with BDEC or Newco II in the same manner as previously conducted with
BDEC as a result of or within one (1) year after the consummation of the
transactions contemplated hereby, to the extent such cessation or refusal might
affect the Assets or the Business. BDEC 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 BDEC.
3.17 Agents. Except as set forth on Schedule 3.17 attached hereto, BDEC has
not designated or appointed any person (other than BDEC's employees, officers
and managers) or other entity to act for it or on its behalf with respect to the
Business pursuant to any power of attorney or any agency which is presently in
effect. ------ -------------
3.18 Commission Sales Contracts. Except as disclosed in Schedule 3.18
attached hereto, BDEC does not employ or have any relationship, related to or
arising out of the Assets or the Business, with any individual, corporation,
partnership, or other entity whose compensation from BDEC is in whole or in part
determined on a commission basis. -------------------------- -------------
3.19 Certain Consents. Except as set forth on Schedule 3.19 attached
hereto, there are no consents, waivers, or approvals required to be executed
and/or obtained by any Sellers from third parties (including, without
limitation, Perkins, Pinkert, or the spouses of Dulaney, Barnet, Perkins or
Pinkert) in connection with the execution, delivery, and performance of this
Agreement or any other Transaction Document. ---------------- -------------
3.20 Brokers. No Seller has engaged, or caused any liability to be incurred
to, any finder, broker, or sales agent (or has paid, or will pay, any finders
fee or similar fee or commission to any person) in connection with the
execution, delivery, or performance of this Agreement or the transactions
contemplated hereby. -------
3.21 Interest in Competitors, Suppliers, and Customers. Except as set
forth on Schedule 3.21 attached hereto, no Seller or any affiliate of any
Seller, and to the knowledge of Sellers no officer, manager or employee of BDEC
or any affiliate of any officer, manager or employee of BDEC, has any ownership
interest in any competitor, customer or supplier of the Business or any property
used in the operation of the Business. For purposes of this Section, none of
Barnet, Dulaney, Perkins or Pinkert, shall be considered, in his individual
capacity, a competitor, customer, or supplier of the Business.
3.22 Warranties. Except as set forth on Schedule 3.22, BDEC has not made
any warranties or guarantees to third parties with respect to any products sold
or services rendered by it related to the Assets or the Business. Except as set
forth on Schedule 3.22 attached hereto, no claims for breach of product or
service warranties related to the Assets or the Business have been made against
BDEC since January 1, 1996. ---------- ------------- -------------
3.23 Investment Representations. Each Seller:
(a) Is an "accredited investor," and has not retained or consulted with any
"purchaser representative" (as such terms are defined in Rule 501 of Regulation
D promulgated under the Securities Act of 1933, as amended (the "Securities
Act")) in connection with its execution of this Agreement and the consummation
of the transactions contemplated hereby;
(b) Has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in Newco
I and/or Newco II;
(c) Will acquire any Newco I and/or Newco II interests for its
own account for investment and not with the view toward resale or redistribution
in a manner which would require registration under the Securities Act, the Texas
Securities Act, as amended, or the securities laws of any other state, and
Sellers do not presently have any reason to anticipate any change in their
respective circumstances or other particular occasion or event which would cause
such Seller to sell its Newco I and/or Newco II interests, or any part thereof
or interest therein, and Sellers have no present intention of dividing the Newco
I and/or Newco II interests with others or reselling or otherwise disposing of
the Newco I and/or Newco II interests or any part thereof or interest therein
either currently or after the passage of a fixed or determinable amount of time
or upon the occurrence or nonoccurrence of any predetermined event or
circumstance;
(d) In connection with entering into this Agreement and the
Transaction Documents to which each Seller is a party, and in making the
investment decisions associated therewith, Sellers have neither received nor
relied on any representations or warranties from Newco I, Newco II, Prime, PMSI,
the affiliates of the foregoing or the officers, directors, shareholders,
employees, partners, managers, members, agents, consultants, personnel or
similarly related parties of any of the foregoing, other than those
representations and warranties contained in this Agreement;
(e) Is able to bear the economic risk of an investment in the Newco I
and/or Newco II interests and it has sufficient net worth to sustain a loss of
its entire investment without material economic hardship if such a loss should
occur; and
(f) Acknowledges that the Newco I and Newco II interests have not been
registered under the Securities Act, or the securities laws of any of the states
of the United States, that an investment in the Newco I and/or Newco II
interests involves a high degree of risk, and that the Newco I and Newco II
interests are an illiquid investment.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. Sellers agree to
cooperate with Prime in the preparation of any financial statements of BDEC,
LASIK, Newco I and/or Newco II which Prime or its affiliates may be required by
any applicable law to prepare. --------------------------------------------
4.2 Member and Manager Action. Sellers each agree that, until such time
as none of the Sellers owns any ownership interest in either Newco I or Newco
II, none of them will, without obtaining the prior written consent of Prime, (i)
authorize the issuance of any additional membership interest in LASIK to any
third party, (ii) cause or allow any additional managers to be elected as
managers of BDEC or LASIK, or (iii) unless allowed under the Transfer
Restriction Agreement (as hereinafter defined), assign, or otherwise dispose of
any membership interest of LASIK owned or controlled by such Seller. The
provisions of this Section shall not be construed in a manner which limits the
application of effect of the provisions of Section 8.4(c) of this Agreement.
4.3 Credit Facilities.
(a) Working Capital Line of Credit. Prime and Newco I each
agree to execute, on or before the Closing Date (i) the Loan Agreement in
substantially the form attached hereto as Exhibit G1 (the "Loan Agreement"),
which provides for, among other credit accommodations described below, a
revolving line of credit in the maximum principal amount of $200,000 and
maturing one (1) year after the Closing (the "Working Capital Line"), pursuant
to which Newco I shall be entitled, subject to the conditions and limitations
contained in the Loan Agreement, to borrow, repay and reborrow funds in order to
meet obligations of Newco I arising in the ordinary course of business, (ii) the
Assignment and Security Agreement in substantially the form attached hereto as
Exhibit G4, and (iii) in connection with the Working Capital Line, the
Promissory Note in substantially the form attached hereto as Exhibit G2.
(b) Development Credit Facility. The Loan Agreement also
provides for a term loan facility, in the maximum principal amount of
$40,000,000 (the "Development Facility"), pursuant to which Newco I shall be
entitled, subject to the conditions and limitations contained in the Loan
Agreement, to borrow funds, from time to time, in order to finance up to one
hundred percent (100%) of the purchase price (or development costs) of a Target
Center (as hereinafter defined) being acquired (or developed) by Newco I;
provided, however, that in no event shall the Development Facility be used in
instances where Prime, PMSI or one of their affiliates independently acquires or
develops a Target Center as permitted by Section 8.1. In connection with the
Development Facility, Newco I agrees to execute, and all parties hereto agree to
vote their interests in Newco I, if any, and to take such other action as may be
necessary, to cause any entity through which Newco I acquires or develops a
Target Center to execute, on or before each closing date of a Target Center
acquisition or the commencement of development, a Promissory Note in
substantially the form attached hereto as Exhibit G5 and an Assignment and
Security Agreement in substantially the form attached hereto as Exhibit G3. In
addition, if Newco I is to obtain, through development or acquisition, directly
or indirectly, a one hundred percent (100%) interest in such Target Center,
Newco I and all parties hereto shall cause such Target Center to execute a
security agreement, acceptable in form and substance to Prime, granting to Prime
the highest available priority security interest in all of the assets of such
Target Center.
(c) Notwithstanding anything herein to the contrary, Prime's
obligations to make each extension of credit pursuant to subsection (b) above
are subject entirely and in all respects to Prime's obtaining prior written
approval from the bank syndication under its outstanding borrowing facilities.
Each of the parties to this Agreement acknowledges and agrees that the
assignment and security agreements, and security agreements, executed pursuant
to this Section will be assignable, and that Prime intends to make a collateral
assignment for the benefit of one or more of its lenders. In addition, each of
the parties to this Agreement agrees to take such action (including voting their
interests in any entity) which may be necessary to ensure the filing and
perfection of security interests required to be granted pursuant to this
Section.
(d) Each of the Sellers acknowledges and agrees that none of
Prime, PMSI or any affiliate of either of them may be required to (i) except as
expressly set forth in this ARTICLE IV and in Section 8.2(b)(ii), extend any
financing, credit facilities, guarantees or other credit enhancements to any
Seller, Newco I or Newco II or (ii) issue any of its capital stock (or rights to
acquire its capital stock) in connection with the acquisition of a Target Center
(provided, however, that Prime, PMSI or such affiliate may elect, upon obtaining
the consent of BDEC, to issue its capital stock in connection with the
acquisition of a Target Center by Newco I or any of its subsidiaries, and any
such issuance shall be treated for all purposes as a loan by Prime to Newco I
pursuant to the Development Credit Facility, in an amount equal to the fair
market value of the capital stock issued on the date of issuance).
(e) Each of the Sellers and Newco I acknowledges and agrees that Newco
I shall not distribute (or allow to be distributed) to its members, with respect
to their respective membership interests, any cash or other property of Newco I
or its subsidiaries if, at the time of the proposed distribution, any amounts
(whether principal or interest) are outstanding under the Credit Documents or
the Target Center Lending Documents (as such terms are hereinafter defined).
Furthermore, each of the Sellers and Newco I agrees that Newco I shall pay all
available cash flow to Prime in payment of Newco I's outstanding obligations, if
any, under the Working Capital Line and Development Facility, irrespective of
whether such payments exceed the minimum required payments under the Working
Capital Line and Development Facility. For purposes of allocating such payments
among any two or more of such outstanding obligations, such payments shall be
allocated pro rata, based upon the respective balances of such obligations,
unless (i) a greater portion of the payment is required to be paid toward a
given obligation in order to prevent a default with respect to that obligation
(but only to the extent necessary to prevent such a default) or (ii) eighty
percent (80%) of the managers of Newco I elect to allocate the payments in a
different manner.
Notwithstanding the foregoing, as long as there has been no
default by any Seller under this Agreement or any other Transaction Document
(excluding, however, the Credit Documents and the Target Center Lending
Documents), then, to the extent that (but only to the extent that) Newco I
possesses the cash flow necessary (in the reasonable discretion of a majority of
its managers) to pay its liabilities in the ordinary course consistent with past
practices, Newco I agrees to make quarterly estimates of its taxable income for
the current tax year and, if not prohibited by law, distribute quarterly (the
"Quarterly Distributions") an amount that would cover the federal and state
income taxes required to be paid by its members with respect such taxable
income, based on each member's then current proportionate interest in Newco I,
assuming that all members pay income taxes on Newco I's taxable earnings at a
rate equal to the highest effective individual tax rate in effect from time to
time (the Assumed Tax Rate"); provided, further, that Newco I shall determine
its actual taxable income at the end of each taxable year and (A) if the
Quarterly Distributions in a given year should have been higher based on the
amount of actual taxable income for that year, promptly distribute the amounts
necessary to eliminate such deficiency or (B) if the Quarterly Distributions in
a given year should have been lower based on the amount of actual taxable income
for that year, withhold dollar for dollar from the first following Quarterly
Distribution, and then against subsequent Quarterly Distributions in a like
manner, the amounts necessary to eliminate such surplus.
(f) All of the loan agreements, promissory notes, guarantees, security
agreements, assignment and security agreements and other agreements, documents
or instruments required to be executed by any party pursuant to this Section are
hereinafter collectively referred to as the "Credit Documents."
4.4 Capital Contributions. The parties agree that no party shall,
except for the express provisions of Section 1.1 and Section 4.3 of this
Agreement or of the Organizational Documents, be required to make any capital
contribution, or extend any credit facility or loans, to either Newco I or Newco
II (or a subsidiary of either) following the Closing, including, without
limitation, for purposes of providing working capital; provided, however, that
this sentence shall not affect any party's obligations under ARTICLE VI with
respect to any breach of the representations or warranties made by that party
under this Agreement.
4.5 Ownership Interest Transfer Restriction Agreement. Each of the owners
of LASIK agrees that it, and its spouse (if any), will execute, on or prior to
the Closing, an Ownership Interest Transfer Restriction Agreement applicable to
LASIK, in substantially the form attached hereto as Exhibit H (the "Transfer
Restriction Agreement"), that imposes certain limitations and conditions on the
sale, transfer, assignment or other disposition of any interest that is directly
or indirectly owned or -------------------------------------------------
- --------- controlled by such party in LASIK.
4.6 ASC Option. BDEC acknowledges that it may, but is not obligated to,
acquire an interest in a certain Ambulatory Surgical Center located at 4800 N.
22nd St., Phoenix, Arizona (the "ASC") from Physicians Resource Group, Inc. or
its successors or affiliates ("PRG"). Sellers agree that, upon any such
acquisition, directly or indirectly, by BDEC or any affiliate of BDEC or any
Seller (including, without limitation, LASIK), Newco I is hereby granted a right
of first refusal (the "ASC Option" pursuant to which Newco I or one of its
wholly owned subsidiaries may, in its sole discretion, and without any
obligation to do so, acquire from BDEC or such affiliate, at the price offered
by (and upon the same terms applicable to) any third party offer, all of the
business and assets of the ASC then held by BDEC or such affiliate, however
acquired by BDEC, prior to any sale or other transfer of the ASC, in whole or in
part, to any third party. Upon receiving any such third party offer, BDEC or
such affiliate shall give written notice thereof to Prime and Newco I. Following
its receipt of such notice, Newco I shall have thirty (30) days to exercise the
ASC Option, and Sellers agree that BDEC (or such affiliates) may not take any
action with respect to the third party offer until Newco I has either provided
written notice of its intent not to exercise the ASC Option, or the thirty (30)
day period has expired without any election by Newco I to exercise the ASC
Option. The closing of any purchase and sale pursuant to an exercise of the ASC
Option shall occur within 30 business days following such exercise, and the
purchase price shall be paid, at Newco I's sole election, in either immediately
available funds or such other manner as shall have been set forth in the notice
of third party offer. In connection with any exercise of the ASC Option by Newco
I, BDEC shall deliver all agreements, documents, instruments and certificates,
and take such other action, as may be reasonably necessary in order to
consummate the purchase and sale contemplated in this Section. The parties agree
that any acquisition pursuant to exercise of the ASC Option shall be
accomplished through an asset purchase, unless the parties otherwise agree.
4.7 Repurchase Option.
(a) At any time prior to the expiration of one (1) year following the
Effective Time, and thereafter at any time within thirty (30) days after BDEC
becomes aware of the occurrence of a Bankruptcy Event (as defined in Section 8.4
hereof) with respect to PMSI or Prime, BDEC shall have the right to elect to
purchase from Prime (the "Repurchase Option") all (but not less than all) of
Prime's interest in Newco II.
(b) The Repurchase Option may be exercised, in whole, and not
in part, by the delivery by BDEC of written notice to Newco II and Prime
specifying that such option is being exercised and a closing date for such
purchase (which shall be no sooner than thirty (30) days and no later than
ninety (90) days following the date of such written notice). The purchase price
(the "Repurchase Price") to be paid upon the closing of the purchase under the
Repurchase Option shall be paid to Prime and shall equal sixty percent (60%) of
(x) the immediately preceding twelve (12) months' EBITDA attributable to the
business and operations of Newco II, as of the effective time of the purchase,
multiplied by (y) six (6); but, in no event may the Repurchase Price be less
than $8,807,000. Prime, Newco II and BDEC shall deliver such other agreements,
documents, instruments and certificates, and take such other action (including
without limitation voting their ownership interest in Newco II), as may be
reasonably necessary in order to consummate the purchase and sale pursuant to
exercise of the Repurchase Option. For purposes of this Agreement, the "EBITDA"
of an entity or business, or interest therein, shall mean the net operating
earnings of such entity or business (or portion thereof attributable to the
interest therein), to the extent such net operating earnings are reasonably
expected to be recurring based on information available at the date of
calculation, calculated without deduction of interest expense, federal income
taxes, depreciation expense or amortization expense, and all as determined in
accordance with GAAP to the extent GAAP is not inconsistent with the definition
described in this sentence.
(c) In return for the grant by Newco II of the Repurchase
Option, BDEC agrees that, for a period of five (5) years immediately following
the closing of the sale and purchase pursuant to BDEC's exercise of the
Repurchase Option, if any (the "Repurchase Option Closing"), BDEC may not sell,
transfer, assign or otherwise dispose of any interest in the Assets or the
Business (each of which, for purposes of this subsection (c), shall include all
assets or business acquired in replacement of, substitution for, incidental to
or in connection with the Assets or the Business) without first offering in
writing all of the Assets and the Business to Prime (the "Prime Right of First
Refusal"). Such offer shall set forth the terms of any third party offer to
acquire the Assets and the Business (or any substantial portion thereof), and
Prime shall be entitled to exercise the Prime Right of First Refusal for:
(i) if such offer is received within the first year
following the Repurchase Option Closing, a purchase price determined by
(A) calculating the immediately preceding twelve (12) months' EBITDA
attributable to the Assets and the Business, as of the effective time
of the purchase pursuant to this subsection (c), and (B) multiplying
such amount by six (6); provided, however, that if such third party
offer is from any person or entity that controls, is controlled by, or
is under common control with BDEC, the purchase price shall be the
lesser of the purchase price determined pursuant to this subsection
(c)(i) and the purchase price determined pursuant to subsection (c)(ii)
below, or
(ii) if such offer is received within the second, third, fourth or fifth
years following the Repurchase Option Closing, the purchase price set forth in
such third party offer (adjusted proportionately, if applicable, to apply to all
of the Assets and the Business).
Upon exercise of the Prime Right of First Refusal, each of
Prime and BDEC shall deliver such other agreements, documents, instruments and
certificates, and take such other action, as may be reasonably necessary in
order to consummate the purchase and sale of the Assets and the Business on the
same terms and conditions as proposed by the third party, other than price and
except as set forth in subsection (d) below. In order to ensure the availability
of the rights granted to Prime under this subsection (c), BDEC agrees that,
during the five (5)-year period following its exercise of the Repurchase Option,
it shall not sell, transfer, assign or otherwise dispose of any of its right,
title or interest in and to any of the Assets or the Business (other than
dispositions in the ordinary course of business, dispositions of items being
replaced, or dispositions that, when considered with related dispositions, do
not exceed $500 in value), unless and until BDEC has given Prime the written
offer required hereunder and Prime has, in each case, either (I) declined in
writing to purchase the Assets and the Business, or (II) failed to respond to
BDEC within thirty (30) business days following its receipt of the written
offer.
(d) The parties agree that any acquisition pursuant to an exercise of the
Prime Right of First Refusal shall be accomplished through an asset purchase
unless the parties otherwise agree. In addition, Prime may elect, in its sole
discretion, to pay the purchase price in cash at the closing, and such method
shall be an acceptable form of payment, regardless of the form of payment
contemplated in the third party offer.
4.8 Forfeiture of Warrants, Certain Other Rights. In addition to any other
forfeiture of or limitation on rights granted to the Sellers under this
Agreement, each of the Sellers acknowledges and agrees that all Primary Warrants
and Target Center Warrants shall irrevocably terminate immediately and without
notice upon the occurrence of any of the following:
- --------------------------------------------
(a) Any exercise by BDEC of the Repurchase Option granted in Section 4.7;
or
(b) Any breach by any of the Sellers under any of the Transaction Documents
or any agreement, contract, document or instrument executed by such Seller that
inures to the benefit of Newco I, Newco II, Prime, or any of Prime's affiliates,
including, without limitation, (i) any Consulting Agreement (as hereinafter
defined) to which such Seller is a party and (ii) any note or security agreement
to which such Seller is a party.
4.9 Insurance. Newco I and Newco II agree to maintain, for five (5) years
after the Closing Date, a prior acts insurance policy providing insurance
coverage of the same scope, in the same amounts and subject to the same
deductibles as the BDEC's insurance in effect immediately prior to the Closing
Date. ---------
4.10 Guaranty of PMSI. PMSI hereby unconditionally and irrevocably
guarantees each of the payment and performance obligations of Prime hereunder
and under each of the Transaction Documents. Without limiting the foregoing,
PMSI agrees that if Prime shall default in any obligation to pay to any
Seller(s) or Newco I any amount then due and payable by Prime to such Seller(s)
or Newco I under ARTICLE I or ARTICLE VII hereunder, PMSI shall immediately pay
such amount to such Seller(s) or Newco ----------------
I. PMSI hereby agrees not to require any Seller to proceed against Prime or
any other person or to pursue any other remedy before proceeding against
PMSI under this guaranty.
4.11 Tucson Earnout. Prime and BDEC acknowledge and agree that the
assets located at 555 E. River Road, Tucson, Arizona (the "Tucson Assets"), and
any business conducted using the Tucson Assets (the "Tucson Operations"), are
included within the Assets and Business and are, pursuant to Section 1.1 of this
Agreement, transferred to Newco II as of the Effective Time. In consideration of
the transfer of the Tucson Assets and the Tucson Operations to Newco II, Prime
agrees to pay, after September 1, 2000, in accordance with the provisions below,
an amount equal to sixty percent (60%) of the Tucson Gross Value (the "Earnout
Payment"). For purposes of this Section, "Tucson Gross Value" shall mean (a) six
(6) times the recurring EBITDA arising solely from the Tucson Operations between
the dates of September 1, 1999 and September 1, 2000 (the "Earnout Period"),
minus (b) the amount of all debt, liabilities and other obligations,
collectively, incurred by Newco II that relate to the Tucson Assets or the
Tucson Operations, and that arose during the Earnout Period (excluding, however,
accounts payable and accrued liabilities arising from normal operating
expenses). On or prior to November 1, 2000, Prime shall provide BDEC with a
written statement setting forth the Earnout Payment. Following delivery of such
statement, BDEC shall have thirty (30) days during which it may dispute the
calculation of the Earnout Payment, and any dispute shall be resolved pursuant
to the arbitration provisions of this Agreement. If BDEC agrees with the
calculation of the Earnout Payment, or fails to respond within such thirty (30)
day period, then the amount of the Earnout Payment reflected in the statement
shall be final and binding on both BDEC and Prime. Promptly following final
determination of the amount of the Earnout Payment pursuant to this Section,
Prime shall pay the Earnout Payment in immediately available funds. In
connection with the payment of the Earnout Payment by Prime, BDEC agrees to
deliver all agreements, documents, instruments and certificates, and take such
other action, as may be reasonably necessary in order to evidence the conveyance
of the Tucson Assets and Business pursuant to Section 1.1 of this Agreement.
ARTICLE V )
Conditions to Closing )
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of each Seller to Close):
- ---------------------------
(a) pay the Purchase Price to BDEC;
(b) ensure that the Primary Warrants are delivered to BDEC;
(c) execute and deliver the Assignment and Assumption Agreement, the
Organizational Documents, the Credit Documents to which it is a party and each
other Transaction Document to which it is a party; and
(d) deliver such good standing certificates, officer certificates, and
similar documents and certificates as counsel for BDEC may reasonably
require. 5.2 Sellers Closing Obligations. At the Closing, each Seller
shall, as applicable (each of which is a condition to the obligations of
Prime to Close): ---------------------------
(a) execute and deliver the Assignment and Assumption Agreement, the
Organizational Documents, the Collocation and Employee and Cost Sharing
Agreement substantially in the form attached hereto as Exhibit I (the
"Collocation Agreement"), the Credit Documents, and the other Transaction
Documents, in each case, only where it is a party thereto; ---------
(b) except for LASIK and BDEC, execute and deliver a consulting
agreement, in substantially the form attached hereto as Exhibit J (the
"Consulting Agreement");
(c) cause each owner of BDEC and LASIK who is not a "Seller" under
this Agreement to execute and deliver, for the benefit of Prime, PMSI and
their affiliates, a non-compete agreement containing terms and provisions
consistent with those contained in Sections 9.3 through 9.7 of this
Agreement;
(d) deliver or cause to be delivered true and correct copies of
executed consents whereby Barnet, Dulaney, Rosenberg, Perkins and Pinkert
and other managers, officers and/or members of BDEC or LASIK have, in their
respective capacities as managers, officers and/or members of BDEC or
LASIK, as applicable, each approved of and ratified (as necessary) BDEC's
or LASIK's execution and delivery of, and performance under, this Agreement
and each Transaction Document; and
(e) deliver such good standing certificates, officer certificates, and
similar documents and certificates as counsel for Prime may reasonably
require.
5.3 Newco I's Closing Obligations. At the Closing, Newco I shall
execute and deliver the Credit Documents to which it is a party, each
Transaction Document to which it is a party and such good standing
certificates, officer certificates, and similar documents and certificates
as counsel for Prime or any of the Sellers may reasonably require.
--------------------------------------
5.4 Newco II's Closing Obligations. At the Closing, Newco II shall
execute and deliver the Assignment and Assumption Agreement, the
Collocation Agreement, the Credit Documents to which it is a party, each
Transaction Document to which it is a party and such good standing
certificates, officer certificates, and similar documents and certificates
as counsel for Prime or any of the Sellers may reasonably require.
---------------------------------------
ARTICLE VI )
Indemnification of Prime, Newco I and Newco II
)
6.1 Indemnification of Prime, Newco I and Newco II.
(a) BDEC and LASIK, each jointly and severally, agree to
indemnify and hold harmless Prime, each subsidiary and/or affiliate of Prime
(including, without limitation, PMSI), each officer, director, shareholder,
manager, member, partner, employee, agent, or representative of Prime and,
following the Closing, Newco I and Newco II (collectively, the "Prime
Indemnified Parties"), from and against any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs, and expenses (including
court costs and attorneys' fees and expenses incurred in investigating and
preparing for any litigation or proceeding) (collectively, "Indemnified Costs")
in connection with the commencement or assertion of any action, proceeding,
demand, or claim by a third party (collectively, a "third-party action") which
any of the Prime Indemnified Parties may sustain, arising out of (i) any breach
or default by any Seller of any of the representations, warranties, covenants or
agreements contained in this Agreement or any Transaction Document (including,
without limitation, the Organizational Documents), (ii) any obligation or
liability of BDEC not assumed by Newco II pursuant to the Assignment and
Assumption Agreement, (iii) any transaction or occurrence involving or related
to the ASC or PRG or any purchase of the assets of the ASC by BDEC (including,
without limitation, claims by a trustee in bankruptcy), or (iv) any obligations
or liabilities with respect to any claims arising out of actions or omissions by
any Seller (excluding any acts or omissions after the Closing in such Seller's
capacity as a member of Newco I or Newco II.
(b) Each of Dulaney, Barnet and Rosenberg, severally, and not
jointly, agrees to indemnify and hold harmless each Prime Indemnified Party from
and against any and all Indemnified Costs incurred in connection with the
commencement or assertion of any third-party action which any of the Prime
Indemnified Parties may sustain, arising out of any breach or default by him of
any of the representations, warranties, covenants or agreements made by him in
this Agreement or any Transaction Document (including, without limitation, the
Organizational Documents).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall
give prompt written notice to the indemnifying party or parties
(collectively, the "indemnifying party") of the commencement or assertion
of any third party action in respect of which such Prime Indemnified Party
shall seek indemnification hereunder. Any failure to so notify the
indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such Prime Indemnified Party under this
ARTICLE ----------------------------- unless the failure to give such
notice materially and adversely prejudices the indemnifying party. The
indemnifying party shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms
as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his,
her, or its own expense, to participate in the defense of such third-party
action;
(b) The indemnifying party 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) The indemnifying party shall not consent to the entry of any
judgment or enter into any settlement with or involving any claimant or
plaintiff 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 such claimant or plaintiff to, and in favor of, each
Prime Indemnified Party; and
(d) The indemnifying party 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 the indemnifying party fails 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 the indemnifying party or BDEC, without the
prior written consent of the indemnifying party.
(e) The indemnifying party 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 the
indemnifying party for the full amount of such payments if the Prime Indemnified
Party is ultimately determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this
ARTICLE and, in connection therewith, shall furnish such records,
information, and testimony and attend such conferences, discovery
proceedings, hearings, trials, and appeals as may be reasonably requested.
6.3 Security. Without limiting or adversely affecting the rights of
Prime under Section 9.12, and in order to secure full and prompt payment of the
obligations of each of the Sellers under this ARTICLE, each of BDEC and LASIK
hereby grants to Prime a continuing security interest in and to distributions
either of them may be entitled to receive at any time after the Closing in
respect of any ownership interest held by either of them in either Newco I or
Newco II. In connection with the grant of a security interest contained in this
Section, each of BDEC and LASIK agrees (i) to execute all documents, agreements,
instruments and certificates, and to take such other actions, as are necessary
in order to fully evidence and perfect such security interest, and (ii) that it,
for a period of five (5) years after the Closing, will not, without obtaining
the express prior written consent of Prime in each instance, grant or assign to
any person or entity rights of any nature in the distributions covered by the
security interest granted in this Section, irrespective of whether such rights
are to be senior or subordinate to the rights granted under this Section.
ARTICLE VII
Indemnification of Sellers
7.1 Indemnification of Sellers. Prime agrees to indemnify and hold
harmless each Seller, each subsidiary and/or affiliate of any Seller, each
officer, director, shareholder, manager, member, partner, employee, agent, or
representative of any Seller and, following the Closing, Newco I and Newco II
(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
(i) any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document
(including, without limitation, the Organizational Documents) or (ii) any
obligations or liabilities with respect to claims arising out of acts or
omissions (excluding any acts or omissions after the Closing in its capacity as
a member of Newco I or Newco II) by Prime, PMSI or one or more of the PMSI
Controlled Parties (excluding Newco I and Newco II).
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 to so notify Prime shall not
relieve Prime from any liability that it may have to such Seller
Indemnified Party under this ARTICLE unless the failure to give such notice
materially and adversely prejudices Prime. Prime shall have
----------------------------- the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms
as it deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the Seller
Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability
in respect thereof if, pursuant to or as a result of such settlement,
compromise, admission, or acknowledgment, injunctive or other equitable
relief would be imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or enter into
any settlement with or involving any claimant or plaintiff 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 such
claimant or plaintiff to, and in favor of, each Seller Indemnified Party;
and
(d) Prime shall not be entitled to control (but shall be entitled to
participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense
or settlement, compromise, admission, or acknowledgment of any third-party
action as to which Prime fails to assume the defense within thirty (30)
days; provided, however, that the Seller Indemnified Party shall make no
settlement, compromise, admission, or acknowledgment which would give rise
to liability (other than liability to Seller Indemnified Parties under this
Agreement) on the part of Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be made
pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of
bills or invoices relating thereto or when otherwise due and payable,
provided that the Seller Indemnified Party has agreed in writing to
reimburse Prime for the full amount of such payments if the Seller
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this
ARTICLE and, in connection therewith, shall furnish such records,
information, and testimony and attend such conferences, discovery
proceedings, hearings, trials, and appeals as may be reasonably requested.
ARTICLE VIII
Exclusivity
8.1 Agreement. Each of the parties to this Agreement (excluding Newco
I) agrees that, following the Closing Date, it will not directly or indirectly
through any affiliate, except through Newco I or one of its wholly owned
subsidiaries, acquire, develop or establish other centers for Refractive
Surgery, or the assets thereof, anywhere in the United States ("Target
Centers"); provided, however, Prime, PMSI or one of their affiliates shall be
entitled to independently acquire or develop any Target Center to which any one
or more of the following apply:
(a) The aggregate purchase price paid to the seller of such Target
Center exceeds $11,009,000;
(b) Newco I is financially unable to acquire or develop such
Target Center using its existing financial resources (including resources that
may be available in such instance under the Development Facility and any other
lines of credit or credit facilities) without requiring a guarantee or other
financial or credit assistance of any member of Newco I, Prime, PMSI or any
affiliate of Prime or PMSI, as determined conclusively in each instance by
either (i) the agreement of not less than eighty percent (80%) of the managers
of Newco I or (ii) the failure of Newco I to close the acquisition of such
Target Center within one hundred twenty (120) days following Newco I's and such
Target Center's agreement on the initial principal terms of such acquisition
(which agreement includes, without limitation, agreement on a terms sheet or
execution of a non-binding letter of intent) because Newco I could not obtain
financing on reasonable market terms;
(c) The managers of Newco I decide not to pursue the acquisition or
development of such Target Center by the affirmative vote of not less than
eighty percent (80%) of the managers then serving on the board of managers
of Newco I;
(d) In the opinion of the board of directors of PMSI, such Target
Center cannot be acquired or developed by Newco I because of the
involvement with and/or direct or indirect ownership of a portion of Newco
I by any of Dulaney, Barnet or Rosenberg;
(e) The acquisition or development of such Target Center was
initiated, arranged for, originated or financed by any entity affiliated
with PMSI (other than Newco I or Newco II, or any future subsidiaries of
either of them) which has previously acquired or developed a Target Center,
or an interest therein, pursuant to any of the exceptions to exclusivity
contained in subsections (a) through (g) of this Section;
(f) Any of Dulaney, Barnet or Rosenberg has previously
terminated, breached or threatened to breach any Transaction Document, any
Credit Document, any Target Center Lending Document or any Consulting Agreement
to which he is a party (provided, however, that (A) each of Barnet, Dulaney and
Rosenberg shall have thirty days within which to cure any breach or default
under his respective Consulting Agreement following delivery of notice of such
breach or default by Prime or PMSI and (B) any termination of any Consulting
Agreement that is agreed to in writing by Prime, or that is done to permit the
agreed upon full time employment of the respective individual by Newco II, shall
not be grounds for exception to the exclusivity obligation pursuant to this
subsection (f)); or
(g) the Closing does not occur on or before July 31, 1999 and Prime,
PMSI or any of their affiliates enters into a definitive agreement for the
acquisition of such Target Center prior to the expiration of forty five
(45) days immediately following the Closing.
8.2 Additional Qualifications, Limitations. In addition to the
qualifications and limitations set forth above, the following shall apply:
--------------------------------------
(a) All acquisitions of Target Centers must be approved in advance by
a majority of the board of directors of Prime;
(b) If the exclusivity obligation contained in Section 8.1 above does
not apply to a particular Target Center solely because of the limitation
set forth in Section 8.1(a), and Prime or one of its affiliates acquires
such Target Center prior to the occurrence of any of the events described
in Section 8.1(f), then
(i) before consummating such acquisition, Prime or
its acquiring affiliate shall provide thirty (30) days' prior written
notice to LASIK of such pending acquisition, and LASIK shall have ten
(10) days from its receipt of such notice to notify Prime or its
acquiring affiliate that LASIK would like to acquire a specified
portion of up to forty percent (40%) of the non-medical Refractive
Surgery portion of the interest being offered to Prime or its acquiring
affiliate in such acquisition, upon the same terms and conditions
agreed to by Prime; provided, however, that the participation right
granted in this subsection (i) shall not apply if (A) Prime or its
acquiring affiliate does not receive notice from LASIK of its election
to participate in such acquisition within the ten (10)-day period
provided for such notice, (B) LASIK refuses or is unable to finance
(after giving effect to subsection (ii) below) its specified portion of
the acquisition, (C) LASIK refuses or is unable to timely execute,
deliver and perform all agreements, documents and instruments required
to be executed, delivered and performed by it (to the extent consistent
with those executed by Prime or its acquiring affiliate in such
transaction) or (D) LASIK fails or refuses to timely execute and
deliver the promissory note and security agreement described in Section
8.2(e) below in the event LASIK borrows any funds pursuant to
subsection (ii) below;
(ii) If LASIK has fully complied with its obligations
and met all other conditions set forth under subsection (i), then, with
respect to that portion of the purchase price to be paid by LASIK under
subsection (i) ("LASIK's Purchase Price"), LASIK shall be entitled to
request in writing and receive financing, made available by Prime or
one of its affiliates, in an amount not to exceed ten percent (10%) of
the aggregate purchase price for the non-medical Refractive Surgery
portion of the interest being offered to Prime or its acquiring
affiliate in such acquisition (but in no event may such amount exceed
LASIK's Purchase Price); provided, however, that LASIK's rights, and
Prime's or its acquiring affiliate's obligations, under this subsection
(ii) are subject entirely and in all respects to Prime's obtaining
prior written approval from (A) the bank syndication under its
outstanding borrowing facilities, and (B) any necessary number of
holders of Prime's outstanding 8 3/4 Senior Subordinated Promissory
Notes (as may be required pursuant to the Indenture governing such
Notes);
(c) If the exclusivity obligation contained in Section 8.1
above does not apply to the acquisition of a particular Target Center solely
because of the limitation set forth in Section 8.1(d) or Section 8.1(e), and
Prime or one of its affiliates acquires such Target Center prior to the
occurrence of any of the events described in Section 8.1(f), then LASIK (or any
combination of the principals of LASIK, but only pursuant to and in the manner
provided for in written instructions delivered to PMSI and Prime by LASIK prior
to such acquisition) shall receive warrants in connection with such acquisition,
in substantially the form attached hereto as Exhibit A (the "Target Center
Warrants"), entitling LASIK or such other person(s) to purchase, at one hundred
ten percent (110%) of PMSI's closing share price as quoted by NASDAQ on the
closing date of the acquisition of such Target Center, that whole number of
shares of common stock of PMSI determined by:
(i) if the Target Center is acquired solely in reliance on the
exception contained in Section 8.1(d), multiplying (i) 0.0075, by (ii) the
portion of the purchase price, expressed as a number and not in dollars,
paid by Prime or its acquiring affiliate in respect of the Refractive
Surgery operations of such Target Center (specifically excluding the value
of any non-Refractive Surgery operations of such Target Center that are
acquired pursuant to subsection (h) below); and
(ii) if the Target Center is acquired solely in reliance on the
exception contained in Section 8.1(e), multiplying (i) 0.0025, by (ii) the
portion of the purchase price, expressed as a number and not in dollars,
paid by Prime or its acquiring affiliate in respect of the Refractive
Surgery operations of such Target Center (specifically excluding the value
of any non-Refractive Surgery operations of such Target Center that are
acquired pursuant to subsection (h) below);
(d) The rights granted under Section 8.2(b) are personal to LASIK and,
notwithstanding any other provision of this Agreement, may not be assigned
to or exercised by any other party;
(e) Any and all amounts loaned to LASIK pursuant to Section
8.2(b)(ii) above shall be evidenced by a promissory note which shall provide
that, among other things (i) such amounts shall bear interest at the per annum
rate of fifteen percent (15%) or, following any default by LASIK under such
promissory note or under any other agreement, document or instrument executed by
LASIK for the benefit of Prime, PMSI or one of their affiliates, the maximum
rate allowed by law, (ii) such amounts shall be repaid in equal monthly
installments of principal and interest over a period of sixty (60) months, and
(iii) the promissory note shall be governed by Texas law; provided further that
such amounts shall be secured by a security agreement executed and delivered by
LASIK to Prime or its acquiring affiliate, securing all of LASIK's obligations
under such promissory note with all of LASIK's right, title and interest in and
to the Target Center being acquired (all notes, security agreements and other
agreements, documents, instruments or certificates required to be executed by
any party pursuant to this subsection (e) are referred to herein as the "Target
Center Lending Documents," and all Target Center Lending Documents shall be in
form and substance reasonably satisfactory to Prime and, unless specifically
specified otherwise, shall be deemed included in the Transaction Documents for
purposes of this Agreement, regardless of when executed);
(f) LASIK agrees that, notwithstanding any other provision of
this Agreement or the Transfer Restriction Agreement, it shall not be entitled
to transfer or assign, to any person or entity, any direct or indirect interest
in any Target Center acquired by it pursuant to the provisions of Section
8.2(b)(ii), until such time as (i) LASIK has irrevocably forfeited any and all
rights to borrow funds pursuant to Section 8.2(b)(ii) above (either by
termination of such rights pursuant to the terms of this Agreement or by
delivery by LASIK to Prime of an irrevocable, perpetual and binding waiver of
such rights) and (ii) there are no amounts (including principal and interest)
outstanding under any promissory note previously executed by LASIK pursuant to
Section 8.2(b)(ii); provided further, that any transfer or assignment of such
interest in any such Target Center in violation of this subsection shall be null
and void and shall not be given effect by PMSI, Prime or any other party to this
Agreement;
(g) Notwithstanding the exclusivity obligation contained in
Section 8.1, LASIK and/or one or more of their affiliates shall be entitled to
independently acquire or develop any Target Center to which any one or more of
the following apply: (i) a majority of the board of directors of Prime votes
against the acquisition of such Target Center; or (ii) Newco II is unable to
finance the acquisition of such Target Center using the Development Facility,
solely because of the limitation set forth in Section 4.3(c); provided, however,
that:
(y) in either instance, LASIK or its affiliates must acquire such
Target Center within one hundred twenty (120) days after the occurrence or
circumstances that triggered the application of this subsection (g), and
upon any failure to so acquire such Target Center within such one hundred
twenty (120) day period, the exclusivity obligation contained in Section
8.1 shall again apply with respect to such Target Center; and
(z) with respect to the exception to exclusivity set
forth in subsection (ii) of this subsection (g), before LASIK or one of
its affiliates acquires such Target Center, LASIK or its acquiring
affiliate shall provide thirty (30) days' prior written notice to Prime
of such pending acquisition, and Prime shall have ten (10) days from
its receipt of such notice to notify LASIK or its acquiring affiliate
that Prime would like to acquire a specified portion of up to forty
percent (40%) of the interest being offered to LASIK or its acquiring
affiliate in such acquisition, upon the same terms and conditions
agreed to by LASIK; provided, however, that the participation right
granted in this subsection (z) shall not apply if (A) LASIK or its
acquiring affiliate does not receive notice from Prime of its election
to participate in such acquisition within the ten (10)-day period
provided for such notice, (B) Prime refuses or is unable to finance its
specified portion of the acquisition, or (C) Prime refuses or is unable
to timely execute, deliver and perform all agreements, documents and
instruments required to be executed, delivered and performed by it (to
the extent consistent with those executed by LASIK or its acquiring
affiliate in such transaction); and
(h) The exclusivity obligation contained in Section 8.1 shall
not restrict Prime or PMSI, or any affiliate of either of them, from
independently acquiring, all or any portion of the non-Refractive Surgery assets
and business of a Target Center to the extent those assets and business are not
used primarily in, or materially relied on for, the conduct of Refractive
Surgery by such Target Center, and LASIK shall not, with respect to any such
acquisition, be entitled to any of the rights granted in this ARTICLE VIII,
including without limitation, the rights granted in subsections (b) and (c) of
this Section.
8.3 Effect. No provision of this ARTICLE VIII, shall be construed to
require any party to this Agreement to purchase any Target Center. ------
8.4 Automatic Termination. This entire ARTICLE VIII shall terminate
and become null and void automatically:
(a) if any party to this Agreement: (i) becomes insolvent, or
makes a transfer in fraud of creditors, or makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its debts as they become
due; (ii) generally is not paying its debts as such debts become due, and one of
the other parties, in good faith, determines that such event or condition could
frustrate the operation of this ARTICLE VIII or otherwise inhibit the delinquent
party's ability to perform its obligations under this Agreement or any
Transaction Document; (iii) has a receiver, trustee or custodian appointed for,
or take possession of, all or substantially all of the assets of such party,
either in a proceeding brought by such party or in a proceeding brought against
such party; (iv) files a petition for relief under the United States Bankruptcy
Code or any other present or future federal or state insolvency, bankruptcy or
similar laws (all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law"), or an involuntary petition for relief is filed against such
party under any Applicable Bankruptcy Law, or an order for relief naming such
party is entered under any Applicable Bankruptcy Law, or any composition,
rearrangement, extension, reorganization or other relief of debtors now or
hereafter existing is requested or consented to by such party; (v) fails to have
discharged within a period of thirty (30) days any attachment, sequestration or
similar writ levied upon, or any claim against or affecting, any property of
such party; or (vi) fails to pay within thirty (30) days any final money
judgment against such party (the events described in this Section are
hereinafter referred to as "Bankruptcy Events");
(b) upon any exercise of the Repurchase Option granted in Section 4.7;
(c) if, at any time after the Closing, Barnet and Dulaney own,
collectively, less than sixty percent (60%) of the total outstanding
ownership interests of BDEC (after assuming the conversion, exchange or
exercise of any and all securities or rights convertible into, or
exchangeable or exercisable for, ownership interests of BDEC); or
(d) upon the expiration of the five (5) year period
immediately following the Closing Date.
ARTICLE IX
Post Closing Agreements
9.1 Transition of Business. Each Seller agrees to cooperate fully with
Prime and Newco II in transitioning the Business existing prior to the Closing,
including the relationships maintained by BDEC (with respect to the Business),
to Newco II 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 (with respect to the Business) might alter
or impair any relationship with any customer, or other service recipient, person
or entity which did business with BDEC prior to the Closing. With respect to the
Business, each Seller agrees to promptly remit to Newco II any payments received
by BDEC or any Seller for services provided by BDEC (as part of the Business) or
Newco II after the Effective Time. Newco I, Newco II and Prime each agree to
promptly remit to BDEC any payments received by it for services provided by BDEC
prior to the Effective Time. Furthermore, Sellers agree to deposit any such
payments received directly to a deposit account designated and controlled by
Newco II or to take such other action as may be requested by Prime to implement
and maintain a system for remitting payments due Newco II which come into the
possession or control of BDEC or any Seller.
9.2 Ratification by Newco I. Prime, BDEC and LASIK each agree that by
executing this Agreement they are deemed to be voting their ownership
interests in Newco I and Newco II, as applicable, to authorize Newco I and
Newco II to enter into and perform this Agreement and each of the
Transaction Documents to which either is a party. Prime, BDEC and LASIK
each agree to execute such resolutions and written consents, and take such
other actions, in their capacities as members of Newco I and Newco
----------------------- II, as any party shall reasonably require after the
Closing to have Newco I and Newco II ratify and adopt this Agreement,
notwithstanding the official date of Newco I's and Newco II's creation.
9.3 Confidentiality Agreement. Each of Prime, PMSI, and each Seller
acknowledges that through its relationship with Newco I and Newco II, it will be
exposed to Proprietary Information (as defined below) of Newco I, Newco II
and/or each of their present or future affiliates (which includes, without
limitation, BDEC, LASIK, Prime, PMSI and each of their present or future
affiliates) (the party owning such Proprietary Information is referred to as the
"Discloser"), that such Proprietary Information is unique and valuable and that
such Discloser would suffer irreparable injury if its Proprietary Information
were divulged to those in competition with Discloser. "Proprietary Information"
shall be all information concerning Discloser which a party acquires, or to
which it has access through its relationship with Discloser, Newco I or Newco
II, that has not been publicly disclosed by Discloser or that is not a matter of
common knowledge among Discloser's competitors, including, but not limited to,
information relating to any inventions, processes, software, formulae, plans,
devices, compilations of information, technical data, mailing lists, management
strategies, business distribution methods, names of suppliers (of both goods and
services) and customers, names of employees and terms of employment,
arrangements entered into with suppliers and customers, including, but not
limited to, proposed expansion plans of Discloser, marketing and other business
and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, Prime, PMSI, and each
Seller agrees that it will not, at any time after the Closing: (i) directly
or indirectly, disclose any Proprietary Information to any person except
its owners, directors, managers, officers, employees, agents and
consultants who need to know such Proprietary Information in connection
with such party's relationship with Newco I or Newco II nor (ii) use
Proprietary Information in any way, except for the purposes of Newco I or
Newco II.
Within forty-eight (48) hours of termination of its ownership of or
consulting relationship with Newco I or Newco II, as applicable, whether
voluntary or involuntary, Prime, PMSI, and each Seller will deliver to the
appropriate Discloser (without retaining copies thereof) all documents, records
or other memorializations including copies of documents and any notes which it
has prepared that contain Proprietary Information, all other tangible
Proprietary Information in its possession or control and all of Discloser's
credit cards, keys, equipment, vehicles, supplies and other materials that are
in its possession or under its control.
9.4 Non-Competition Agreement. Each of PMSI, Prime, and each Seller, as
a material inducement to one another to enter into this Agreement, hereby agrees
that, at all times during which the provisions of ARTICLE VIII are applicable,
and at all times until five (5) years after either LASIK and its affiliates
(excluding PMSI, Prime, and the subsidiaries of either of them), or Prime and
its affiliates (excluding LASIK), no longer own any equity or other interest in
Newco I, such party 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, corporation
or other entity, without the prior written consent of each other party hereto,
commit any of the following acts, which acts shall be considered violations of
this covenant not to compete:
(a) Except through Newco I or its subsidiaries, or Newco II,
directly or indirectly engage in, or provide, anywhere within a fifty (50) mile
radius of any center or facility that provides Refractive Surgery and is owned,
directly or indirectly, partially or wholly, by Newco I or a subsidiary of Newco
I (collectively, the "Restricted Area"), any services (other than services
included in the practice of medicine) related to (i) the operating of centers or
facilities that provide Refractive Surgery, (ii) the manufacture, maintenance,
refurbishing, repair, sale, or leasing of any equipment related to or necessary
for the operating of centers or facilities that provide Refractive Surgery, or
(iii) providing any management services, training or consulting services related
to any of the activities described in (i) or (ii);
(b) Except through Newco I or its subsidiaries, or Newco II,
directly or indirectly provide, anywhere within the Restricted Area, (i)
facilities, equipment and non-physician personnel for the performance by
physicians of Refractive Surgery, (ii) the marketing, scheduling and management
of Refractive Surgery (but excluding, with respect to either Barnet or Dulaney,
marketing, scheduling and management of patients for treatment by Barnet or
Dulaney, respectively), (iii) the credentialing and scheduling of physicians to
perform Refractive Surgery and (iv) the billing, collecting or accounting for
the use of any such facilities, equipment or non-physician personnel.
(c) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Newco I or any of its subsidiaries, Prime, each Seller or any affiliate or
related entity of any of them, to withdraw, curtail, or cancel its business
with such person or entity; or
(d) Directly or indirectly hire any employee of Newco I or any of its
subsidiaries, Prime, any Seller or any affiliate or related entity of any
of them, or induce or attempt to influence any employee of Newco I or any
of its subsidiaries, Prime, any Seller or any such affiliate or related
entity to terminate his or her employment with such person or entity.
9.5 Exclusivity. Each of the parties hereto acknowledges and agrees
that any acquisition or development of a Target Center by Prime, PMSI,
Newco II or a Seller through an entity not owned (wholly or partially,
directly or indirectly) by Newco I shall be subject to the provisions of
Section 9.4, regardless of whether such acquisition or development is
contemplated by or provided for in the provisions of ARTICLE VIII.
-----------
9.6 Agreement. Each of Prime, PMSI and each Seller has reviewed and
carefully considered the provisions of Sections 9.3 and 9.4 and, having
done so, agrees that the restrictions applicable to it as set forth therein
(a) are fair and reasonable with respect to time, geographic area and
scope, (b) are not unduly burdensome to them, and (c) are reasonably
required for the protection of the interests of the other parties hereto
for whose benefit such restrictions were agreed upon. ---------
9.7 Remedies. Each of Prime, PMSI and each Seller agrees that a
violation on its part of any applicable covenant contained in Sections 9.3 or
9.4 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, it 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.
9.8 Special Options to Sell or Acquire Interests In Newco I.
(a) Option to Sell. Upon the expiration of five (5) years
immediately following the Closing Date, if no Seller is in breach of this
Agreement or any other Transaction Document, all or any of the Sellers shall at
any time, and from time to time, be entitled to require that Prime purchase from
such Seller(s) up to a maximum twenty percent (20%) interest in Newco I (when
aggregated with all other purchases pursuant to this Section), upon the terms
and conditions hereinafter set forth, by giving written notice of such election
to Prime.
(b) No Further Obligation. The Sellers acknowledge and agree that
Prime shall be under no obligation to notify any Seller of the exercise by
another Seller of rights under this Section, and that Prime may not, under
any circumstances, be required to purchase more than an aggregate twenty
percent (20%) interest in Newco I (considering all purchases pursuant to
this Section together), regardless of whether one Seller disposes of more
or less of an interest in Newco I under this --------------------- Section
than another Seller.
(c) Purchase Price. The purchase price for any interest transferred
pursuant to this Section shall, in the absence of an agreement on price
between Prime and the applicable Seller(s), be determined as follows:
--------------
(i) If the exercise of the option hereunder is after the expiration of
such ninety (90) day period, then the purchase price must be mutually
agreed upon by the applicable Seller(s) and Prime.
(ii) If the exercise of the option hereunder is
within the ninety (90) day period immediately following the expiration
of the five (5) year period described in Section 9.8(a), then Prime
shall select a certified business appraiser (that is a member of either
the American Society of Appraisers or the Institute of Business
Appraisers) to value the interest being transferred. If the selling
Seller(s) under this Section do not agree with the value determined by
Prime's appraiser, such Seller(s) may, at their own expense, select a
second appraiser that is a member of one or both of the above named
professional organizations to value the interest being transferred. If
the two appraisers cannot agree on the value of the interest being
transferred, the two appraisers shall mutually select a third appraiser
(that meets the above described membership requirements) to value the
interest being transferred together with the first two appraisers,
based on a majority vote. Any valuation determined by such third
appraiser shall be final, binding and conclusive. The expense of such
third appraiser shall be paid by the selling Seller(s), unless the
appraised value ultimately determined is more than ten percent (10%)
greater than the value determined by Prime's original appraiser, in
which event Prime shall bear the entire cost of the third appraiser. If
the exercise of the option hereunder is after the expiration of such
ninety (90) day period, then the purchase price must be mutually agreed
upon by the applicable Seller(s) and Prime.
(d) Such purchase price shall be paid in immediately available
funds at the closing of the transfer pursuant to this Section. The closing of
any purchase and sale pursuant to this Section shall take place at the principal
office of Prime or such other place designated by Prime and the applicable
Seller(s), on the thirtieth day (or if such thirtieth day is not a business day,
the next business day following the thirtieth day) following the final
determination of a purchase price under subsection (c) above. At such closing,
Seller shall execute all documents and take such other actions as may be
reasonably necessary to deliver to Prime title to the interest transferred, free
and clear of all liens, claims, encumbrances or restrictions of any kind or
nature whatsoever, except those established in the Organizational Documents and
other governing documents of Newco I.
(e) Exceptions. Notwithstanding the foregoing provisions of this
Section 9.8, Prime shall not be obligated to purchase any interest in Newco
I pursuant to this Section if Prime is unable to obtain financing for such
purchase from a third party upon reasonable market terms, after Prime and
PMSI have exercised commercially reasonable efforts to obtain such
financing. ----------
9.9 Obligation to Extinguish Debt. Each of BDEC, Barnet and Dulaney
agrees that it or he will take all necessary action, including, without
limitation, execute any documents and pay any amounts, that may be
necessary to cause the lien on certain of the Assets in favor of Camel Back
Bank (described more fully on Schedule 1.4 attached hereto) to be fully,
unconditionally and irrevocably released on or prior to September 30, 1999.
----------------------------- ------------
9.10 Notice of Certain Transfers. Without in any manner restricting or
modifying any prohibition on the sale of BDEC ownership interests by any of
the owners of BDEC, each of the Sellers agrees that it must notify Prime
and Newco II in writing within three (3) days of learning of any transfer
of BDEC ownership interests. ---------------------------
9.11 Fiscal Years of Newco I and Newco II. Each of the parties to this
Agreement hereby agrees to vote its interests, if any, in Newco I and Newco
II, and to vote in its capacity as a manager of Newco I or Newco II, if
applicable, to cause the fiscal years of each of Newco I and Newco II to
end annually on December 31. ------------------------------------
9.12 Right of Offset. Each Seller agrees that Newco I and Newco II
shall each have rights of offset against distributions to either BDEC and/or
LASIK in respect of any ownership interest either may have in either Newco I or
Newco II at any time following the Closing, for any and all debts, obligations
or liabilities that any Seller may have to Prime or PMSI, including, without
limitation, any liability arising out of or relating to such Seller's indemnity
obligations under this Agreement or any Transaction Document. Each Seller hereby
authorizes and directs Newco I and Newco II, and appoints each of Newco I and
Newco II as its attorney in fact, to withhold and pay such offset amounts to
Prime and to take all other actions necessary to make such payment. Each of
Newco I and Newco II hereby agrees to promptly remit any and all such offset
amounts to Prime upon request.
ARTICLE X
Miscellaneous
10.1 Collateral Agreements, Amendments, and Waivers. This Agreement
(together with the Transaction Documents) 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 Transaction Document
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 fifty percent (50%) of the voting equity
ownership interests of which is at the time owned, directly or indirectly,
by PMSI. Any assignment in violation of the foregoing shall be null and
void. Subject to the preceding sentences of this Section,
---------------------- the provisions of this Agreement (and, unless
otherwise expressly provided therein, of any Transaction Document) 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
legal counsel and accountants. Up to $3,000 of the costs and expenses incurred
by Prime and associated specifically with the formation and documentation of
Newco I and Newco II, including legal fees and expenses for drafting the
Organizational Documents, shall be paid to Prime, or reimbursed, by Newco II.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in Section 9.3 and Section 9.4) is intended to be
performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules and regulations. If any provision of
this Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable but
the extent of the invalidity or unenforceability does not ------------
destroy the basis of the bargain between the parties as contained herein,
the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather
shall be enforced to the fullest extent permitted by law.
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 Transaction
Document) 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, Newco I and Prime Medical Operating, Inc., Prime/BDR Acquisition, L.L.C.
Newco II: and Prime/BDEC Acquisition, L.L.C.
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: Barnet Dulaney Eye Center, P.L.L.C., LASIK
Investors, L.L.C., David D. Dulaney, M.D.,
Ronald W. Barnet, M.D., and Mark Rosenberg
4800 North 22nd Street
Phoenix, AZ 85016
with a copy to: Mr. Bert L. Campbell
Vinson & Elkins, L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002
Each party may change its address for purposes of this Section by
proper notice to the other parties.
10.7 Survival of Agreement. 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 of the provisions of this Agreement and the
Transaction Documents 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.
10.9 Construction, Knowledge and Materiality. This Agreement and each
Transaction Document 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 each Transaction Document 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 any Transaction Document. 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. As used herein, "day" or "days" refers to
calendar days unless otherwise specified in each instance. When the term
"knowledge" is used in this Agreement in reference to (i) Prime, it shall mean
such items as are within the actual knowledge of Ken Shifrin, Joe Jenkins,
Cheryl Williams and John Hedrick and (ii) BDEC or LASIK, it shall mean such
items as are within the actual knowledge of Pinkert, Perkins, Dulaney, Barnet or
Rosenberg.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to arbitration by either party. The arbitration proceedings shall be
conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association. The arbitration shall be conducted in
Dallas, Texas and the arbitrator shall have the right to award actual damages
and attorney fees and costs, but shall not have the right to award punitive,
exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which together shall
constitute one and the same instrument. Any party hereto may execute this
Agreement by signing any one counterpart.
[Signature pages follow]
<PAGE>
SIGNATURE PAGE TO
CONTRIBUTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PRIME: PRIME MEDICAL OPERATING, INC.
By:/s/ Kenneth Shifrin
Printed Name:Ken Shifrin
Title:Chairman of the Board
BDEC: BARNET DULANEY EYE CENTER, P.L.L.C.
By:/s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By:/s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
LASIK: LASIK INVESTORS, L.L.C.
By:/s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
NEWCO I: PRIME/BDR ACQUISITION, L.L.C.
By:
LASIK Investors, L.L.C.. - Member
By: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
By:
Prime Medical Operating, Inc. - Member
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Treasurer
NEWCO II: PRIME/BDEC ACQUISITION, L.L.C.
By:
Barnet Dulaney Eye Center, P.L.L.C. - Member
By: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
By:
Prime Medical Operating, Inc. - Member
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Treasurer
<PAGE>
DULANEY: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D.
BARNET: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D.
ROSENBERG: /s/ Mark Rosenberg
Mark Rosenberg
PMSI: PRIME MEDICAL SERVICES, INC.
By: /s/ Cheryl Williams
Printed Name:Cheryl Williams
Title: Treasurer
<PAGE>
TABLE OF EXHIBITS
Exhibit A Form of Primary Warrants
Exhibit B Form of Organizational Documents of Newco I
Exhibit C Form of Organizational Documents of Newco II
Exhibit D Form of Assignment and Assumption Agreement
Exhibit E PMSI Financial Statements
Exhibit F BDEC Financial Statements
Exhibits G1
to G5 Credit Documents
Exhibit H LASIK Ownership Interest Transfer Restriction
Agreement
Exhibit I Collocation Agreement
Exhibit J Consulting Agreement
<PAGE>
EXHIBIT-A
WARRANT CERTIFICATE
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON
THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED OR
RESOLD WITHOUT REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
UNLESS AN EXEMPTION FROM REGISTRATION IS THEN AVAILABLE.
WARRANT TO PURCHASE COMMON STOCK
OF
PRIME MEDICAL SERVICES, INC.
Date: ________________
This is to certify that, for value received, Barnet Dulaney Eye Center,
P.L.L.C. (the "Holder") is entitled to purchase, subject to the provisions of
this Warrant (including, without limitation, the vesting provisions of Section
10), from Prime Medical Services, Inc., a Texas corporation (the "Company"),
Forty Four Thousand Thirty Five (44,035) shares of the Company's common stock,
$.01 par value (such class of stock being referred to herein as the "Stock"),
for $9.4875 per share (the "Exercise Price"). This Warrant is issued pursuant to
that certain Contribution Agreement (the "Contribution Agreement"), dated
effective September 1, 1999, by and among the Company, Prime Medical Operating,
Inc., a Delaware corporation, the Holder, Prime/BDEC Acquisition, L.L.C., a
Delaware limited liability company, Prime/BDR Acquisition, L.L.C., a Delaware
limited liability company, LASIK Investors, L.L.C., a Delaware limited liability
company, David D. Dulaney, M.D., Ronald W. Barnet, M.D., and Mark Rosenberg. The
number of shares of Stock to be received upon the exercise of this Warrant and
the Exercise Price shall be adjusted from time to time as hereinafter set forth.
The shares of Stock or other securities or property deliverable upon such
exercise, as adjusted from time to time, are hereinafter sometimes referred to
as "Warrant Shares." Unless the context otherwise requires, the term "Warrant"
or "Warrants" as used herein includes this Warrant and any other Warrant or
Warrants which may be issued pursuant to the provisions of this Warrant, whether
upon transfer, assignment, partial exercise, divisions, combinations, exchange
or otherwise, and the term "the Holder" includes any registered transferee or
transferees or registered assignee or assignees of the Holder, who in each case
shall be subject to the provisions of this Warrant, and when used with reference
to Warrant Shares, means the holder or holders of such Warrant Shares.
SECTION 1. Exercise of Warrant. Subject to the provisions hereof
(including, without limitation, the vesting provisions of Section 10), this
Warrant may be exercised in whole or in part at any time or from time to time
during the period commencing on _______________ (the "Commencement Date") and
ending 5:00 P.M., Central Standard Time, on _______________ (the "Expiration
Date"), by presentation and surrender to the Company at its principal office of
this Warrant and the Purchase Form, attached hereto as Exhibit A, duly executed
and accompanied by payment of the Exercise Price for the number of Warrant
Shares specified in such form. The Exercise Price may be paid at the Holder's
election either (i) by cash, certified or official bank check payable to the
order of the Company, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Holder elects the Net Issuance method, the Company will
issue that number of Warrant Shares determined by (a) subtracting the Exercise
Price from the Fair Market Value, (b) multiplying such difference by the number
of shares of Warrant Shares requested to be exercised under this Warrant and (c)
dividing such product by the Fair Market Value. As used in this Warrant, "Fair
Market Value" shall mean the per share price of the Warrant Shares at the time
of exercise, as determined by averaging the closing price per share quoted by
NASDAQ on the five trading days immediately preceding the date of Exercise. If
this Warrant is exercised in part only, the Company shall, promptly after
presentation of this Warrant upon such exercise, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the Warrant Shares purchasable hereunder upon the same terms and conditions as
herein set forth.
SECTION 2. Reservation of Shares. The Company shall at all times after
the Commencement Date and until expiration of this Warrant reserve for issuance
and delivery upon exercise of this Warrant the number of Warrant Shares as shall
be required for issuance and delivery upon exercise of this Warrant.
SECTION 3. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the current market value of such fractional share,
determined as follows:
(a) if the Stock is listed on a national securities exchange
or admitted to unlisted trading privileges thereon, the current value
shall be the last reported sale price of the Stock on such exchange on
the last business day prior to the date of exercise of this Warrant, or
if no such sale is made on such day, such price of the Stock for such
immediately preceding day as such a sale occurred on such exchange; or
(b) if the Stock is not so listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last
reported high and low prices of the Stock reported by a comparable
exchange system selected by the Board of Directors of the Company, on
the last business day prior to the date of the exercise of this
Warrant; or
(c) if the Stock is not listed or admitted to unlisted trading
privileges, and bid and asked prices are not so reported, the current
value shall be an amount, not less than book value per share of Stock,
determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.
SECTION 4. Transfer, Exchange, Assignment or Loss of Warrant.
4.1 Neither this Warrant, nor any rights or interest herein, may be
assigned, transferred or encumbered, in whole or in part, without the express
written consent of the Company in each instance, and upon receipt of such
consent may only be assigned, transferred or encumbered as provided herein so
long as such assignment or transfer is in accordance with and subject to the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (said Act and such rules and Regulations
being hereinafter collectively referred to as the "Securities Act"). Any
purported transfer or assignment made other than in accordance with this Section
4 shall be null and void and of no force and effect.
4.2 Any assignment permitted hereunder shall be made by surrender of
this Warrant to the Company at its principal office, with any requested
assignment form duly executed and funds sufficient to pay any transfer tax. In
such event the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment and designate
the assignee as the registered holder on the Company's records and this Warrant
shall promptly be canceled.
4.3 Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification to the
Company or (in the case of mutilation) presentation of this Warrant for
surrender and cancellation, the Company will execute and deliver a new Warrant
of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
SECTION 5. Adjustment in the Number of Warrant Shares Purchasable and Exercise
Price.
5.1 The number of shares of Stock for which this Warrant may be
exercised shall be subject to adjustment as follows:
(a) in the event there is a subdivision or combination of the
outstanding shares of Stock into a larger or smaller number of shares,
the number of shares of Stock for which this Warrant may be exercised
shall be increased or reduced in the same proportion as the increase or
decrease in the outstanding shares of Stock;
(b) if the Company declares a dividend on Stock payable in
Stock or securities convertible into Stock, the number of shares of
Stock for which this Warrant may be exercised shall be increased, as of
the record date for determining which holders of Stock shall be
entitled to receive such dividend, in proportion to the increase in the
number of outstanding shares of Stock as a result of such dividend;
(c) if the Company decides to offer rights to all holders of
Stock which entitle them to subscribe to additional Stock or securities
convertible into Stock, the Company shall give written notice of any
such proposed rights offering to the Holder at least fifteen days prior
to the proposed record date in order to permit the Holder to exercise
this Warrant on or before such record date. There shall be no
adjustment in the number of shares of Stock for which this Warrant may
be exercised or the Exercise Price by virtue of such rights offering or
by virtue of any sale of any class of securities of the Company
pursuant to such rights offering.
5.2 In the event at any time prior to the expiration of this Warrant of
any reorganization or reclassification of the outstanding shares of Stock (other
than a change in par value, or from no par value to par value, or from par value
to no par value, or as a result of a subdivision or combination), the Holder
shall have the right, but not the obligation, to exercise this Warrant. Upon
such exercise, Holder shall have the right to receive the same kind and number
of shares of stock and other securities, cash or other property as would have
been distributed to the Holder upon such reorganization or reclassification had
Holder exercised this Warrant immediately prior to such reorganization or
reclassification. The Holder shall pay upon such exercise the Exercise Price
that otherwise would have been payable pursuant to the terms of this Warrant. If
any such reorganization or reclassification results in a cash distribution in
excess of the Exercise Price provided by this Warrant, the Holder may, at
Holder's option, exercise this Warrant without making payment of the Exercise
Price, and in such case the Company shall, upon distribution to Holder, consider
the Exercise Price to have been paid in full, and in making settlement to
Holder, shall deduct an amount equal to the Exercise Price from the amount
payable to the Holder.
5.3 If the Company shall, at any time prior to the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have the
right, but not the obligation, to exercise this Warrant. Upon such exercise
Holder shall have the right to receive, in lieu of the shares of Stock that
Holder otherwise would have been entitled to receive, the same kind and amount
of assets as would have been issued, distributed or paid to Holder upon any such
dissolution, liquidation or winding up with respect to such shares of Stock had
Holder been the holder of record of such shares of Stock receivable upon
exercise of this Warrant on the date for determining those entitled to receive
any such distribution. If any dissolution, liquidation or winding up results in
any cash distribution in excess of the Exercise Price provided for by this
Warrant, Holder may, at Holder's option, exercise this Warrant without making
payment of the Exercise Price and, in such case, the Company shall, upon
distribution to Holder, consider the Exercise Price to have been paid in full,
and in making settlement to Holder shall deduct an amount equal to the Exercise
Price from the amount payable to Holder.
5.4 In the event that, at any time prior to the expiration of this
Warrant, the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or more
than 50 percent of the outstanding voting securities of the Company are owned by
another corporation as a result of such merger or consolidation, then at the
election of the Board of Directors of the Company (i) the successor entity shall
assume the Company's obligations hereunder and Holder shall be entitled, upon
exercise of this Warrant, to receive in lieu of shares of Stock shares of such
stock or other securities as the holders of shares of Stock received pursuant to
the terms of the merger or consolidation or (ii) this Warrant may be canceled by
the Board of Directors of the Company as of the effective date of any such
merger or consolidation, provided that (x) notice of such cancellation shall be
given to Holder, and (y) Holder shall have the right to exercise this Warrant in
full during a thirty (30) day period preceding the effective date of such merger
or consolidation.
5.5 The Company may retain a firm of independent public accountants of
recognized standing (who may be any such firm regularly employed by the Company)
to make any computation required under this Section 5, and a certificate signed
by such firm shall be conclusive evidence of the correctness of any computation
made under this Section.
5.6 Whenever the number of shares of Stock purchasable upon the
exercise of this Warrant is adjusted as herein provided, the Exercise Price
shall be adjusted by multiplying the applicable Exercise Price immediately prior
to such adjustment by a fraction, the numerator of which shall be the number of
shares of Stock purchasable upon exercise of this Warrant immediately prior to
such adjustment and the denominator of which shall be the number of shares of
Stock purchasable immediately after such adjustment.
SECTION 6. Officer's Certificate. Whenever the number of Warrant Shares
or the Exercise Price shall be adjusted as required by the provisions of Section
5 hereof, the Company forthwith shall file in the custody of its secretary or an
assistant secretary, at its principal office, a certificate of the chief
executive officer of the Company setting forth the number and kind of shares
purchasable, as so adjusted, stating that such adjustments in the number or kind
of shares or other securities conform to the requirements of Section 5 of this
Warrant, and setting forth a brief statement of the facts accounting for such
adjustments. Promptly after receipt of such certificate, the Company will
deliver, by first-class mail, postage prepaid, a brief summary thereof (to be
supplied by the Company) to the Holder; provided however, that failure to file
or to give any notice required under this Subsection, or any defect therein,
shall not affect the legality or validity of any such adjustments under Section
5. Each such officer's certificate shall be made available at all reasonable
times during reasonable hours for inspection by Holder.
SECTION 7. Cancellation of Warrant. This Warrant may be revoked and
cancelled by the Company upon (i) the occurrence of certain events specified in
the Contribution Agreement, (ii) any breach, or threatened breach by BDEC or
Holder of the Contribution Agreement or any Transaction Document (as defined in
the Contribution Agreement) to which either BDEC or Holder is a party, (iii) any
breach or threatened breach by BDEC or Holder of any other contract or agreement
entered into at any time by BDEC or Holder and to which the Company or any of
the Company's subsidiaries or affiliates is a party or named beneficiary, and
(iv) upon any transfer or encumbrance or attempted transfer or encumbrance by
Holder of this Warrant or any rights hereunder or interest herein in violation
of the provisions of Section 4 hereof.
SECTION 8. Notice to Holder. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Stock otherwise than in cash or (ii) if the Company shall offer to the
holders of Stock for subscription or purchase by them any shares of any class or
any other rights or (iii) if there shall be any capital reorganization of the
Company, reclassification of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, sale, lease or transfer
of all or substantially all of the property and assets of the Company, or
voluntary or involuntary dissolution, liquidation or winding up of the Company,
then in any such event, the Company shall cause to be mailed by certified mail
to Holder, at least twenty (20) days prior to the relevant date described below,
a notice containing a brief description of the proposed action and stating the
date or expected date on which a record is to be taken for the purpose of such
dividend, distribution or rights, or such reclassification, reorganization,
consolidation, merger, conveyance, lease or transfer, dissolution, liquidation
or winding up and the date or expected date as of which the holders of Stock of
record shall be entitled to exchange their shares of Stock for securities or
other property deliverable upon such event.
SECTION 9. Warrant Certificate Holder Not Deemed a Stockholder. Holder
shall not, solely because of holding the warrant, be entitled to vote, receive
dividends or be deemed the holder of Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Warrant for any
purpose whatsoever, nor shall anything contained herein be construed to confer
upon the Holder, as such, any of the rights of stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any time thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger conveyance or otherwise), or to receive notice of
meetings or other actions affecting stockholders (except as provided in Section
8 hereof), or to receive dividend or subscription rights, or otherwise, until
such Warrant Certificate shall have been exercised in accordance with the
provisions hereof and the Warrant Shares shall have been issued.
SECTION 10. Vesting. Assuming Holder complies with all of the terms and
conditions contained in this Warrant, all of Holder's rights under this Warrant
(including, without limitation, Holder's rights to acquire common stock pursuant
to this Warrant) shall vest twenty five percent (25%) upon each one-year
anniversary of the date of this Warrant.
SECTION 11. Agreement of Holder. The Holder, by accepting this Warrant consents
and agrees with
(a) The Warrants are transferable on the registry books of the Company only
upon the terms and conditions set forth in this Warrant; and
(b) The Company may deem and treat the person in whose name
the Warrant is registered as the absolute owner of the Warrant
(notwithstanding any notation of ownership or other writing thereon
made by anyone other than the Company or the Warrant Agent) for all
purposes whatever and the Company shall not be affected by any notice
to the contrary, except as set forth in Section 4 of this Warrant.
SECTION 12. Governing Law. This Warrant shall be construed in accordance with
the laws of the State of Texas applicable to contracts executed and to be
performed wholly within such state.
SECTION 13. Notice. Notices and other communications to be given to
Holder of the Warrant evidenced hereby shall be delivered by hand or by
first-class mail, postage prepaid, to Barnet Dulaney Eye Center, P.L.L.C., 4800
North 22nd Street, Phoenix, Arizona 85016, Attn: President (until another
address is filed in writing by the Holder with the Company). Notices or other
communications to the Company shall be deemed to have been sufficiently given if
delivered by hand or by first-class mail, postage prepaid to the Company at 1301
Capital of Texas Highway, Suite C-300, Austin, Texas 78746, or such other
address as the Company shall have designated by written notice to such
registered owner is herein provided. Notice by mail shall be deemed given when
deposited in the United States mail, postage prepaid, as herein provided.
SECTION 14. Successors. All the covenants and provisions of this
Warrant by or for the benefit of the Company shall bind and inure to the benefit
of its successors and assigns hereunder, and all covenants and provisions of
this Warrant by or for the benefit of the Holder of this Warrant shall bind and
inure to the benefit of the registered holder of the Warrants.
SECTION 15. Termination. This Warrant shall terminate as of the earliest of: (a)
the close of business on the Expiration Date, (b) the date upon which all rights
hereunder shall have been exercised or redeemed or (c) upon its cancellation
pursuant to Section 7 of this Warrant.
SECTION 16. Benefits of this Agreement. Nothing in this Warrant
Certificate shall be construed to give to any person or corporation other than
the Company, and its respective successors and assigns hereunder and the Holder
of any legal or equitable right, remedy or claim hereunder, but shall be for the
sole and exclusive benefit of the Company and its respective successors and
assigns hereunder and the Holder.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
WARRANT CERTIFICATE
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date set forth above.
PRIME MEDICAL SERVICES, INC.
By: ___________________________________
Printed Name: ___________________________
Title: __________________________________
EXHIBIT A
PURCHASE FORM
TO: Prime Medical Services, Inc., Secretary
(1) The undersigned Holder hereby elects to purchase _______ shares of the
common stock, $.01 par value, of Prime Medical Services, Inc., a Delaware
corporation ("PMSI"), pursuant to the terms of the Warrant Agreement dated the
1st day of August, 1999 (the "Warrant Agreement") between PMSI and the Holder,
and tenders herewith payment in full of the Exercise Price (as defined in the
Warrant Agreement) for such shares of common stock using (check only one):
[ ] cash
[ ] certified check
[ ] Net Issuance Method (as defined in the Warrant Agreement)
(2) The undersigned also tenders herewith all applicable transfer taxes, if any,
using cash or certified check.
(3) Please issue a certificate or certificates representing said shares of PMSI
common stock in the name of the undersigned or in such other name as is
specified below.
- ---------------------------------
(Name)
- ---------------------------------
(Address)
HOLDER: _________________________
By: _________________________
Title: _________________________
Date: _________________________
<PAGE>
EXHIBIT-B
LIMITED LIABILITY COMPANY AGREEMENT
OF PRIME/BDR ACQUISITION, L.L.C.
Organized under the Delaware Limited Liability Company Act (the "Act").
ARTICLE I.
NAME AND LOCATION
Section 1.1. Name. The name of this limited liability company is Prime/BDR
Acquisition, L.L.C. (the "Company").
Section 1.2. Members. The only members of the Company upon the
execution of this Limited Liability Company Agreement (this "Agreement") shall
be Prime Medical Operating, Inc, a Delaware corporation ("Prime"), and LASIK
Investors L.L.C., a Delaware limited liability company ("LASIK"). For purposes
of this Agreement, the "Members" shall include such named members and any new
members admitted pursuant to the terms of this Agreement, 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 1301 Capital of Texas Hwy., Suite C-300, Austin, Texas 78746-6550, 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
Certificate of Formation of the Company are:
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
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.
Section 1.6 Contribution Agreement. The Company was initially formed
with a single member, LASIK, for the purpose of consummating the transactions
contemplated by that certain Contribution Agreement dated effective September 1,
1999, by and among Prime, Prime Medical Services, Inc., a Delaware corporation
("PMSI"), LASIK, Barnet Dulaney Eye Center, P.L.L.C., an Arizona professional
limited liability company, the Company, Prime/BDEC Acquisition, L.L.C., a
Delaware limited liability company, David D. Dulaney, M.D., Ronald W. Barnet,
M.D., and Mark Rosenberg (the "Contribution Agreement"). The parties have
executed this Agreement upon consummation of the transactions contemplated by
the Contribution Agreement. This agreement supercedes and replaces any prior
membership agreement or other governing or organizational document of the
Company.
ARTICLE II.
MEMBERSHIP
Section 2.1. Members' Interests. The "Membership Interest" of each Member
is set forth on Exhibit A.
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, this
Agreement 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, (i) the Membership Interests of Prime may be
freely transferred, without consent, to any entity that is then owned or
controlled, directly or indirectly, by PMSI (or its successor in interest), (ii)
the Membership Interests of any Member may be freely assigned, pledged or
otherwise transferred, without consent, to secure any debt, liability or
obligation owed to Prime by the Company, any Member or any entity affiliated
with the Company, (iii) the Membership Interests of any Member may be freely
assigned, pledged or otherwise transferred, without consent, in favor of the
Lender(s) under, or by the Lender(s) as a result of the enforcement of any
security interest arising pursuant to, that certain Senior Credit Facility (the
"Credit Facility") of PMSI, (iv) the Membership Interests of any Member may be
freely transferred, without consent, pursuant to and in accordance with the
express terms and conditions of the Contribution Agreement, and (iv) the pledge
by LASIK (pursuant to Section 6.3 of the Contribution Agreement) of its right to
receive distributions from the Company in respect of its Membership Interest
shall not be deemed to violate any provision of this Agreement..
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
Delaware 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 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 Act, the Certificate of Formation or this Limited Liability
Company Agreement. 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 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
Except for each Member's initial capital contribution made in
connection with the formation of the Company, no capital contributions shall be
required of any Member without the approval of all the Members to raise
additional capital, and only then proportionately as to each Member.
ARTICLE V.
DISTRIBUTION TO MEMBERS
The Company shall not distribute (or allow to be distributed) to its
members, with respect to their respective membership interests, any cash or
other property of the Company or its subsidiaries if, at the time of the
proposed distribution, any amounts (whether principal or interest) are
outstanding under the Credit Documents or the Target Center Lending Documents
(as such terms are defined in the Contribution Agreement). Furthermore, the
Company shall pay all available cash flow to Prime in payment of the Company's
outstanding obligations, if any, under the Working Capital Line and Development
Facility (as such terms are defined in the Contribution Agreement), irrespective
of whether such payments exceed the minimum required payments under the Working
Capital Line and Development Facility. For purposes of allocating such payments
among any two or more of such outstanding obligations, such payments shall be
allocated pro rata, based upon the respective balances of such obligations,
unless (i) a greater portion of the payment is required to be paid toward a
given obligation in order to prevent a default with respect to that obligation
(but only to the extent necessary to prevent such a default) or (ii) eighty
percent (80%) of the managers of the Company elect to allocate the payments in a
different manner.
Notwithstanding the foregoing, as long as no party other than PMSI or
Prime is in default under the Contribution Agreement or any other Transaction
Document (as defined in the Contribution Agreement, but excluding, however, the
Credit Documents and the Target Center Lending Documents), then, to the extent
that (but only to the extent that) the Company possesses the cash flow necessary
(in the reasonable discretion of a majority of its managers) to pay its
liabilities in the ordinary course consistent with past practices, the Company
agrees to make quarterly estimates of its taxable income for the current tax
year and, if not prohibited by law, distribute quarterly (the "Quarterly
Distributions") an amount that would cover the federal and state income taxes
required to be paid by its members with respect such taxable income, based on
each member's then current proportionate interest in the Company, assuming that
all members pay income taxes on the Company's taxable earnings at a rate equal
to the highest effective individual tax rate in effect from time to time (the
"Assumed Tax Rate"); provided, further, that the Company shall determine its
actual taxable income at the end of each taxable year and (A) if the Quarterly
Distributions in a given year should have been higher based on the amount of
actual taxable income for that year, promptly distribute the amounts necessary
to eliminate such deficiency or (B) if the Quarterly Distributions in a given
year should have been lower based on the amount of actual taxable income for
that year, withhold dollar for dollar from the first following Quarterly
Distribution, and then against subsequent Quarterly Distributions in a like
manner, the amounts necessary to eliminate such surplus.
Subject to the foregoing, the Managers shall determine, in their sole
discretion, the amount and timing of all distributions from the Company.
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. In no event may the Company make a
distribution to its Members if, 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 creditors is limited to specified property of the Company, exceed the fair
value of the Company's 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. Except as contemplated in this Article V, no
distributions of cash or other assets of the Company shall be made to the
Members in their capacity as owners of the Company.
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.
ARTICLE VII.
DISSOLUTION AND WINDING UP
Section 7.1. Dissolution. Notwithstanding any provision of the Act, the
Company shall be dissolved only upon the first of the following to occur:
(a) Forty (40) years from the date of filing the Certificate of
Formation of the Company;
(b) Written consent of all the then current 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 7.1(c) of this Article VII., in the event of dissolution of the Company,
the Managers (excluding any Manager(s) holding office pursuant to designation by
a Member subject to bankruptcy proceedings) 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;
and
(b) The balance, if any, shall be divided between the
Members in accordance with the Members' Membership Interests.
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 Ken Shifrin, Cheryl Williams, and Joe Jenkins, M.D., (as the initial
Manager designees of Prime), David D. Dulaney, M.D., and Ronald W. Barnet, M.D.
(as the initial Manager designees of LASIK). Thereafter, for so long as there
are five (5) Managers, (a) Prime shall be entitled to designate three (3) of the
Managers; and (b) LASIK shall be entitled to designate the remaining two (2) of
the Managers. Notwithstanding the foregoing, a Member shall not be entitled to
designate any Manager unless its Membership Interest: (x) has not (other than as
allowed under Section 2.5 of this Agreement) been transferred, repurchased,
assigned, pledged, hypothecated or in any way alienated; and (y) equals or
exceeds forty percent (40%) of the aggregate Membership Interests; provided,
however, that if the immediately preceding subsection (y) shall apply to LASIK
solely because of an exercise by LASIK of its put rights under Section 9.8 of
the Contribution Agreement, then LASIK shall, unless and until there is an
additional decrease in it Membership Interest other than pursuant to Section 9.8
of the Contribution Agreement, be entitled to designate only one Manager in the
manner provided above. 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 their resignation
or removal pursuant to Section 8.2 or 8.3 of this Article VIII. Managers need
not be residents of the State of Delaware 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. The Member who designated a resigning manager
shall be entitled to designate the successor thereto and all Members agree to
take such action as may be necessary to cause the election of all such successor
Managers.
Section 8.3. Removal of Managers. Any Manager may be removed, for or
without cause, at any time, but only by the Member who designated such Manager,
upon the written notice to all Members. The Member who designated such removed
Manager shall be entitled to designate the successor thereto and all Members
agree to take such action as may be necessary to cause the election of all such
successor Managers.
Section 8.4. General Powers. The business of the Company shall be
managed by its Managers, which may, by the vote or written consent in accordance
with this Agreement, 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 Certificate of
Formation or this Limited Liability Company Agreement 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
Delaware.
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.
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 four (4) 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 Contribution Agreement, the Certificate of Formation or
this Agreement. 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.
Notwithstanding any voting, quorum, or other provisions of this Agreement to the
contrary, the affirmative vote of at least four (4) Managers shall be required
to effect any of the following actions:
(a) any amendment, modification or waiver of any provision of the
Company's Certificate of Formation or this Agreement;
(b) effecting any mergers, consolidations or combinations of the
Company with other entities;
(c) dissolving, liquidating, or filing bankruptcy or seeking
relief under any debtor relief law;
(d) entering into a transaction or other action with a Member or
Manager;
(e) borrowing or incurring any indebtedness, other than open
accounts payable to unaffiliated third parties, or granting any
collateral or security (by way of guaranty or otherwise) for any
indebtedness or obligation, that exceeds (in any single transaction or
directly related series of transactions) $25,000;
(f) purchasing or leasing assets or property, or entering into
any contract or obligation, which obligates the Company to pay in
excess of $25,000 in one or any directly related series of
installments;
(g) selling, leasing or otherwise transferring substantially all
of the Company's assets other than in the ordinary course of the
Company's business;
(h) except as expressly set forth in Section 9.12 of the
Contribution Agreement, allocating to the Company any costs or expenses
that are paid or incurred by any Member or its affiliates (excluding
the Company), or paid by the Company but reimbursable by any Member or
its affiliates (excluding the Company), in each instance;
(i) issuance of any ownership interest in the Company; and
(j) disposition, sale, assignment or other transfer by the
Company of any interest it owns in the Company, except that such
interest may be extinguished without the approval required under this
Section.
Section 8.10. Committees. The Managers may, by resolution passed by
eighty percent (80%) of the Managers, designate committees, each committee to
consist of two or more Managers (at least one of which must be a Manager
designee of Prime and one of which must be a Manager designee of LASIK), 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 provide, by unanimous approval, that any one or more of the
Managers shall not be compensated, and may, by unanimous approval, fix any
compensation (which may include expenses) they elect to pay to any one or more
of the Managers.
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 Certificate of
Formation and this Limited Liability Company Agreement.
ARTICLE IX.
NOTICES
Section 9.1. Form of Notice. Whenever under the provisions of the Act,
the Certificate of Formation or this Limited Liability Company Agreement 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 Certificate
of Formation or this Limited Liability Company Agreement, 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
Any Manager may also serve as an officer 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: Ken Shifrin, Chairman of the Board; Joe Jenkins, M.D.,
President; Cheryl Williams, Vice President, Secretary and Chief Financial
Officer; and Mark Rosenberg, 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 Delaware Limited
Liability Company Act, and any successor statute, as amended from time-to-time.
ARTICLE XI.
INDEMNITY
Section 11.1. Indemnification. The Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action, suit
or proceeding and any inquiry or investigation that could lead to such an
action, suit or proceeding (whether or not by or in the right of the Company),
by reason of the fact that such person is or was a manager, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
director, manager, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another corporation, employee benefit plan,
other enterprise, or other entity, against all judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses (including
attorneys' fees and court costs) actually and reasonably incurred by him in
connection with such action, suit or proceeding to the fullest extent permitted
by any applicable law, and such indemnity shall inure to the benefit of the
heirs, executors and administrators of any such person so indemnified pursuant
to this Article XI. The right to indemnification under this Article XI shall be
a contract right and shall not be deemed exclusive of any other right to which
those seeking indemnification may be entitled under any law, bylaw, agreement,
vote of members or disinterested managers or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. Any repeal or amendment of this Article XI by the Members of the Company
or by changes in applicable law shall, to the extent permitted by applicable
law, be prospective only, and shall not adversely affect the indemnification of
any person who may be indemnified at the time of such repeal or amendment.
Section 11.2. Indemnification Not Exclusive. The rights of
indemnification and reimbursement provided for in 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 Certificate of Formation, this
Limited Liability Company Agreement, agreement or vote of Members, or as a
matter of law or otherwise.
Section 11.3. Other Indemnification Clauses. Notwithstanding the
foregoing, this Article XI shall not be construed to contradict the
indemnification provision of the Contribution Agreement. Notwithstanding
anything contained herein, this Article XI shall be ineffectual and shall not
permit or require indemnification for all, or any, losses, costs, liabilities,
claims or expenses arising, directly or indirectly, from any action or omission
permitting or requiring indemnification under the Contribution Agreement; and in
no event may any indemnity be allowed under this Agreement or pursuant to any
provision of the Act for an amount paid or payable pursuant to the
indemnification provisions of the Contribution Agreement.
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 Certificate of Formation and Limited
Liability Company Agreement 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.
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 Managers 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.
Section 12.9. Binding Arbitration. Any controversy between the parties
regarding this Agreement and any claims arising out of this Agreement or its
breach shall be submitted to arbitration by either party. The arbitration
proceedings shall be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration shall
be conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
ARTICLE XIII.
AMENDMENTS
Section 13.1. Amendments. This Agreement may be altered, amended or
repealed and a new limited liability company agreement may be adopted, only in
accordance with the provisions of Section 8.9, but otherwise at any regular
meeting or at any special meeting called for that purpose, or by execution of a
written consent in accordance with the provisions of Section 3.8.
Section 13.2. When Limited Liability Company Agreement Silent. It is
expressly recognized that when the Limited Liability Company Agreement is 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.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
LIMITED LIABILITY COMPANY AGREEMENT
IN WITNESS WHEREOF, the undersigned Members hereby adopt this Limited
Liability Company Agreement as the Limited Liability Company Agreement of the
Company, effective as of the 1st day of September, 1999.
LASIK Investors, L.L.C.
By:
Ronald W. Barnet, M.D., manager
By:
David D. Dulaney, M.D., manager
Prime Medical Operating, Inc.
By:
Printed Name:
Title:
<PAGE>
EXHIBIT A
OWNERSHIP INTERESTS
Name Ownership Percentage
Prime 60%
LASIK 40%
<PAGE>
EXHIBIT-C
LIMITED LIABILITY COMPANY AGREEMENT
OF PRIME/BDEC ACQUISITION, L.L.C.
Organized under the Delaware Limited Liability Company Act (the "Act").
ARTICLE I.
NAME AND LOCATION
Section 1.1. Name. The name of this limited liability company is Prime/BDEC
Acquisition, L.L.C. (the "Company"). ----
Section 1.2. Members. The only members of the Company upon the
execution of this Limited Liability Company Agreement (this "Agreement") shall
be Prime Medical Operating, Inc, a Delaware corporation ("Prime"), and Barnet
Dulaney Eye Center, P.L.L.C., an Arizona professional limited liability company
("BDEC"). For purposes of this Agreement, the "Members" shall include such named
members and any new members admitted pursuant to the terms of this Agreement,
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 1301 Capital of Texas Hwy., Suite C-300, Austin, Texas 78746-6550, 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
Certificate of Formation of the Company are: -----------------------------
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
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. -------------
Section 1.6 Contribution Agreement. The Company was initially formed
with a single member, BDEC, for the purpose of consummating the transactions
contemplated by that certain Contribution Agreement dated effective September 1,
1999, by and among Prime, Prime Medical Services, Inc., a Delaware corporation
("PMSI"), BDEC, the Company, Prime/BDR Acquisition, L.L.C., a Delaware limited
liability company, LASIK Investors, L.L.C., a Delaware limited liability
company, David D. Dulaney, M.D., Ronald W. Barnet, M.D., and Mark Rosenberg (the
"Contribution Agreement"). The parties have executed this Agreement upon
consummation of the transactions contemplated by the Contribution Agreement.
This agreement supercedes and replaces any prior membership agreement or other
governing or organizational document of the Company.
ARTICLE II.
MEMBERSHIP
Section 2.1. Members' Interests. The "Membership Interest" of each Member
is set forth on Exhibit A. ------------------ ---------
Section 2.2. Admission to Membership. The admission of new Members shall be
only by the vote of the Managers pursuant to Section 8.9 hereof. If new Members
are admitted, this Agreement 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, (i) the Membership Interests of 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 (or its successor in interest), (ii) the Membership Interests of any
Member may be freely assigned, pledged or otherwise transferred, without
consent, to secure any debt, liability or obligation owed to Prime by the
Company, any Member or any entity affiliated with the Company, (iii) the
Membership Interests of any Member may be freely assigned, pledged or otherwise
transferred, without consent, in favor of the Lender(s) under, or by the
Lender(s) as a result of the enforcement of any security interest arising
pursuant to, that certain Senior Credit Facility (the "Credit Facility") of
PMSI, and (iv) the pledge by BDEC (pursuant to Section 6.3 of the Contribution
Agreement) of its right to receive distributions from the Company in respect of
its Membership Interest shall not be deemed to violate any provision of this
Agreement.
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 Delaware
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 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. Members shall only be required to vote in
instances or with respect to matters where member voting is required by
applicable law or to the extent expressly contemplated in Section 8.1. With
respect to any act or transaction that requires a vote by the Members under
applicable law, the affirmative vote of not less than three (3) of the Managers
shall also be required in order to approve the act or transaction, in each
instance. Subject to the foregoing, 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 Act, the Certificate of Formation or this Limited
Liability Company Agreement. 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. The
provisions of this Section shall not interfere with the provisions of Section
8.9 relating to acts or transactions requiring the written approval of three (3)
or more Managers. Each Member acknowledges and agrees that, in the event of any
exercise of the Repurchase Option, as defined in the Contribution Agreement,
each Member will vote its entire Membership Interest in favor of transferring
the Company's assets pursuant to the Repurchase Option.
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 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
Except for each Member's initial capital contribution made in
connection with the formation of the Company, no capital contributions shall be
required of any Member without the approval of all the Members to raise
additional capital, and only then proportionately as to each Member.
ARTICLE V.
DISTRIBUTION TO MEMBERS
At the end of each calendar quarter, subject only to the qualifications
and limitations set forth below, the Company shall distribute its available
excess earnings to its members, to be divided among them 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 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.
ARTICLE VII.
DISSOLUTION AND WINDING UP
Section 7.1. Dissolution. Notwithstanding any provision of the Act, the
Company shall be dissolved only upon the first of the following to occur:
- -----------
(a) Forty (40) years from the date of filing the Certificate of
Formation of the Company;
(b) Written consent of all the then current 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 7.1(c) of
this Article VII., in the event of dissolution of the Company, the Managers
(excluding any Manager(s) holding office pursuant to designation by a
Member subject to bankruptcy proceedings) 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; and
(b) The balance, if any, shall be divided between the Members
in accordance with the Members' Membership Interests.
ARTICLE VIII.
MANAGERS
Section 8.1. Selection of Managers. Management of the Company shall be
vested in the Managers. Initially, the Company shall have four (4) Managers,
being Ken Shifrin, Joe Jenkins, M.D., (as the initial Manager designees of
Prime), David D. Dulaney, M.D. and Ronald W. Barnet, M.D., (as the initial
Manager designees of BDEC). Thereafter, for so long as there are four (4)
Managers, (a) Prime shall be entitled to designate two (2) of the Managers; and
(b) BDEC shall be entitled to designate the remaining two (2) of the Managers.
Notwithstanding the foregoing, a Member shall not be entitled to designate any
Manager unless its Membership Interest: (x) has not (other than as allowed under
Section 2.5 of this Agreement) been transferred, repurchased, assigned, pledged,
hypothecated or in any way alienated; and (y) equals or exceeds forty percent
(40%) of the aggregate Membership Interests. 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
their resignation or removal pursuant to Section 8.2 or 8.3 of this Article
VIII. Managers need not be residents of the State of Delaware 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. The Member who designated a
resigning manager shall be entitled to designate the successor thereto and
all Members agree to take such action as may be ------------ necessary to
cause the election of all such successor Managers.
Section 8.3. Removal of Managers. Any Manager may be removed, for or
without cause, at any time, but only by the Member who designated such
Manager, upon the written notice to all Members. The Member who designated
such removed Manager shall be entitled to designate the successor thereto
and all Members agree to take such action as may be necessary to cause the
election of all such successor Managers. -------------------
Section 8.4. General Powers. The business of the Company shall be
managed by its Managers, which may, by the vote or written consent in accordance
with this Agreement, 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 Certificate of
Formation or this Limited Liability Company Agreement 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 Delaware. -----------------
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. ----------------
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 three (3) 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 Contribution Agreement, the Certificate of Formation or
this Agreement. 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.
Notwithstanding any other Member or Manager voting or quorum provisions
contained in this Agreement, the following acts or transactions by, or
involving, the Company shall require the prior written approval of three (3)
Managers (unless and to the extent a particular act or transaction is expressly
required of the Company pursuant to the terms and provisions of the Contribution
Agreement or any Transaction Document):
(a) Any amendment to the Company's Certificate of Formation or this
Agreement.
(b) Mergers, consolidations or combinations of the Company with
another limited liability company or other entity.
(c) Purchase by the Company of any interest in the Company,
irrespective of the source of such interest.
(d) Disposition, sale, assignment or other transfer by the Company of
any interest it owns in the Company, except that such interest may be
extinguished without the approval required under this Article.
(e) Issuance of any interest in the Company to any party.
(f) Dissolving, liquidating, or filing bankruptcy or seeking
relief under any debtor relief law.
(g) Election or removal of officers, and establishing or
changing the compensation for Managers, officers or other employees.
(h) Not making any cash distributions to its Members that are required
by this Agreement to be made, or making any distributions to its Members of
cash or property that are prohibited under this Agreement.
(i) Sale, lease or other transfer of all or substantially all of the
Company's assets, or any assets other than in the ordinary course of the
Company's business.
(j) Initiating or settling any litigation or regulatory
proceeding, or confessing any judgment.
(k) Hiring or changing the Company's accountants or legal
counsel.
(l) Opening or closing bank or other depository accounts, and
establishing or changing the signature withdrawal authority with respect to any
such accounts.
(m) Borrowing or incurring any indebtedness, other than open accounts
payable to unaffiliated third parties, or granting any collateral or
security (by way of guaranty or otherwise) for any indebtedness or
obligation.
(n) Engaging in any act or transaction not in the ordinary
course of the Company's business.
(o) Purchasing or leasing assets or property, or entering into any
contract or obligation, which obligates the Company to pay in excess of
$10,000 in the aggregate in one or any series of installments.
(p) Doing any business other than the conduct of the Business (as
defined in the Contribution Agreement) or causing a change in the nature of
the business or the legal name of the Company.
(q) Entering into a transaction or other action with any
Manager, officer or Member.
(r) Waiving, refusing to enforce, amending, restating, superseding or
modifying any of the provisions of this Agreement or any Transaction
Document, including, without limitation, the Collocation Agreement.
(s) Taking any other action which, by the terms of this Agreement,
requires the approval or consent of not less than seventy-five percent
(75%) of the Members.
(t) Except as expressly set forth in the Collocation Agreement or
Section 9.12 of the Contribution Agreement, allocating to the Company any
costs or expenses that are paid or incurred by any Member or its affiliates
(excluding the Company), or paid by the Company but reimbursable by any
Member or its affiliates (excluding the Company), in each instance.
(u) With respect to the business and operations of Newco II conducted
or to be conducted at or near the location of 4800 N. 22nd St., Phoenix,
Arizona, waiving, amending, supplementing or modifying any of the
professional fees, facility fees or fee allocations by Newco II, to the
extent such amounts or allocations were utilized in preparing the pro forma
financial statements of Newco II attached to the Collocation Agreement.
(v) With respect to the business and operations of Newco II conducted
or to be conducted at any other future office or business locations
(including without limitation, the office located at 555 E. River Road,
Tucson, Arizona), adopting any professional fees, facility fees or fee
allocations.
Any of the above stated actions taken by the Company without the
necessary manager approval is void ab initio.
Section 8.10. Committees. The Managers may, by resolution passed by
eighty percent (80%) of the Managers, designate committees, each committee to
consist of two or more Managers (at least one of which must be a Manager
designee of Prime and one of which must be a Manager designee of BDEC), 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, by unanimous
approval, shall have the authority to provide that any one or more of the
Managers shall not be compensated, and may, by unanimous approval, fix any
compensation (which may include expenses) they elect to pay to any one or
more of the Managers. ------------------------
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
Certificate of Formation and this Limited Liability Company Agreement.
--------------------------
ARTICLE IX.
NOTICES
Section 9.1. Form of Notice. Whenever under the provisions of the Act,
the Certificate of Formation or this Limited Liability Company Agreement 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
Certificate of Formation or this Limited Liability Company Agreement, 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
Any Manager may also serve as an officer 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: Ken Shifrin, Chairman of the Board; Joe Jenkins, M.D.,
President; Cheryl Williams, Vice President, Secretary and Chief Financial
Officer; and Mark Rosenberg, 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 Delaware Limited
Liability Company Act, and any successor statute, as amended from time-to-time.
ARTICLE XI.
INDEMNITY
Section 11.1. Indemnification. The Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action, suit
or proceeding and any inquiry or investigation that could lead to such an
action, suit or proceeding (whether or not by or in the right of the Company),
by reason of the fact that such person is or was a manager, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
director, manager, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another corporation, employee benefit plan,
other enterprise, or other entity, against all judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses (including
attorneys' fees and court costs) actually and reasonably incurred by him in
connection with such action, suit or proceeding to the fullest extent permitted
by any applicable law, and such indemnity shall inure to the benefit of the
heirs, executors and administrators of any such person so indemnified pursuant
to this Article XI. The right to indemnification under this Article XI shall be
a contract right and shall not be deemed exclusive of any other right to which
those seeking indemnification may be entitled under any law, bylaw, agreement,
vote of members or disinterested managers or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. Any repeal or amendment of this Article XI by the Managers (pursuant to
Section 8.9 hereof) or by changes in applicable law shall, to the extent
permitted by applicable law, be prospective only, and shall not adversely affect
the indemnification of any person who may be indemnified at the time of such
repeal or amendment.
Section 11.2. Indemnification Not Exclusive. The rights of
indemnification and reimbursement provided for in 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 Certificate of Formation, this
Limited Liability Company Agreement, agreement or vote of Members, or as a
matter of law or otherwise. -----------------------------
Section 11.3. Other Indemnification Clauses. Notwithstanding the
foregoing, this Article XI shall not be construed to contradict the
indemnification provision of the Contribution Agreement. Notwithstanding
anything contained herein, this Article XI shall be ineffectual and shall not
permit or require indemnification for all, or any, losses, costs, liabilities,
claims or expenses arising, directly or indirectly, from any action or omission
permitting or requiring indemnification under the Contribution Agreement; and in
no event may any indemnity be allowed under this Agreement or pursuant to any
provision of the Act for an amount paid or payable pursuant to the
indemnification provisions of the Contribution Agreement.
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 Certificate of Formation and Limited Liability
Company Agreement 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.
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 Managers may select. --------
Section 12.7. Annual Statement. The Managers shall present at each
annual meeting 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.
Section 12.9. Binding Arbitration. Any controversy between the parties
regarding this Agreement and any claims arising out of this Agreement or
its breach shall be submitted to arbitration by either party. The
arbitration proceedings shall be conducted by a single arbitrator pursuant
to the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration shall be conducted in Dallas, Texas and the
arbitrator shall have the right to award actual damages and
------------------- attorney fees and costs, but shall not have the right
to award punitive, exemplary or consequential damages against either party.
ARTICLE XIII.
AMENDMENTS
Section 13.1. Amendments. This Agreement may be altered, amended or
repealed and a new limited liability company agreement may be adopted, only
in accordance with the provisions of Section 8.9, but otherwise at any
regular meeting or at any special meeting called for that purpose, or by
execution of a written consent in accordance with the provisions of Section
3.8. ----------
Section 13.2. When Limited Liability Company Agreement Silent. It is
expressly recognized that when the Limited Liability Company Agreement is
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.
-----------------------------------------------
[Signature page follows]
<PAGE>
043838.0000 AUSTIN 133169 v8 S-1
SIGNATURE PAGE TO
LIMITED LIABILITY COMPANY AGREEMENT
IN WITNESS WHEREOF, the undersigned Members hereby adopt this Limited
Liability Company Agreement as the Limited Liability Company Agreement of the
Company, effective as of the 1st day of September, 1999.
Barnet Dulaney Eye Center, P.L.L.C.
By:
Ronald W. Barnet, M.D., manager
By:
David D. Dulaney, M.D., manager
Prime Medical Operating, Inc.
By:
Printed Name:
Title:
<PAGE>
A-
043838.0000 AUSTIN 133169 v8
EXHIBIT A
OWNERSHIP INTERESTS
Name Ownership Percentage
Prime 60%
BDEC 40%
<PAGE>
EXHIBIT-D
ASSIGNMENT AND ASSUMPTION
AGREEMENT
For and in consideration of the sum of Ten Dollars ($10) and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and pursuant to and in accordance with that certain Contribution
Agreement, dated September 1, 1999, between and among Prime Medical Services,
Inc., a Delaware corporation, Prime Medical Operating, Inc., a Delaware
corporation ("Prime"), Barnet Dulaney Eye Center, P.L.L.C., an Arizona
professional limited liability company ("BDEC"), LASIK Investors, L.L.C., a
Delaware limited liability company, Prime/BDEC Acquisition, L.L.C., a Delaware
limited liability company ("Newco II"), Prime/BDR Acquisition, L.L.C., a
Delaware limited liability company, Ronald W. Barnet, M.D., David D. Dulaney,
M.D. and Mark Rosenberg (the "Contribution Agreement"), each of Prime, BDEC, and
each of their constituent owners, hereby assigns, transfers and sets over to
Newco II, its successors and assigns, as of the Effective Time (as defined in
the Contribution Agreement), with such representations, warranties and covenants
as are expressly set forth in the Contribution Agreement, all of its right,
title and interest in and to the Assets and the Business (as such terms are
defined in the Contribution Agreement).
Newco II hereby assumes, as of the Effective Time, only those lease or
contract obligations of BDEC arising under lease agreements assigned to Newco II
pursuant to the foregoing paragraph, and only those liabilities set forth, by
item and amount, on Schedule 1.4 of the Contribution Agreement. With respect to
any lease or contract obligations assumed by Newco II pursuant to the foregoing
sentence, Newco II only assumes obligations thereunder which accrue after the
Effective Time, and has no responsibility whatsoever for any breaches or
defaults which occurred prior to the later of the Effective Time or the Closing
Date (as defined in the Contribution Agreement), or for obligations accruing
prior to the Effective Time.
BDEC acknowledges and agrees that, except as expressly set forth in the
immediately preceding paragraph, Newco II does not assume any debts, liabilities
or obligations of any kind whatsoever, 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 the Contribution Agreement, and any liabilities
arising from any litigation or civil, criminal or regulatory proceeding
involving or related to BDEC or its business), and any and all of such debts,
liabilities and obligations shall remain the sole responsibility of BDEC.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
ASSIGNMENT AND ASSUMPTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be executed by their duly authorized representatives,
effective for all purposes the 1st day of September, 1999.
PRIME: PRIME MEDICAL OPERATING, INC.
By:
Printed Name:
Title:
BDEC: BARNET DULANEY EYE CENTER, P.L.L.C.
By: ________________________________
Ronald W. Barnet, M.D., manager
By: ________________________________
David D. Dulaney, M.D., manager
NEWCO II: PRIME/BDEC ACQUISITION, L.L.C.
By:
Printed Name:
Title:
<PAGE>
EXHIBIT-G1
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into as of the ____
day of September, 1999, by and between Prime Medical Operating, Inc., a Delaware
corporation, and Prime/BDR Acquisition, L.L.C., a Delaware limited liability
company.
Definitions:
EFFECTIVE DATE: September ___, 1999
BORROWER: Prime/BDR Acquisition, L.L.C., a Delaware limited liability
company
BORROWER'S ADDRESS: 1301 Capital of Texas Highway, Suite C-300, Austin,
Texas 78746
LENDER: Prime Medical Operating, Inc., a Delaware corporation
LENDER'S ADDRESS: 1301 Capital of Texas Highway, Suite C-300, Austin, Texas
78746
NOTES:
Working Capital Note: Promissory Note (Line of Credit) in the maximum
principal amount of $200,000 (the "Working Capital Maximum Principal Amount")
dated September ___, 1999, executed by Borrower, and payable to the order of
Lender as provided therein (the "Working Capital Note").
Development Facility Notes: Promissory Notes in the aggregate maximum
original principal amount not to exceed $40,000,000 (the "Development Facility
Maximum Principal Amount"), executed by Borrower and payable to the order of
Lender as provided therein (the "Development Facility Notes"). Collectively, the
Working Capital Notes and the Development Facility Notes are referred to herein
as the "Notes."
SECURITY AGREEMENTS: All documents, agreements and instruments hereinafter
or herewith executed by Borrower, LASIK Investors, L.L.C., a Delaware limited
liability company ("LASIK") or any Target Center securing this Agreement or the
obligations under any of the Notes.
LOAN DOCUMENTS: This Agreement, the Working Capital Note, the
Development Facility Notes, the Security Agreements, and all other
documents, agreements, and instruments now or hereafter existing,
evidencing, securing, or otherwise relating to this Agreement and any
transactions contemplated by this Agreement, as any of the foregoing items
may be modified or supplemented from time to time.
INDEBTEDNESS: All present and future indebtedness, obligations and liabilities
of Borrower to Lender, all present and future indebtedness, obligations and
liabilities of any Target Center to Lender, and all renewals, extensions and
modifications of either of the foregoing, arising pursuant to any of the Loan
Documents and all interest accruing thereon, and all other fees, costs,
expenses, charges and attorneys' fees payable, and covenants performable, under
any of the Loan Documents (including without limitation this Agreement).
DEFINED TERMS: Terms not otherwise defined herein shall have the
meaning provided in that certain Contribution Agreement dated effective
September 1, 1999, by and among Barnet Dulaney Eye Center, P.L.L.C., David
D. Dulaney, M.D., Ronald W. Barnet, M.D., Mark Rosenberg, Prime Medical
Services, Inc., Lender, Borrower, LASIK and Prime/BDEC Acquisition, L.L.C.
(the "Contribution Agreement"). For the purposes hereof the terms "Target
Centers" and "Target Center" shall have the meaning set forth in the
Contribution Agreement, but shall include, upon the acquisition of a Target
Center by Borrower or any subsidiary or affiliate of Borrower, the
subsidiary or affiliate utilized to make such acquisition.
AGREEMENT:
Borrower has requested from Lender the credit accommodations described
below, and Lender has agreed to provide such credit accommodations on the
terms and conditions contained herein. Therefore, for good and valuable
consideration, the receipt and sufficiency of which Lender and Borrower
acknowledge, Lender and Borrower hereby agree as follows:
ARTICLE I
THE WORKING CAPITAL LOAN
1.1 The Working Capital Loan. Lender agrees to lend and Borrower
agrees to borrow an amount not to exceed the Working Capital Maximum
Principal Amount on the terms and conditions set forth herein (the "Working
Capital Loan"). The Working Capital Loan will be evidenced by the Working
Capital Note. ------------------------
1.2 Revolving Line of Credit. Subject to and in reliance upon the
terms, conditions, representations and warranties hereinafter set forth,
Lender agrees to make advances (the "Working Capital Advances") to Borrower
from time to time during the period from the Effective Date to and
including the one year anniversary of the Effective Date (the "Maturity
Date"), in an aggregate amount not to exceed the Working Capital Maximum
Principal Amount. Each Working Capital Advance must be either
------------------------ $10,000 or a higher integral multiple of $10,000.
Funds borrowed and repaid may be reborrowed, so long as all conditions
precedent to Working Capital Advances are met. The purpose of the Working
Capital Advances is to provide funds to Borrower for working capital and
for other general business purposes of Borrower.
1.3 Interest and Repayment. Borrower shall pay the aggregate unpaid
principal amount of all Working Capital Advances in accordance with the
terms of the Working Capital Note evidencing the indebtedness resulting
from such Working Capital Advances. Interest on the Working Capital
Advances shall be due and payable in the manner and at the times set forth
in the Working Capital Note, with final maturity of the Working Capital
Note being on or before the Maturity Date. ----------------------
1.4 Making Advances. Each Working Capital Advance shall be made within
two business days of written notice (or telephonic notice confirmed in
writing) given by noon (Austin, Texas time) on a business day of Lender by
Borrower to Lender specifying the amount and date thereof (which may be the
same business day) and if sent by wired funds, at Lender's option, the
wiring instructions of the deposit account of Borrower to which such
Working Capital Advance is to be deposited. ---------------
1.5 Payments and Computations. Borrower shall make each payment
hereunder and under the Working Capital Note on the day when due in lawful
money of the United States of America to Lender at Lender's Address for
Payment in same day funds. All repayments of principal on the Working
Capital Note shall be in a minimum amount of $1,000, or a higher integral
multiple of $1,000. All computations of interest shall be made by Lender on
the basis of the actual number of days (including the first
------------------------- day but excluding the last day) in the year (365
or 366, as the case may be) elapsed, but in no event shall any such
computation result in an amount of interest that would cause the interest
contracted for, charged or received by Lender to be in excess of the amount
that would be payable at the Highest Lawful Rate, as herein defined.
ARTICLE II
THE DEVELOPMENT FACILITY LOANS
2.1 The Development Facility. Subject to the terms of the Contribution
Agreement and the terms, conditions, representations and warranties
hereinafter set forth, Lender agrees to lend Borrower from time to time,
the amounts necessary to acquire or develop Target Centers, in an aggregate
amount not to exceed the Development Facility Maximum Principal Amount
(collectively, the "Development Facility Loans"). ------------------------
2.2 Development Facility Loans. Each Development Facility Loan will
finance up to 100% of the purchase price (or development cost) of a Target
Center being acquired (or developed) by Borrower. The parties acknowledge that
the grant of any Development Facility Loan does not create any obligation on the
part of Lender to extend further Development Facility Loans. Additionally, each
Development Facility Loan is subject in all respects to Lender obtaining prior
written approval from the bank syndication under its or its parent company's
outstanding borrowing facilities and the execution and delivery of such
guarantees by Borrower as may be required by such bank syndication. Pursuant to
the Contribution Agreement, each Development Facility Loan must be (a) evidenced
by a separate Development Facility Note executed by Borrower, (b) secured by all
of LASIK's ownership interest in Borrower as evidenced by an Assignment and
Security Agreement executed by LASIK, and (c) accompanied by Assignment and
Security Agreements executed by Borrower. In addition, if Borrower is acquiring,
directly or indirectly, a one hundred percent (100%) interest in a Target Center
(hereinafter referred to as a "100% Target Center"), Borrower shall cause such
Target Center to execute a security agreement, acceptable in form and substance
to Lender, granting to Lender or one of Lender's subsidiaries the highest
available priority security interest in all of the assets of such Target Center.
2.3 Interest and Repayment. Borrower and Target Center shall pay the
unpaid principal amount under each Development Facility Note in accordance
with the terms of the respective Development Facility Note. Payments of
interest and principal on each Development Facility Note shall be due and
payable in the manner and at the times set forth in the respective
Development Facility Note. ----------------------
ARTICLE III
CONDITIONS TO WORKING CAPITAL ADVANCES AND DEVELOPMENT FACILITY LOANS
3.1 Conditions Precedent to Initial Working Capital Advance. The
obligation of Lender to make its initial Working Capital Advance is subject
to the condition precedent that Lender shall have received on or before the
day of such Working Capital Advance the following, each in form and
substance satisfactory to Lender and properly executed by Borrower or other
appropriate parties: (a) the Working Capital Note duly executed by
Borrower, and (b) such other documents, opinions, certificates and
------------------------------------------------------- evidences as Lender
may reasonably request.
3.2 Conditions Precedent to Each Working Capital Advance/Development
Facility Loan. In addition to the conditions precedent stated elsewhere
herein, Lender shall not be obligated to make any Working Capital Advance
or any Development Facility Loan unless:
(a) the representations and warranties contained in Article IV are
true and correct in all material respects on and as of the date of such
Working Capital Advance or Development Facility Loan, as though made on and
as of such date with such changes therein;
(b) on the date of the Working Capital Advance or Development Facility
Loan, no Event of Default, and no event which, with the lapse of time or
notice or both, could become an Event of Default, has occurred and is
continuing;
(c) there shall have been no material adverse change, as determined by
Lender in its reasonable judgment, in the financial condition or business
of Borrower;
(d) there has been no breach or threatened breach by Borrower under
the Contribution Agreement or any Transaction Document (as such term is
defined in the Contribution Agreement);
with respect to each Development Facility Loan, Borrower executes
the respective Development Facility Note and Borrower executes an Assignment and
Security Agreement in the form attached as Exhibit G3 to the Contribution
Agreement, and otherwise in form and substance acceptable to Lender wherein
Lender is granted a first lien perfected security interest in all of Borrower's
or Borrower's subsidiaries' ownership interest in the Target Center and related
acquisition documents;
LASIK shall have previously granted to Lender a first lien
perfected security interest in all of LASIK's ownership interest in Borrower
through the execution and delivery of the Assignment and Security Agreement in
the form attached as Exhibit G4 to the Contribution Agreement and LASIK shall be
in compliance with all of its obligations thereunder;
(g) if Borrower is using a Development Facility Loan to acquire,
directly or indirectly, a 100% Target Center, Borrower shall cause such
Target Center to execute a security agreement, acceptable in form and
substance to Lender, granting to Lender or one of Lender's subsidiaries the
highest available priority security interest in all of the assets of such
Target Center; and
(h) Lender shall have received such other approvals, opinions,
documents, certificates or evidences as Lender may reasonably request (in
form and substance reasonably satisfactory to Lender). Each request for an
Working Capital Advance or Development Facility Loan shall be deemed a
representation by Borrower that the conditions of this Section 3.2 have
been met.
ARTICLE IV
BORROWER'S REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender as follows:
4.1 Good Standing. Borrower is a duly formed limited liability
company, duly organized and in good standing, under the laws of Delaware
and has the power to own its property and to carry on its business in each
jurisdiction in which Borrower operates. -------------
4.2 Authority and Compliance. Borrower has full power and authority to
enter into this Agreement, to make the borrowing hereunder, to execute and
deliver the Loan Documents and to incur the indebtedness described in this
Agreement, all of which has been duly authorized by all proper and necessary
action of its managers and members. No further consent or approval of any public
authority is required as a condition to the validity of any Loan Document, and
Borrower is in compliance with all laws and regulatory requirements to which it
is subject.
4.3 Binding Agreement. This Agreement and other Loan Documents when
issued and delivered pursuant hereto for value received will constitute,
valid and legally binding obligations of Borrower in accordance with their
terms. -----------------
4.4 Litigation. There are no proceedings pending or, to the knowledge
of Borrower, threatened before any court or administrative agency which
will or may have a material adverse effect on the financial condition or
operations of Borrower or any subsidiary, except as disclosed to Lender in
writing prior to the date of this Agreement. To the knowledge of Borrower,
there are no proceedings pending or threatened against any Target Center.
----------
4.5 No Conflicting Agreements. There are no provisions of Borrower's
organizational documents and no provisions of any existing agreement,
mortgage, indenture or contract binding on Borrower or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of the Loan Documents.
-------------------------
4.6 Ownership of Assets. Borrower will at all times maintain its
tangible property, real and personal, in good order and repair taking into
consideration reasonable wear and tear. -------------------
4.7 Taxes. All income taxes and other taxes due and payable through
the date of this Agreement have been paid prior to becoming delinquent.
-----
ARTICLE V
BORROWER'S AFFIRMATIVE COVENANTS
So long as Borrower may borrow under this Agreement and until payment
in full of the Working Capital Note and all Development Facility Notes, and
performance of all other obligations of Borrower and Target Centers hereunder or
thereunder, Borrower covenants and agrees to do the following:
5.1 Financial Statements.
(a) Maintain, and cause each Target Center to maintain, a
system of accounting satisfactory to Lender and in accordance with
generally accepted accounting principles consistently applied, and will
permit Lender's officers or authorized representatives to visit and
inspect Borrower's or Target Center's books of account and other
records at such reasonable times and as often as Lender may desire
during office hours and after reasonable notice to Borrower, and pay
the reasonable fees and disbursements of any accountants or other
agents of Lender selected by Lender for the foregoing purposes. Unless
written notice of another location is given to Lender, Borrower's books
and records will be located at Borrower's Address.
(b) Furnish to Lender year end financial statements, of Borrower and
each Target Center, to include balance sheet, operating statement and
surplus reconciliation, together with an officer's certificate of
compliance with this Agreement including computations of all quantitative
covenants, within 90 days after the end of each annual accounting period.
(c) Furnish to Lender quarterly financial statements, of Borrower and
each Target Center, to include balance sheet and profit and loss statement,
together with an officer's certificate of compliance with this Agreement
including computations of all quantitative covenants, within 45 days of the
end of each such accounting period.
(d) With each balance sheet delivered under subsections (b) or
(c) of this Section 5.1, an aging of all Accounts Receivable.
(e) Promptly provide Lender with such additional information, reports
or statements respecting the business operations and financial condition of
Borrower or any Target Center, as Lender may reasonably request from time
to time.
5.2 Insurance. Maintain, and cause each Target Center to maintain,
insurance with responsible insurance companies on such of its respective
properties, in such amounts and against such risks as is customarily maintained
by similar businesses operating in the same vicinity, specifically to include a
policy of fire and extended coverage insurance covering all assets, and
liability insurance, all to be with such companies and in such amounts
satisfactory to Lender and to contain a mortgage clause naming Lender as its
interest may appear. Evidence of such insurance will be supplied to Lender.
5.3 Existence and Compliance. Maintain, and cause each Target Center
to maintain, its organizational existence in good standing and comply with
all laws, regulations and governmental requirements applicable to it or to
any of its property, business operations and transactions. Borrower further
agrees to provide Lender with copies of all instruments filed with the
Delaware Secretary of State amending and/or renewing Borrower's certificate
of formation. ------------------------
5.4 Adverse Conditions or Events. Promptly advise Lender in writing of
any condition, event or act which comes to its attention that would or
might materially affect Borrower's or any Target Center's financial
condition, Lender's rights under this Agreement or any of the Loan
Documents, and of any litigation filed against Borrower or to its knowledge
against any Target Center. ----------------------------
5.5 Taxes. Pay all taxes as they become due and payable.
5.6 Maintenance. Maintain, and cause each Target Center to maintain,
all of its respective tangible property in good condition and repair,
reasonable wear and tear excepted, and make all necessary replacements
thereof, and preserve and maintain all licenses, privileges, franchises,
certificates and the like necessary for the operation of its business.
-----------
5.7 Application of Earnings. Except as expressly contemplated in
Section 4.3(e) of the Contribution Agreement, pay all available funds
toward repayment of the Working Capital Note and any Development Facility
Notes, regardless of whether payment of such amounts exceeds the minimum
required payments under the Working Capital Note and the Development
Facility Notes. -----------------------
ARTICLE VI
BORROWER'S NEGATIVE COVENANTS
So long as Borrower may borrow under this Agreement and until payment
in full of the Working Capital Note and all Development Facility Notes, and
performance of all other obligations of Borrower or Target Center hereunder or
thereunder, Borrower will not, and will cause each of the Target Centers to not,
without the prior written consent of Lender:
6.1 Transfer of Assets. Enter into any merger or consolidation, or
sell, lease, assign, or otherwise dispose of or transfer any assets except
in the normal course of its business. ------------------
6.2 Change in Ownership or Structure. Dissolve or liquidate; become a
party to any merger or consolidation; reorganize as a professional
corporation; acquire by purchase, lease or otherwise all or substantially
all of the assets or capital stock of any corporation or other entity; or
sell, transfer, lease, or otherwise dispose of all or any substantial part
of its respective property or assets or business.
--------------------------------
6.3 Liens. From and after the date hereof grant, suffer, or permit
liens on or security interests in its respective assets, or fail to
promptly pay all lawful claims, whether for labor, materials, or otherwise,
except for purchase money security interests arising in the ordinary course
of its respective business. -----
6.4 Loans. Make any loans, advances or investments to or in any joint
venture, corporation or other entity, except for the purchase of
obligations of Lender or U.S. Government obligations or the purchase of
federally-insured certificates of deposit. -----
6.5 Borrowings. Except for borrowing or incurring open accounts
payable to unaffiliated third parties in the ordinary course of business,
create, incur, assume, or liable in any manner for any indebtedness (for
borrowed money, deferred payment for the purchase of assets, lease
payments, as surety or guarantor of the debt of another, or otherwise)
other than to Lender in excess of $25,000 without Lender's prior written
consent. ----------
6.6 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated. -----------------------
6.7 Equity Redemptions or Restructurings. Apply any of its property or
assets to the purchase, retirement or redemption of any of its equity
interests or in any way amend its capital structure.
------------------------------------
6.8 Character of Business. Change the general character of business as
conducted at the date hereof, or engage in any type of business not
reasonably related to its business as presently and normally conducted.
---------------------
ARTICLE VII
EVENTS OF DEFAULT; NOTICE; ACCELERATION
7.1 Events of Default. If one or more of the following events of
default shall occur and continue after thirty (30) days' written notice to
Borrower, all outstanding principal plus unpaid interest of the Working
Capital Note and each Development Facility Note, and any other indebtedness
of Borrower to Lender, shall automatically be due and payable immediately
and Lender shall have no further obligation to fund under this Agreement.
-----------------
(a) There shall be any breach or default shall be made in the payment
of any installment of principal or interest upon the Working Capital Note
or any Development Facility Note, when due and payable, whether at maturity
or otherwise; or
(b) There shall be any breach or default (other than by Lender or
Prime Medical Services, Inc.) under any Loan Document, the Contribution
Agreement, or any Transaction Document (other than those certain Consulting
Agreements with Dr. Dulaney, Dr. Barnet and Mark Rosenberg as required
pursuant to the Contribution Agreement), or any other certificate,
agreement or document contemplated hereby or thereby; or
(c) Any representation or warranty of Borrower contained herein or in
any financial statement, certificate, report or opinion submitted to Lender
in connection with the Working Capital Loan or any Development Facility
Loan, or by Borrower pursuant to the requirements of this Agreement, shall
prove to have been incorrect or misleading in any material respect when
made; or
(d) Any judgment against Borrower or any attachment or other levy
against the property of Borrower with respect to a claim materially
affecting Borrower's financial status remains unpaid, unstayed on appeal,
undischarged, not bonded or not dismissed for a period of 30 days; or
(e) The bankruptcy, death, or dissolution of any guarantor of the
Indebtedness; or
(f) Borrower makes an assignment for the benefit of creditors,
admits in writing its inability to pay its debts generally as they
become due, files a petition in bankruptcy, is adjudicated insolvent or
bankrupt, petitions or applies to any tribunal for any receiver or any
trustee of Borrower or any substantial part of their respective
property, commences any action relating to Borrower under any
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, or if there is commenced against Borrower any such
action, or Borrower by any act indicates its consent to or approval of
any trustee for Borrower or any substantial part of its property, or
suffers any such receivership or trustee to continue undischarged.
7.2 Lender's Remedies. Upon the occurrence of an Event of Default,
Lender, without notice of any kind, except for any notice required under this
Agreement or any other Loan Document, may, at Lender's option: (i) terminate its
obligation to fund any Working Capital Advance or any Development Facility Loan
hereunder; (ii) declare the Indebtedness, in whole or in part, immediately due
and payable; and/or (iii) exercise any other rights and remedies available to
Lender under this Agreement, any other Loan Document, or applicable laws; except
that upon the occurrence of an Event of Default described in subsection 7.1(f),
all the Indebtedness shall automatically be immediately due and payable, and
Lender's obligation to fund any Working Capital Advance or any Development
Facility Loan hereunder shall automatically terminate, without notice of any
kind (including without limitation notice of intent to accelerate and notice of
acceleration) to Borrower or to any Target Center, guarantor, or to any surety
or endorser of any of the Notes, or to any other person. Borrower, each Target
Center, and each guarantor, surety, and endorser of any of the Notes, and any
and all other parties liable for the Indebtedness or any part thereof, waive
demand, notice of intent to demand, presentment for payment, notice of
nonpayment, protest, notice of protest, grace, notice of dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, and diligence
in collection.
7.3 Right of Set-Off. Borrower hereby authorizes Lender, to the maximum
extent permitted under and in accordance with applicable laws, at any time after
the occurrence of an Event of Default which continues uncured, to set-off and
apply any and all deposits, funds or assets at any time held and any and all
other indebtedness at any time owing by Lender to or for the credit or the
account of Borrower against any and all Indebtedness, whether or not Lender
exercises any other right or remedy hereunder and whether or not such
Indebtedness are then matured.
ARTICLE VIII
GENERAL TERMS AND CONDITIONS
8.1 Notices. All notices, demands, requests, approvals and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given when (a) presented personally, or (b) three (3) days
after deposited in a regularly maintained mail receptacle of the United States
Postal Service, postage prepaid, certified, return receipt requested, or (c)
upon receipt of confirmation after sending by facsimile transmission, addressed
to Borrower or Lender, as the case may be, at the respective addresses or
facsimile number for notice set forth on the first page of this Agreement, or
such other address or facsimile number as Borrower or Lender may from time to
time designate by written notice to the other.
8.2 Entire Agreement and Modifications. The Loan Documents, together
with the Contribution Agreement and Transaction Documents, constitute the
entire understanding and agreement between the undersigned with respect to
the transactions arising in connection with the Working Capital Loan and
the Development Facility Loans, and supersede all prior written or oral
understandings and agreements between the undersigned in connection
therewith. No provision of this Agreement or the other Loan
---------------------------------- Documents may be modified, waived, or
terminated except by instrument in writing executed by the party against
whom a modification, waiver, or termination is sought to be enforced, and,
in the case of Lender, executed by a Vice President or higher level officer
of Lender.
8.3 Severability. In case any of the provisions of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
------------
8.4 Cumulative Rights and No Waiver. Lender shall have all of the
rights and remedies granted in the Loan Documents and available at law or in
equity, and these same rights and remedies shall be cumulative and may be
pursued separately, successively, or concurrently against Borrower, at the sole
discretion of Lender. Lender's delay in exercising any right shall not operate
as a waiver thereof, nor shall any single or partial exercise by Lender of any
right preclude any other or future exercise thereof or the exercise of any other
right. Any of Borrower's covenants and agreements may be waived by Lender but
only in writing signed by an authorized officer of Vice President level or
higher of Lender or any subsequent owner or holder of any of the Notes. Except
as otherwise expressly provided in this Agreement and in any Note, Borrower
expressly waives any presentment, demand, protest, notice of default, notice of
intent to accelerate, notice of acceleration, notice of intent to demand
payment, or other notice of any kind. No notice to or demand on Borrower in any
case shall, of itself, entitle Borrower to any other or further notice or demand
in similar or other circumstances. No delay or omission by Lender in exercising
any power or right hereunder shall impair any such right or power or be
construed as a waiver thereof, or the exercise of any other right or power
hereunder.
8.5 Form and Substance. All documents, certificates, insurance
policies, and other items required under this Agreement to be executed
and/or delivered to Lender shall be in form and substance reasonably
satisfactory to Lender. ------------------
8.6 Limitation on Interest: Maximum Rate. Lender and Borrower intend to
contract in strict compliance with applicable usury law from time to time in
effect. To effectuate this intention, Lender and Borrower stipulate and agree
that none of the terms and provisions of any Note and any other agreement among
such parties, whether now existing or arising hereafter, shall ever be construed
as a contract to pay interest for the use, forbearance or detention of money in
excess of the Maximum Rate. If, from any possible construction of any document,
interest would otherwise be payable to Lender in excess of the Maximum Rate, any
such construction shall be subject to the provisions of this Section and such
document shall be automatically reformed and the interest payable to Lender
shall be automatically reduced to the Maximum Rate permitted under applicable
law, without the necessity of the execution of any amendment or new document.
Neither Borrower, endorsers or other persons now or hereafter becoming liable
for payment of any portion of the principal or interest of any Note shall ever
be liable for any unearned interest on the principal amount or shall ever be
required to pay interest thereon in excess of the Maximum Rate that may be
lawfully charged under applicable law from time to time in effect. Lender and
any subsequent holder of any Note expressly disavow any intention to charge or
collect unearned or excessive interest or finance charges in the event the
maturity of any Note, is accelerated. If the maturity of any Note is accelerated
for any reason, whether as a result of a default under any Note, or by voluntary
prepayment, or otherwise, any amounts constituting interest, or adjudicated as
constituting interest, which are then unearned and have previously been
collected by Lender or any subsequent holder of any Note shall be applied to
reduce the principal balance thereof then outstanding, or if such amounts exceed
the unpaid balance of principal, the excess shall be refunded to Borrower (and
Target Center, as applicable). In the event Lender or any subsequent holder of
any Note ever receives, collects or applies as interest any amounts constituting
interest or adjudicated as constituting interest which would otherwise increase
the interest to an amount in excess of the amount permitted under applicable
law, such amount which would be excessive interest shall be applied to the
reduction of the unpaid principal balance of such Note, and, if the principal
balances of such Note is paid in full, any remaining excess shall be paid to
Borrower (and Target Center, as applicable). In determining whether or not the
interest paid or payable under the specific contingencies exceeds the Maximum
Rate allowed by applicable law, Borrower and Lender shall, to the maximum extent
permitted under applicable law, (i) characterize any non-principal payment as an
expense, fee or premium, rather than as interest; (ii) exclude voluntary
prepayments and the effect thereof; (iii) amortize, prorate, allocate and
spread, in equal parts, the total amount of interest throughout the entire
contemplated term of the applicable Note (as it may be renewed and extended) so
that the interest rate is uniform throughout the entire term of such Note. The
terms and provisions of this section shall control and supersede every other
provision of all existing and future agreements between Lender and Borrower (and
Target Center, as applicable). As used in this Agreement, "Maximum Rate" means
the maximum non-usurious interest rate that at any time or from time to time may
be contracted for, taken, reserved, charged or received on the unpaid principal
or accrued past due interest under applicable law and may be greater than the
applicable rate, the parties hereby stipulating and agreeing that Lender may
contract for, take, reserve, charge or receive interest up to the Maximum Rate
without penalty under any applicable law; and "applicable law" means the laws of
the State of Texas or the laws of the United States of America, whichever laws
allow the greater interest, as such laws now exist or may be changed or amended
or come into effect in the future. In the event applicable law provides for an
interest ceiling under Chapter One of Title 79, Texas Revised Civil Statutes
Annotated, as amended, that ceiling shall be the indicated rate ceiling, subject
to any right Lender may have in the future to change the method of determining
the Maximum Rate.
8.7 Third Party Beneficiary. Borrower acknowledges that the bank
syndication under the senior credit facility of Prime Medical Services,
Inc. (as hereinafter supplemented, modified, or replaced) is a third party
beneficiary to this Agreement. Except for the preceding sentence, this
Agreement is for the sole benefit of Lender and Borrower and is not for the
benefit of any third party. -----------------------
8.8 Borrower In Control. In no event shall Lender's rights and
interests under the Loan Documents be construed to give Lender the right
to, or be deemed to indicate that Lender is in control of the business,
management or properties of Borrower or any Target Center or has power over
the daily management functions and operating decisions made by Borrower or
any Target Center. -------------------
8.9 Use of Financial and Other Information. Borrower agrees that
Lender shall be permitted to investigate and verify the accuracy of any and
all information furnished to Lender in connection with the Loan Documents,
including without limitation financial statements, and to disclose such
information, or provide copies of such information, to representatives
appointed by Lender, including independent accountants, agents, attorneys,
asset investigators, appraisers and any other persons deemed
-------------------------------------- necessary by Lender to such
investigation.
8.10 Collateral Assignment of Loan Documents. Lender shall have the
right to collaterally assign all of its rights under this Agreement and the
other Loan Documents to the third party beneficiaries described in Section 8.7.
Lender shall have the right to disclose in confidence such financial information
regarding Borrower as may be necessary to complete any such assignment or
attempted assignment, including without limitation, all financial statements,
projections, internal memoranda, audits, reports, payment history, appraisals
and any and all other information and documentation in Lender's files relating
to Borrower. This authorization shall be irrevocable in favor of Lender, and
Borrower waives any claims against Lender or the party receiving information
from Lender regarding disclosure of information in Lender's files, and further
waive any alleged damages which may result from such disclosure. Borrower
acknowledges that Lender intends to make a collateral assignment of its rights
under this Agreement and the Loan Documents for the benefit of one or more of
its or its parent company's lenders and will not be authorized to amend or
modify this Agreement or the Loan Documents, or grant waivers of any of its
rights thereunder without the prior written consent of some or all of such
lenders.
8.11 Further Assurances. Borrower agrees to execute and deliver, and
cause each Target Center to execute and deliver, to Lender, promptly upon
request from Lender, such other and further documents as may be reasonably
necessary or appropriate to consummate the transactions contemplated
herein. ------------------
8.12 Number and Gender. Whenever used herein, the singular number
shall include the plural and the plural the singular, and the use of any
gender shall be applicable to all genders. The duties, covenants,
obligations, and warranties of Borrower in this Agreement shall be joint
and several obligations of Borrower and of each Borrower if more than one.
-----------------
8.13 Captions. The captions, headings, and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit,
amplify, or modify the terms and provisions hereof. --------
8.14 Continuing Agreement. This is a continuing agreement and all
rights, powers, and remedies of Lender under this Agreement and the other Loan
Documents shall continue in full force and effect until each Note is paid in
full as the same becomes due and payable and all other Indebtedness is paid and
discharged, until Lender has no further obligation to advance moneys to Borrower
under this Agreement, and until Lender, upon request of Borrower, has executed a
written termination statement. Furthermore, the parties contemplate that there
may be times when no Indebtedness is owing, but notwithstanding such occurrence,
this Agreement (and all other Loan Documents) shall remain valid and shall be in
full force and effect as to subsequent Indebtedness and Advances, provided that
Lender has not executed a written termination statement.
8.15 Applicable Law. This Agreement and the Loan Documents shall be
governed by and construed in accordance with the laws of the State of Texas
and the laws of the United States applicable to transactions within such
state. --------------
8.16 NO ORAL AGREEMENTS. THE WRITTEN LOAN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
SIGNATURE PAGE TO
LOAN AGREEMENT
EXECUTED as of ____ day of September, 1999.
BORROWER:
PRIME/BDR ACQUISITION, L.L.C.
By: ______________________________________
Name: ____________________________________
Title: _____________________________________
LENDER:
PRIME MEDICAL OPERATING, INC.
By: ______________________________________
Name: ____________________________________
Title: _____________________________________
<PAGE>
EXHIBIT-G2
PROMISSORY NOTE
Austin, Texas (LINE OF CREDIT) September 1, 1999
PROMISE TO PAY: For value received, the undersigned Borrower (whether one or
more) promises to pay to the order of Lender the Principal Amount, to the extent
advanced by Lender, together with interest on the unpaid balance of such amount,
in lawful money of the United States of America, in accordance with all the
terms, conditions, and covenants of this Note and the Loan Documents identified
below.
BORROWER: Prime/BDR Acquisition, L.L.C., a Delaware limited liability
company
BORROWER'S ADDRESS FOR NOTICE: 1301 Capital of Texas Highway, Suite C-300
Austin, Texas 78746 Attention: President
LENDER: Prime Medical Operating, Inc., a Delaware corporation
LENDER'S ADDRESS FOR PAYMENT: 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746 Attention: Chief Financial Officer
PRINCIPAL AMOUNT: Two Hundred Thousand Dollars ($200,000)
INTEREST RATE: Fifteen Percent (15%)
PAYMENT TERMS: Interest on the unpaid balance of this Note is due and payable
quarterly, beginning November 1, 1999, and continuing regularly and quarterly
thereafter on or before the first day of February, May, August, until September
1, 2000 (the "Maturity Date"), when the outstanding principal balance and all
accrued interest shall be due and payable in full. Interest will be calculated
on the unpaid principal balance. Each payment will be credited first to the
accrued interest and then to the reduction of principal.
REVOLVING LINE OF CREDIT: This Note evidences a revolving line of credit.
Subject to the terms of the Loan Agreement between Borrower and Lender of even
date herewith, all or any portion of the Principal Amount of this Note may be
borrowed, paid, prepaid, repaid, and reborrowed, from time to time prior to the
Maturity Date and in accordance with the Loan Documents. Each borrowing and
repayment hereunder will be (i) endorsed on an attachment to this Note, or (ii)
entered in the books and records of Lender. The books and records of Lender
shall be prima facie evidence of all sums due Lender. If an event of default
exists under this Note or any Loan Document, then Lender shall be under no
obligation to make any advance under this Note.
LOAN AGREEMENT: This Note is executed pursuant to and is governed by the
terms of the Loan Agreement of even date herewith, executed by Borrower and
Lender, as amended (collectively, the "Loan Agreement").
1. INTEREST PROVISIONS:
Rate: The principal balance of this Note from time to time remaining unpaid
prior to maturity shall bear interest at the Interest Rate per annum stated
above. Interest shall be calculated on the amount of each advance of the
Principal Amount of this Note from the date of each such advance.
Maximum Lawful Interest: The term "Maximum Lawful Rate" means the maximum rate
of interest and the term "Maximum Lawful Amount" means the maximum
amount of interest that is permissible under applicable state or
federal law for the type of loan evidenced by this Note and the other
Loan Documents. If the Maximum Lawful Rate is increased by statute or
other governmental action subsequent to the date of this Note, then the
new Maximum Lawful Rate shall be applicable to this Note from the
effective date thereof, unless otherwise prohibited by applicable law.
Spreadingof Interest: Because of the possibility of irregular periodic balances
of principal or premature payment, the total interest that will accrue
under this Note cannot be determined in advance. Lender does not intend
to contract for, charge, or receive more than the Maximum Lawful Rate
or Maximum Lawful Amount permitted by applicable state or federal law,
and to prevent such an occurrence Lender and Borrower agree that all
amounts of interest, whenever contracted for, charged, or received by
Lender, with respect to the loan of money evidenced by this Note, shall
be spread, prorated, or allocated over the full period of time this
Note is unpaid, including the period of any renewal or extension of
this Note. If demand for payment of this Note is made by Lender prior
to the full stated term, the total amount of interest contracted for,
charged, or received to the time of such demand shall be spread,
prorated, or allocated along with any interest thereafter accruing over
the full period of time that this Note thereafter remains unpaid for
the purpose of determining if such interest exceeds the Maximum Lawful
Amount.
Excess Interest: At maturity (whether by acceleration or otherwise) or on
earlier final payment of this Note, Lender shall compute the total
amount of interest that has been contracted for, charged, or received
by Lender or payable by Borrower under this Note and compare such
amount to the Maximum Lawful Amount that could have been contracted
for, charged, or received by Lender. If such computation reflects that
the total amount of interest that has been contracted for, charged, or
received by Lender or payable by Borrower exceeds the Maximum Lawful
Amount, then Lender shall apply such excess to the reduction of the
principal balance and not to the payment of interest; or if such excess
interest exceeds the unpaid principal balance, such excess shall be
refunded to Borrower. This provision concerning the crediting or refund
of excess interest shall control and take precedence over all other
agreements between Borrower and Lender so that under no circumstances
shall the total interest contracted for, charged, or received by Lender
exceed the Maximum Lawful Amount.
Interest After Default: At Lender's option, the unpaid principal balance shall
bear interest after maturity (whether by acceleration or otherwise) at
the "Default Interest Rate." The Default Interest Rate shall be, at
Lender's option, (i) the Maximum Lawful Rate, if such Maximum Lawful
Rate is established by applicable law; or (ii) the Interest Rate stated
on the first page of this Note plus five (5) percentage points, if no
Maximum Lawful Rate is established by applicable law; or (iii) eighteen
percent (18%) per annum; or (iv) such lesser rate of interest as Lender
in its sole discretion may choose to charge; but never more than the
Maximum Lawful Rate or at a rate that would cause the total interest
contracted for, charged, or received by Lender to exceed the Maximum
Lawful Amount.
Daily Computation of Interest: To the extent permitted by applicable law, Lender
at its option will calculate the per diem interest rate or amount based on the
actual number of days in the year (365 or 366, as the case may be), and charge
that per diem interest rate or amount each day. In no event shall Lender compute
the interest in a manner that would cause Lender to contract for, charge, or
receive interest that would exceed the Maximum Lawful Rate or the Maximum Lawful
Amount
DEFAULT PROVISIONS:
EVENTS OF DEFAULT AND ACCELERATION OF MATURITY: LENDER MAY, AFTER THIRTY (30)
DAYS' WRITTEN NOTICE TO BORROWER AND BORROWER'S FAILURE TO CURE WITHIN SUCH
30-DAY PERIOD AND WITHOUT FURTHER NOTICE OR DEMAND, (except as otherwise
required by statute), ACCELERATE THE MATURITY OF THIS NOTE AND DECLARE THE
ENTIRE UNPAID PRINCIPAL BALANCE AND ALL ACCRUED INTEREST AT ONCE DUE AND PAYABLE
IF:
There is default in the payment of any installment of principal,
interest, or any other sum required to be paid under the terms of this Note or
any of the Loan Documents; or
There is a breach or default (other than by Lender or Prime Medical
Services, Inc.) under this Note or any of the Loan Documents, including any
instrument securing the payment of this Note or any loan agreement relating to
the advance of loan proceeds.
WAIVER BY BORROWER: EXCEPT AS PROVIDED IN PARAGRAPH 2(a) HEREOF AND IN ANY
OTHER LOAN DOCUMENT, BORROWER AND ALL OTHER PARTIES LIABLE FOR THIS
NOTE WAIVE, DEMAND, NOTICE OF INTENT TO DEMAND, PRESENTMENT FOR
PAYMENT, NOTICE OF NONPAYMENT, PROTEST, NOTICE OF PROTEST, GRACE,
NOTICE OF DISHONOR, NOTICE OF INTENT TO ACCELERATE MATURITY, NOTICE OF
ACCELERATION OF MATURITY, AND DILIGENCE IN COLLECTION. EACH MAKER,
SURETY, ENDORSER, AND GUARANTOR OF THIS NOTE WAIVES AND AGREES TO ONE
OR MORE EXTENSIONS FOR ANY PERIOD OR PERIODS OF TIME, AND ANY PARTIAL
PAYMENTS, BEFORE OR AFTER MATURITY, WITHOUT PREJUDICE TO THE HOLDER OF
THIS NOTE. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR WAIVES NOTICE OF
ANY AND ALL RENEWALS, EXTENSIONS, REARRANGEMENTS, AND MODIFICATIONS OF
THIS NOTE.
Non-Waiver by Lender: Any previous extension of time, forbearance, failure to
pursue some remedy, acceptance of late payments, or acceptance of partial
payment by Lender, before or after maturity, does not constitute a waiver by
Lender of its subsequent right to strictly enforce the collection of this Note
according to its terms.
Other Remedies Not Required: Lender shall not be required to first file suit,
exhaust all remedies, or enforce its rights against any security in order to
enforce payment of this Note.
Joint and Several Liability: Each Borrower who signs this Note, and all of the
other parties liable for the payment of this Note, such as guarantors,
endorsers, and sureties, are jointly and severally liable for the payment of
this Note.
Attorney's Fees: If Lender requires the services of an attorney to enforce the
payment of this Note or the performance of the other Loan Documents, or if this
Note is collected through any lawsuit, probate, bankruptcy, or other judicial
proceeding, Borrower agrees to pay Lender an amount equal to its reasonable
attorney's fees and other collection costs. This provision shall be limited by
any applicable statutory restrictions relating to the collection of attorney's
fees.
3. MISCELLANEOUS PROVISIONS:
Subsequent Holder: All references to Lender in this Note shall also refer to any
subsequent owner or holder of this Note by transfer, assignment, endorsement, or
otherwise.
Transfer:Borrower acknowledges and agrees that Lender may transfer this Note or
partial interests in the Note to one or more transferees or
participants, including without limitation transfers provided for in
Section 8.10 of the Loan Agreement. Borrower authorizes Lender to
disseminate to any such transferee or participant or prospective
transferee or participant any information it has pertaining to the loan
evidenced by this Note, including, without limitation, credit
information on Borrower and any guarantor of this Note and any of the
type of information described in Section 8.10 of the Loan Agreement.
Other Parties Liable: All promises, waivers, agreements, and conditions
applicable to Borrower shall likewise be applicable to and binding upon any
other parties primarily or secondarily liable for the payment of this Note,
including all guarantors, endorsers, and sureties.
Successors and Assigns: The provisions of this Note shall be binding upon and
for the benefit of the successors, assigns, heirs, executors, and administrators
of Lender and Borrower.
No Duty or Special Relationship: Borrower acknowledges that Lender has no duty
of good faith to Borrower, and Borrower acknowledges that no fiduciary, trust,
or other special relationship exists between Lender and Borrower.
Modifications: Any modifications agreed to by Lender relating to the release of
liability of any of the parties primarily or secondarily liable for the payment
of this Note, or relating to the release, substitution, or subordination of all
or part of the security for this Note, shall in no way constitute a release of
liability with respect to the other parties or security not covered by such
modification.
Entire Agreement: Borrower warrants and represents that the Loan Documents
constitute the entire agreement between Borrower and Lender with respect to the
loan evidenced by this Note and agrees that no modification, amendment, or
additional agreement with respect to such loan or the advancement of funds
thereunder will be valid and enforceable unless made in writing signed by both
Borrower and Lender.
Borrower's Address for Notice: All notices required to be sent by Lender to
Borrower shall be sent by U.S. Mail, postage prepaid, to Borrower's Address for
Notice stated on the first page of this Note, until Lender shall receive written
notification from Borrower of a new address for notice.
Lender's Address for Payment: All sums payable by Borrower to Lender shall be
paid at Lender's Address for Payment stated on the first page of this Note, or
at such other address as Lender shall designate from time to time.
Business Use: Borrower warrants and represents to Lender that the proceeds of
this Note will be used solely for business or commercial purposes, and in no way
will the proceeds be used for personal, family, or household purposes.
Chapter 15 Not Applicable: It is understood that Chapter 15 of the Texas Credit
Code relating to certain revolving credit loan accounts and tri-party accounts
is not applicable to this Note.
APPLICABLE LAW: THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN TEXAS AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE
LAWS OF THE UNITED STATES OF AMERICA APPLICABLE TO TRANSACTIONS IN TEXAS.
4. LOAN DOCUMENTS:
This Note.
The Loan Agreement and the Loan Documents as defined therein.
All other documents signed in connection with the Loan Agreement or the
loan evidenced by this Note, including, without limitation, that
certain Contribution Agreement, dated effective September 1, 1999,
between and among Borrower, Lender, Prime Medical Services, Inc., a
Delaware corporation, Prime/BDEC Acquisition, L.L.C., a Delaware
limited liability company, Barnet Dulaney Eye Center, P.L.L.C., an
Arizona professional limited liability company, LASIK Investors,
L.L.C., a Delaware limited liability company, David D. Dulaney, M.D.,
Ronald W. Barnet, M.D., and Mark Rosenberg (the "Contribution
Agreement") and each Transaction Document (as such term is defined in
the Contribution Agreement).
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
PROMISSORY NOTE
EXECUTED this ____ day of September, 1999.
BORROWER:
PRIME/BDR ACQUISITION, L.L.C., a Delaware limited liability company
By: ________________________________________
Printed Name: _______________________________
Title: _______________________________________
<PAGE>
EXHIBIT G3
FORM OF
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the ____ day of __________, 1999, by and between Prime
Medical Operating, Inc., a Delaware corporation (the "Secured Party") and
Prime/BDR Acquisition, L.L.C., a Delaware limited liability company (the
"Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Contribution Agreement dated effective September 1, 1999, between and among
Debtor, Secured Party, Prime Medical Services, Inc., a Delaware corporation,
Prime/BDEC Acquisition, L.L.C., a Delaware limited liability company, Barnet
Dulaney Eye Center, P.L.L.C., an Arizona professional limited liability company,
LASIK Investors L.L.C., a Delaware limited liability company, David D. Dulaney,
M.D., Ronald W. Barnet, M.D., and Mark Rosenberg (the "Contribution Agreement"),
and that certain Loan Agreement, dated September ___, 1999 (the "Loan
Agreement"), pursuant to which Secured Party agrees to make certain loans to
Debtor on the terms and subject to the conditions provided therein.
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any
obligations arising under loans made pursuant to the Loan Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's extension of credit under the Loan Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Interest in Subsidiary. All ownership interests of Debtor in [Target
Center], whether now existing or hereafter acquired and including, without
limitation, that certain ____% interest in [Target Center]
(b) Interest in Acquisition Agreements. All of Debtor's interest and rights
(but not any obligations) under that certain [Describe Acquisition Documents
Pursuant To Which Target Center Was Acquired and Related Transaction Documents];
(c) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) and (b)above, and all
rights of Debtor now or hereafter arising under any agreement pertaining to the
Collateral described in (a) and (b) above, including without limitation all
distributions, proceeds, fees, dividends, preferences, payments or other
benefits of whatever nature which Debtor is now or may hereafter become entitled
to receive with respect to any Collateral described in (a) and (b) above;
(d) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any other
Collateral: (i) any stock or other ownership certificate, including without
limitation, any certificate representing a stock dividend or any certificate in
connection with any recapitalization, reclassification, merger, consolidation,
conversion, sale of assets, combination, stock split, reverse stock split, or
spin-off; (ii) any option, warrant, subscription or right, whether as an
addition to or in substitution of any other Collateral; (iii) any dividends or
distributions of any kind whatsoever, whether distributable in cash, stock or
other property; (iv) any interest, premium or principal payments; and (v) any
conversion or redemption proceeds; and
(e) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), (c) or (d) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
or any subsidiary of Secured Party (including, without limitation, any
principal, interest, fees and other amounts, and any other obligations) under
and pursuant to this Agreement and/or the Contribution Agreement, the Loan
Agreement, each promissory note issued pursuant to the Loan Agreement
(collectively, the "Note"), and/or any other contract or agreement between
Secured Party (or any of its subsidiaries) and Debtor or any affiliate of Debtor
(collectively, including the Contribution Agreement, the Loan Agreement and the
Note, the "Other Agreements"); and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party or any subsidiary of
Secured Party of any kind or character, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, arising from, connected with,
or related to the Other Agreements, or any other document, agreement, or
instrument executed in connection therewith, (ii) all accrued but unpaid
interest on any of the indebtedness described in (i) above, (iii) all
obligations of Debtor and/or any affiliate of Debtor to Secured Party or any
subsidiary of Secured Party under any documents or agreements evidencing,
securing, governing and/or pertaining to all or any part of the indebtedness
described in (i) and (ii) above, (iv) all costs and expenses incurred by Secured
Party or its subsidiaries in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party or any subsidiary of Secured Party to Debtor or any affiliate of Debtor,
or expended by Secured Party or its subsidiaries for the account of Debtor or
its affiliates or otherwise owing by Debtor or its affiliates to Secured Party
or its subsidiaries, in respect of the Obligations, and all other sums expended
or advanced by Secured Party or its subsidiaries pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Interests are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is and will
be solvent; (ii) the fair saleable value of Debtor's assets exceeds and will
continue to exceed Debtor's liabilities (both fixed and contingent); (iii)
Debtor has and will have sufficient capital to satisfy all of Debtor's
obligations as they become due; (iv) no receiver, trustee, or custodian has been
appointed for, or taken possession of, all or substantially all of the assets of
Debtor, either in a proceeding brought by Debtor or in a proceeding brought
against Debtor; (v) Debtor is not the subject of a petition for relief under the
United States Bankruptcy Code or any similar federal or state insolvency law,
including without limitation a petition filed by Debtor or a petition filed by a
third party seeking relief against Debtor; and (vi) Debtor has no intention of
filing a petition for relief under the United States Bankruptcy Code or any
similar federal or state insolvency law, or of seeking any other form of
creditor relief, within the two-year period immediately following the date of
this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under each Other Agreement. No further consent or
approval is required as a condition to the validity of this Agreement or any
Other Agreement. Debtor is in compliance with all applicable laws, ordinances,
statutes, orders, regulations, judgments, writs, or decrees of any governmental
entity to which it is subject.
3.3 Binding Agreement. This Agreement and each Other Agreement
constitute valid and legally binding obligations of Debtor, in accordance with
their terms, subject to the applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement or any Other
Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
interests or shares of any class of securities of such issuer, (ii) any
instrument convertible voluntarily by the holder thereof or automatically upon
the occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Interests unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall (i) promptly advise Secured Party in writing of any
litigation filed against Debtor and of any condition, event or act which comes
to its attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations, (ii)
except as expressly contemplated in Section 4.3(e)(i) and (ii) of the
Contribution Agreement, pay all available funds toward repayment of the Note,
regardless of whether payment of such amounts exceeds the required payments
under the Note and (iii) if Borrower uses any proceeds from the Note, to
acquire, directly or indirectly, a one hundred percent (100%) interest in a
Target Center, Borrower shall cause such Target Center to execute a security
agreement, acceptable in form and substance to Lender, granting to Lender or one
of Lender's subsidiaries the highest available priority security interest in all
of the assets of such Target Center.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Loan Agreement (including, without limitation, principal,
interest and fees due thereunder), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
ten (10) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation after such
amount is due (and, if applicable under the terms of any contractual agreement
creating or governing such Obligation, after the expiration of any cure period
expressly required);
(c) Debtor's breach of a covenant in this Agreement or any other failure to
perform its obligations under this Agreement or any Other Agreement;
(d) Any representation or warranty made by Debtor in this
Agreement or any Other Agreement between Debtor and Secured Party shall be false
or materially misleading, as determined in the reasonable discretion of Secured
Party;
(e) Any event of default shall occur under the terms of the
Loan Agreement and shall not be cured within the time expressly provided for
with respect thereto in the Loan Agreement;
(f) If Debtor or any other party obligated to pay any portion
of the Obligations: (i) becomes insolvent, or makes a transfer in fraud of
creditors, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they become due; (ii) generally is not
paying its debts as such debts become due and Secured Party, in good faith,
determines that such event or condition could lead to a material impairment of
the Collateral, or any part thereof, or of any other payment security for any of
the Obligations; (iii) has a receiver, trustee or custodian appointed for, or
take possession of, all or substantially all of the assets of such party or any
of the Collateral, either in a proceeding brought by such party or in a
proceeding brought against such party and such appointment is not discharged or
such possession is not terminated within sixty (60) days after the effective
date thereof or such party consents to or acquiesces in such appointment or
possession; (iv) files a petition for relief under the United States Bankruptcy
Code or any other present or future federal or state insolvency, bankruptcy or
similar laws (all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or an involuntary petition for relief is filed against such
party under any Applicable Bankruptcy Law and such involuntary petition is not
dismissed within sixty (60) days after the filing thereof, or an order for
relief naming such party is entered under any Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization or other relief of debtors
now or hereafter existing is requested or consented to by such party; (v) fails
to have discharged within a period of sixty (60) days any attachment,
sequestration or similar writ levied upon, or any claim against or affecting,
any property of such party; or (vi) fails to pay within ninety (90) days any
final money judgment against such party; or
(g) The issuer of any securities constituting Collateral files
a petition for relief under any Applicable Bankruptcy Law, an involuntary
petition for relief is filed against any such issuer under any Applicable
Bankruptcy Law and such involuntary petition is not dismissed within thirty (30)
days after the filing thereof, or an order for relief naming any such issuer is
entered under any Applicable Bankruptcy Law.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(c) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(d) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in any type of offering which complies with, or is exempt from the
registration requirements of, the Securities Act of 1933 and any applicable
state securities laws, and no sale so made in good faith by Secured Party shall
be deemed to be not "commercially reasonable" because so made.
(e) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Contribution Agreement or any
Other Agreement; (d) then, to or among the amounts of fees, interest and
principal then owing and unpaid in respect of the Obligations, in such priority
as Secured Party may determine in its discretion; and (e) the remainder of such
proceeds, if any, shall be paid to Debtor. If such proceeds shall be
insufficient to discharge the entire Obligations, Secured Party shall have any
other available legal recourse against Debtor under, or for the performance of,
the Contribution Agreement and any Other Agreement between Debtor and Secured
Party, for the deficiency, together with interest thereon at the maximum rate
permitted under applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of any Other Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY AND ITS
SUBSIDIARIES, AND EACH OF THEIR OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS,
EMPLOYEES, LENDERS, SUCCESSORS AND ASSIGNS, FROM AND AGAINST ALL LIABILITIES,
CLAIMS, DAMAGES, LOSSES, FINES, PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS
AND EXPENSES (INCLUDING COURT COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION)
OF ANY NATURE, KIND OR DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR
INDIRECTLY, ARISING OUT OF, CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART),
ANY ACT OR OMISSION OF SECURED PARTY, OR ANYONE ACTING ON BEHALF OF SECURED
PARTY, IN CONNECTION WITH THE COLLATERAL, INCLUDING WITHOUT LIMITATION ANY
MARKET FLUCTUATIONS IN THE COLLATERAL AS A RESULT OF SECURED PARTY'S SALE OF, OR
FAILURE TO SELL, THE INTERESTS AT ANY PARTICULAR TIME WHEN IT HAS THE RIGHT TO
DO SO. THE FOREGOING INDEMNITY SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under any Other Agreement, or in respect
of the Collateral (subject to any applicable default cure period), Secured Party
(a) may but shall not be obligated to take any action Secured Party deems
necessary or desirable to prevent or remedy any such default by Debtor or
otherwise to protect the Security Interest, and (b) shall have the absolute and
immediate right to take possession of the Collateral or any part thereof (to the
extent Secured Party has not previously taken possession) to such extent and as
often as the Secured Party, in its sole discretion, deems necessary or desirable
in order to prevent or to cure any such default by Debtor, or otherwise to
protect the security of this Agreement. Secured Party may advance or expend such
sums of money for the account of Debtor as Secured Party in its sole discretion
deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of any Other Agreement or the
Collateral, shall be a part of the Obligations and shall be paid by Debtor to
Secured Party, upon demand, and shall bear interest until paid at the maximum
rate of interest permitted by applicable law, from the date incurred by Secured
Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: Prime/BDR Acquisition, L.L.C.
1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor acknowledges that Lender intends to make a
collateral assignment of its rights under this Agreement for the benefit of one
or more of its lenders. Debtor may not assign this Agreement or any of its
rights or obligations hereunder without the express prior written consent of
Secured Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE LOAN AGREEMENT, THE NOTE AND THE
CONTRIBUTION AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this ____ day of __________, 1999.
DEBTOR: Prime/BDR Acquisition, L.L.C.
By:_________________________________
Printed Name:________________________
Title:_______________________________
SECURED PARTY: Prime Medical Operating, Inc.
By:_________________________________
Printed Name:________________________
Title:_______________________________
<PAGE>
EXHIBIT-G4
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation (the "Secured Party") and Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company (the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Contribution Agreement dated effective September 1, 1999, between and among
Debtor, Secured Party, Prime Medical Services, Inc., a Delaware corporation,
Prime/BDEC Acquisition, L.L.C., a Delaware limited liability company, Barnet
Dulaney Eye Center, P.L.L.C., an Arizona professional limited liability company,
LASIK Investors L.L.C., a Delaware limited liability company, David D. Dulaney,
M.D., Ronald W. Barnet, M.D., and Mark Rosenberg (the "Contribution Agreement"),
and that certain Loan Agreement, dated September 1, 1999 (the "Loan Agreement"),
pursuant to which Secured Party agrees to make certain loans to Debtor on the
terms and subject to the conditions provided therein.
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor
may now or hereafter have to Secured Party, including, without limitation,
any obligations arising under loans made pursuant to the Loan Agreement.
C. Debtor desires to enter into this Agreement as a material inducement
to Secured Party's extension of credit under the Loan Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a
security interest in, the following described collateral (collectively, the
"Collateral"): --------------------------
(a) Interest in Subsidiary. All ownership interests of Debtor in
Horizon Vision Center, Inc., a Nevada corporation ("Horizon"), whether now
existing or hereafter acquired and including, without limitation, that
certain 60% interest in Horizon (the "Interests"). ----------------------
<PAGE>
(b) Interest in Acquisition Agreements. All of Debtor's interest and
rights (but not any obligations) under those certain Stock Purchase
Agreements by and between Debtor and the Shareholders of Horizon;
----------------------------------
(c) Accounts. All accounts and rights now or hereafter attributable to
any of the Collateral described in (a) and (b)above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the
Collateral described in (a) and (b) above, including without limitation all
distributions, proceeds, fees, dividends, preferences, payments or other
benefits of whatever nature which Debtor is now or may hereafter become
entitled to receive with respect to any Collateral --------described in (a)
and (b) above;
(d) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any other
Collateral: (i) any stock or other ownership certificate, including without
limitation, any certificate representing a stock dividend or any certificate in
connection with any recapitalization, reclassification, merger, consolidation,
conversion, sale of assets, combination, stock split, reverse stock split, or
spin-off; (ii) any option, warrant, subscription or right, whether as an
addition to or in substitution of any other Collateral; (iii) any dividends or
distributions of any kind whatsoever, whether distributable in cash, stock or
other property; (iv) any interest, premium or principal payments; and (v) any
conversion or redemption proceeds; and
(e) Proceeds. All proceeds (cash and non-cash) arising out of the
sale, exchange, collection or other disposition of all or any portion of
the Collateral described in (a), (b), (c) or (d) above, including without
limitation proceeds in the form of stock, accounts, chattel paper,
instruments, documents, goods, inventory and equipment. --------
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness,
duties and obligations (collectively, the "Obligations"): -----------
(a) All liabilities and obligations of Debtor to Secured Party
or any subsidiary of Secured Party (including, without limitation, any
principal, interest, fees and other amounts, and any other obligations) under
and pursuant to this Agreement and/or the Contribution Agreement, the Loan
Agreement, each promissory note issued pursuant to the Loan Agreement
(collectively, the "Note"), and/or any other contract or agreement between
Secured Party (or any of its subsidiaries) and Debtor or any affiliate of Debtor
(collectively, including the Contribution Agreement, the Loan Agreement and the
Note, the "Other Agreements"); and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party or any subsidiary of
Secured Party of any kind or character, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, arising from, connected with,
or related to the Other Agreements, or any other document, agreement, or
instrument executed in connection therewith, (ii) all accrued but unpaid
interest on any of the indebtedness described in (i) above, (iii) all
obligations of Debtor and/or any affiliate of Debtor to Secured Party or any
subsidiary of Secured Party under any documents or agreements evidencing,
securing, governing and/or pertaining to all or any part of the indebtedness
described in (i) and (ii) above, (iv) all costs and expenses incurred by Secured
Party or its subsidiaries in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party or any subsidiary of Secured Party to Debtor or any affiliate of Debtor,
or expended by Secured Party or its subsidiaries for the account of Debtor or
its affiliates or otherwise owing by Debtor or its affiliates to Secured Party
or its subsidiaries, in respect of the Obligations, and all other sums expended
or advanced by Secured Party or its subsidiaries pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests,
shareholders agreement, calls, charge, or encumbrance, except for this
Security Interest. No financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any
recording office, except as may have been filed in favor of Secured Party
relating to this Agreement. -----------------------
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to
perfect and protect such security interest, which have been duly taken,
create a valid and perfected first priority security interest in the
Collateral securing the payment and performance of the Obligations.
-----------------
2.3 No Agreements. The Interests are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the
rights of Secured Party under this Agreement. -------------
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are
fully paid and non-assessable, and were not issued in violation of the
preemptive rights of any party or of any agreement by which Debtor or the
issuer thereof is bound. No restrictions or conditions exist with respect
to the transfer or voting of any securities pledged as ----------
Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is and will
be solvent; (ii) the fair saleable value of Debtor's assets exceeds and will
continue to exceed Debtor's liabilities (both fixed and contingent); (iii)
Debtor has and will have sufficient capital to satisfy all of Debtor's
obligations as they become due; (iv) no receiver, trustee, or custodian has been
appointed for, or taken possession of, all or substantially all of the assets of
Debtor, either in a proceeding brought by Debtor or in a proceeding brought
against Debtor; (v) Debtor is not the subject of a petition for relief under the
United States Bankruptcy Code or any similar federal or state insolvency law,
including without limitation a petition filed by Debtor or a petition filed by a
third party seeking relief against Debtor; and (vi) Debtor has no intention of
filing a petition for relief under the United States Bankruptcy Code or any
similar federal or state insolvency law, or of seeking any other form of
creditor relief, within the two-year period immediately following the date of
this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter
into and perform its obligations under each Other Agreement. No further
consent or approval is required as a condition to the validity of this
Agreement or any Other Agreement. Debtor is in compliance with all
applicable laws, ordinances, statutes, orders, regulations, judgments,
writs, or decrees of any governmental entity to which it is subject.
------------------------
3.3 Binding Agreement. This Agreement and each Other Agreement
constitute valid and legally binding obligations of Debtor, in accordance
with their terms, subject to the applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally. -----------------
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will
or may have a material adverse effect on the financial condition of Debtor
or upon Debtor's ability to perform its obligations under this Agreement or
any Other Agreement. ----------
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting
its property, which would conflict with or in any way prevent the
execution, delivery, or carrying out of the terms of this Agreement or any
Other Agreement. -------------------------
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances. -------------------
3.7 Taxes. Debtor has filed all tax returns required to be filed by
Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(d) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf
has, or shall have any right, power, or authority to and shall not create,
incur, or permit to be placed or imposed, upon the Collateral, any lien of
any type or nature whatsoever, other than the liens in favor of Secured
Party. -----
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or
occurrences that may have a material adverse effect on the status or value
of the Collateral or this Agreement, including without limitation the
occurrence of an Event of Default, or an event which, with giving of notice
or lapse of time, or both, would constitute an Event of Default.
-------------------------------------------------------------
4.7 Agreements Pertaining to Collateral. Debtor will not enter into
any type of contract or agreement pertaining to any of the Collateral or in
any way transfer any voting rights pertaining to the Collateral to any
person or entity. -----------------------------------
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
interests or shares of any class of securities of such issuer, (ii) any
instrument convertible voluntarily by the holder thereof or automatically upon
the occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Interests unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall (i) promptly advise Secured Party in writing of any
litigation filed against Debtor and of any condition, event or act which comes
to its attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations, (ii)
except as expressly contemplated in Section 4.3(e)(i) and (ii) of the
Contribution Agreement, pay all available funds toward repayment of the Note,
regardless of whether payment of such amounts exceeds the required payments
under the Note and (iii) if Borrower uses any proceeds from the Note, to
acquire, directly or indirectly, a one hundred percent (100%) interest in a
Target Center (as defined in the Contribution Agreement), Borrower shall cause
such Target Center to execute a security agreement, acceptable in form and
substance to Lender, granting to Lender or one of Lender's subsidiaries the
highest available priority security interest in all of the assets of such Target
Center.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in,
the Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated. -----------------------
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall
exist if any one or more of the following events shall occur:
-----------------
(a) The failure of Debtor to pay any amount required to be paid under
the Loan Agreement (including, without limitation, principal, interest and
fees due thereunder), or any other amount which Debtor may now or hereafter
owe to Secured Party under any Other Agreement or otherwise, within ten
(10) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation after such amount is
due (and, if applicable under the terms of any contractual agreement
creating or governing such Obligation, after the expiration of any cure
period expressly required);
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement;
(d) Any representation or warranty made by Debtor in this Agreement or
any Other Agreement between Debtor and Secured Party shall be false or
materially misleading, as determined in the reasonable discretion of
Secured Party;
(e) Any event of default shall occur under the terms of the Loan
Agreement and shall not be cured within the time expressly provided for
with respect thereto in the Loan Agreement;
(f) If Debtor or any other party obligated to pay any portion
of the Obligations: (i) becomes insolvent, or makes a transfer in fraud of
creditors, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they become due; (ii) generally is not
paying its debts as such debts become due and Secured Party, in good faith,
determines that such event or condition could lead to a material impairment of
the Collateral, or any part thereof, or of any other payment security for any of
the Obligations; (iii) has a receiver, trustee or custodian appointed for, or
take possession of, all or substantially all of the assets of such party or any
of the Collateral, either in a proceeding brought by such party or in a
proceeding brought against such party and such appointment is not discharged or
such possession is not terminated within sixty (60) days after the effective
date thereof or such party consents to or acquiesces in such appointment or
possession; (iv) files a petition for relief under the United States Bankruptcy
Code or any other present or future federal or state insolvency, bankruptcy or
similar laws (all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or an involuntary petition for relief is filed against such
party under any Applicable Bankruptcy Law and such involuntary petition is not
dismissed within sixty (60) days after the filing thereof, or an order for
relief naming such party is entered under any Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization or other relief of debtors
now or hereafter existing is requested or consented to by such party; (v) fails
to have discharged within a period of sixty (60) days any attachment,
sequestration or similar writ levied upon, or any claim against or affecting,
any property of such party; or (vi) fails to pay within ninety (90) days any
final money judgment against such party; or
(g) The issuer of any securities constituting Collateral files a
petition for relief under any Applicable Bankruptcy Law, an involuntary
petition for relief is filed against any such issuer under any Applicable
Bankruptcy Law and such involuntary petition is not dismissed within thirty
(30) days after the filing thereof, or an order for relief naming any such
issuer is entered under any Applicable Bankruptcy Law.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of
Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and
exercise any rights under the Texas UCC, rights and remedies of Secured
Party under this Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(c) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(d) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in any type of offering which complies with, or is exempt from the
registration requirements of, the Securities Act of 1933 and any applicable
state securities laws, and no sale so made in good faith by Secured Party shall
be deemed to be not "commercially reasonable" because so made.
(e) Not in limitation of any other provision of this Agreement,
Secured Party shall have all rights and remedies of a secured party under
the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Contribution Agreement or any
Other Agreement; (d) then, to or among the amounts of fees, interest and
principal then owing and unpaid in respect of the Obligations, in such priority
as Secured Party may determine in its discretion; and (e) the remainder of such
proceeds, if any, shall be paid to Debtor. If such proceeds shall be
insufficient to discharge the entire Obligations, Secured Party shall have any
other available legal recourse against Debtor under, or for the performance of,
the Contribution Agreement and any Other Agreement between Debtor and Secured
Party, for the deficiency, together with interest thereon at the maximum rate
permitted under applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the
same shall become due in accordance with the terms of any Other Agreement.
--------------------------
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto. -----------
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under
Section 8.8. In no event, however, shall Secured Party have any obligation
or duties whatsoever to perform any covenant or agreement of Debtor
contained herein, and any such performance by Secured Party shall be
---------------------------- wholly discretionary with Secured Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY AND ITS
SUBSIDIARIES, AND EACH OF THEIR OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS,
EMPLOYEES, LENDERS, SUCCESSORS AND ASSIGNS, FROM AND AGAINST ALL LIABILITIES,
CLAIMS, DAMAGES, LOSSES, FINES, PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS
AND EXPENSES (INCLUDING COURT COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION)
OF ANY NATURE, KIND OR DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR
INDIRECTLY, ARISING OUT OF, CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART),
ANY ACT OR OMISSION OF SECURED PARTY, OR ANYONE ACTING ON BEHALF OF SECURED
PARTY, IN CONNECTION WITH THE COLLATERAL, INCLUDING WITHOUT LIMITATION ANY
MARKET FLUCTUATIONS IN THE COLLATERAL AS A RESULT OF SECURED PARTY'S SALE OF, OR
FAILURE TO SELL, THE INTERESTS AT ANY PARTICULAR TIME WHEN IT HAS THE RIGHT TO
DO SO. THE FOREGOING INDEMNITY SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security.
Secured Party may, at the expense of Debtor, appear in and defend any
action or proceeding at law or in equity purporting to affect Secured
Party's Security Interest under this Agreement.
----------------------------------------------------------
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under any Other Agreement, or in respect
of the Collateral (subject to any applicable default cure period), Secured Party
(a) may but shall not be obligated to take any action Secured Party deems
necessary or desirable to prevent or remedy any such default by Debtor or
otherwise to protect the Security Interest, and (b) shall have the absolute and
immediate right to take possession of the Collateral or any part thereof (to the
extent Secured Party has not previously taken possession) to such extent and as
often as the Secured Party, in its sole discretion, deems necessary or desirable
in order to prevent or to cure any such default by Debtor, or otherwise to
protect the security of this Agreement. Secured Party may advance or expend such
sums of money for the account of Debtor as Secured Party in its sole discretion
deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of any Other Agreement or the
Collateral, shall be a part of the Obligations and shall be paid by Debtor to
Secured Party, upon demand, and shall bear interest until paid at the maximum
rate of interest permitted by applicable law, from the date incurred by Secured
Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not
have any duty to present for conversion any Collateral unless it shall have
received from Debtor detailed written instructions to that effect at a time
reasonably far in advance of the final conversion date to make such
conversion possible. ----------------------
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every
such remedy shall be cumulative, not in lieu of, but in addition to any
other rights or remedies given under this Agreement and all other security
documents. Any and all of Secured Party's rights and remedies may be
exercised from time to time and as often as such exercise as deemed
necessary or desirable by Secured Party. --------
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall
be deemed commercially reasonable within the meaning of the Texas UCC.
-----------------------------
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: Prime/BDR Acquisition, L.L.C.
1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise
of any power or right preclude other or further exercise thereof or the
exercise of any other power or right. No waiver by Secured Party of any
right hereunder of any default by Debtor shall be binding upon Secured
Party unless in writing, and no failure by Secured Party to exercise any
power or right hereunder or waiver of any default by Debtor ------ shall
operate as a waiver of any other or further exercise of such right or power
of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether
or not of the character contemplated at the date of this Agreement, and if
all transactions between Secured Party and Debtor shall be closed at any
time, shall be equally applicable to any new transactions thereafter.
Provisions of this Agreement, unless by their terms exclusive, shall be in
addition to those contained in any Other Agreement. --------------------
9.6 Definitions. Unless the context indicated otherwise, definitions
in the Texas Business and Commerce Code ("Texas UCC") apply to words and
phrases in this Agreement; if Texas UCC definitions conflict, Chapter 9
definitions apply. -----------
9.7 Miscellaneous. In this Agreement, whenever the context so
requires, the neuter gender includes the masculine and feminine, and the
singular number includes the plural and vice versa. The headings of
paragraphs herein are inserted only for convenience and shall in no way
define, describe or limit the scope of intent of any provisions of this
Agreement. No change, amendment, modification, cancellation, or discharge
of any provision of this Agreement shall be valid unless consented to in
------------- writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement
without approval or consent. Debtor acknowledges that Lender intends to
make a collateral assignment of its rights under this Agreement for the
benefit of one or more of its lenders. Debtor may not assign this Agreement
or any of its rights or obligations hereunder without the express prior
written consent of Secured Party in each instance.
--------------------------------------
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA. ---------------
9.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE LOAN AGREEMENT, THE NOTE
AND THE CONTRIBUTION AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. ----------------
[Signature page follows]
2
<PAGE>
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this ____ day of September, 1999.
DEBTOR: Prime/BDR Acquisition, L.L.C.
By: ______________________________________
Printed Name: _____________________________
Title: _____________________________________
SECURED PARTY: Prime Medical Operating, Inc.
By: ______________________________________
Printed Name: _____________________________
Title: _____________________________________
<PAGE>
EXHIBIT G5
FORM OF
PROMISSORY NOTE
Austin, Texas ____________, 1999
PROMISE TO PAY: For value received, the undersigned Borrower (whether one or
more) promises to pay to the order of Lender the Principal Amount, together with
interest on the unpaid balance of such amount, in lawful money of the United
States of America, in accordance with all the terms, conditions, and covenants
of this Note and the Loan Documents identified below.
BORROWER: Prime/BDR Acquisition, L.L.C., a Delaware limited liability company
BORROWER'S ADDRESS FOR NOTICE: 1301 Capital of Texas Highway, Suite C-300
Austin, Texas 78746
Attention: President
LENDER: Prime Medical Operating, Inc., a Delaware corporation
LENDER'S ADDRESS FOR PAYMENT: 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746
Attention: Chief Financial Officer
PRINCIPAL AMOUNT: ______________________ ($____________)
INTEREST RATE: Fifteen Percent (15%)
PAYMENT TERMS: Interest on the unpaid balance of this Note is due and payable
quarterly, beginning ______________, 1999, and continuing regularly and
quarterly thereafter on or before the first day of ____________, ____________,
____________ and ____________ of each year, until [seven years from date of
loan] (the "Maturity Date"), when the outstanding principal balance and all
accrued interest shall be due and payable in full. Interest will be calculated
on the unpaid principal balance. Each payment will be credited first to the
accrued interest and then to the reduction of principal.
LOAN AGREEMENT: This Note is executed pursuant to and is governed by the terms
of that certain Loan Agreement dated September ___, 1999, executed by Borrower
and Lender, as amended (collectively, the "Loan Agreement").
1. INTEREST PROVISIONS:
(a) Rate: The principal balance of this Note from time to time remaining
unpaid prior to maturity shall bear interest at the Interest Rate per
annum stated above.
(b) Maximum Lawful Interest: The term "Maximum Lawful Rate" means the
maximum rate of interest and the term "Maximum Lawful Amount" means the
maximum amount of interest that is permissible under applicable state
or federal law for the type of loan evidenced by this Note and the
other Loan Documents. If the Maximum Lawful Rate is increased by
statute or other governmental action subsequent to the date of this
Note, then the new Maximum Lawful Rate shall be applicable to this Note
from the effective date thereof, unless otherwise prohibited by
applicable law.
(c) Spreading of Interest: Because of the possibility of irregular
periodic balances of principal or premature payment, the total
interest that will accrue under this Note cannot be determined in
advance. Lender does not intend to contract for, charge, or receive
more than the Maximum Lawful Rate or Maximum Lawful Amount permitted
by applicable state or federal law, and to prevent such an occurrence
Lender and Borrower agree that all amounts of interest, whenever
contracted for, charged, or received by Lender, with respect to the
loan of money evidenced by this Note, shall be spread, prorated, or
allocated over the full period of time this Note is unpaid, including
the period of any renewal or extension of this Note. If demand for
payment of this Note is made by Lender prior to the full stated term,
the total amount of interest contracted for, charged, or received to
the time of such demand shall be spread, prorated, or allocated along
with any interest thereafter accruing over the full period of time
that this Note thereafter remains unpaid for the purpose of
determining if such interest exceeds the Maximum Lawful Amount.
(d) Excess Interest: At maturity (whether by acceleration or otherwise) or
on earlier final payment of this Note, Lender shall compute the total
amount of interest that has been contracted for, charged, or received
by Lender or payable by Borrower under this Note and compare such
amount to the Maximum Lawful Amount that could have been contracted
for, charged, or received by Lender. If such computation reflects that
the total amount of interest that has been contracted for, charged, or
received by Lender or payable by Borrower exceeds the Maximum Lawful
Amount, then Lender shall apply such excess to the reduction of the
principal balance and not to the payment of interest; or if such
excess interest exceeds the unpaid principal balance, such excess
shall be refunded to Borrower. This provision concerning the crediting
or refund of excess interest shall control and take precedence over
all other agreements between Borrower and Lender so that under no
circumstances shall the total interest contracted for, charged, or
received by Lender exceed the Maximum Lawful Amount.
(e) Interest After Default: At Lender's option, the unpaid principal
balance shall bear interest after maturity (whether by acceleration or
otherwise) at the "Default Interest Rate." The Default Interest Rate
shall be, at Lender's option, (i) the Maximum Lawful Rate, if such
Maximum Lawful Rate is established by applicable law; or (ii) the
Interest Rate stated on the first page of this Note plus five (5)
percentage points, if no Maximum Lawful Rate is established by
applicable law; or (iii) eighteen percent (18%) per annum; or (iv)
such lesser rate of interest as Lender in its sole discretion may
choose to charge; but never more than the Maximum Lawful Rate or at a
rate that would cause the total interest contracted for, charged, or
received by Lender to exceed the Maximum Lawful Amount.
(f) Daily Computation of Interest: To the extent permitted by applicable
law, Lender at its option will calculate the per diem interest rate or
amount based on the actual number of days in the year (365 or 366, as
the case may be), and charge that per diem interest rate or amount each
day. In no event shall Lender compute the interest in a manner that
would cause Lender to contract for, charge, or receive interest that
would exceed the Maximum Lawful Rate or the Maximum Lawful Amount
2. DEFAULT PROVISIONS:
(a) EVENTS OF DEFAULT AND ACCELERATION OF MATURITY: LENDER MAY, AFTER
THIRTY (30) DAYS' WRITTEN NOTICE TO BORROWER AND BORROWER'S FAILURE TO
CURE WITHIN SUCH 30-DAY PERIOD AND WITHOUT FURTHER NOTICE OR DEMAND,
(except as otherwise required by statute), ACCELERATE THE MATURITY OF
THIS NOTE AND DECLARE THE ENTIRE UNPAID PRINCIPAL BALANCE AND ALL
ACCRUED INTEREST AT ONCE DUE AND PAYABLE IF:
(i) There is default in the payment of any installment of
principal, interest, or any other sum required to be paid under the
terms of this Note or any of the Loan Documents; or
(ii) There is a breach or default (other than by Lender or Prime
Medical Services, Inc.) under this Note or any of the Loan Documents,
including any instrument securing the payment of this Note or any loan
agreement relating to the advance of loan proceeds.
(b) WAIVER BY BORROWER: EXCEPT AS PROVIDED IN PARAGRAPH 2(a) HEREOF AND IN
ANY OTHER LOAN DOCUMENT, BORROWER AND ALL OTHER PARTIES LIABLE FOR
THIS NOTE WAIVE, DEMAND, NOTICE OF INTENT TO DEMAND, PRESENTMENT FOR
PAYMENT, NOTICE OF NONPAYMENT, PROTEST, NOTICE OF PROTEST, GRACE,
NOTICE OF DISHONOR, NOTICE OF INTENT TO ACCELERATE MATURITY, NOTICE OF
ACCELERATION OF MATURITY, AND DILIGENCE IN COLLECTION. EACH MAKER,
SURETY, ENDORSER, AND GUARANTOR OF THIS NOTE WAIVES AND AGREES TO ONE
OR MORE EXTENSIONS FOR ANY PERIOD OR PERIODS OF TIME, AND ANY PARTIAL
PAYMENTS, BEFORE OR AFTER MATURITY, WITHOUT PREJUDICE TO THE HOLDER OF
THIS NOTE. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR WAIVES NOTICE
OF ANY AND ALL RENEWALS, EXTENSIONS, REARRANGEMENTS, AND MODIFICATIONS
OF THIS NOTE.
(c) Non-Waiver by Lender: Any previous extension of time, forbearance,
failure to pursue some remedy, acceptance of late payments, or
acceptance of partial payment by Lender, before or after maturity, does
not constitute a waiver by Lender of its subsequent right to strictly
enforce the collection of this Note according to its terms.
(d) Other Remedies Not Required: Lender shall not be required to first
file suit, exhaust all remedies, or enforce its rights against any
security in order to enforce payment of this Note.
(e) Joint and Several Liability: Each Borrower who signs this Note, and all
of the other parties liable for the payment of this Note, such as
guarantors, endorsers, and sureties, are jointly and severally liable
for the payment of this Note.
(f) Attorney's Fees: If Lender requires the services of an attorney to
enforce the payment of this Note or the performance of the other Loan
Documents, or if this Note is collected through any lawsuit, probate,
bankruptcy, or other judicial proceeding, Borrower agrees to pay Lender
an amount equal to its reasonable attorney's fees and other collection
costs. This provision shall be limited by any applicable statutory
restrictions relating to the collection of attorney's fees.
3. MISCELLANEOUS PROVISIONS:
(a) Subsequent Holder: All references to Lender in this Note shall also refer
to any subsequent owner or holder of this Note by transfer, assignment,
endorsement, or otherwise.
(b) Transfer: Borrower acknowledges and agrees that Lender may transfer
this Note or partial interests in the Note to one or more transferees
or participants, including without limitation transfers provided for in
Section 8.10 of the Loan Agreement. Borrower authorizes Lender to
disseminate to any such transferee or participant or prospective
transferee or participant any information it has pertaining to the loan
evidenced by this Note, including, without limitation, credit
information on Borrower and any guarantor of this Note and any of the
type of information described in Section 8.10 of the Loan Agreement.
(c) Other Parties Liable: All promises, waivers, agreements, and conditions
applicable to Borrower shall likewise be applicable to and binding upon
any other parties primarily or secondarily liable for the payment of
this Note, including all guarantors, endorsers, and sureties.
(d) Successors and Assigns: The provisions of this Note shall be binding
upon and for the benefit of the successors, assigns, heirs, executors,
and administrators of Lender and Borrower.
(e) No Duty or Special Relationship: Borrower acknowledges that Lender has
no duty of good faith to Borrower, and Borrower acknowledges that no
fiduciary, trust, or other special relationship exists between Lender
and Borrower.
(f) Modifications: Any modifications agreed to by Lender relating to the
release of liability of any of the parties primarily or secondarily
liable for the payment of this Note, or relating to the release,
substitution, or subordination of all or part of the security for this
Note, shall in no way constitute a release of liability with respect to
the other parties or security not covered by such modification.
(g) Entire Agreement: Borrower warrants and represents that the Loan
Documents constitute the entire agreement between Borrower and Lender
with respect to the loan evidenced by this Note and agrees that no
modification, amendment, or additional agreement with respect to such
loan or the advancement of funds thereunder will be valid and
enforceable unless made in writing signed by both Borrower and Lender.
(h) Borrower's Address for Notice: All notices required to be sent by
Lender to Borrower shall be sent by U.S. Mail, postage prepaid, to
Borrower's Address for Notice stated on the first page of this Note,
until Lender shall receive written notification from Borrower of a new
address for notice.
(i) Lender's Address for Payment: All sums payable by Borrower to Lender
shall be paid at Lender's Address for Payment stated on the first page
of this Note, or at such other address as Lender shall designate from
time to time.
(j) Business Use: Borrower warrants and represents to Lender that the proceeds
of this Note will be used solely for business or commercial purposes, and
in no way will the proceeds be used for personal, family, or household
purposes.
(k) Chapter 15 Not Applicable: It is understood that Chapter 15 of the
Texas Credit Code relating to certain revolving credit loan accounts
and tri-party accounts is not applicable to this Note.
(l) APPLICABLE LAW: THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN TEXAS AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE
OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA APPLICABLE TO
TRANSACTIONS IN TEXAS.
4. LOAN DOCUMENTS:
(a) This Note.
(b) The Loan Agreement and the Loan Documents as defined therein.
(c) All other documents signed in connection with the Loan Agreement or the
loan evidenced by this Note, including, without limitation, that
certain Contribution Agreement, dated effective September 1, 1999,
between and among Borrower, Lender, Prime Medical Services, Inc., a
Delaware corporation, Prime/BDEC Acquisition, L.L.C., a Delaware
limited liability company, Barnet Dulaney Eye Center, P.L.L.C., an
Arizona professional limited liability company, LASIK Investors,
L.L.C., a Delaware limited liability company, David D. Dulaney, M.D.,
Ronald W. Barnet, M.D., and Mark Rosenberg (the "Contribution
Agreement") and each Transaction Document (as such term is defined in
the Contribution Agreement).
[Signature page follows]
<PAGE>
S-1
EXECUTION PAGE TO
PROMISSORY NOTE
EXECUTED this ___ day of ___________, 1999.
BORROWER:
Prime/BDR Acquisition, L.L.C., a Delaware limited liability
company
By: ________________________________________
Printed Name: ________________________________________
Title: ________________________________________
<PAGE>
EXHIBIT-H
MEMBERSHIP INTEREST
TRANSFER RESTRICTION AGREEMENT
This Membership Interest Transfer Restriction Agreement (this "Agreement")
is entered into effective as of the 1st day of September, 1999, by and among
LASIK Investors, L.L.C., a Delaware limited liability company (the "Company"),
Prime Medical Operating, Inc., a Delaware corporation ("Prime"), Ronald W.
Barnet, M.D. ("Barnet"), David D. Dulaney, M.D. ("Dulaney"), Mark Rosenberg
("Rosenberg"), Scott A. Perkins, M.D. ("Perkins"), and Robert B. Pinkert, O.D.
("Pinkert"). Barnet, Dulaney, Rosenberg, Perkins and Pinkert, together with any
subsequent Members in the Company who hereafter execute this Agreement, are
collectively referred to herein as the "Members".
R E C I T A L S:
WHEREAS, Barnet, Dulaney, Rosenberg, Perkins and Pinkert own all
the issued and outstanding membership interests of the Company (all such
membership interests, together with any hereafter acquired, are hereinafter
referred to as the "Membership Interests"); and
WHEREAS, this Agreement is a "Transaction Document," as defined in
that certain Contribution Agreement (the "Contribution Agreement") dated
effective September 1, 1999, by and among Prime, Prime Medical Services, Inc., a
Delaware corporation ("PMSI"), the Company, Barnet Dulaney Eye Center, P.L.L.C.,
an Arizona professional limited liability company, Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company, Prime/BDEC Acquisition, L.L.C., a
Delaware limited liability company, Barnet, Dulaney and Rosenberg.
WHEREAS, the Members, the Company and Prime desire to enter into
this Agreement to control the distribution of ownership interests in the Company
and to promote the harmonious management of the Company's affairs.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PERMITTED TRANSFERS; RESTRICTIONS AGAINST TRANSFER
As used in this Agreement, "Permitted Transfers" shall mean any transfer of all
or any part of any Member's Membership Interest to (i) the members of the
immediate family of the Member or a trust or trusts for the benefit of members
of the immediate family of the Member, provided that after any such transfer the
Member retains the sole express right to vote, or direct the votes of, the
Membership Interest, (ii) any other Member, provided that after any transfer
pursuant to this subsection (ii) is consummated, Barnet and Dulaney (or trusts
that hold Membership Interests as a result of Permitted Transfers subsection (i)
above) must collectively own in the aggregate at least fifty-one percent (51%)
of the total outstanding Membership Interests of the Company, or (iii) Prime.
Any Member transferring all or a portion of its Membership Interest pursuant to
a Permitted Transfer shall give written notice of the Permitted Transfer
(containing the same information as required for notice under Section 2.1.1) to
Prime and the other Members fifteen (15) days prior to the effective date of the
Permitted Transfer. Except for a Permitted Transfer, or as otherwise provided in
this Agreement, a Member shall not transfer, assign, pledge, hypothecate, or in
any way alienate any Membership Interest, or any interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, without the prior
written consent of the Company, the other Members and Prime, which consent may
be withheld in their sole and absolute discretion. Any purported transfer in
violation of any provision of this Agreement shall be void and ineffectual,
shall not operate to transfer any interest or title to the purported transferee,
and shall give the Company, the other Members and Prime options to purchase such
Membership Interest in the manner and on the conditions hereinafter provided. As
used in this Agreement, "Option Members" shall mean all Members of the Company
except (i) the Member who, prior to the proposed transfer or the incident
resulting in the proposed transfer of all or a portion of a Membership Interest,
owned such interest and (ii) Rosenberg.
ARTICLE II
OPTIONS
2.1 OPTION UPON VOLUNTARY TRANSFER.
2.1.1 Notice of Intention to Transfer. If a Member intends to
voluntarily transfer any of its Membership Interest, other than pursuant to a
Permitted Transfer, to any person other than the Company, and does not obtain
the written consents required in ARTICLE I hereof, the Member shall give written
notice to the other Members, Rosenberg and Prime stating (i) the intention to
transfer a Membership Interest, (ii) the amount of Membership Interest to be
transferred, (iii) the name, business and residence address of the proposed
transferee, (iv) the nature and amount of the consideration, and (v) the other
terms of the proposed sale.
2.1.2 Option to Purchase. The Option Members shall have, and may
exercise within 30 days after receipt of the notice of intent to transfer, an
option to purchase all or any portion of the Membership Interest the
transferring Member intends to transfer, for the price and upon the other terms
stated in the notice of intent to transfer. If the Option Members fail, within
such 30-day period, to exercise their purchase option (by delivery of written
notice) with respect to the entire Membership Interest being transferred, the
Option Members shall be deemed to have elected not to exercise their purchase
option with respect to such unpurchased Membership Interest. Upon any notice of
non-exercise (or deemed non-exercise) by the Option Members, Rosenberg (if not
the transferring Member) shall have, and may exercise within 30 days of receipt
of notice of such non-exercise (or deemed non-exercise), an option to purchase
all or any portion of such unpurchased Membership Interest upon the same terms
and conditions. If Rosenberg fails, within such 30-day period, to exercise his
purchase option (by delivery of written notice) with respect to the entire
unpurchased Membership Interest, Rosenberg shall be deemed to have elected not
to exercise his purchase option with respect to any remaining Membership
Interest. Upon any notice of non-exercise (or deemed non-exercise) by Rosenberg,
Prime shall have, and may exercise within 30 days of receipt of notice of such
non-exercise (or deemed non-exercise), an option to purchase all of such
remaining Membership Interest upon the same terms and conditions.
2.1.3 Death Before Closing. If a Member who proposed to transfer a
Membership Interest dies prior to the closing of the sale and purchase
contemplated by this Section 2.1, the Membership Interest of such deceased
Member shall be the subject of sale and purchase under Section 2.3.
2.1.4 Allowable Consideration. All parties hereto acknowledge and
agree that it would be impractical to exercise an option to purchase arising
pursuant to this Section 2.1 whenever the proposed consideration to be received
by the transferring Member is other than cash or cash equivalents. Therefore,
the parties agree that no transfer shall be permitted and no option shall arise
pursuant to this Section 2.1 whenever the consideration to be received from the
proposed transferee is other than cash or cash equivalents.
2.2 OPTION UPON CERTAIN INVOLUNTARY TRANSFERS.
2 2.1 Exercise Event and Notice. The filing of a voluntary or
involuntary petition of bankruptcy by or on behalf of a Member, an assignment by
a Member of any of its Membership Interest, or of any right or interest therein,
for the benefit of creditors, or the voluntary transfer, transfer by law or any
other transfer, of any Membership Interest, or of any right or interest therein
(other than transfers governed by ARTICLE I or Sections 2.1, 2.3 or 2.4 or
ARTICLE VII hereof), shall give the other Members, Rosenberg and Prime the
option to purchase the Membership Interest of such bankrupt Member or such
transferred Membership Interest as provided herein. Upon the filing of a
voluntary or involuntary petition of bankruptcy by or on behalf of a Member or
an assignment by Member of any of its Membership Interest, or of any right or
interest therein, for the benefit of creditors, the Member or its personal
representative shall promptly give written notice of such occurrence to the
other Members, Rosenberg and Prime. In the event of a transfer of Membership
Interest, as described above, the Member transferring such Membership Interest
shall promptly give written notice of such transfer to the other Members,
Rosenberg and Prime.
2.2.2 Option to Purchase. The Option Members shall have, and may
exercise within 30 days after receipt of the notice of the applicable exercise
event, an option to purchase all or any portion of the Membership Interest the
bankrupt or transferring Member intends to transfer, for the price and upon the
other terms hereinafter provided. If the Option Members fail, within such 30-day
period, to exercise their purchase option (by delivery of written notice) with
respect to the entire Membership Interest being transferred, the Option Members
shall be deemed to have elected not to exercise their purchase option with
respect to such unpurchased Membership Interest. Upon any notice of non-exercise
(or deemed non-exercise) by the Option Members, Rosenberg (if not the bankrupt
or transferring Member) shall have, and may exercise within 30 days of receipt
of notice of such non-exercise (or deemed non-exercise), an option to purchase
all or any portion of such unpurchased Membership Interest for the price and
upon the other terms hereinafter provided. If Rosenberg fails, within such
30-day period, to exercise his purchase option (by delivery of written notice)
with respect to the entire unpurchased Membership Interest, Rosenberg shall be
deemed to have elected not to exercise his purchase option with respect to any
remaining Membership Interest. Upon any notice of non-exercise (or deemed
non-exercise) by Rosenberg, Prime shall have, and may exercise within 30 days of
receipt of notice of such non-exercise (or deemed non-exercise), an option to
purchase all of such remaining Membership Interest for the price and upon the
other terms hereinafter provided.
2.3 PURCHASE AND SALE OF MEMBERSHIP INTEREST UPON DEATH.
2.3.1 Notice of Death. Upon the death of the Member, the
representative of the estate of the deceased Member shall promptly give written
notice of the death to the other Members, Rosenberg and Prime.
2.3.2 Option to Purchase. The Option Members shall have, and may
exercise within 30 days after receipt of the notice of death, an option to
purchase all or any portion of the Membership Interest of the deceased Member,
for the price and upon the other terms hereinafter provided. If the Option
Members fail, within such 30-day period, to exercise their purchase option (by
delivery of written notice) with respect to the entirety of such Membership
Interest, the Option Members shall be deemed to have elected not to exercise
their purchase option with respect to such unpurchased Membership Interest. Upon
any notice of non-exercise (or deemed non-exercise) by the Option Members,
Rosenberg (but not his estate if he is the deceased Member) shall have, and may
exercise within 30 days of receipt of notice of such non-exercise (or deemed
non-exercise), an option to purchase all or any portion of such unpurchased
Membership Interest for the price and upon the other terms hereinafter provided.
If Rosenberg fails, within such 30-day period, to exercise his purchase option
(by delivery of written notice) with respect to the entire unpurchased
Membership Interest, Rosenberg shall be deemed to have elected not to exercise
his purchase option with respect to any remaining Membership Interest. Upon any
notice of non-exercise (or deemed non-exercise) by Rosenberg, Prime shall have,
and may exercise within 30 days of receipt of notice of such non-exercise (or
deemed non-exercise), an option to purchase all of such remaining Membership
Interest for the price and upon the other terms hereinafter provided.
2.4 OPTION UPON DEATH OF A MEMBER'S SPOUSE, TERMINATION OF MARITAL RELATIONSHIP
OR PARTITION OF COMMUNITY PROPERTY.
2.4.1 Death of Member's Spouse. Each Member and each Member's
spouse agree that in the event the spouse of a Member predeceases such Member
and such Member does not succeed by the spouse's last will and testament or by
operation of law to any interest (including, without limitation, a community
property interest) of the spouse in the Membership Interest, such Member shall
have, and may exercise within 60 days after the death of the spouse, an option
to purchase all or any portion of the spouse's interest for the price and upon
the other terms hereinafter provided. If the Member fails, within such 60-day
period, to exercise his purchase option (by delivery of written notice) with
respect to the entirety of such spouse's interest, that Member shall be deemed
to have elected not to exercise his purchase option with respect to such
spouse's interest. Upon any notice of non-exercise (or deemed non-exercise) by
the Member, the Option Members shall then have, and may exercise within 30 days
after receipt of such non-exercise (or deemed non-exercise), an option to
purchase all or any portion of the deceased spouse's interest, for the price and
upon the other terms hereinafter provided. If the Option Members fail, within
such 30-day period, to exercise their purchase option (by delivery of written
notice) with respect to the entirety of such deceased spouse's interest, the
Option Members shall be deemed to have elected not to exercise their purchase
option with respect to such unpurchased deceased spouse's interest. Upon any
notice of non-exercise (or deemed non-exercise) by the Option Members, Rosenberg
(if not the Member whose spouse is deceased) shall have, and may exercise within
30 days of receipt of notice of such non-exercise (or deemed non-exercise), an
option to purchase all or any portion of such unpurchased deceased spouse's
interest for the price and upon the other terms hereinafter provided. If
Rosenberg fails, within such 30-day period, to exercise his purchase option (by
delivery of written notice) with respect to the entire unpurchased deceased
spouse's interest, Rosenberg shall be deemed to have elected not to exercise his
purchase option with respect to any remaining portion of the deceased spouse's
interest. Upon any notice of non-exercise (or deemed non-exercise) by Rosenberg,
Prime shall have, and may exercise within 30 days of receipt of notice of such
non-exercise (or deemed non-exercise), an option to purchase all of such
remaining portion of the deceased spouse's interest for the price and upon the
other terms hereinafter provided.
2.4.2 Termination of Marital Relationship or Partition of Community
Property. In the event a divorce, annulment or other proceeding for termination
of the marital relationship is filed by or against a Member, or upon the
initiation of any voluntary or involuntary attempt to partition the community
property estate between a Member and such Member's spouse for any reason, the
Member shall promptly give written notice to the other Members, Rosenberg, and
Prime, of such event. The Member shall have, and may exercise within 60 days of
giving of such notice, an option to purchase all or any portion of the departing
spouse's interest in such Membership Interest (including without limitation any
community property interest, for purposes of this Section), for the price and
upon the other terms hereinafter provided. If the Member fails, within such
60-day period, to exercise his purchase option (by delivery of written notice)
with respect to the entirety of such spouse's interest, that Member shall be
deemed to have elected not to exercise his purchase option with respect to such
spouse's interest. Upon any notice of non-exercise (or deemed non-exercise) by
the Member, the Option Members shall then have, and may exercise within 30 days
after receipt of such non-exercise (or deemed non-exercise), an option to
purchase all or any portion of the departing spouse's interest, for the price
and upon the other terms hereinafter provided. If the Option Members fail,
within such 30-day period, to exercise their purchase option (by delivery of
written notice) with respect to the entirety of such departing spouse's
interest, the Option Members shall be deemed to have elected not to exercise
their purchase option with respect to such unpurchased departing spouse's
interest. Upon any notice of non-exercise (or deemed non-exercise) by the Option
Members, Rosenberg (if not the Member whose spouse is departing) shall have, and
may exercise within 30 days of receipt of notice of such non-exercise (or deemed
non-exercise), an option to purchase all or any portion of such unpurchased
departing spouse's interest for the price and upon the other terms hereinafter
provided. If Rosenberg fails, within such 30-day period, to exercise his
purchase option (by delivery of written notice) with respect to the entire
unpurchased departing spouse's interest, Rosenberg shall be deemed to have
elected not to exercise his purchase option with respect to any remaining
portion of the departing spouse's interest. Upon any notice of non-exercise (or
deemed non-exercise) by Rosenberg, Prime shall have, and may exercise within 30
days of receipt of notice of such non-exercise (or deemed non-exercise), an
option to purchase all of such remaining portion of the departing spouse's
interest for the price and upon the other terms hereinafter provided.
2.5 ALTERNATE NOTICES.
The failure of any person, whether a party to this Agreement or
otherwise, to give notice of the occurrence of an Exercise Event (as defined in
Section 4.3) as contemplated herein shall not operate to prevent the creation of
any option which would otherwise arise pursuant to this ARTICLE II. Any party to
this Agreement who has actual knowledge of the occurrence of an Exercise Event
may give the required written notice of the occurrence of an Exercise Event, and
upon the giving of such written notice the options shall be created and become
exercisable to the same extent as if such notice was given by the party
initially contemplated above. For instance, and purely by way of example, in the
event of the death of a Member, another Member having actual knowledge of the
Member's death may give the notice initially contemplated to be given by a
representative of the estate of the deceased Member pursuant to Section 2.3.1
above, whereupon the Option Members' option described in Section 2.3.2 would
arise and become exercisable to the same extent as if the notice had been given
by the representative of the estate of the deceased Member.
ARTICLE III
EXERCISE OF OPTIONS; EFFECT OF NON-EXERCISE
3.1 MANNER OF EXERCISE OF OPTIONS.
All options granted in, or arising pursuant to, ARTICLE II shall be
exercised by a written notice to that effect delivered within the time provided
for the exercise of the option.
3.2 COMPLETE EXERCISE OF OPTIONS.
Notwithstanding anything herein to the contrary, the holders of
options granted in, or arising pursuant to, ARTICLE II must, either alone or in
the aggregate, exercise the options in such a manner as to purchase all of the
Membership Interest (or interest therein) subject to such options, and failure
to do so shall cause a forfeiture of the options.
3.3 MULTIPLE OPTION HOLDERS.
In cases where an option is held by more than one Option Member,
each purchasing Option Member shall be entitled to purchase his or her
proportionate share of the Membership Interest subject to the option. An Option
Member's proportionate share shall equal the total amount of Membership
Interests subject to the option multiplied by a fraction the numerator of which
is the amount of Membership Interests held by such Option Member and the
denominator of which shall be the amount of Membership Interests held by all
Option Members electing to exercise the option.
3.4 EFFECT OF NON-EXERCISE OF OPTIONS.
If the holders of options granted or arising pursuant to this
Agreement do not exercise their options, or such options are forfeited, as
provided herein, the person or persons acquiring the Membership Interests (or
interest therein) that were the subject of the options shall execute a
counterpart of this Agreement and become a party hereto and shall hold such
Membership Interests subject to all the terms and conditions provided herein,
and any transfer of such Membership Interests (or interest therein) shall only
be made in accordance with the terms and conditions provided herein. In the
event the person or persons acquiring the Membership Interests (or interest
therein) fail to execute a counterpart of this Agreement and become a party
hereto, such transfer shall be void and ineffectual, and shall not operate to
transfer any interest or title to the purported transferee and such Membership
Interests shall thereafter be subject to cancellation and extinguishment by the
Company, without consideration therefor. In addition, in the event of a
voluntary transfer subject to the provisions of Section 2.1, upon the lapse or
forfeiture of the options arising pursuant to that Section, the Member proposing
the transfer shall have the right to effectuate the transfer of Membership
Interests in accordance with the terms stated in the notice of intent to
transfer, and the transferee of such Membership Interests shall execute and
become a party to this Agreement and shall hold such Membership Interests
subject to all of its terms and conditions. Provided further, however, any such
transfer of Membership Interests shall be void and ineffectual, and shall not
operate to transfer any interest or title to the purported transferee, if (i)
the transfer is not upon the terms or is not to the transferee stated in the
notice of intent to transfer, or (ii) the transfer is not closed within 10 days
of receipt of written notice of the election not to exercise, or the forfeiture
of, all applicable options.
ARTICLE IV
PURCHASE PRICE
4.1 PURCHASE PRICE.
The purchase price of the Membership Interests to be purchased
pursuant to options granted, held or exercised pursuant to Sections 2.2, 2.3 and
2.4 hereof, shall be the amount calculated in accordance with Section 4.2
hereof.
4.2 CALCULATION OF PURCHASE PRICE.
When determined in accordance with this Section 4.2, the purchase
price for the Membership Interest or any portion thereof or spouse's interest
therein shall be equal to the Appraised Value of the Membership Interest as of
the Valuation Date (as defined in Section 4.3 hereof), reduced when necessary to
reflect the purchase of less than a one hundred percent (100%) interest in each
of the Membership Interests to be transferred (for example: reduced by one-half
when a spouse's interest is only an undivided one-half community property
interest in each of the Membership Interests of a Member spouse). For purposes
of this Agreement, the "Appraised Value" of a Membership Interest shall be (i)
based on the overall value of the Company as a going concern, expressed in a per
Membership Interest unit amount without consideration to whether the Membership
Interest, or interest therein, being transferred constitutes a controlling or
minority interest in the Company, and (ii) determined by a certified business
appraiser, selected by the Company, that is a member of either the American
Society of Appraisers or the Institute of Business Appraisers; but if a Member
or Prime disagrees with such determination that Member or Prime may, at its
expense, have another certified business appraiser that is a member of one or
both of the above named professional organizations determine the value, and if
the two appraisers cannot agree upon a value, they shall mutually select a third
certified business appraiser (that meets the above described membership
requirements) who shall, together with the first two appraisers, determine the
value of the Membership Interest by majority vote. The expense of such third
appraiser shall also be paid by the Member or Prime, as the case may be, who
disagrees with the value determination of the Company's original appraiser,
unless the appraised value ultimately determined is more than ten percent (10%)
greater than the value determined by the Company's original appraiser.
4.3 CERTAIN DEFINITIONS.
As used herein, the term "Valuation Date" shall mean and refer to
the end of the fiscal year of the Company immediately preceding the Exercise
Event, unless the purchasing party elects to use the alternate valuation date,
in which event the Valuation Date shall be the end of the month immediately
preceding the Exercise Event. As used herein, the term "Exercise Event" shall
mean and refer to the event or circumstance described in ARTICLE II of this
Agreement, as a result of which the Company, a Member, or Prime, as the case may
be in the first instance, becomes entitled to exercise a purchase option
hereunder.
ARTICLE V
PAYMENT OF THE PURCHASE PRICE
5.1 PAYMENT.
Except as otherwise provided in this Agreement, including Section
2.1, the purchase price for a Membership Interest to be purchased from a selling
party shall either: (i) be paid in cash; or (ii) at the option of the purchasing
party, up to seventy percent (70%) of the purchase price may be deferred with
the remainder paid in cash at the closing.
5.2 PROMISSORY NOTE.
If the purchasing party elects to defer part of the purchase price
by the execution and delivery of a promissory note, the deferred portion of the
price shall be evidenced by the promissory note of the purchasing party to the
order of the selling party payable in sixty (60) equal monthly installments of
principal and interest on or before the first day of each month beginning the
month next following the date of closing. The interest rate for such installment
promissory note shall be equal to the prime or base rate on corporate loans at
large U.S. money center commercial banks as published in the "Money Rates"
column of the Wall Street Journal on the date of exercise of the option to
purchase (or, if such option is not exercised on a date on which such rate is
published, the next following date on which such rate is published). In no event
shall the interest rate exceed the maximum legal interest rate then prevailing
for such obligations in the state of Texas. The note shall be secured by a first
lien security interest in the Membership Interest transferred and the purchasing
party shall deliver certificates evidencing the Membership Interest to the
selling party and take such further action as is reasonably necessary to perfect
the security interest.
ARTICLE VI
THE CLOSING
Unless otherwise agreed by the parties, the closing of the sale and
purchase of a Membership Interest shall take place at the principal offices of
the Company within sixty (60) days after the exercise of any option provided by
this Agreement. Each party hereto (including the spouses of the Members) shall
bear its own transaction costs, including legal and accounting fees, if any,
attributable to any transfer of a Membership Interest, or any interest therein,
pursuant to this Agreement. Upon the closing, the selling party shall deliver
its Membership Interest to the purchaser free and clear of all liens and
encumbrances, and shall deliver to the Company its resignation and that of all
of its nominees, if any, as officers and directors of the Company and any of the
Company's subsidiaries. The selling party shall deliver to the purchasing party
at closing, all appropriate documents of transfer, including without limitation
bills of sale, assignments or other instruments of conveyance. As a condition to
any closing of the sale and purchase of a Membership Interest (or any interest
therein) pursuant to this Agreement: (i) the selling party shall be indemnified
by the purchasing party (in a form reasonably satisfactory to the selling party)
for all the Company's liabilities, whether fixed or contingent, to lenders and
others, incurred prior to the closing of the transaction, (ii) the purchasing
party and/or the Company shall cause the release of any personal guaranties by
the selling party that the selling party may have granted to the Company's
lenders or other creditors or which may have otherwise been provided by the
selling party for the benefit of the Company, and (iii) if the selling party is
a creditor of the Company, the purchasing party shall unconditionally guarantee
the debt of the Company to the selling party and execute such documents and
instruments of guarantee as may be necessary in connection therewith.
Furthermore, and as a condition to closing, in the event the selling party owes
any amounts to the Company at the time of closing, such indebtedness shall be
paid in full by the selling party at or prior to the closing, or may be deducted
from and offset against the purchase price by the purchasing party, in the
purchasing party's sole discretion. In the event of a failure to close as a
result of the non-satisfaction of the conditions to closing set forth herein,
this Agreement shall remain in full force and effect and all Membership
Interests shall remain subject to the restrictions contained herein and, in
addition, the parties hereto shall be entitled to such other remedies as may be
available in the event the failure to close constitutes a breach hereof.
ARTICLE VII
LEGEND ON CERTIFICATES
All Membership Interests now or hereafter owned by the Members, or
their permitted transferees, shall be subject to the provisions of this
Agreement, and any certificates representing same shall bear the following
legend:
"THE MEMBERSHIP INTEREST REPRESENTED HEREBY AND THE SALE,
ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF ARE
SUBJECT TO CERTAIN RESTRICTIONS CONTAINED IN A MEMBERSHIP INTEREST
TRANSFER RESTRICTION AGREEMENT AMONG THE COMPANY AND THE WITHIN
NAMED MEMBER, AND ANY AMENDMENT THERETO. THE AGREEMENT LIMITS THE
USE OF THIS MEMBERSHIP INTEREST AS COLLATERAL FOR ANY LOAN WHETHER
BY PLEDGE, HYPOTHECATION OR OTHERWISE. A COPY OF THE MEMBERSHIP
INTERES TRANSFER RESTRICTION AGREEMENT AND ALL APPLICABLE
AMENDMENTS THERETO WILL BE FURNISHED BY THE COMPANY TO THE HOLDER
HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE."
ARTICLE VIII
TERMINATION OF AGREEMENT
This Agreement and all restrictions on Membership Interest transfer
created hereby shall terminate on the occurrence of any of the following events:
(a) The bankruptcy or dissolution of the Company.
(b) The ownership by one person of all of the Membership Interests of the
Company which are then subject to this Agreement.
(c) The execution of a written instrument by the Company, all of
the Members who then own Membership Interests subject to this Agreement, and
Prime which terminates the same.
(d) The date twenty-one (21) years after the death of the last survivor of
all individuals who are parties to this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 REMEDIES FOR BREACH.
The Membership Interests are unique chattels, and each party to
this Agreement shall have the remedies which are available to him, her or it for
the violation of any of the terms of this Agreement, including, but not limited
to, the equitable remedy of specific performance.
9.2 BINDING EFFECT.
This Agreement is binding upon and inures to the benefit of the
Company, its successors and permitted assigns, to the Members and their
respective heirs, personal representatives, successors and permitted assigns,
and to Prime, its successors and permitted assigns. This Agreement may not be
assigned, in whole or in part, by any party hereto without the express written
consent of all parties hereto.
9.3 PRIOR AGREEMENTS.
This Agreement supersedes all prior written and oral agreements
between the parties regarding the subject matter hereof.
9.4 GOVERNING LAWS.
This Agreement is executed under, and in conformity with, the laws
of the State of Texas and shall be governed thereby. If any provision of this
Agreement shall be determined to be invalid or unenforceable or prohibited by
the laws of the State of Texas, this Agreement shall be considered divisible as
to such provisions and such provisions shall be inoperative and shall not be a
part of the consideration moving from any party to another party. The remaining
provisions shall be valid and binding upon the parties and be of like effect as
though such invalid, unenforceable or prohibited provisions were not included
herein.
9.5 AMENDMENT.
This Agreement may be amended in whole or in part only by the
written consent of all the parties. Such amendment shall be effective as of the
date then determined by the parties and shall supersede any provisions herein
contained which are in conflict.
9.6 CAPTIONS AND GENDER.
The captions and titles herein are for convenience only and are not
intended to include or conclusively define the subject matter of the text. All
pronouns and references thereto shall refer to the masculine, feminine, and
neuter genders, singular or plural, as the identification of the persons,
entities, and companies may require. The term "person" as used in this Agreement
shall include natural persons, companies, partnerships, trusts, estates and any
other form of entity.
9.7 NOTICES.
All notices required to be given hereunder shall be deemed to be
duly given by personally delivering such notice or by mailing it by certified
mail, to the Company, to the Members, and to Prime at the following addresses
(which may be changed by giving written notice of such change to all other
parties hereto):
To the Company: LASIK Investors, L.L.C.
4800 North 22nd Street
Phoenix, Arizona 85016
To Barnet: Ronald W. Barnet, M.D.
4800 North 22nd Street
Phoenix, Arizona 85016
To Dulaney: David D. Dulaney, M.D.
4800 North 22nd Street
Phoenix, Arizona 85016
To Rosenberg: Mark Rosenberg
4800 North 22nd Street
Phoenix, Arizona 85016
To Perkins: Scott A. Perkins, M.D.
4800 North 22nd Street
Phoenix, Arizona 85016
To Pinkert: Robert B. Pinkert, O.D.
4800 North 22nd Street
Phoenix, Arizona 85016
To Prime: Prime Medical Operations, Inc.
Attention: President
1301 Capital of Texas Highway
Austin, Texas 78746
9.8 BINDING EFFECT OF THIS AGREEMENT ON ADDITIONAL MEMBERSHIP INTEREST ACQUIRED
BY A MEMBER.
In the event a Member acquires, contracts to acquire, or receives
any Membership Interests of the Company which are not subject to this Agreement
at the time of acquisition, such additional Membership Interests of the Member
shall be automatically subject to this Agreement and any certificates
representing such Membership Interests shall bear the legend prescribed herein
and this Agreement shall be amended, if necessary, to reflect the acquisition of
such Membership Interests by the Member.
9.9 EXECUTION OF DOCUMENTS.
Whenever Membership Interests are to be purchased by the Company, a
Member, or Prime pursuant to this Agreement, the transferor shall do all things
and execute and deliver all documents and make all transfers as may be necessary
to consummate such purchase. In the event that the transferor refuses to abide
by the terms and conditions specified herein, the purchaser(s) may tender
payment for such Membership Interest by mailing payment to the transferor's
attention at the address of the Company's registered office on file at the
office of the Texas Secretary of State. After payment is tendered accordingly,
the Company shall be entitled to cancel such Membership Interest on its books,
and reissue such Membership Interest to the purchaser(s) or, if the purchaser is
the Company, the Company may hold such Membership Interest as treasury stock or
cancel such Membership Interest.
9.10 ACTIONS BY THE COMPANY.
Any decision by the Company to exercise any purchase option, give
any notice or otherwise enforce any provisions of this Agreement, shall be made
by a majority vote of Members who are not then in breach of this Agreement and
whose Membership Interests are not then the subject of any option or requirement
of notice of an Exercise Event.
[Signature pages follow]
<PAGE>
SIGNATURE PAGE TO
MEMBERSHIP INTEREST
TRANSFER RESTRICTION AGREEMENT
EXECUTED as of the date first mentioned above.
COMPANY: LASIK Investors, L.L.C.
By:
Ronald W. Barnet, M.D., manager
By:
David D. Dulaney, M.D., manager
BARNET:
Ronald W. Barnet, M.D.
DULANEY:
David D. Dulaney, M.D.
ROSENBERG:
Mark Rosenberg
Perkins:
Scott A. Perkins, M.D.
Pinkert:
Robert B. Pinkert, O.D.
PRIME: Prime Medical Operating, Inc.
By:
Printed Name:
Title:
<PAGE>
SPOUSAL CONSENTS
The undersigned spouse of Ronald W. Barnet, M.D. hereunto
subscribes her name in evidence of her agreement and consent to the disposition
made of any interest she may have, including any community property interests,
in the membership interest of LASIK Investors, L.L.C., referred to in the
foregoing Agreement, and to all other provisions of such Agreement.
Signature:
Printed Name:
The undersigned spouse of David D. Dulaney, M.D. hereunto
subscribes her name in evidence of her agreement and consent to the disposition
made of any interest she may have, including any community property interests,
in the membership interest of LASIK Investors, L.L.C., referred to in the
foregoing Agreement, and to all other provisions of such Agreement.
Signature:
Printed Name:
The undersigned spouse of Mark Rosenberg hereunto subscribes her
name in evidence of her agreement and consent to the disposition made of any
interest she may have, including any community property interests, in the
membership interest of LASIK Investors, L.L.C., referred to in the foregoing
Agreement, and to all other provisions of such Agreement.
Signature:
Printed Name:
The undersigned spouse of Scott A. Perkins, M.D. hereunto
subscribes her name in evidence of her agreement and consent to the disposition
made of any interest she may have, including any community property interests,
in the membership interest of LASIK Investors, L.L.C., referred to in the
foregoing Agreement, and to all other provisions of such Agreement.
Signature:
Printed Name:
The undersigned spouse of Robert B. Pinkert, O.D. hereunto
subscribes her name in evidence of her agreement and consent to the disposition
made of any interest she may have, including any community property interests,
in the membership interest of LASIK Investors, L.L.C., referred to in the
foregoing Agreement, and to all other provisions of such Agreement.
Signature:
Printed Name:
<PAGE>
EXHIBIT-I
COLLOCATION AGREEMENT
BY AND BETWEEN
BARNET DULANEY EYE CENTER, P.L.L.C.
AND
PRIME/BDEC ACQUISITION, L.L.C.
<PAGE>
COLLOCATION
AGREEMENT
This COLLOCATION AGREEMENT ("Agreement"), effective as of the 1st day of
September, 1999 (the "Effective Time"), is by and between BARNET DULANEY EYE
CENTER, P.L.L.C., an Arizona professional limited liability company ("BDEC"),
and PRIME/BDEC ACQUISITION, L.L.C., a Delaware limited liability company
("Company").
W I T N E S S E T H:
WHEREAS, the Company has been organized for the purpose of providing
facilities, equipment and non-physician personnel for the performance by
physicians of Refractive Surgery (as defined herein), for the marketing,
scheduling and management of Refractive Surgery, for the credentialing and
scheduling of physicians to perform Refractive Surgery and for the billing,
collecting and accounting for the use of the facility, equipment and
non-physician personnel (the "Business");
WHEREAS, BDEC has owned or leased assets for the performance by physicians
of Refractive Surgery, including, without limitation, certain space located in a
building at 4800 North 22nd Street, Phoenix, Arizona 85016 and certain space
located in a building at 555 East River Road, Tucson, Arizona (individually a
"Facility" and collectively the "Facilities") and in connection with each
Facility, equipment, instruments, computer software used in connection with the
equipment, certain leases and contracts, the leasehold improvements, furniture,
fixtures and other fixed assets and items of personal property used primarily in
or materially relied on for the performance of Refractive Surgery (the
"Equipment and Personalty");
WHEREAS, BDEC employs non-physician personnel (the "BDEC Employees") with
expertise and experience in assisting physicians in the performance of
Refractive Surgery, in credentialing and scheduling physicians for the
performance of Refractive Surgery in the Facilities, in performing the
scheduling of patients for Refractive Surgery in the Facilities, in performing
marketing, accounting, billing and collection services for the use of the
Facilities and in managing the Facilities and all non-physician aspects of
Refractive Surgery in the Facilities (the "Support Services");
WHEREAS, BDEC employs physician and non-physician executives (the
"Managers") with expertise and experience in the management of the Facilities,
the Equipment and Personalty, the Support Services and all other elements of a
Refractive Surgery center (the "Management Services");
WHEREAS, BDEC, Prime Medical Operating, Inc.("Prime") and others entered
into that certain Contribution Agreement dated effective September 1, 1999 (the
"Contribution Agreement"), pursuant to which Prime, BDEC and others have
participated in a series of transactions that were completed simultaneously with
the execution and delivery of this Agreement, in which transactions the Company
became the owner of the Equipment and Personalty and the business conducted
therewith, excluding the practice of medicine, and in which transactions BDEC
agreed to provide to the Company the Facility and the Management Services and
Support Services on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants set forth
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby forever acknowledged and confessed, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Agreement shall mean this Collocation Agreement between the Company and
BDEC and any amendments hereto as may from time to time be adopted as
hereinafter provided.
1.2 BDEC shall mean Barnet Dulaney Eye Center, P.L.L.C.
1.3 Buildings shall mean Building P and Building T.
1.4 Building P shall mean the building located at 4800 North 22nd Street,
Phoenix, Arizona 85016, and known generally as the Barnet Dulaney Eye Center.
1.5 Building T shall mean the building located at 555 East River Road,
Tucson, Arizona, and known generally as the Barnet Dulaney Eye Center.
1.6 Business shall mean the provision of facilities, equipment and
non-physician personnel for the performance by physicians of Refractive Surgery
(as defined herein), the marketing, scheduling and management of Refractive
Surgery, the credentialing and scheduling of physicians to perform Refractive
Surgery and the billing, collecting and accounting for the use of the facility,
equipment and non-physician personnel.
1.7 Business Expense shall mean all out-of-pocket costs and expenses
incurred by BDEC solely and exclusively in the performance of its duties and
obligations under, and in accordance with, this Agreement. Business Expense
shall also include that portion (allocated based on the relative percentage
amount of each such employee's time spent working directly on the Business of
the Company) of salaries, wages and benefits for those personnel employed by
BDEC to provide services hereunder, but only to the extent such employees (i)
work directly on the Business of the Company and (ii) are either listed on
Exhibit B hereto or are subsequently employed to replace such listed employees
or are added in the same service categories related to the Business as
corresponds to the service categories applicable to the employees listed on
Exhibit B. Business Expense shall also include a reasonable allocation of the
out-of-pocket costs incurred by BDEC related to hiring such personnel.
Notwithstanding the foregoing, Business Expense shall not include any portion of
the salaries, wages or benefits related to any personnel employed or otherwise
retained or contracted by BDEC who work in any of the following departments or
fall within any of the following categories: (a) accounting, (b) accounts
receivable, (c) purchasing, (d) practice operations, (e) management information
systems and facilities support, (f) human resources, (g) credentialing, or (h)
executive management. Furthermore, Business Expense shall not include any rent
or other costs or expenses incurred by BDEC pursuant to the Base Leases. For
illustration purposes, the parties agree that Business Expense for the Phoenix
Refractive Surgery center based on the pro forma annualized facility model
attached hereto as Exhibit A for the first full year of the Term of this
Agreement would be $1,663,638, being the sum of the categories on Exhibit A
marked with an asterisk. It is the intention of the parties that Business
Expense be consistent with the methodology reflected in Exhibit A.
1.8 Company shall mean Prime/BDEC Acquisition, L.L.C.
1.9 Facility and Facilities shall have the meaning given to it in the
recitals to this Agreement.
1.10 Premises P shall mean the Facility and other space located in Building
P to which the right to use is granted in Section 2.3 hereof.
1.11 Premises T shall mean the Facility and other space located in Building
T to which the right to use is granted in Section 2.3 hereof.
1.12 Refractive Surgery shall mean, collectively, any current and/or future
surgical procedures intended to correct myopia, hyperopia or astigmatism of the
eye, excluding procedures aimed only at restoring accommodation (presbyopia) and
procedures to treat only cataracts, glaucoma, oculoplastics or retinal
abnormality.
1.13 Services Fee shall mean BDEC's compensation established and described
in Article VI hereof.
1.14 State shall mean the State of Arizona.
1.15 Term shall mean the initial and any renewal periods of duration of
this Agreement as described herein.
ARTICLE II
RIGHT TO USE THE PREMISES
2.1 Base Lease. Section 2.3 contains a grant of a right to use Premises P
and Premises T and is subject and subordinate to the terms and conditions of
those certain leases as amended ("Base Leases") pursuant to which BDEC leases
the Building P and Building T.
2.2 Users of Buildings. Building P and Building T are used for multiple
activities, including, but not limited to, Refractive Surgery, office and clinic
activities of BDEC physicians and other professionals, an ambulatory surgery
center ("ASC") and marketing, accounting, management and other administrative
activities. The various activities in each Building do not necessarily have
specific or identified space and, in some instances, more than one activity uses
a space at the same time or at different times. BDEC designates, schedules and
modifies the location and the times that each activity can use space in the
Buildings.
2.3 Grant of Right to Use. In consideration of Company's payment to
BDEC of the Purchase Price, as defined in the Contribution Agreement, and on the
terms and conditions of this Agreement, BDEC hereby grants to the Company the
non-exclusive right to use for Refractive Surgery the spaces in the Buildings
where the Equipment and Personalty are located at the times during regular
business hours and in the manner designated by BDEC (but in no event less than
forty percent (40%) of the of the business hours during each week), which might
require the using of such space while the same or adjoining space is being used
by an ASC or on a cooperative schedule with an ASC. BDEC also grants to the
Company the non-exclusive right to use and to permit its guests and invitees to
use the common areas in accordance with the Base Leases. Notwithstanding that
the foregoing grants are non-exclusive, BDEC covenants and agrees that it will
not allow any person or entity, other than the Company, to utilize any space in
the Buildings, any Equipment and Personalty or any BDEC Employees for purposes
of conducting any component of the Business.
2.4 Term and Conditions of Grant. The grants set forth in Section 2.3 above
are each for the term and on the conditions, requirements, covenants, rules and
regulations of the Base Leases and subject to Company's paying its allocated
portion of the rent, common area charges and other payments required of BDEC
under the Base Leases.
2.5 Maintenance of Base Leases. Throughout the Term of this Agreement, BDEC
covenants and agrees to maintain all Base Leases in full force and affect,
without any breach or default by BDEC thereunder.
ARTICLE III
APPOINTMENT AND AUTHORITY OF BDEC
3.1 Appointment. The Company hereby appoints BDEC as its sole and exclusive
agent for the management and performance of day-to-day operations of the
Business in the Facilities, using the Equipment and Personalty, through the
provision of Management Services and Support Services, as defined herein, and
BDEC hereby accepts such appointment, subject at all times to the provisions of
this Agreement.
3.2 Authority. Consistent with the provisions of this Agreement,
directions given by the Company and operating and capital budgets established by
the Company, BDEC shall have the responsibility and commensurate authority to
provide, or cause to be provided, personnel, business and administrative
services for the Company, which shall include those services set forth in
Article III hereof. BDEC is hereby expressly authorized to provide all such
services in whatever manner BDEC, in good faith, deems appropriate and
consistent with commercially reasonable standards to meet the day-to-day
requirements of the business functions of the Company or related to the
Business. The authority of BDEC shall extend no further than is expressly
provided herein, and shall not be extended by implication or otherwise.
Notwithstanding anything contained herein to the contrary, BDEC shall have no
authority to speak on behalf of, or to bind, the Company with respect to any
third party.
3.3 Retained Authority. The Company shall at all times retain the ultimate
responsibility for the operation of the Business and, except as delegated to
BDEC herein or by resolution of Company's managers, shall retain the authority
and power and to make all decisions with respect to its assets and rights.
3.4 Nature of Relationship. The parties acknowledge and agree that no
partnership or other form of entity, or any joint and several liability, is
intended to be created by or between them by the execution or operation of this
Agreement, and none of the foregoing should be implied.
ARTICLE IV
COVENANTS OF BDEC
4.1 Management and Support Services. BDEC shall provide the Management
Services and Support Services necessary to operate the Business as it was
operated by BDEC prior to the Effective Time, including, but not limited to the
following:
4.1.1 Marketing and Scheduling. BDEC shall conduct marketing efforts for
the Facility and shall schedule patient treatment in the Facility, in the manner
that such services were performed prior to the Effective Time.
4.1.2 Physician Matters. BDEC shall credential physicians to perform
Refractive Surgery in the Facility and shall schedule physicians to use the
Facility in the manner that such services were performed prior to the Effective
Time.
4.1.3 Supplies. As agent for the Company, BDEC shall obtain all reasonable
medical, office, and other supplies, including stationery and forms, and shall
ensure that the Company is at all times adequately stocked with such supplies as
are reasonably necessary and appropriate for the operation of the Business.
4.1.4 Licenses and Permits. BDEC shall coordinate all development and
planning processes, and apply for and use BDEC's best efforts to obtain and
maintain all federal, state, and local licenses and regulatory permits required
for or in connection with the operation of the Business.
4.1.5 Contract Negotiations. BDEC shall negotiate, either directly or on
the Company's behalf, as appropriate, all contractual arrangements with third
parties as are reasonably necessary and appropriate for the Business.
4.1.6 Financial Matters. BDEC shall establish and administer
accounting procedures, controls, and systems for the development, preparation,
and safekeeping of records and books of accounts relating to the Company, all of
which shall be prepared and maintained in accordance with generally accepted
accounting principles consistently applied. BDEC shall prepare and deliver to
the Company, and each of its members, within thirty (30) days after the end of
each fiscal year of the Company, a balance sheet, a profit and loss statement,
and a statement of sources and applications of funds and changes in working
capital reflecting the financial status of the Company and as of the end of such
prior fiscal year, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied. Additionally, BDEC shall
prepare and deliver to the board of managers of the Company, and each of the
Company's members, monthly financial statements within ten (10) days after the
end of each month, and shall prepare and deliver to the board of managers of the
Company, and each of the Company's members, such other financial statements or
records as BDEC may from time to time deem appropriate or as the board of
managers of the Company, or its members, may reasonably request. On or before
ninety (90) days prior to the end of each fiscal year of the Company, BDEC will
prepare and deliver to the board of managers of the Company, and each of the
Company's members, a proposed operating budget of projected expenses and
revenues of the Company for the next fiscal year of the Company, and
representatives of BDEC shall make themselves reasonably available to the board
of managers and the members of the Company to explain such proposed budget and
the underlying assumptions.
4.1.7 Billing and Collection. BDEC shall be solely responsible for billing
and collecting for all services provided by Company and for the use of the
Facility and Equipment and Personalty. Company shall be entitled to all monies
collected by BDEC on behalf of Company.
4.1.8 Information Systems. BDEC shall provide and maintain the information
systems it deems necessary to operate the Business. BDEC shall have reasonable
discretion to select hardware and software, provided such hardware and software
shall be adequate to operate the Business in a commercially reasonable manner,
and BDEC shall be responsible for training employees to operate any such
systems.
4.1.9 Legal Actions. As requested by the Company, BDEC shall advise and
assist the Company in instituting or defending legal actions or proceedings by
or against third parties arising out of the Business, including, without
limitation, those actions necessary for the protection and continued operation
of the Company. BDEC shall have no authority to initiate, compromise or settle
any legal action in the name of the Company, or to confess a judgment in the
name of, or on behalf of, the Company.
4.1.10 Insurance. (a) BDEC shall obtain and maintain professional and
comprehensive general liability insurance and other insurance covering Company
for the risks and in the amounts typically carried by others in the same
business as Company.
(b) BDEC shall obtain and maintain appropriate workers' compensation
coverage for BDEC's personnel and shall carry professional and comprehensive
general liability insurance covering all BDEC personnel in amounts that BDEC
deems necessary, the cost of which insurance shall be a Business Expense.
4.2 Personnel. BDEC shall employ or otherwise retain, and shall be
responsible for interviewing, selecting, hiring, training, supervising,
scheduling, and terminating, non-physician personnel as BDEC deems reasonably
necessary and appropriate for the performance of Management Services and Support
Services. Such personnel may include temporary or "floater" personnel who are
retained by BDEC to substitute for permanent personnel. BDEC shall have sole
responsibility for determining the salaries, wages, and fringe benefits of all
such personnel, for paying such salaries and wages, and for providing such
fringe benefits, and for withholding, as required by law, any sums for income
tax, unemployment insurance, social security, or any other withholding required
by applicable law or governmental requirement. BDEC shall have sole discretion
in decisions regarding the termination of personnel employed by BDEC to provide
services to the Company. BDEC shall indemnify the Company and the Compan s
managers and members and hold them harmless from and against any claim or cause
of action which alleges or is based upon any act or omission by BDEC or its
owners, managers, directors, officers or employees with respect to any employee
or former employee of BDEC. This indemnity obligation shall survive any
termination or expiration of this Agreement.
4.2.1 Non-Exclusivity. In recognition of the fact that the personnel
retained by BDEC to provide services pursuant to this Agreement may from
time to time perform services for others, this Agreement shall not prevent
BDEC from performing such services for others or restrict BDEC from using
such personnel in the performance of services for other parties which are
not in the same business as Company.
4.2.2 Equal Employment Opportunity. Without limitation of any
provision set forth herein, BDEC expressly agrees, for itself and on behalf of
the Company, to abide by any and all applicable federal and/or State equal
employment opportunity statutes, rules, and regulations, including, without
limitation, Title VII of the Civil Rights Act of 1964, the Equal Employment
Opportunity Act of 1972, the Age Discrimination in Employment Act of 1967, the
Equal Pay Act of 1963, the National Labor Relations Act, the Fair Labor
Standards Act, the Rehabilitation Act of 1973, the Occupational Safety and
Health Act of 1970, and the Americans with Disabilities Act, all as may from
time-to-time be modified or amended.
4.2.3 Labor Reports. BDEC shall for its own account or on behalf of
the Company, as appropriate, prepare, maintain, and file all requisite
reports and statements regarding income tax withholdings, unemployment
insurance, social security, workers' compensation, equal employment
opportunity, or other reports and statements required with respect to
personnel provided by BDEC pursuant to this Agreement and with respect to
all personnel employed or otherwise retained by the Company.
4.3 Conduct of Business. BDEC represents and warrants to the Company
that it is authorized to enter into and perform this Agreement and its
duties hereunder without the consent or approval of any third party which
has not been obtained. BDEC covenants and agrees to provide all of the
services required of it hereunder, and to perform all of its obligations
hereunder, in a commercially reasonable manner and in compliance with all
applicable laws and legal requirements.
ARTICLE V y'
COVENANTS OF COMPANY y'
5.1 Notices to BDEC. Company will give BDEC timely notice of operating
and capital budgets approved by the Company and directions or requests that
it has with respect to the conduct of the Business or the manner in which
BDEC performs its duties hereunder in order that BDEC shall have an
opportunity to comply with such budgets, directions or requests.
5.2 Invoices and Payment. BDEC shall deliver to the board of managers
of the Company, and to each of the members of the Company, monthly invoices
setting forth the Services Fee, Use Fees, and expense reimbursement due BDEC for
the immediately preceding month, together with such supporting documentation as
shall be reasonably necessary to document the calculation and incurrence of such
amounts in accordance with the terms of this Agreement. The Company will pay, or
authorize BDEC in writing to pay, the invoiced amounts properly due within ten
(10) days after receipt of such invoice, unless any of such amounts are
contested in good faith.
ARTICLE VI y'
FINANCIAL ARRANGEMENT y'
6.1 Amount of Services Fee. As compensation (the "Services Fee") for
the Management Services and Support Services to be rendered hereunder, BDEC
shall be entitled to receive from the Company an amount equal to Two
percent (2%) of the Company's Net Revenues (as hereinafter defined).
6.2 Determination of Net Revenues. For purposes of Section 6.1, "Net
Revenues" shall mean the total operating revenues of the Company net of revenue
deductions which include without limitation an allowance for contractual
allowances, discounts, professional fees, co-management fees and staff managed
fees and other uncollectible amounts, all as determined in accordance with the
methodology used in the preparation of Exhibit A hereto and otherwise in
accordance with generally accepted accounting principles consistently applied.
For illustration purposes, the parties agree that Net Revenues for the Phoenix
Refractive Surgery center based on the pro forma annualized facility model
attached hereto as Exhibit A for the first full year of the Term of this
Agreement would be $5,968,627.
6.3 Business Expenses. In addition to the Services Fee described in
Section 6.1, the Company shall reimburse BDEC, upon submission by BDEC of
an invoice and necessary supporting documentation, for any Business Expense
properly incurred by BDEC in accordance with this Agreement.
6.4 Use Payment. Company agrees to pay (the "Use Payment") to BDEC on
a monthly basis as compensation for BDEC's grant to Company of the right to
use the Premises and common areas of the Buildings. The Use Payment for the
Premises in Building P shall be twelve percent (12%), and for the Premises
in Building T shall be thirty-six percent (36%) of the rent and all other
costs and expenses incurred by BDEC pursuant to the Base Lease for each of
the respective building. The Use Payment shall be paid in advance and shall
be due and payable on the first day of each month during the Term.
ARTICLE VII y'
TERM AND TERMINATION y'
7.1 Term. This Agreement shall be effective for an initial period (the
"Term") commencing on the Effective Date and ending September 1, 2004.
7.2 Termination. The Company may terminate this Agreement immediately
upon the occurrence of one of the following events:
(1) the dissolution or bankruptcy of BDEC; or
(2) after the expiration of a ninety (90) day period in
which BDEC has failed to remedy its failure to perform its
duties under this Agreement after having received written
notice from the Company of BDEC's failure to perform its
duties under this Agreement, which notice must specify the
failure to perform.
7.3 Termination by Agreement. In the event the Company and BDEC shall
mutually agree in writing, this Agreement may be terminated on the date
specified in such written agreement.
7.4 Effects of Termination. Upon termination of this Agreement, as
hereinabove provided, no party shall have any further obligations hereunder
except for (i) obligations accruing prior to the date of termination, and (ii)
obligations, promises, or covenants set forth herein that are expressly made to
extend beyond the Term, including, without limitation, payment of accrued money
due under Article VI, if any, and the authority and limited power of attorney
granted to BDEC herein, which shall survive until such time as such obligations,
promises, or covenants shall be fully paid and satisfied (all of which
provisions shall survive the expiration or termination of this Agreement).
Notwithstanding anything to the contrary herein, upon termination of this
Agreement for any reason, all accrued Service Fees, Business Expenses and Use
Payments, if any, shall become immediately due and payable to BDEC without
demand or notice.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. Any notice, request, demand, instruction, communication, or
other document required, permitted, or desired to be given hereunder shall be in
writing and, except as otherwise provided for herein, shall be deemed
effectively given: (a) on receipt if delivered personally or by commercial
courier service or if sent by prepaid telex, telegram, by facsimile or by other
instantaneous electronic transmission device, or (b) on the fifth day after
deposit (unless a different date is shown on the return receipt) if sent postage
prepaid registered or certified United States mail, return receipt requested, as
follows:
Company: Prime/BDEC Acquisition, L.L.C.
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attn.: President
Facsimile: (512) 314-4398
BDEC: Barnet Dulaney Eye Center, P.L.L.C.
4800 North 22nd Street
Phoenix, Arizona 85016
Attn.: Mark Rosenberg
Facsimile: (602) 508-4889
or to such other address, or to the attention of such other person or officer,
as either party may by written notice designate.
8.2 Governing Law. This Agreement has been executed and delivered in, and
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Texas. Proper venue for any action with respect to this Agreement
shall be Dallas County, Texas.
8.3 Assignment. Except as may be herein specifically provided to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors, and
assigns; provided, however, that neither party may assign its rights and
obligations under this Agreement without the prior written consent of the other.
8.4 No Waiver. The failure of either party to insist at any time upon the
strict observance or performance of any provision of this Agreement or to
exercise any right or remedy as provided in this Agreement shall not impair any
right or remedy of such party or be construed as a waiver or relinquishment
thereof with respect to subsequent defaults or breaches. Every right and remedy
given by this Agreement to the parties hereto may be exercised from time to time
and as often as may be deemed expedient by the appropriate party.
8.5 Consents, Approvals, and Exercise of Discretion. Except as may be
herein specifically provided to the contrary, whenever this Agreement requires
any consent or approval to be given by either party, or either party must or may
exercise discretion, the parties agree that such consent or approval shall not
be unreasonably withheld or delayed, and such discretion shall be reasonably
exercised.
8.6 Severability. In the event any provision of this Agreement is held to
be invalid, illegal, or unenforceable for any reason and in any respect, such
invalidity, illegality, or unenforceability shall not affect the remainder of
this Agreement, if the remainder of this Agreement can be enforced to achieve
its purposes equitably to both parties.
8.7 Divisions and Headings. The division of this Agreement into articles,
sections, and subsections and the use of captions and headings in connection
therewith are solely for convenience and shall not affect in any way the meaning
or interpretation of this Agreement.
8.8 Sales and Use Tax. BDEC and the Company acknowledge and agree that
certain of the services to be provided by BDEC hereunder may be subject to state
sales and use taxes and that BDEC may have a legal obligation to collect such
taxes from the Company and to remit same to the State. The Company agrees to pay
the applicable state sales and use taxes in respect of the portion of the
Services Fee attributable to such services, and grants BDEC the right to
withdraw and disburse from the bank accounts of the Company amounts necessary to
timely and fully pay such taxes.
8.9 Entire Agreement. With respect to the subject matter of this
Agreement, this Agreement supersedes all previous contracts and constitutes the
entire agreement between the parties. Neither party shall be entitled to
benefits other than those specified herein. No oral statements or prior written
material not specifically incorporated herein shall be of any force and effect,
and no changes in or additions to this Agreement shall be recognized unless
incorporated herein by amendment in writing and signed by all parties hereto.
Such amendment(s) shall become effective on the date stipulated in such
amendment(s). The parties specifically acknowledge that, in entering into and
executing this Agreement, the parties rely solely upon the representations and
agreements contained in this Agreement and no others.
8.10 Audit Rights. During the Term of this Agreement and for a period
of two (2) years after any termination or expiration of this Agreement, the
Company and each of its members shall be entitled to audit and inspect the books
and records of BDEC for purposes of determining the propriety of all Business
Expenses, Services Fees and Use Payments charged to the Company under this
Agreement. BDEC agrees to maintain, throughout such period, detailed records
supporting all amounts charged to, or reimbursed by, the Company pursuant to
this Agreement and to cooperate fully with, and to make its employees and
records available during normal business hours to, the auditors or other
representatives of the Company or its members performing such audit. Audit
rights may not be exercised more frequently than once in every eighteen (18)
month period and all costs and expenses associated therewith shall be borne by
the party exercising audit rights unless any such inspection reveals that the
Company has overpaid, by at least $25,000, any amounts which should have been
properly paid or reimbursed to BDEC in accordance with the terms of this
Agreement. BDEC shall be entitled to receive at least thirty (30) days' prior
written notice of the exercise of audit rights prior to the beginning of such
inspection.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
COLLOCATION AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
COMPANY: PRIME/BDEC ACQUISITION, L.L.C.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
BDEC: BARNET DULANEY EYE CENTER, P.L.L.C.
By: ______________________________________
Ronald W. Barnet, M.D., manager
By: ______________________________________
David D. Dulaney, M.D., manager
<PAGE>
EXHIBIT A
Pro Forma Annualized
Facility Model
<PAGE>
EXHIBIT B
EMPLOYEES
<PAGE>
EXHIBIT J
FORM OF
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement") is made and entered into
as of September 1, 1999 (the "Effective Date"), by and between Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company (the "Company") and
____________________________ (the "Consultant").
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. BACKGROUND. This Agreement is entered into in connection with the
Company's and Consultant's execution of that certain Contribution Agreement,
dated September 1, 1999, between and among the Company, Consultant, Prime
Medical Services, Inc., a Delaware corporation, Prime Medical Operating, Inc., a
Delaware corporation ("Prime"), Prime/BDEC Acquisition, L.L.C., a Delaware
limited liability company, Barnet Dulaney Eye Center, P.L.L.C., an Arizona
professional limited liability company, LASIK Investors, L.L.C., a Delaware
limited liability company, David D. Dulaney, M.D., Ronald W. Barnet, M.D. and
Mark Rosenberg (the "Contribution Agreement"). Accordingly, the terms and
provisions of this Agreement shall be construed consistently with the terms and
provisions of the Contribution Agreement. Consultant acknowledges that its
execution of this Agreement serves as a material inducement to the Company's and
Prime's execution of the Contribution Agreement.
2. TERM. The term of this Agreement shall commence on the Effective Date
and continue through the earlier to occur of the following:
a. Delivery of written notice from either Prime or the Company following any
breach of, or failure to perform for any reason under, this Agreement by
Consultant;
b. The death or disability of Consultant (For purposes of this Agreement,
the meaning of "disability" shall be as defined in the Disability
Insurance Policy that covers Consultant at the time in question, or if
no such policy is then in force, the insurance policy that covered
Consultant on September 1, 1999); and
c. The termination of the exclusivity obligations of the parties to the
Contribution Agreement as set forth in ARTICLE VIII of the Contribution
Agreement, pursuant to the terms of the Contribution Agreement.
3. SERVICES. During the term of this Agreement, Consultant shall, from
time to time, make himself available to Prime, the Company, and the Company's
subsidiaries to represent the interests of such entities in professional
associations and other professional or trade associations or groups related to
the field of refractive surgery. Furthermore, Consultant shall make himself, and
those clinics operated, utilized or controlled by Consultant, available to Prime
and the Company for professional development and training of physicians and
other medical professions and staff, all with respect to refractive surgery.
Consultant shall make himself available to consult with other doctors affiliated
with the Company, or with whom the Company seeks an affiliation, and will assist
the Company and the Company's subsidiaries with staffing, training, consultation
on outcomes analysis and strategic planning.
It is expressly agreed that Consultant is an independent
contractor and shall not be construed to be an employee of the Company with
regard to any matter, under any circumstances or for any purposes whatsoever.
The services to be provided by Consultant hereunder are vitally important to the
Company and its subsidiaries and shall be rendered at such times and places as
mutually agreed upon by the Company and Consultant; provided it is the
understanding and agreement of all parties hereto that the responsibilities of
Consultant hereunder will require substantially less than the full time efforts
of Consultant. Any failure or inability of Consultant to provide the services
contemplated in this Agreement, for any or no reason, shall terminate the
exclusivity obligations of Prime arising under ARTICLE VIII of the Contribution
Agreement.
4. COMPENSATION. Consultant acknowledges and agrees that Consultants
entering into and performing its obligations hereunder is in consideration for
Prime and the Company agreeing to enter into the Consulting Agreement and the
transactions contemplated therein. Accordingly, the parties hereto acknowledge
and agree that no further compensation is due Consultant for consulting services
hereunder. The Company shall reimburse Consultant for reasonable out-of-pocket
travel, lodging and meal expenses approved by the Company and Prime and which
are necessary for Consultant to perform consulting services hereunder that are
requested by the Company or Prime.
5. AUTHORITY. This Agreement does not grant Consultant any authority
whatsoever as an agent, officer, member, employee, manager or other
representative of the Company, to bind or commit the Company in any way,
contractually or otherwise. Except as specifically set forth in Section 4, the
Company shall have no responsibility to reimburse the Consultant for any costs,
expenses or other amounts that may be incurred by Consultant in connection with
the providing of Consultant's services hereunder.
6. CONFIDENTIAL INFORMATION. Consultant shall maintain and protect the
confidentiality of the terms and existence of this Agreement, and any
information obtained by Consultant pursuant to this Agreement or the performance
of this Agreement.
7. NOTICES. Any notice required or allowed hereunder shall be deemed to
have been delivered when either hand-delivered to the party or when deposited in
the United States mail, postage pre-paid, certified, return receipt requested,
addressed to the party at the address set forth below or to the last new address
provided in writing by the party:
Consultant: ____________________________
4800 North 22nd Street
Phoenix, AZ 85016
Company: 1301 Capital of Texas Highway, Suite C-300
Austin, TX 78746
Attn: President
8. COMPLIANCE WITH LAWS. Consultant shall comply with all applicable state,
federal, and local laws, in the performance of its services.
9. ASSIGNMENT. This Agreement is personal to Consultant and may not be
assigned in whole or in part by Consultant without the express written consent
of the Company in each instance. This Agreement shall inure to the benefit of
and be binding upon any successors and permitted assigns of the parties.
10. WAIVER OR MODIFICATION. The failure of any party to insist, in any
one or more instances, upon the performance of any of the terms, covenants, or
conditions of this contract or to exercise any right, shall not be construed as
a waiver or relinquishment of the future performance of any such terms,
covenants or conditions or the future exercise of such rights. Any waiver,
alteration, or modification of any of the provisions of this Agreement or
cancellation or replacement of this Agreement shall not be valid unless made in
writing and signed by all the parties hereto. Waiver by any party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
11. CONSTRUCTION. This Agreement shall be governed by the laws of the state
of Texas.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be construed as an original for all purposes,
but all of which taken together shall constitute one and the same Agreement.
13. DESCRIPTIVE HEADINGS. The descriptive headings for the sections in this
Agreement are inserted for convenience only and do not constitute part of the
Agreement.
14. NEGOTIATED AGREEMENT. This Agreement reflects the negotiations of
all parties hereto. The language used herein shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied. All parties acknowledge and agree that they are
fully aware of the affiliated relationship between and among each other.
15. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
16. ENTIRE AGREEMENT. This Agreement, together with the Contribution
Agreement and each other Transaction Document (as defined in the Contribution
Agreement), constitutes the entire agreement between the parties with respect to
the subject matter hereof, and all prior agreements, representations,
statements, negotiations, and undertakings are superseded by this Agreement. The
binding arbitration provisions of the contribution Agreement shall apply with
respect to any disputes hereunder.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
CONSULTING AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPANY: Prime/BDR Acquisition, L.L.C.
By:
Printed Name:
Title:
CONSULTANT:
Printed Name: _____________________________
<PAGE>
FIRST AMENDMENT
TO
CONTRIBUTION AGREEMENT
This First Amendment to Contribution Agreement (this "Amendment") is
executed to be effective as of January 31, 2000, by and between Prime Medical
Operating, Inc., a Delaware corporation ("Prime"), Prime Medical Services, Inc.
a Delaware corporation ("PMSI"), Barnet Dulaney Eye Center, P.L.L.C., an Arizona
professional limited liability company ("BDEC"), Prime Refractive, L.L.C., a
Delaware limited liability company ("Prime Refractive"), Prime Refractive
Management, L.L.C., a Delaware limited liability company ("Prime Management"),
LASIK Investors, L.L.C., a Delaware limited liability company ("LASIK"), David
D. Dulaney, M.D. ("Dulaney"), Ronald W. Barnet, M.D. ("Barnet"), Mark Rosenberg
("Rosenberg"), Prime/BDR Acquisition, L.L.C., a Delaware limited liability
company ("Newco I") and Prime/BDEC Acquisition, L.L.C., a Delaware limited
liability company ("Newco II"). All of the foregoing parties other than Prime
Refractive and Prime Management are sometimes referred to collectively herein as
the "Original Parties." Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in that certain Contribution
Agreement, dated effective as of September 1, 1999, among the Original Parties
(the "Contribution Agreement").
Preliminary Statements
Prime has agreed in Section 4.3 of the Contribution Agreement to make
certain credit accommodations available to Newco I for the acquisition and/or
development of Target Centers, including, without limitation, the Development
Facility provided for in the Loan Agreement.
Pursuant to the provisions of Section 4.3 of the Contribution
Agreement, Prime and Newco I executed that certain Loan Agreement, dated as of
September 1, 1999 (the "Original Loan Agreement") which provides for a
$40,000,000 development loan facility (the "Original Development Facility").
Newco I has borrowed certain amounts under the Original Loan Agreement
in order to finance the acquisition of an equity ownership interest in Horizon
Vision Center, Inc., a Nevada corporation.
The Original Parties have agreed in ARTICLE VIII of the Contribution
Agreement to certain exclusivity obligations and related terms and conditions.
The Original Parties have agreed to hereby amend the Contribution
Agreement to provide for: (a) the addition of Prime Refractive and Prime
Management as parties to the Contribution Agreement, for only those purposes
expressly stated in this Amendment; (b) the execution of a second Loan Agreement
which shall create a replacement loan facility that replaces any and every
obligation of Prime to advance additional money to any party under the Original
Loan Agreement in respect of the Original Development Facility; and (c) the
extension of certain provisions of the Contribution Agreement to specifically
apply to, benefit, and/or bind Prime Refractive and/or Prime Management, as
applicable.
Statement of Agreement
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
Section 1. Joinder of Prime Refractive and Prime Management. Each of
Prime Refractive and Prime Management hereby agrees that its execution of this
Amendment constitutes its execution of the Contribution Agreement (as amended by
this Amendment), and that it is hereby made a party to the Contribution
Agreement and is bound by and shall benefit from all of the applicable terms and
conditions of the Contribution Agreement (as amended by this Amendment).
Section 2. Amendments, Additions and Deletions to Agreement.
------------------------------------------------
a. The Original Parties hereby agree to amend Section 4.3(a)
of the Contribution Agreement to read in its entirety as follows:
" (a) Working Capital Line of Credit. Prime Refractive
Management, L.L.C., a Delaware limited liability company
("Prime Management"), and Prime Refractive, L.L.C., a
Delaware limited liability company ("Prime Refractive"),
have each executed a loan agreement, dated January 31, 2000
(the "Development Facility") which provides for, among other
credit accommodations described below, a revolving line of
credit in the maximum principal amount of $200,000 and
maturing one (1) year after the Closing (the "Working
Capital Line"), pursuant to which Prime Refractive shall be
entitled, subject to the conditions and limitations
contained in the Loan Agreement, to borrow, repay and
reborrow funds in order to meet obligations of Prime
Refractive arising in the ordinary course of business."
b. The Original Parties hereby agree to amend Section 4.3(b) of the
Contribution Agreement to read in its entirety as follows:
" (b) Development Credit Facility. In addition to the Working
Capital Line, the Development Facility provides for an
additional lending facility, in the aggregate maximum
principal amount of $29,165,000, pursuant to which Prime
Refractive shall be entitled, subject to the conditions and
limitations contained in the Development Facility, to borrow
funds, from time to time, in order to finance up to one
hundred percent (100%) of the purchase price (or development
costs) of a Target Center (as hereinafter defined) being
acquired (or developed) by Prime Refractive; provided,
however, that in no event shall the Development Facility be
used in instances where Prime, PMSI or one of their affiliates
independently acquires or develops a Target Center as
permitted by Section 8.1. In connection with the Development
Facility, Prime Refractive agrees to execute, and all parties
hereto agree to vote their interests in Prime Refractive, if
any, and to take such other action as may be necessary, to
cause any entity through which Prime Refractive acquires or
develops a Target Center to execute, on or before each closing
date of a Target Center acquisition or the commencement of
development, an Assignment and Security Agreement in
substantially the form attached hereto as Exhibit G1 and a
Promissory Note in substantially the form attached hereto as
Exhibit G2. In addition, if Prime Refractive is to obtain,
through development or acquisition, directly or indirectly, a
one hundred percent (100%) interest in such Target Center,
Prime Refractive and all parties hereto shall cause such
Target Center to execute a security agreement, acceptable in
form and substance to Prime, granting to Prime Management the
highest available priority security interest in all of the
assets of such Target Center."
c. The Original Parties hereby agree to amend Section 4.3(c) of the
Contribution Agreement to read in its entirety as follows:
" (c) Pursuant to the Development Facility, Prime Management's
obligations to make each extension of credit described in
subsection (b) above are subject entirely and in all respects
to Prime and Prime Management obtaining prior written approval
from the lenders under (but only if such approval is required
under) either (i) that certain Loan Agreement for a
$14,000,000 advancing term loan (the "$14,000,000 Facility"),
entered into by Prime Management, Bank of America, N.A., as
administrative agent, BankBoston, N.A., as documentation agent
and such lenders named therein or (ii) that certain Loan
Agreement for a $86,000,000 revolving credit loan (the
"$86,000,000 Facility"), entered into by PMSI, Bank of
America, N.A., as administrative agent, BankBoston, N.A., as
documentation agent and such lenders named therein. Each of
the parties to this Agreement acknowledges and agrees that the
assignment and security agreements, and security agreements,
executed pursuant to this Section and Section 8.2 will be
assignable to the lenders under the $14,000,000 Facility, and
that Prime and/or Prime Management intends to make a
collateral assignment for the benefit of such lenders. In
addition, each of the parties to this Agreement agrees to take
such action (including voting their interests in any entity)
which may be necessary to ensure the filing and perfection of
security interests required to be granted pursuant to this
Section."
d. The Original Parties hereby agree to amend Section 4.3(d) of the
Contribution Agreement to read in its entirety as follows:
" (d) Each of the Sellers acknowledges and agrees that none of
Prime Management, Prime, PMSI or any affiliate of any of them
may be required to (i) except as expressly set forth in this
ARTICLE IV and in Section 8.2(b)(ii), extend any financing,
credit facilities, guarantees or other credit enhancements to
any Seller, Prime Refractive, Newco I or Newco II or (ii)
issue any of its ownership interests (or rights to acquire its
ownership interests) in connection with the acquisition of a
Target Center (provided, however, that Prime Management,
Prime, PMSI or such affiliate may elect, upon obtaining the
consent of BDEC, to issue its ownership interests in
connection with the acquisition of a Target Center by Prime
Refractive or any of its subsidiaries, and any such issuance
shall be treated for all purposes as a loan by Prime
Management to Prime Refractive pursuant to the Development
Credit Facility, in an amount equal to the fair market value
of the capital stock issued on the date of issuance)."
e. The Original Parties hereby agree to amend Section 4.3(e) of the
Contribution Agreement to read in its entirety as follows:
" (e) Each of the Sellers, Newco I, and Prime Refractive
acknowledges and agrees that neither Newco I nor Prime
Refractive shall distribute (or allow to be distributed) to
its members, with respect to their respective membership
interests, any of its or its subsidiaries' cash or other
property if, at the time of the proposed distribution, any
amounts (whether principal or interest) are outstanding under
the Credit Documents or the Target Center Lending Documents
(as such terms are hereinafter defined). Furthermore, each of
the Sellers, Newco I, and Prime Refractive agrees that each of
Newco I and Prime Refractive shall pay all available cash flow
in payment of its respective outstanding obligations, if any,
under the Loan Agreement or Development Facility (as
applicable), irrespective of whether such payments exceed the
minimum required payments under the Loan Agreement or
Development Facility. For purposes of allocating such payments
by either Newco I or Prime Refractive among any two or more of
such entity's respective outstanding obligations, such
payments shall be allocated pro rata, based upon the
respective balances of such obligations, unless (i) a greater
portion of the payment is required to be paid toward a given
obligation in order to prevent a default with respect to that
obligation (but only to the extent necessary to prevent such a
default) or (ii) eighty percent (80%) of the managers of such
entity elect to allocate the payments in a different manner.
Notwithstanding the foregoing, as long as
there has been no default by any Seller under this Agreement
or any other Transaction Document (excluding, however, the
Credit Documents and the Target Center Lending Documents),
then, to the extent that (but only to the extent that) either
of Newco I or Prime Refractive possesses the cash flow
necessary (in the reasonable discretion of a majority of its
managers) to pay its liabilities in the ordinary course
consistent with past practices, such entity agrees to make
quarterly estimates of its taxable income for the current tax
year and, if not prohibited by law, distribute quarterly (the
"Quarterly Distributions") an amount that would cover the
federal and state income taxes required to be paid by its
members with respect to such taxable income, based on each
member's then current proportionate interest in such entity,
assuming that all members pay income taxes on such entity's
taxable earnings at a rate equal to the highest effective
individual tax rate in effect from time to time (the "Assumed
Tax Rate"); provided, further, that such entity shall
determine its actual taxable income at the end of each taxable
year and (A) if the Quarterly Distributions in a given year
should have been higher based on the amount of actual taxable
income for that year, promptly distribute the amounts
necessary to eliminate such deficiency or (B) if the Quarterly
Distributions in a given year should have been lower based on
the amount of actual taxable income for that year, withhold
dollar for dollar from the first following Quarterly
Distribution, and then against subsequent Quarterly
Distributions in a like manner, the amounts necessary to
eliminate such surplus."
f. The Original Parties hereby agree to amend Section 4.3(f) of the
Contribution Agreement to read in its entirety as follows:
" (f) The parties acknowledge the execution and existence of
that certain Loan Agreement in the maximum principal amount of
$10,835,000, dated September 1, 1999, between Prime and Newco
I (the "Loan Agreement"), that certain Promissory Note, in the
amount of $10,835,000, executed by Newco I and dated September
1, 1999 (the "Horizon Note"), and that certain Assignment and
Security Agreement, dated September 1, 1999, between Prime and
Newco I (the "Horizon Security Agreement"). The parties agree
that the Loan Agreement, the Horizon Note and the Horizon
Security Agreement are "Transaction Documents" for purposes of
this Agreement. The Parties further agree that the Loan
Agreement, the Horizon Note, the Horizon Security Agreement,
and all of the loan agreements, promissory notes, guarantees,
security agreements, assignment and security agreements and
other agreements, documents or instruments executed by any
party in connection with the Loan Agreement or the Development
Facility are hereinafter collectively referred to as the
"Credit Documents"."
g. The Original Parties hereby agree to amend Section 4.4 of the
Contribution Agreement to read in its entirety as follows:
" 4.4 Capital Contributions. The parties agree that no party
shall, except for the express provisions of Section 1.1 and
Section 4.3 of this Agreement or of the Organizational
Documents, be required to make any capital contribution, or
extend any credit facility or loans, to either Prime
Refractive, Newco I or Newco II (or a subsidiary of either)
following the Closing, including, without limitation, for
purposes of providing working capital; provided, however, that
this sentence shall not affect any party's obligations under
Article VI with respect to any breach of the representations
or warranties made by that party under this Agreement."
h. The Original Parties hereby agree to amend Section 4.6 of
the Contribution Agreement to replace every reference to "Newco I" contained in
Section 4.6 with a reference instead to "Prime Refractive".
i. The Original Parties hereby agree to amend Section 4.10 of the
Contribution Agreement to read in its entirety as follows:
" 4.10 Guaranty of PMSI. PMSI hereby unconditionally and
irrevocably guarantees each of the payment and performance
obligations of Prime Refractive, Prime Management and Prime
hereunder and under each of the Transaction Documents. Without
limiting the foregoing, PMSI agrees that if Prime, Prime
Refractive or Prime Management shall default in any obligation
to pay to any Seller(s) or Newco I any amount then due and
payable by Prime, Prime Refractive or Prime Management to such
Seller(s) or Newco I under ARTICLE I or ARTICLE VII hereunder,
PMSI shall immediately pay such amount to such Seller(s) or
Newco I. PMSI hereby agrees not to require any Seller to
proceed against Prime Refractive, Prime Management, Prime or
any other person or to pursue any other remedy before
proceeding against PMSI under this guaranty."
j. The Original Parties hereby agree to amend Section 6.3 of the
Contribution Agreement to read in its entirety as follows:
" 6.3 Security. Without limiting or adversely affecting the
rights of Prime under Section 9.12, and in order to secure
full and prompt payment of the obligations of each of the
Sellers under this ARTICLE, each of BDEC and LASIK hereby
grants to Prime (for the benefit of Prime Refractive or any
other subsidiary or affiliate of Prime to which any Seller may
hereafter owe any amount) a continuing security interest in
and to distributions either of them may be entitled to receive
at any time after the Closing in respect of any ownership
interest held by either of them in any of Prime Refractive,
Newco I or Newco II. In connection with the grant of a
security interest contained in this Section, each of BDEC and
LASIK agrees (i) to execute all documents, agreements,
instruments and certificates, and to take such other actions,
as are necessary in order to fully evidence and perfect such
security interest, and (ii) that it will not for a period of
five (5) years after the Closing grant or assign to any person
or entity, without obtaining the express prior written consent
of Prime in each instance, rights of any nature in the
distributions covered by the security interest granted in this
Section, irrespective of whether such rights are to be senior
or subordinate to the rights granted under this Section;
provided, however, that Prime acknowledges and agrees that any
grant of a security interest in such distributions by LASIK to
either Prime Management or the lenders under the $14,000,000
Facility shall not be a violation of this Section, and the
grant to the lenders under the $14,000,000 Facility shall be
senior to the security interest hereby granted by LASIK to
Prime."
k. The Original Parties hereby agree to amend the following
subsections of Section 8.1 of the Contribution Agreement to replace every
reference to "Newco I" contained in such subsections with a reference instead to
"Prime Refractive": introductory paragraph to Section 8.1; Section 8.1(b);
Section 8.1(c); and Section 8.1(d).
l. The Original Parties hereby agree to amend Section 8.1(e) of the
Contribution Agreement to read in its entirety as follows:
" (e) The acquisition or development of such Target Center
was initiated, arranged for, originated or financed by any
entity affiliated with PMSI (other than Prime Refractive,
Newco I or Newco II, or any future subsidiaries of either of
them) which has previously acquired or developed a Target
Center, or an interest therein, pursuant to any of the
exceptions to exclusivity contained in subsections (a) through
(g) of this Section;"
m. The Original Parties hereby agree to amend the first paragraph of
Section 8.2(g) of the Contribution Agreement to read in its entirety as follows:
" (g) Notwithstanding the exclusivity obligation contained in
Section 8.1, LASIK and/or one or more of their affiliates
shall be entitled to independently acquire or develop any
Target Center to which any one or more of the following apply:
(i) a majority of the board of directors of Prime votes
against the acquisition of such Target Center; or (ii) Prime
Refractive is unable to finance the acquisition of such Target
Center using the Development Facility, solely because of the
limitation set forth in Section 4.3(c); provided, however,
that:"
n. The Original Parties hereby agree to amend Section 9.3 of
the Contribution Agreement to replace every reference to "Newco I" contained in
Section 9.3 with a reference instead to "Prime Refractive, Newco I".
o. The Original Parties hereby agree to amend Section 9.4 of the
Contribution Agreement to read in its entirety as follows:
" 9.4 Non-Competition Agreement. Each of PMSI, Prime, Prime
Management and each Seller, as a material inducement to one
another to enter into this Agreement, hereby agrees that, at
all times during which the provisions of Article VIII are
applicable, and at all times until five (5) years after either
LASIK and its affiliates (excluding PMSI, Prime, and the
subsidiaries of either of them), or Prime and its affiliates
(excluding LASIK), no longer own any equity or other interest
in either Newco I or Prime Refractive, such party 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, corporation or other entity, without the prior written
consent of each other party hereto, commit any of the
following acts, which acts shall be considered violations of
this covenant not to compete:
(a) Except through Newco I, Prime
Refractive, either of their subsidiaries, or Newco II,
directly or indirectly engage in, or provide, anywhere within
a fifty (50) mile radius of any center or facility that
provides Refractive Surgery and is owned, directly or
indirectly, partially or wholly, by Newco I, Prime Refractive,
or a subsidiary of either of them (collectively, the
"Restricted Area"), any services (other than services included
in the practice of medicine) related to (i) the operating of
centers or facilities that provide Refractive Surgery, (ii)
the manufacture, maintenance, refurbishing, repair, sale, or
leasing of any equipment related to or necessary for the
operating of centers or facilities that provide Refractive
Surgery, or (iii) providing any management services, training
or consulting services related to any of the activities
described in (i) or (ii);
(b) Except through Newco I, Prime
Refractive, the subsidiaries of either of them, or Newco II,
directly or indirectly provide, anywhere within the Restricted
Area, (i) facilities, equipment and non-physician personnel
for the performance by physicians of Refractive Surgery, (ii)
the marketing, scheduling and management of Refractive Surgery
(but excluding, with respect to either Barnet or Dulaney,
marketing, scheduling and management of patients for treatment
by Barnet or Dulaney, respectively), (iii) the credentialing
and scheduling of physicians to perform Refractive Surgery and
(iv) the billing, collecting or accounting for the use of any
such facilities, equipment or non-physician personnel;
(c) Directly or indirectly request or advise
any person, firm, physician, corporation or other entity
having a business relationship with Newco I, Prime Refractive,
a subsidiary of either of them, Prime, each Seller or any
affiliate or related entity of any of them, to withdraw,
curtail, or cancel its business with such person or entity; or
(d) Directly or indirectly hire any employee
of Newco I, Prime Refractive, any subsidiary of either of the
foregoing, Prime, any Seller or any affiliate or related
entity of any of them, or induce or attempt to influence any
employee of Newco I, Prime Refractive, any subsidiary of
either of the foregoing, Prime, any Seller or any such
affiliate or related entity to terminate his or her employment
with such person or entity."
p. The Original Parties hereby agree to amend Section 9.5 of the
Contribution Agreement to read in its entirety as follows:
" 9.5 Exclusivity. Each of the parties hereto acknowledges
and agrees that any acquisition or development of a Target
Center by Prime Management, Prime, PMSI, Newco II or a Seller
through an entity not owned (wholly or partially, directly or
indirectly) by Prime Refractive or Newco I shall be subject to
the provisions of Section 9.4, regardless of whether such
acquisition or development is contemplated by or provided for
in the provisions of ARTICLE VIII."
q. The Original Parties hereby agree to amend Section 9.8 of the
Contribution Agreement to read in its entirety as follows:
" 9.8 Special Options to Sell or Acquire Interests In Newco I and
Prime Refractive.
(a) Option to Sell. Upon the expiration of
five (5) years immediately following the Closing Date, if no
Seller is in breach of this Agreement or any other Transaction
Document, all or any of the Sellers shall at any time, and
from time to time, be entitled to require that Prime purchase
from such Seller(s) up to a maximum twenty percent (20%)
interest in each of Newco I and Prime Refractive (when
aggregated for each entity with all other purchases by all
Sellers pursuant to this Section), upon the terms and
conditions hereinafter set forth, by giving written notice of
such election to Prime; provided, however, that any exercise
of the option to sell pursuant to this Section must (unless
Prime consents otherwise in writing) be made by such Seller
with respect to exactly equal percentage interests in Newco I
and Prime Refractive, in each instance and taken individually
and not in combination with elections by another Seller.
(b) No Further Obligation. The Sellers
acknowledge and agree that Prime shall be under no obligation
to notify any Seller of the exercise by another Seller of
rights under this Section, and that Prime may not, under any
circumstances, be required to purchase more than an aggregate
twenty percent (20%) interest in either Newco I or Prime
Refractive (considering all purchases by all Sellers pursuant
to this Section), regardless of whether one Seller disposes of
more or less of an interest in Newco I and Prime Refractive
under this Section than another Seller.
(c) Purchase Price. The purchase price for any interest
transferred pursuant to this Section shall, in the absence
of an agreement on price between Prime and the applicable
Seller(s), be determined as follows:
(i) If the exercise of the option
hereunder is after the expiration of such ninety (90)
day period, then the purchase price must be mutually
agreed upon by the applicable Seller(s) and Prime.
(ii) If the exercise of the option
hereunder is within the ninety (90) day period
immediately following the expiration of the five (5)
year period described in Section 9.8(a), then Prime
shall select a certified business appraiser (that is
a member of either the American Society of Appraisers
or the Institute of Business Appraisers) to value the
interests being transferred. If the selling Seller(s)
under this Section do not agree with the value
determined by Prime's appraiser, such Seller(s) may,
at their own expense, select a second appraiser that
is a member of one or both of the above named
professional organizations to value the interests
being transferred. If the two appraisers cannot agree
on the value of the interests being transferred, the
two appraisers shall mutually select a third
appraiser (that meets the above described membership
requirements) to value the interests being
transferred together with the first two appraisers,
based on a majority vote. Any valuation determined by
such majority vote shall be final, binding and
conclusive. The expense of such third appraiser shall
be paid by the selling Seller(s), unless the
appraised value ultimately determined is more than
ten percent (10%) greater than the value determined
by Prime's original appraiser, in which event Prime
shall bear the entire cost of the third appraiser. If
the exercise of the option hereunder is after the
expiration of such ninety (90) day period, then the
purchase price must be mutually agreed upon by the
applicable Seller(s) and Prime.
(d) Such purchase price shall be paid in
immediately available funds at the closing of the transfer
pursuant to this Section. The closing of any purchase and sale
pursuant to this Section shall take place at the principal
office of Prime or such other place designated by Prime and
the applicable Seller(s), on the thirtieth day (or if such
thirtieth day is not a business day, the next business day
following the thirtieth day) following the final determination
of a purchase price under subsection (c) above. At such
closing, Seller shall execute all documents and take such
other actions as may be reasonably necessary to deliver to
Prime title to the interests transferred, free and clear of
all liens, claims, encumbrances or restrictions of any kind or
nature whatsoever, except (i) those established in the
organizational documents and other governing documents of
Newco I and Prime Refractive, (ii) those in favor of the
lenders under $14,000,000 Facility and the $86,000,000
Facility pursuant to any Transaction Document and (iii) those
in favor of Prime or any affiliate or subsidiary of Prime
pursuant to any Transaction Document.
(e) Exceptions. Notwithstanding the
foregoing provisions of this Section 9.8, Prime shall not be
obligated to purchase any interest in either Newco I or Prime
Refractive pursuant to this Section if Prime is unable to
obtain financing for such purchase from a third party upon
reasonable market terms, after Prime and PMSI have exercised
commercially reasonable efforts to obtain such financing."
r. The Original Parties hereby agree to amend Section 9.12 of
the Contribution Agreement to replace every reference to "Newco I" contained in
Section 9.12 with a reference instead to "Prime Refractive, Newco I", and to
replace every reference to "Prime or PMSI" contained in Section 9.12 with a
reference instead to "Prime Management, Prime or PMSI".
s. The Original Parties hereby agree to amend the first paragraph of
Exhibit G3 to the Contribution Agreement to read in its entirety as follows:
" THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement")
is made and entered into as of the ____ day of __________,
200__, by and between Prime Refractive Management, L.L.C., a
Delaware limited liability company (the "Secured Party") and
Prime Refractive, L.L.C., a Delaware limited liability company
(the "Debtor")."
t. The Original Parties hereby agree to amend Recital A. of Exhibit G3 to
the Contribution Agreement to read in its entirety as follows:
" A. Debtor and Secured Party have executed and delivered
that certain Contribution Agreement dated effective September 1,
1999, between and among Debtor, Secured Party, Prime Medical
Operating, Inc., a Delaware corporation, Prime Medical Services,
Inc., a Delaware corporation, Prime/BDEC Acquisition, L.L.C., a
Delaware limited liability company, Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company, Barnet Dulaney Eye
Center, P.L.L.C., an Arizona professional limited liability
company, LASIK Investors L.L.C., a Delaware limited liability
company, David D. Dulaney, M.D., Ronald W. Barnet, M.D., and Mark
Rosenberg (as amended by that certain First Amendment to
Contribution Agreement dated as of January 31, 2000, among the
foregoing parties, the "Contribution Agreement"), and that
certain Loan Agreement, dated as of January 31, 2000 (the "Loan
Agreement"), pursuant to which Secured Party agrees to make
certain loans to Debtor on the terms and subject to the
conditions provided therein."
u. The Original Parties hereby agree to amend Article I of
Exhibit G3 to the Contribution Agreement to add the following Section 1.3 in its
entirety as a new Section:
1.3 Subordination. Liens created hereby are subordinate to
liens in favor of Lenders (as such term is defined in that
certain Loan Agreement for a $14,000,000 advancing term loan,
entered into by Secured Party, Bank of America, N.A., as
administrative agent, BankBoston, N.A., as documentation agent
and such Lenders).
v. The Original Parties hereby agree to amend Section 4.3 of
Exhibit G3 to the Contribution Agreement to replace the reference to "Section
1.1(c)" contained in Section 4.3 with a reference instead to "Section 1.1(d)".
w. The Original Parties hereby agree to amend Article V of
Exhibit G3 to the Contribution Agreement to replace the reference to "Target
Center" contained in Article V with a reference instead to "Target Center (as
defined in the Contribution Agreement)".
x. The Original Parties hereby agree to amend Section 9.2 of Exhibit G3 to
the Contribution Agreement to replace the reference to "Prime/BDR Acquisition,
L.L.C." contained in Section 9.2 with a reference instead to "Prime Refractive,
L.L.C.".
y. The Original Parties hereby agree to amend the signature page to Exhibit
G3 to the Contribution Agreement to (i) replace the reference to "Prime/BDR
Acquisition, L.L.C." contained in the signature page with a reference instead to
"Prime Refractive, L.L.C.", (ii) replace the reference to "Prime Medical
Operating, Inc." contained in the signature page with a reference instead to
"Prime Refractive Management, L.L.C.", and (iii) replace the reference to "1999"
contained in the signature page with a reference instead to "200__".
z. The Original Parties hereby agree to amend the second paragraph of
Exhibit G5 to the Contribution Agreement (beginning with "Borrower:") to replace
the reference to "Prime/BDR Acquisition, L.L.C." contained in such paragraph
with a reference instead to "Prime Refractive, L.L.C.".
aa. The Original Parties hereby agree to amend the fourth paragraph of
Exhibit G5 to the Contribution Agreement (beginning with "LENDER:") to
replace the reference to "Prime Medical Operating, Inc., a Delaware
corporation" contained in such paragraph with a reference instead to "Prime
Refractive Management, L.L.C., a Delaware limited liability company".
bb. The Original Parties hereby agree to amend the eighth paragraph of
Exhibit G5 to the Contribution Agreement (beginning with "payment terms:")
to replace the reference to "1999" contained in such paragraph with a
reference instead to "200__".
cc. The Original Parties hereby agree to amend the ninth paragraph of
Exhibit G5 to the Contribution Agreement (beginning with "Loan Agreement:")
to read in its entirety as follows:
"LOAN AGREEMENT: This Note is executed pursuant to and is
governed by the terms of that certain Loan Agreement dated as
of January 31, 2000, executed by Borrower and Lender, as
amended (collectively, the "Loan Agreement")."
dd. The Original Parties hereby agree to amend Section
2(a)(ii) of Exhibit G5 to the Contribution Agreement to replace the reference to
"Lender" contained in Section 2(a)(ii) with a reference instead to "Lender,
Prime Medical Operating, Inc.".
ee. The Original Parties hereby agree to amend Section 4(c) of Exhibit
G5 to the Contribution Agreement to read in its entirety as follows:
" (c) All other documents signed in connection with the
Loan Agreement or the loan evidenced by this Note,
including, without limitation, that certain Contribution
Agreement, dated effective September 1, 1999, between and
among Borrower, Lender, Prime Medical Services, Inc., a
Delaware corporation, Prime Medical Operating, Inc., a
Delaware corporation, Prime/BDEC Acquisition, L.L.C., a
Delaware limited liability company, Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company, Barnet Dulaney
Eye Center, P.L.L.C., an Arizona professional limited
liability company, LASIK Investors, L.L.C., a Delaware
limited liability company, David D. Dulaney, M.D., Ronald W.
Barnet, M.D., and Mark Rosenberg (as amended by that certain
First Amendment to Contribution Agreement dated as of
January 31, 2000, among the foregoing parties, the
"Contribution Agreement") and each Transaction Document (as
such term is defined in the Contribution Agreement)."
ff. The Original Parties hereby agree to amend the signature page to
Exhibit G5 to the Contribution Agreement to replace the reference to "Prime/BDR
Acquisition, L.L.C." contained in the signature page with a reference instead to
"Prime Refractive, L.L.C.".
gg. The Original Parties hereby agree to (i) delete Exhibit
G1, Exhibit G2 and Exhibit G4 from the Contribution Agreement, (ii) rename
Exhibit G3 as Exhibit G1, (iii) rename Exhibit G5 as Exhibit G2, and (iv) amend
the TABLE OF EXHIBITS of the Contribution Agreement to replace the reference to
"Exhibits G1 to G5" contained in the TABLE OF EXHIBITS with a reference instead
to "Exhibits G1 and G2".
Section 3. Amendment of Loan Agreement. Each Original Party agrees that
the Original Loan Agreement is hereby amended to eliminate the $200,000 Working
Capital Line and to reduce the remaining maximum principal amount of $40,000,000
to $10,835,000. Each Original Party further acknowledges and agrees that Prime
has previously advanced the maximum principal amount under the Original Loan
Agreement, and that, accordingly, Prime is hereby unconditionally released from
any obligation (whether asserted now or in the future) to advance additional
money under the Original Loan Agreement.
Section 4. Relationship Between Prime and Prime Refractive. The parties
agree that for all purposes under the Contribution Agreement, each of Prime
Refractive and Prime Management shall be deemed an affiliate of Prime for as
long as Prime owns, directly or indirectly, an equity ownership interest in it.
Section 5. Transaction Document. This Amendment, and each other
document, agreement, and certificate executed in connection with or contemplated
by this Amendment (each a "Related Document"), shall be considered a
"Transaction Document," as such term is used in the Contribution Agreement.
Section 6. No Assumption of Liabilities. Notwithstanding any provision of
this Amendment or any Related Document, neither Prime Refractive nor Prime
Management assumes any debts, obligations or liabilities of any of the Original
Parties.
Section 7. Authority. Each of Prime Refractive, Prime Management and
each Original Party, hereby represents and warrants (severally and not jointly)
that it has full power and authority to enter into and perform this Amendment
and each Related Document to be executed or delivered by such party. The
execution, delivery, and performance of this Amendment and such Related
Documents have been duly authorized by all necessary action of such party and,
if applicable, its respective officers and owners. This Amendment has been duly
and validly executed and delivered by such party and constitutes a valid and
binding obligation of such party enforceable against such party in accordance
with its terms. The execution, delivery, and performance by such party of this
Amendment and each such Related Document does not violate or conflict with (a)
any law, rule, or regulation applicable to such party, (b) any agreement to
which such party is a party, or (c) the organizational documents of such party.
Section 8. Ratification by Prime Refractive. Each of Prime Management
and each Original Party agrees that by executing this Amendment, it is deemed to
be voting its ownership interest (if any) in Prime Refractive to authorize Prime
Refractive to enter into and perform this Amendment and each other Related
Document to which Prime Refractive is a party. Each such party agrees to execute
such resolutions and written consents, and take such other actions, in their
capacities as members of Prime Refractive, as any other such party shall
reasonably require after the date of this Amendment in order to have Prime
Refractive ratify and adopt this Amendment, notwithstanding the date of Prime
Refractive's creation.
Section 9. Cooperation Relating to Financial Statements. Each of the
Sellers agrees to cooperate with Prime in the preparation of any financial
statements of Prime Refractive which Prime or its affiliates may be required by
any applicable law to prepare.
Section 10. Effect on Existing Agreements. This Amendment is
incorporated into the Contribution Agreement by reference. Other than as
provided in this Amendment, the Contribution Agreement (including Exhibits and
Schedules) has not been modified or amended and is in full force and effect.
Each Original Party hereby affirms that it remains a party to the Contribution
Agreement (as amended by this Amendment) after the execution of this Amendment.
The Contribution Agreement may be restated as amended hereby for the convenience
of the parties hereto. This Amendment may be executed in a number of identical
counterparts which, taken together, shall constitute collectively one and the
same agreement.
[Signature pages follow]
<PAGE>
SIGNATURE PAGE TO
FIRST AMENDMENT
TO
CONTRIBUTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the day and year first above written.
PMSI: PRIME MEDICAL SERVICES, INC.
By:
Printed Name:
Title:
PRIME: PRIME MEDICAL OPERATING, INC.
By:
Printed Name:
Title:
PRIME MANAGEMENT: PRIME REFRACTIVE MANAGEMENT, L.L.C.
By:
Printed Name:
Title:
BDEC: Barnet Dulaney Eye CENTER, P.L.L.C.
By:
David D. Dulaney, M.D., manager
LASIK: LASIK INVESTORS, L.L.C.
By:
Ronald W. Barnet, M.D., manager
By:
David D. Dulaney, M.D., manager
NEWCO I: PRIME/BDR ACQUISITION, L.L.C.
By: LASIK Investors, L.L.C.. - Member
By:
Ronald W. Barnet, M.D., manager
By:
David D. Dulaney, M.D., manager
By: Prime Medical Operating, Inc. - Member
By:
Printed Name:
Title:
NEWCO II: PRIME/BDEC ACQUISITION, L.L.C.
By: Barnet Dulaney Eye Center, P.L.L.C. - Member
By:
Ronald W. Barnet, M.D., manager
By:
David D. Dulaney, M.D., manager
By: Prime Medical Operating, Inc. - Member
By:
Printed Name:
Title:
PRIME REFRACTIVE: PRIME REFRACTIVE, L.L.C.
By: LASIK Investors, L.L.C.. - Member
By:
Ronald W. Barnet, M.D., manager
By:
David D. Dulaney, M.D., manager
By: Prime Refractive Management, L.L.C. - Member
By:
Printed Name:
Title:
DULANEY:
David D. Dulaney, M.D.
BARNET:
Ronald W. Barnet, M.D.
ROSENBERG:
Mark Rosenberg
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into as of the 1st
day of September, 1999, by and between Prime Medical Operating, Inc., a Delaware
corporation, and Prime/BDR Acquisition, L.L.C., a Delaware limited liability
company.
Definitions:
EFFECTIVE DATE: September 1, 1999
BORROWER: Prime/BDR Acquisition, L.L.C., a Delaware limited liability
company
BORROWER'S ADDRESS: 1301 Capital of Texas Highway, Suite C-300, Austin,
Texas 78746
LENDER: Prime Medical Operating, Inc., a Delaware corporation
LENDER'S ADDRESS: 1301 Capital of Texas Highway, Suite C-300, Austin, Texas
78746
NOTES:
Working Capital Note: Promissory Note (Line of Credit) in the maximum
principal amount of $200,000 (the "Working Capital Maximum Principal Amount")
dated September ___, 1999, executed by Borrower, and payable to the order of
Lender as provided therein (the "Working Capital Note").
Development Facility Notes: Promissory Notes in the aggregate maximum
original principal amount not to exceed $40,000,000 (the "Development Facility
Maximum Principal Amount"), executed by Borrower and payable to the order of
Lender as provided therein (the "Development Facility Notes"). Collectively, the
Working Capital Notes and the Development Facility Notes are referred to herein
as the "Notes."
SECURITY AGREEMENTS: All documents, agreements and instruments hereinafter
or herewith executed by Borrower, LASIK Investors, L.L.C., a Delaware limited
liability company ("LASIK") or any Target Center securing this Agreement or the
obligations under any of the Notes.
LOAN DOCUMENTS: This Agreement, the Working Capital Note, the
Development Facility Notes, the Security Agreements, and all other
documents, agreements, and instruments now or hereafter existing,
evidencing, securing, or otherwise relating to this Agreement and any
transactions contemplated by this Agreement, as any of the foregoing items
may be modified or supplemented from time to time.
INDEBTEDNESS: All present and future indebtedness, obligations and liabilities
of Borrower to Lender, all present and future indebtedness, obligations and
liabilities of any Target Center to Lender, and all renewals, extensions and
modifications of either of the foregoing, arising pursuant to any of the Loan
Documents and all interest accruing thereon, and all other fees, costs,
expenses, charges and attorneys' fees payable, and covenants performable, under
any of the Loan Documents (including without limitation this Agreement).
DEFINED TERMS: Terms not otherwise defined herein shall have the
meaning provided in that certain Contribution Agreement dated effective
September 1, 1999, by and among Barnet Dulaney Eye Center, P.L.L.C., David
D. Dulaney, M.D., Ronald W. Barnet, M.D., Mark Rosenberg, Prime Medical
Services, Inc., Lender, Borrower, LASIK and Prime/BDEC Acquisition, L.L.C.
(the "Contribution Agreement"). For the purposes hereof the terms "Target
Centers" and "Target Center" shall have the meaning set forth in the
Contribution Agreement, but shall include, upon the acquisition of a Target
Center by Borrower or any subsidiary or affiliate of Borrower, the
subsidiary or affiliate utilized to make such acquisition.
AGREEMENT:
Borrower has requested from Lender the credit accommodations described
below, and Lender has agreed to provide such credit accommodations on the
terms and conditions contained herein. Therefore, for good and valuable
consideration, the receipt and sufficiency of which Lender and Borrower
acknowledge, Lender and Borrower hereby agree as follows:
ARTICLE I
THE WORKING CAPITAL LOAN
1.1 The Working Capital Loan. Lender agrees to lend and Borrower
agrees to borrow an amount not to exceed the Working Capital Maximum
Principal Amount on the terms and conditions set forth herein (the "Working
Capital Loan"). The Working Capital Loan will be evidenced by the Working
Capital Note. ------------------------
1.2 Revolving Line of Credit. Subject to and in reliance upon the
terms, conditions, representations and warranties hereinafter set forth,
Lender agrees to make advances (the "Working Capital Advances") to Borrower
from time to time during the period from the Effective Date to and
including the one year anniversary of the Effective Date (the "Maturity
Date"), in an aggregate amount not to exceed the Working Capital Maximum
Principal Amount. Each Working Capital Advance must be either
------------------------ $10,000 or a higher integral multiple of $10,000.
Funds borrowed and repaid may be reborrowed, so long as all conditions
precedent to Working Capital Advances are met. The purpose of the Working
Capital Advances is to provide funds to Borrower for working capital and
for other general business purposes of Borrower.
1.3 Interest and Repayment. Borrower shall pay the aggregate unpaid
principal amount of all Working Capital Advances in accordance with the
terms of the Working Capital Note evidencing the indebtedness resulting
from such Working Capital Advances. Interest on the Working Capital
Advances shall be due and payable in the manner and at the times set forth
in the Working Capital Note, with final maturity of the Working Capital
Note being on or before the Maturity Date. ----------------------
1.4 Making Advances. Each Working Capital Advance shall be made within
two business days of written notice (or telephonic notice confirmed in
writing) given by noon (Austin, Texas time) on a business day of Lender by
Borrower to Lender specifying the amount and date thereof (which may be the
same business day) and if sent by wired funds, at Lender's option, the
wiring instructions of the deposit account of Borrower to which such
Working Capital Advance is to be deposited. ---------------
1.5 Payments and Computations. Borrower shall make each payment
hereunder and under the Working Capital Note on the day when due in lawful
money of the United States of America to Lender at Lender's Address for
Payment in same day funds. All repayments of principal on the Working
Capital Note shall be in a minimum amount of $1,000, or a higher integral
multiple of $1,000. All computations of interest shall be made by Lender on
the basis of the actual number of days (including the first
------------------------- day but excluding the last day) in the year (365
or 366, as the case may be) elapsed, but in no event shall any such
computation result in an amount of interest that would cause the interest
contracted for, charged or received by Lender to be in excess of the amount
that would be payable at the Highest Lawful Rate, as herein defined.
ARTICLE II
THE DEVELOPMENT FACILITY LOANS
2.1 The Development Facility. Subject to the terms of the Contribution
Agreement and the terms, conditions, representations and warranties
hereinafter set forth, Lender agrees to lend Borrower from time to time,
the amounts necessary to acquire or develop Target Centers, in an aggregate
amount not to exceed the Development Facility Maximum Principal Amount
(collectively, the "Development Facility Loans"). ------------------------
2.2 Development Facility Loans. Each Development Facility Loan will
finance up to 100% of the purchase price (or development cost) of a Target
Center being acquired (or developed) by Borrower. The parties acknowledge that
the grant of any Development Facility Loan does not create any obligation on the
part of Lender to extend further Development Facility Loans. Additionally, each
Development Facility Loan is subject in all respects to Lender obtaining prior
written approval from the bank syndication under its or its parent company's
outstanding borrowing facilities and the execution and delivery of such
guarantees by Borrower as may be required by such bank syndication. Pursuant to
the Contribution Agreement, each Development Facility Loan must be (a) evidenced
by a separate Development Facility Note executed by Borrower, (b) secured by all
of LASIK's ownership interest in Borrower as evidenced by an Assignment and
Security Agreement executed by LASIK, and (c) accompanied by Assignment and
Security Agreements executed by Borrower. In addition, if Borrower is acquiring,
directly or indirectly, a one hundred percent (100%) interest in a Target Center
(hereinafter referred to as a "100% Target Center"), Borrower shall cause such
Target Center to execute a security agreement, acceptable in form and substance
to Lender, granting to Lender or one of Lender's subsidiaries the highest
available priority security interest in all of the assets of such Target Center.
2.3 Interest and Repayment. Borrower and Target Center shall pay the
unpaid principal amount under each Development Facility Note in accordance
with the terms of the respective Development Facility Note. Payments of
interest and principal on each Development Facility Note shall be due and
payable in the manner and at the times set forth in the respective
Development Facility Note. ----------------------
ARTICLE III
CONDITIONS TO WORKING CAPITAL ADVANCES AND DEVELOPMENT FACILITY LOANS
3.1 Conditions Precedent to Initial Working Capital Advance. The
obligation of Lender to make its initial Working Capital Advance is subject
to the condition precedent that Lender shall have received on or before the
day of such Working Capital Advance the following, each in form and
substance satisfactory to Lender and properly executed by Borrower or other
appropriate parties: (a) the Working Capital Note duly executed by
Borrower, and (b) such other documents, opinions, certificates and
------------------------------------------------------- evidences as Lender
may reasonably request.
3.2 Conditions Precedent to Each Working Capital Advance/Development
Facility Loan. In addition to the conditions precedent stated elsewhere
herein, Lender shall not be obligated to make any Working Capital Advance
or any Development Facility Loan unless:
(a) the representations and warranties contained in Article IV are
true and correct in all material respects on and as of the date of such
Working Capital Advance or Development Facility Loan, as though made on and
as of such date with such changes therein;
(b) on the date of the Working Capital Advance or Development Facility
Loan, no Event of Default, and no event which, with the lapse of time or
notice or both, could become an Event of Default, has occurred and is
continuing;
(c) there shall have been no material adverse change, as determined by
Lender in its reasonable judgment, in the financial condition or business
of Borrower;
(d) there has been no breach or threatened breach by Borrower under
the Contribution Agreement or any Transaction Document (as such term is
defined in the Contribution Agreement);
with respect to each Development Facility Loan, Borrower executes
the respective Development Facility Note and Borrower executes an Assignment and
Security Agreement in the form attached as Exhibit G3 to the Contribution
Agreement, and otherwise in form and substance acceptable to Lender wherein
Lender is granted a first lien perfected security interest in all of Borrower's
or Borrower's subsidiaries' ownership interest in the Target Center and related
acquisition documents;
LASIK shall have previously granted to Lender a first lien
perfected security interest in all of LASIK's ownership interest in Borrower
through the execution and delivery of the Assignment and Security Agreement in
the form attached as Exhibit G4 to the Contribution Agreement and LASIK shall be
in compliance with all of its obligations thereunder;
(g) if Borrower is using a Development Facility Loan to acquire,
directly or indirectly, a 100% Target Center, Borrower shall cause such
Target Center to execute a security agreement, acceptable in form and
substance to Lender, granting to Lender or one of Lender's subsidiaries the
highest available priority security interest in all of the assets of such
Target Center; and
(h) Lender shall have received such other approvals, opinions,
documents, certificates or evidences as Lender may reasonably request (in
form and substance reasonably satisfactory to Lender). Each request for an
Working Capital Advance or Development Facility Loan shall be deemed a
representation by Borrower that the conditions of this Section 3.2 have
been met.
ARTICLE IV
BORROWER'S REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender as follows:
4.1 Good Standing. Borrower is a duly formed limited liability
company, duly organized and in good standing, under the laws of Delaware
and has the power to own its property and to carry on its business in each
jurisdiction in which Borrower operates. -------------
4.2 Authority and Compliance. Borrower has full power and authority to
enter into this Agreement, to make the borrowing hereunder, to execute and
deliver the Loan Documents and to incur the indebtedness described in this
Agreement, all of which has been duly authorized by all proper and necessary
action of its managers and members. No further consent or approval of any public
authority is required as a condition to the validity of any Loan Document, and
Borrower is in compliance with all laws and regulatory requirements to which it
is subject.
4.3 Binding Agreement. This Agreement and other Loan Documents when
issued and delivered pursuant hereto for value received will constitute,
valid and legally binding obligations of Borrower in accordance with their
terms. -----------------
4.4 Litigation. There are no proceedings pending or, to the knowledge
of Borrower, threatened before any court or administrative agency which
will or may have a material adverse effect on the financial condition or
operations of Borrower or any subsidiary, except as disclosed to Lender in
writing prior to the date of this Agreement. To the knowledge of Borrower,
there are no proceedings pending or threatened against any Target Center.
----------
4.5 No Conflicting Agreements. There are no provisions of Borrower's
organizational documents and no provisions of any existing agreement,
mortgage, indenture or contract binding on Borrower or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of the Loan Documents.
-------------------------
4.6 Ownership of Assets. Borrower will at all times maintain its
tangible property, real and personal, in good order and repair taking into
consideration reasonable wear and tear. -------------------
4.7 Taxes. All income taxes and other taxes due and payable through
the date of this Agreement have been paid prior to becoming delinquent.
-----
ARTICLE V
BORROWER'S AFFIRMATIVE COVENANTS
So long as Borrower may borrow under this Agreement and until payment
in full of the Working Capital Note and all Development Facility Notes, and
performance of all other obligations of Borrower and Target Centers hereunder or
thereunder, Borrower covenants and agrees to do the following:
5.1 Financial Statements.
(a) Maintain, and cause each Target Center to maintain, a
system of accounting satisfactory to Lender and in accordance with
generally accepted accounting principles consistently applied, and will
permit Lender's officers or authorized representatives to visit and
inspect Borrower's or Target Center's books of account and other
records at such reasonable times and as often as Lender may desire
during office hours and after reasonable notice to Borrower, and pay
the reasonable fees and disbursements of any accountants or other
agents of Lender selected by Lender for the foregoing purposes. Unless
written notice of another location is given to Lender, Borrower's books
and records will be located at Borrower's Address.
(b) Furnish to Lender year end financial statements, of Borrower and
each Target Center, to include balance sheet, operating statement and
surplus reconciliation, together with an officer's certificate of
compliance with this Agreement including computations of all quantitative
covenants, within 90 days after the end of each annual accounting period.
(c) Furnish to Lender quarterly financial statements, of Borrower and
each Target Center, to include balance sheet and profit and loss statement,
together with an officer's certificate of compliance with this Agreement
including computations of all quantitative covenants, within 45 days of the
end of each such accounting period.
(d) With each balance sheet delivered under subsections (b) or
(c) of this Section 5.1, an aging of all Accounts Receivable.
(e) Promptly provide Lender with such additional information, reports
or statements respecting the business operations and financial condition of
Borrower or any Target Center, as Lender may reasonably request from time
to time.
5.2 Insurance. Maintain, and cause each Target Center to maintain,
insurance with responsible insurance companies on such of its respective
properties, in such amounts and against such risks as is customarily maintained
by similar businesses operating in the same vicinity, specifically to include a
policy of fire and extended coverage insurance covering all assets, and
liability insurance, all to be with such companies and in such amounts
satisfactory to Lender and to contain a mortgage clause naming Lender as its
interest may appear. Evidence of such insurance will be supplied to Lender.
5.3 Existence and Compliance. Maintain, and cause each Target Center
to maintain, its organizational existence in good standing and comply with
all laws, regulations and governmental requirements applicable to it or to
any of its property, business operations and transactions. Borrower further
agrees to provide Lender with copies of all instruments filed with the
Delaware Secretary of State amending and/or renewing Borrower's certificate
of formation. ------------------------
5.4 Adverse Conditions or Events. Promptly advise Lender in writing of
any condition, event or act which comes to its attention that would or
might materially affect Borrower's or any Target Center's financial
condition, Lender's rights under this Agreement or any of the Loan
Documents, and of any litigation filed against Borrower or to its knowledge
against any Target Center. ----------------------------
5.5 Taxes. Pay all taxes as they become due and payable.
5.6 Maintenance. Maintain, and cause each Target Center to maintain,
all of its respective tangible property in good condition and repair,
reasonable wear and tear excepted, and make all necessary replacements
thereof, and preserve and maintain all licenses, privileges, franchises,
certificates and the like necessary for the operation of its business.
-----------
5.7 Application of Earnings. Except as expressly contemplated in
Section 4.3(e) of the Contribution Agreement, pay all available funds
toward repayment of the Working Capital Note and any Development Facility
Notes, regardless of whether payment of such amounts exceeds the minimum
required payments under the Working Capital Note and the Development
Facility Notes. -----------------------
ARTICLE VI
BORROWER'S NEGATIVE COVENANTS
So long as Borrower may borrow under this Agreement and until payment
in full of the Working Capital Note and all Development Facility Notes, and
performance of all other obligations of Borrower or Target Center hereunder or
thereunder, Borrower will not, and will cause each of the Target Centers to not,
without the prior written consent of Lender:
6.1 Transfer of Assets. Enter into any merger or consolidation, or
sell, lease, assign, or otherwise dispose of or transfer any assets except
in the normal course of its business. ------------------
6.2 Change in Ownership or Structure. Dissolve or liquidate; become a
party to any merger or consolidation; reorganize as a professional
corporation; acquire by purchase, lease or otherwise all or substantially
all of the assets or capital stock of any corporation or other entity; or
sell, transfer, lease, or otherwise dispose of all or any substantial part
of its respective property or assets or business.
--------------------------------
6.3 Liens. From and after the date hereof grant, suffer, or permit
liens on or security interests in its respective assets, or fail to
promptly pay all lawful claims, whether for labor, materials, or otherwise,
except for purchase money security interests arising in the ordinary course
of its respective business. -----
6.4 Loans. Make any loans, advances or investments to or in any joint
venture, corporation or other entity, except for the purchase of
obligations of Lender or U.S. Government obligations or the purchase of
federally-insured certificates of deposit. -----
6.5 Borrowings. Except for borrowing or incurring open accounts
payable to unaffiliated third parties in the ordinary course of business,
create, incur, assume, or liable in any manner for any indebtedness (for
borrowed money, deferred payment for the purchase of assets, lease
payments, as surety or guarantor of the debt of another, or otherwise)
other than to Lender in excess of $25,000 without Lender's prior written
consent. ----------
6.6 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated. -----------------------
6.7 Equity Redemptions or Restructurings. Apply any of its property or
assets to the purchase, retirement or redemption of any of its equity
interests or in any way amend its capital structure.
------------------------------------
6.8 Character of Business. Change the general character of business as
conducted at the date hereof, or engage in any type of business not
reasonably related to its business as presently and normally conducted.
---------------------
ARTICLE VII
EVENTS OF DEFAULT; NOTICE; ACCELERATION
7.1 Events of Default. If one or more of the following events of
default shall occur and continue after thirty (30) days' written notice to
Borrower, all outstanding principal plus unpaid interest of the Working
Capital Note and each Development Facility Note, and any other indebtedness
of Borrower to Lender, shall automatically be due and payable immediately
and Lender shall have no further obligation to fund under this Agreement.
-----------------
(a) There shall be any breach or default shall be made in the payment
of any installment of principal or interest upon the Working Capital Note
or any Development Facility Note, when due and payable, whether at maturity
or otherwise; or
(b) There shall be any breach or default (other than by Lender or
Prime Medical Services, Inc.) under any Loan Document, the Contribution
Agreement, or any Transaction Document (other than those certain Consulting
Agreements with Dr. Dulaney, Dr. Barnet and Mark Rosenberg as required
pursuant to the Contribution Agreement), or any other certificate,
agreement or document contemplated hereby or thereby; or
(c) Any representation or warranty of Borrower contained herein or in
any financial statement, certificate, report or opinion submitted to Lender
in connection with the Working Capital Loan or any Development Facility
Loan, or by Borrower pursuant to the requirements of this Agreement, shall
prove to have been incorrect or misleading in any material respect when
made; or
(d) Any judgment against Borrower or any attachment or other levy
against the property of Borrower with respect to a claim materially
affecting Borrower's financial status remains unpaid, unstayed on appeal,
undischarged, not bonded or not dismissed for a period of 30 days; or
(e) The bankruptcy, death, or dissolution of any guarantor of the
Indebtedness; or
(f) Borrower makes an assignment for the benefit of creditors,
admits in writing its inability to pay its debts generally as they
become due, files a petition in bankruptcy, is adjudicated insolvent or
bankrupt, petitions or applies to any tribunal for any receiver or any
trustee of Borrower or any substantial part of their respective
property, commences any action relating to Borrower under any
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, or if there is commenced against Borrower any such
action, or Borrower by any act indicates its consent to or approval of
any trustee for Borrower or any substantial part of its property, or
suffers any such receivership or trustee to continue undischarged.
7.2 Lender's Remedies. Upon the occurrence of an Event of Default,
Lender, without notice of any kind, except for any notice required under this
Agreement or any other Loan Document, may, at Lender's option: (i) terminate its
obligation to fund any Working Capital Advance or any Development Facility Loan
hereunder; (ii) declare the Indebtedness, in whole or in part, immediately due
and payable; and/or (iii) exercise any other rights and remedies available to
Lender under this Agreement, any other Loan Document, or applicable laws; except
that upon the occurrence of an Event of Default described in subsection 7.1(f),
all the Indebtedness shall automatically be immediately due and payable, and
Lender's obligation to fund any Working Capital Advance or any Development
Facility Loan hereunder shall automatically terminate, without notice of any
kind (including without limitation notice of intent to accelerate and notice of
acceleration) to Borrower or to any Target Center, guarantor, or to any surety
or endorser of any of the Notes, or to any other person. Borrower, each Target
Center, and each guarantor, surety, and endorser of any of the Notes, and any
and all other parties liable for the Indebtedness or any part thereof, waive
demand, notice of intent to demand, presentment for payment, notice of
nonpayment, protest, notice of protest, grace, notice of dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, and diligence
in collection.
7.3 Right of Set-Off. Borrower hereby authorizes Lender, to the maximum
extent permitted under and in accordance with applicable laws, at any time after
the occurrence of an Event of Default which continues uncured, to set-off and
apply any and all deposits, funds or assets at any time held and any and all
other indebtedness at any time owing by Lender to or for the credit or the
account of Borrower against any and all Indebtedness, whether or not Lender
exercises any other right or remedy hereunder and whether or not such
Indebtedness are then matured.
ARTICLE VIII
GENERAL TERMS AND CONDITIONS
8.1 Notices. All notices, demands, requests, approvals and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given when (a) presented personally, or (b) three (3) days
after deposited in a regularly maintained mail receptacle of the United States
Postal Service, postage prepaid, certified, return receipt requested, or (c)
upon receipt of confirmation after sending by facsimile transmission, addressed
to Borrower or Lender, as the case may be, at the respective addresses or
facsimile number for notice set forth on the first page of this Agreement, or
such other address or facsimile number as Borrower or Lender may from time to
time designate by written notice to the other.
8.2 Entire Agreement and Modifications. The Loan Documents, together
with the Contribution Agreement and Transaction Documents, constitute the
entire understanding and agreement between the undersigned with respect to
the transactions arising in connection with the Working Capital Loan and
the Development Facility Loans, and supersede all prior written or oral
understandings and agreements between the undersigned in connection
therewith. No provision of this Agreement or the other Loan
---------------------------------- Documents may be modified, waived, or
terminated except by instrument in writing executed by the party against
whom a modification, waiver, or termination is sought to be enforced, and,
in the case of Lender, executed by a Vice President or higher level officer
of Lender.
8.3 Severability. In case any of the provisions of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
------------
8.4 Cumulative Rights and No Waiver. Lender shall have all of the
rights and remedies granted in the Loan Documents and available at law or in
equity, and these same rights and remedies shall be cumulative and may be
pursued separately, successively, or concurrently against Borrower, at the sole
discretion of Lender. Lender's delay in exercising any right shall not operate
as a waiver thereof, nor shall any single or partial exercise by Lender of any
right preclude any other or future exercise thereof or the exercise of any other
right. Any of Borrower's covenants and agreements may be waived by Lender but
only in writing signed by an authorized officer of Vice President level or
higher of Lender or any subsequent owner or holder of any of the Notes. Except
as otherwise expressly provided in this Agreement and in any Note, Borrower
expressly waives any presentment, demand, protest, notice of default, notice of
intent to accelerate, notice of acceleration, notice of intent to demand
payment, or other notice of any kind. No notice to or demand on Borrower in any
case shall, of itself, entitle Borrower to any other or further notice or demand
in similar or other circumstances. No delay or omission by Lender in exercising
any power or right hereunder shall impair any such right or power or be
construed as a waiver thereof, or the exercise of any other right or power
hereunder.
8.5 Form and Substance. All documents, certificates, insurance
policies, and other items required under this Agreement to be executed
and/or delivered to Lender shall be in form and substance reasonably
satisfactory to Lender. ------------------
8.6 Limitation on Interest: Maximum Rate. Lender and Borrower intend to
contract in strict compliance with applicable usury law from time to time in
effect. To effectuate this intention, Lender and Borrower stipulate and agree
that none of the terms and provisions of any Note and any other agreement among
such parties, whether now existing or arising hereafter, shall ever be construed
as a contract to pay interest for the use, forbearance or detention of money in
excess of the Maximum Rate. If, from any possible construction of any document,
interest would otherwise be payable to Lender in excess of the Maximum Rate, any
such construction shall be subject to the provisions of this Section and such
document shall be automatically reformed and the interest payable to Lender
shall be automatically reduced to the Maximum Rate permitted under applicable
law, without the necessity of the execution of any amendment or new document.
Neither Borrower, endorsers or other persons now or hereafter becoming liable
for payment of any portion of the principal or interest of any Note shall ever
be liable for any unearned interest on the principal amount or shall ever be
required to pay interest thereon in excess of the Maximum Rate that may be
lawfully charged under applicable law from time to time in effect. Lender and
any subsequent holder of any Note expressly disavow any intention to charge or
collect unearned or excessive interest or finance charges in the event the
maturity of any Note, is accelerated. If the maturity of any Note is accelerated
for any reason, whether as a result of a default under any Note, or by voluntary
prepayment, or otherwise, any amounts constituting interest, or adjudicated as
constituting interest, which are then unearned and have previously been
collected by Lender or any subsequent holder of any Note shall be applied to
reduce the principal balance thereof then outstanding, or if such amounts exceed
the unpaid balance of principal, the excess shall be refunded to Borrower (and
Target Center, as applicable). In the event Lender or any subsequent holder of
any Note ever receives, collects or applies as interest any amounts constituting
interest or adjudicated as constituting interest which would otherwise increase
the interest to an amount in excess of the amount permitted under applicable
law, such amount which would be excessive interest shall be applied to the
reduction of the unpaid principal balance of such Note, and, if the principal
balances of such Note is paid in full, any remaining excess shall be paid to
Borrower (and Target Center, as applicable). In determining whether or not the
interest paid or payable under the specific contingencies exceeds the Maximum
Rate allowed by applicable law, Borrower and Lender shall, to the maximum extent
permitted under applicable law, (i) characterize any non-principal payment as an
expense, fee or premium, rather than as interest; (ii) exclude voluntary
prepayments and the effect thereof; (iii) amortize, prorate, allocate and
spread, in equal parts, the total amount of interest throughout the entire
contemplated term of the applicable Note (as it may be renewed and extended) so
that the interest rate is uniform throughout the entire term of such Note. The
terms and provisions of this section shall control and supersede every other
provision of all existing and future agreements between Lender and Borrower (and
Target Center, as applicable). As used in this Agreement, "Maximum Rate" means
the maximum non-usurious interest rate that at any time or from time to time may
be contracted for, taken, reserved, charged or received on the unpaid principal
or accrued past due interest under applicable law and may be greater than the
applicable rate, the parties hereby stipulating and agreeing that Lender may
contract for, take, reserve, charge or receive interest up to the Maximum Rate
without penalty under any applicable law; and "applicable law" means the laws of
the State of Texas or the laws of the United States of America, whichever laws
allow the greater interest, as such laws now exist or may be changed or amended
or come into effect in the future. In the event applicable law provides for an
interest ceiling under Chapter One of Title 79, Texas Revised Civil Statutes
Annotated, as amended, that ceiling shall be the indicated rate ceiling, subject
to any right Lender may have in the future to change the method of determining
the Maximum Rate.
8.7 Third Party Beneficiary. Borrower acknowledges that the bank
syndication under the senior credit facility of Prime Medical Services,
Inc. (as hereinafter supplemented, modified, or replaced) is a third party
beneficiary to this Agreement. Except for the preceding sentence, this
Agreement is for the sole benefit of Lender and Borrower and is not for the
benefit of any third party. -----------------------
8.8 Borrower In Control. In no event shall Lender's rights and
interests under the Loan Documents be construed to give Lender the right
to, or be deemed to indicate that Lender is in control of the business,
management or properties of Borrower or any Target Center or has power over
the daily management functions and operating decisions made by Borrower or
any Target Center. -------------------
8.9 Use of Financial and Other Information. Borrower agrees that
Lender shall be permitted to investigate and verify the accuracy of any and
all information furnished to Lender in connection with the Loan Documents,
including without limitation financial statements, and to disclose such
information, or provide copies of such information, to representatives
appointed by Lender, including independent accountants, agents, attorneys,
asset investigators, appraisers and any other persons deemed
-------------------------------------- necessary by Lender to such
investigation.
8.10 Collateral Assignment of Loan Documents. Lender shall have the
right to collaterally assign all of its rights under this Agreement and the
other Loan Documents to the third party beneficiaries described in Section 8.7.
Lender shall have the right to disclose in confidence such financial information
regarding Borrower as may be necessary to complete any such assignment or
attempted assignment, including without limitation, all financial statements,
projections, internal memoranda, audits, reports, payment history, appraisals
and any and all other information and documentation in Lender's files relating
to Borrower. This authorization shall be irrevocable in favor of Lender, and
Borrower waives any claims against Lender or the party receiving information
from Lender regarding disclosure of information in Lender's files, and further
waive any alleged damages which may result from such disclosure. Borrower
acknowledges that Lender intends to make a collateral assignment of its rights
under this Agreement and the Loan Documents for the benefit of one or more of
its or its parent company's lenders and will not be authorized to amend or
modify this Agreement or the Loan Documents, or grant waivers of any of its
rights thereunder without the prior written consent of some or all of such
lenders.
8.11 Further Assurances. Borrower agrees to execute and deliver, and
cause each Target Center to execute and deliver, to Lender, promptly upon
request from Lender, such other and further documents as may be reasonably
necessary or appropriate to consummate the transactions contemplated
herein. ------------------
8.12 Number and Gender. Whenever used herein, the singular number
shall include the plural and the plural the singular, and the use of any
gender shall be applicable to all genders. The duties, covenants,
obligations, and warranties of Borrower in this Agreement shall be joint
and several obligations of Borrower and of each Borrower if more than one.
-----------------
8.13 Captions. The captions, headings, and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit,
amplify, or modify the terms and provisions hereof. --------
8.14 Continuing Agreement. This is a continuing agreement and all
rights, powers, and remedies of Lender under this Agreement and the other Loan
Documents shall continue in full force and effect until each Note is paid in
full as the same becomes due and payable and all other Indebtedness is paid and
discharged, until Lender has no further obligation to advance moneys to Borrower
under this Agreement, and until Lender, upon request of Borrower, has executed a
written termination statement. Furthermore, the parties contemplate that there
may be times when no Indebtedness is owing, but notwithstanding such occurrence,
this Agreement (and all other Loan Documents) shall remain valid and shall be in
full force and effect as to subsequent Indebtedness and Advances, provided that
Lender has not executed a written termination statement.
8.15 Applicable Law. This Agreement and the Loan Documents shall be
governed by and construed in accordance with the laws of the State of Texas
and the laws of the United States applicable to transactions within such
state. --------------
8.16 NO ORAL AGREEMENTS. THE WRITTEN LOAN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
SIGNATURE PAGE TO
LOAN AGREEMENT
EXECUTED as of 1st day of September, 1999.
BORROWER:
PRIME/BDR ACQUISITION, L.L.C.
By: /s/ Ronald W. Barnet, M.D.
Name: Ronald W. Barnet, M.D.
Title: Manager
LENDER:
PRIME MEDICAL OPERATING, INC.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Treasurer
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF PRIME/BDR ACQUISITION, L.L.C.
Organized under the Delaware Limited Liability Company Act (the "Act").
ARTICLE I.
NAME AND LOCATION
Section 1.1. Name. The name of this limited liability company is Prime/BDR
Acquisition, L.L.C. (the "Company").
Section 1.2. Members. The only members of the Company upon the
execution of this Limited Liability Company Agreement (this "Agreement") shall
be Prime Medical Operating, Inc, a Delaware corporation ("Prime"), and LASIK
Investors L.L.C., a Delaware limited liability company ("LASIK"). For purposes
of this Agreement, the "Members" shall include such named members and any new
members admitted pursuant to the terms of this Agreement, 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 1301 Capital of Texas Hwy., Suite C-300, Austin, Texas 78746-6550, 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
Certificate of Formation of the Company are:
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
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.
Section 1.6 Contribution Agreement. The Company was initially formed
with a single member, LASIK, for the purpose of consummating the transactions
contemplated by that certain Contribution Agreement dated effective September 1,
1999, by and among Prime, Prime Medical Services, Inc., a Delaware corporation
("PMSI"), LASIK, Barnet Dulaney Eye Center, P.L.L.C., an Arizona professional
limited liability company, the Company, Prime/BDEC Acquisition, L.L.C., a
Delaware limited liability company, David D. Dulaney, M.D., Ronald W. Barnet,
M.D., and Mark Rosenberg (the "Contribution Agreement"). The parties have
executed this Agreement upon consummation of the transactions contemplated by
the Contribution Agreement. This agreement supercedes and replaces any prior
membership agreement or other governing or organizational document of the
Company.
ARTICLE II.
MEMBERSHIP
Section 2.1. Members' Interests. The "Membership Interest" of each Member
is set forth on Exhibit A.
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, this
Agreement 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, (i) the Membership Interests of Prime may be
freely transferred, without consent, to any entity that is then owned or
controlled, directly or indirectly, by PMSI (or its successor in interest), (ii)
the Membership Interests of any Member may be freely assigned, pledged or
otherwise transferred, without consent, to secure any debt, liability or
obligation owed to Prime by the Company, any Member or any entity affiliated
with the Company, (iii) the Membership Interests of any Member may be freely
assigned, pledged or otherwise transferred, without consent, in favor of the
Lender(s) under, or by the Lender(s) as a result of the enforcement of any
security interest arising pursuant to, that certain Senior Credit Facility (the
"Credit Facility") of PMSI, (iv) the Membership Interests of any Member may be
freely transferred, without consent, pursuant to and in accordance with the
express terms and conditions of the Contribution Agreement, and (iv) the pledge
by LASIK (pursuant to Section 6.3 of the Contribution Agreement) of its right to
receive distributions from the Company in respect of its Membership Interest
shall not be deemed to violate any provision of this Agreement..
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
Delaware 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 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 Act, the Certificate of Formation or this Limited Liability
Company Agreement. 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 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
Except for each Member's initial capital contribution made in
connection with the formation of the Company, no capital contributions shall be
required of any Member without the approval of all the Members to raise
additional capital, and only then proportionately as to each Member.
ARTICLE V.
DISTRIBUTION TO MEMBERS
The Company shall not distribute (or allow to be distributed) to its
members, with respect to their respective membership interests, any cash or
other property of the Company or its subsidiaries if, at the time of the
proposed distribution, any amounts (whether principal or interest) are
outstanding under the Credit Documents or the Target Center Lending Documents
(as such terms are defined in the Contribution Agreement). Furthermore, the
Company shall pay all available cash flow to Prime in payment of the Company's
outstanding obligations, if any, under the Working Capital Line and Development
Facility (as such terms are defined in the Contribution Agreement), irrespective
of whether such payments exceed the minimum required payments under the Working
Capital Line and Development Facility. For purposes of allocating such payments
among any two or more of such outstanding obligations, such payments shall be
allocated pro rata, based upon the respective balances of such obligations,
unless (i) a greater portion of the payment is required to be paid toward a
given obligation in order to prevent a default with respect to that obligation
(but only to the extent necessary to prevent such a default) or (ii) eighty
percent (80%) of the managers of the Company elect to allocate the payments in a
different manner.
Notwithstanding the foregoing, as long as no party other than PMSI or
Prime is in default under the Contribution Agreement or any other Transaction
Document (as defined in the Contribution Agreement, but excluding, however, the
Credit Documents and the Target Center Lending Documents), then, to the extent
that (but only to the extent that) the Company possesses the cash flow necessary
(in the reasonable discretion of a majority of its managers) to pay its
liabilities in the ordinary course consistent with past practices, the Company
agrees to make quarterly estimates of its taxable income for the current tax
year and, if not prohibited by law, distribute quarterly (the "Quarterly
Distributions") an amount that would cover the federal and state income taxes
required to be paid by its members with respect such taxable income, based on
each member's then current proportionate interest in the Company, assuming that
all members pay income taxes on the Company's taxable earnings at a rate equal
to the highest effective individual tax rate in effect from time to time (the
"Assumed Tax Rate"); provided, further, that the Company shall determine its
actual taxable income at the end of each taxable year and (A) if the Quarterly
Distributions in a given year should have been higher based on the amount of
actual taxable income for that year, promptly distribute the amounts necessary
to eliminate such deficiency or (B) if the Quarterly Distributions in a given
year should have been lower based on the amount of actual taxable income for
that year, withhold dollar for dollar from the first following Quarterly
Distribution, and then against subsequent Quarterly Distributions in a like
manner, the amounts necessary to eliminate such surplus.
Subject to the foregoing, the Managers shall determine, in their sole
discretion, the amount and timing of all distributions from the Company.
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. In no event may the Company make a
distribution to its Members if, 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 creditors is limited to specified property of the Company, exceed the fair
value of the Company's 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. Except as contemplated in this Article V, no
distributions of cash or other assets of the Company shall be made to the
Members in their capacity as owners of the Company.
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.
ARTICLE VII.
DISSOLUTION AND WINDING UP
Section 7.1. Dissolution. Notwithstanding any provision of the Act, the
Company shall be dissolved only upon the first of the following to occur:
(a) Forty (40) years from the date of filing the Certificate of
Formation of the Company;
(b) Written consent of all the then current 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 7.1(c) of this Article VII., in the event of dissolution of the Company,
the Managers (excluding any Manager(s) holding office pursuant to designation by
a Member subject to bankruptcy proceedings) 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;
and
(b) The balance, if any, shall be divided between the
Members in accordance with the Members' Membership Interests.
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 Ken Shifrin, Cheryl Williams, and Joe Jenkins, M.D., (as the initial
Manager designees of Prime), David D. Dulaney, M.D., and Ronald W. Barnet, M.D.
(as the initial Manager designees of LASIK). Thereafter, for so long as there
are five (5) Managers, (a) Prime shall be entitled to designate three (3) of the
Managers; and (b) LASIK shall be entitled to designate the remaining two (2) of
the Managers. Notwithstanding the foregoing, a Member shall not be entitled to
designate any Manager unless its Membership Interest: (x) has not (other than as
allowed under Section 2.5 of this Agreement) been transferred, repurchased,
assigned, pledged, hypothecated or in any way alienated; and (y) equals or
exceeds forty percent (40%) of the aggregate Membership Interests; provided,
however, that if the immediately preceding subsection (y) shall apply to LASIK
solely because of an exercise by LASIK of its put rights under Section 9.8 of
the Contribution Agreement, then LASIK shall, unless and until there is an
additional decrease in it Membership Interest other than pursuant to Section 9.8
of the Contribution Agreement, be entitled to designate only one Manager in the
manner provided above. 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 their resignation
or removal pursuant to Section 8.2 or 8.3 of this Article VIII. Managers need
not be residents of the State of Delaware 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. The Member who designated a resigning manager
shall be entitled to designate the successor thereto and all Members agree to
take such action as may be necessary to cause the election of all such successor
Managers.
Section 8.3. Removal of Managers. Any Manager may be removed, for or
without cause, at any time, but only by the Member who designated such Manager,
upon the written notice to all Members. The Member who designated such removed
Manager shall be entitled to designate the successor thereto and all Members
agree to take such action as may be necessary to cause the election of all such
successor Managers.
Section 8.4. General Powers. The business of the Company shall be
managed by its Managers, which may, by the vote or written consent in accordance
with this Agreement, 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 Certificate of
Formation or this Limited Liability Company Agreement 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
Delaware.
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.
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 four (4) 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 Contribution Agreement, the Certificate of Formation or
this Agreement. 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.
Notwithstanding any voting, quorum, or other provisions of this Agreement to the
contrary, the affirmative vote of at least four (4) Managers shall be required
to effect any of the following actions:
(a) any amendment, modification or waiver of any provision of the
Company's Certificate of Formation or this Agreement;
(b) effecting any mergers, consolidations or combinations of the
Company with other entities;
(c) dissolving, liquidating, or filing bankruptcy or seeking
relief under any debtor relief law;
(d) entering into a transaction or other action with a Member or
Manager;
(e) borrowing or incurring any indebtedness, other than open
accounts payable to unaffiliated third parties, or granting any
collateral or security (by way of guaranty or otherwise) for any
indebtedness or obligation, that exceeds (in any single transaction or
directly related series of transactions) $25,000;
(f) purchasing or leasing assets or property, or entering into
any contract or obligation, which obligates the Company to pay in
excess of $25,000 in one or any directly related series of
installments;
(g) selling, leasing or otherwise transferring substantially all
of the Company's assets other than in the ordinary course of the
Company's business;
(h) except as expressly set forth in Section 9.12 of the
Contribution Agreement, allocating to the Company any costs or expenses
that are paid or incurred by any Member or its affiliates (excluding
the Company), or paid by the Company but reimbursable by any Member or
its affiliates (excluding the Company), in each instance;
(i) issuance of any ownership interest in the Company; and
(j) disposition, sale, assignment or other transfer by the
Company of any interest it owns in the Company, except that such
interest may be extinguished without the approval required under this
Section.
Section 8.10. Committees. The Managers may, by resolution passed by
eighty percent (80%) of the Managers, designate committees, each committee to
consist of two or more Managers (at least one of which must be a Manager
designee of Prime and one of which must be a Manager designee of LASIK), 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 provide, by unanimous approval, that any one or more of the
Managers shall not be compensated, and may, by unanimous approval, fix any
compensation (which may include expenses) they elect to pay to any one or more
of the Managers.
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 Certificate of
Formation and this Limited Liability Company Agreement.
ARTICLE IX.
NOTICES
Section 9.1. Form of Notice. Whenever under the provisions of the Act,
the Certificate of Formation or this Limited Liability Company Agreement 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 Certificate
of Formation or this Limited Liability Company Agreement, 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
Any Manager may also serve as an officer 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: Ken Shifrin, Chairman of the Board; Joe Jenkins, M.D.,
President; Cheryl Williams, Vice President, Secretary and Chief Financial
Officer; and Mark Rosenberg, 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 Delaware Limited
Liability Company Act, and any successor statute, as amended from time-to-time.
ARTICLE XI.
INDEMNITY
Section 11.1. Indemnification. The Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action, suit
or proceeding and any inquiry or investigation that could lead to such an
action, suit or proceeding (whether or not by or in the right of the Company),
by reason of the fact that such person is or was a manager, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
director, manager, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another corporation, employee benefit plan,
other enterprise, or other entity, against all judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses (including
attorneys' fees and court costs) actually and reasonably incurred by him in
connection with such action, suit or proceeding to the fullest extent permitted
by any applicable law, and such indemnity shall inure to the benefit of the
heirs, executors and administrators of any such person so indemnified pursuant
to this Article XI. The right to indemnification under this Article XI shall be
a contract right and shall not be deemed exclusive of any other right to which
those seeking indemnification may be entitled under any law, bylaw, agreement,
vote of members or disinterested managers or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. Any repeal or amendment of this Article XI by the Members of the Company
or by changes in applicable law shall, to the extent permitted by applicable
law, be prospective only, and shall not adversely affect the indemnification of
any person who may be indemnified at the time of such repeal or amendment.
Section 11.2. Indemnification Not Exclusive. The rights of
indemnification and reimbursement provided for in 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 Certificate of Formation, this
Limited Liability Company Agreement, agreement or vote of Members, or as a
matter of law or otherwise.
Section 11.3. Other Indemnification Clauses. Notwithstanding the
foregoing, this Article XI shall not be construed to contradict the
indemnification provision of the Contribution Agreement. Notwithstanding
anything contained herein, this Article XI shall be ineffectual and shall not
permit or require indemnification for all, or any, losses, costs, liabilities,
claims or expenses arising, directly or indirectly, from any action or omission
permitting or requiring indemnification under the Contribution Agreement; and in
no event may any indemnity be allowed under this Agreement or pursuant to any
provision of the Act for an amount paid or payable pursuant to the
indemnification provisions of the Contribution Agreement.
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 Certificate of Formation and Limited
Liability Company Agreement 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.
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 Managers 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.
Section 12.9. Binding Arbitration. Any controversy between the parties
regarding this Agreement and any claims arising out of this Agreement or its
breach shall be submitted to arbitration by either party. The arbitration
proceedings shall be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration shall
be conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
ARTICLE XIII.
AMENDMENTS
Section 13.1. Amendments. This Agreement may be altered, amended or
repealed and a new limited liability company agreement may be adopted, only in
accordance with the provisions of Section 8.9, but otherwise at any regular
meeting or at any special meeting called for that purpose, or by execution of a
written consent in accordance with the provisions of Section 3.8.
Section 13.2. When Limited Liability Company Agreement Silent. It is
expressly recognized that when the Limited Liability Company Agreement is 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.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
LIMITED LIABILITY COMPANY AGREEMENT
IN WITNESS WHEREOF, the undersigned Members hereby adopt this Limited
Liability Company Agreement as the Limited Liability Company Agreement of the
Company, effective as of the 1st day of September, 1999.
LASIK Investors, L.L.C.
By: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Treasurer
<PAGE>
EXHIBIT A
OWNERSHIP INTERESTS
Name Ownership Percentage
Prime 60%
LASIK 40%
LIMITED LIABILITY COMPANY AGREEMENT
OF PRIME/BDEC ACQUISITION, L.L.C.
Organized under the Delaware Limited Liability Company Act (the "Act").
ARTICLE I.
NAME AND LOCATION
Section 1.1. Name. The name of this limited liability company is Prime/BDEC
Acquisition, L.L.C. (the "Company"). ----
Section 1.2. Members. The only members of the Company upon the
execution of this Limited Liability Company Agreement (this "Agreement") shall
be Prime Medical Operating, Inc, a Delaware corporation ("Prime"), and Barnet
Dulaney Eye Center, P.L.L.C., an Arizona professional limited liability company
("BDEC"). For purposes of this Agreement, the "Members" shall include such named
members and any new members admitted pursuant to the terms of this Agreement,
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 1301 Capital of Texas Hwy., Suite C-300, Austin, Texas 78746-6550, 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
Certificate of Formation of the Company are: -----------------------------
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
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. -------------
Section 1.6 Contribution Agreement. The Company was initially formed
with a single member, BDEC, for the purpose of consummating the transactions
contemplated by that certain Contribution Agreement dated effective September 1,
1999, by and among Prime, Prime Medical Services, Inc., a Delaware corporation
("PMSI"), BDEC, the Company, Prime/BDR Acquisition, L.L.C., a Delaware limited
liability company, LASIK Investors, L.L.C., a Delaware limited liability
company, David D. Dulaney, M.D., Ronald W. Barnet, M.D., and Mark Rosenberg (the
"Contribution Agreement"). The parties have executed this Agreement upon
consummation of the transactions contemplated by the Contribution Agreement.
This agreement supercedes and replaces any prior membership agreement or other
governing or organizational document of the Company.
ARTICLE II.
MEMBERSHIP
Section 2.1. Members' Interests. The "Membership Interest" of each Member
is set forth on Exhibit A. ------------------ ---------
Section 2.2. Admission to Membership. The admission of new Members shall be
only by the vote of the Managers pursuant to Section 8.9 hereof. If new Members
are admitted, this Agreement 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, (i) the Membership Interests of 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 (or its successor in interest), (ii) the Membership Interests of any
Member may be freely assigned, pledged or otherwise transferred, without
consent, to secure any debt, liability or obligation owed to Prime by the
Company, any Member or any entity affiliated with the Company, (iii) the
Membership Interests of any Member may be freely assigned, pledged or otherwise
transferred, without consent, in favor of the Lender(s) under, or by the
Lender(s) as a result of the enforcement of any security interest arising
pursuant to, that certain Senior Credit Facility (the "Credit Facility") of
PMSI, and (iv) the pledge by BDEC (pursuant to Section 6.3 of the Contribution
Agreement) of its right to receive distributions from the Company in respect of
its Membership Interest shall not be deemed to violate any provision of this
Agreement.
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 Delaware
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 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. Members shall only be required to vote in
instances or with respect to matters where member voting is required by
applicable law or to the extent expressly contemplated in Section 8.1. With
respect to any act or transaction that requires a vote by the Members under
applicable law, the affirmative vote of not less than three (3) of the Managers
shall also be required in order to approve the act or transaction, in each
instance. Subject to the foregoing, 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 Act, the Certificate of Formation or this Limited
Liability Company Agreement. 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. The
provisions of this Section shall not interfere with the provisions of Section
8.9 relating to acts or transactions requiring the written approval of three (3)
or more Managers. Each Member acknowledges and agrees that, in the event of any
exercise of the Repurchase Option, as defined in the Contribution Agreement,
each Member will vote its entire Membership Interest in favor of transferring
the Company's assets pursuant to the Repurchase Option.
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 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
Except for each Member's initial capital contribution made in
connection with the formation of the Company, no capital contributions shall be
required of any Member without the approval of all the Members to raise
additional capital, and only then proportionately as to each Member.
ARTICLE V.
DISTRIBUTION TO MEMBERS
At the end of each calendar quarter, subject only to the qualifications
and limitations set forth below, the Company shall distribute its available
excess earnings to its members, to be divided among them 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 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.
ARTICLE VII.
DISSOLUTION AND WINDING UP
Section 7.1. Dissolution. Notwithstanding any provision of the Act, the
Company shall be dissolved only upon the first of the following to occur:
- -----------
(a) Forty (40) years from the date of filing the Certificate of
Formation of the Company;
(b) Written consent of all the then current 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 7.1(c) of
this Article VII., in the event of dissolution of the Company, the Managers
(excluding any Manager(s) holding office pursuant to designation by a
Member subject to bankruptcy proceedings) 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; and
(b) The balance, if any, shall be divided between the Members
in accordance with the Members' Membership Interests.
ARTICLE VIII.
MANAGERS
Section 8.1. Selection of Managers. Management of the Company shall be
vested in the Managers. Initially, the Company shall have four (4) Managers,
being Ken Shifrin, Joe Jenkins, M.D., (as the initial Manager designees of
Prime), David D. Dulaney, M.D. and Ronald W. Barnet, M.D., (as the initial
Manager designees of BDEC). Thereafter, for so long as there are four (4)
Managers, (a) Prime shall be entitled to designate two (2) of the Managers; and
(b) BDEC shall be entitled to designate the remaining two (2) of the Managers.
Notwithstanding the foregoing, a Member shall not be entitled to designate any
Manager unless its Membership Interest: (x) has not (other than as allowed under
Section 2.5 of this Agreement) been transferred, repurchased, assigned, pledged,
hypothecated or in any way alienated; and (y) equals or exceeds forty percent
(40%) of the aggregate Membership Interests. 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
their resignation or removal pursuant to Section 8.2 or 8.3 of this Article
VIII. Managers need not be residents of the State of Delaware 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. The Member who designated a
resigning manager shall be entitled to designate the successor thereto and
all Members agree to take such action as may be ------------ necessary to
cause the election of all such successor Managers.
Section 8.3. Removal of Managers. Any Manager may be removed, for or
without cause, at any time, but only by the Member who designated such
Manager, upon the written notice to all Members. The Member who designated
such removed Manager shall be entitled to designate the successor thereto
and all Members agree to take such action as may be necessary to cause the
election of all such successor Managers. -------------------
Section 8.4. General Powers. The business of the Company shall be
managed by its Managers, which may, by the vote or written consent in accordance
with this Agreement, 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 Certificate of
Formation or this Limited Liability Company Agreement 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 Delaware. -----------------
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. ----------------
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 three (3) 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 Contribution Agreement, the Certificate of Formation or
this Agreement. 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.
Notwithstanding any other Member or Manager voting or quorum provisions
contained in this Agreement, the following acts or transactions by, or
involving, the Company shall require the prior written approval of three (3)
Managers (unless and to the extent a particular act or transaction is expressly
required of the Company pursuant to the terms and provisions of the Contribution
Agreement or any Transaction Document):
(a) Any amendment to the Company's Certificate of Formation or this
Agreement.
(b) Mergers, consolidations or combinations of the Company with
another limited liability company or other entity.
(c) Purchase by the Company of any interest in the Company,
irrespective of the source of such interest.
(d) Disposition, sale, assignment or other transfer by the Company of
any interest it owns in the Company, except that such interest may be
extinguished without the approval required under this Article.
(e) Issuance of any interest in the Company to any party.
(f) Dissolving, liquidating, or filing bankruptcy or seeking
relief under any debtor relief law.
(g) Election or removal of officers, and establishing or
changing the compensation for Managers, officers or other employees.
(h) Not making any cash distributions to its Members that are required
by this Agreement to be made, or making any distributions to its Members of
cash or property that are prohibited under this Agreement.
(i) Sale, lease or other transfer of all or substantially all of the
Company's assets, or any assets other than in the ordinary course of the
Company's business.
(j) Initiating or settling any litigation or regulatory
proceeding, or confessing any judgment.
(k) Hiring or changing the Company's accountants or legal
counsel.
(l) Opening or closing bank or other depository accounts, and
establishing or changing the signature withdrawal authority with respect to any
such accounts.
(m) Borrowing or incurring any indebtedness, other than open accounts
payable to unaffiliated third parties, or granting any collateral or
security (by way of guaranty or otherwise) for any indebtedness or
obligation.
(n) Engaging in any act or transaction not in the ordinary
course of the Company's business.
(o) Purchasing or leasing assets or property, or entering into any
contract or obligation, which obligates the Company to pay in excess of
$10,000 in the aggregate in one or any series of installments.
(p) Doing any business other than the conduct of the Business (as
defined in the Contribution Agreement) or causing a change in the nature of
the business or the legal name of the Company.
(q) Entering into a transaction or other action with any
Manager, officer or Member.
(r) Waiving, refusing to enforce, amending, restating, superseding or
modifying any of the provisions of this Agreement or any Transaction
Document, including, without limitation, the Collocation Agreement.
(s) Taking any other action which, by the terms of this Agreement,
requires the approval or consent of not less than seventy-five percent
(75%) of the Members.
(t) Except as expressly set forth in the Collocation Agreement or
Section 9.12 of the Contribution Agreement, allocating to the Company any
costs or expenses that are paid or incurred by any Member or its affiliates
(excluding the Company), or paid by the Company but reimbursable by any
Member or its affiliates (excluding the Company), in each instance.
(u) With respect to the business and operations of Newco II conducted
or to be conducted at or near the location of 4800 N. 22nd St., Phoenix,
Arizona, waiving, amending, supplementing or modifying any of the
professional fees, facility fees or fee allocations by Newco II, to the
extent such amounts or allocations were utilized in preparing the pro forma
financial statements of Newco II attached to the Collocation Agreement.
(v) With respect to the business and operations of Newco II conducted
or to be conducted at any other future office or business locations
(including without limitation, the office located at 555 E. River Road,
Tucson, Arizona), adopting any professional fees, facility fees or fee
allocations.
Any of the above stated actions taken by the Company without the
necessary manager approval is void ab initio.
Section 8.10. Committees. The Managers may, by resolution passed by
eighty percent (80%) of the Managers, designate committees, each committee to
consist of two or more Managers (at least one of which must be a Manager
designee of Prime and one of which must be a Manager designee of BDEC), 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, by unanimous
approval, shall have the authority to provide that any one or more of the
Managers shall not be compensated, and may, by unanimous approval, fix any
compensation (which may include expenses) they elect to pay to any one or
more of the Managers. ------------------------
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
Certificate of Formation and this Limited Liability Company Agreement.
--------------------------
ARTICLE IX.
NOTICES
Section 9.1. Form of Notice. Whenever under the provisions of the Act,
the Certificate of Formation or this Limited Liability Company Agreement 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
Certificate of Formation or this Limited Liability Company Agreement, 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
Any Manager may also serve as an officer 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: Ken Shifrin, Chairman of the Board; Joe Jenkins, M.D.,
President; Cheryl Williams, Vice President, Secretary and Chief Financial
Officer; and Mark Rosenberg, 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 Delaware Limited
Liability Company Act, and any successor statute, as amended from time-to-time.
ARTICLE XI.
INDEMNITY
Section 11.1. Indemnification. The Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action, suit
or proceeding and any inquiry or investigation that could lead to such an
action, suit or proceeding (whether or not by or in the right of the Company),
by reason of the fact that such person is or was a manager, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
director, manager, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another corporation, employee benefit plan,
other enterprise, or other entity, against all judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses (including
attorneys' fees and court costs) actually and reasonably incurred by him in
connection with such action, suit or proceeding to the fullest extent permitted
by any applicable law, and such indemnity shall inure to the benefit of the
heirs, executors and administrators of any such person so indemnified pursuant
to this Article XI. The right to indemnification under this Article XI shall be
a contract right and shall not be deemed exclusive of any other right to which
those seeking indemnification may be entitled under any law, bylaw, agreement,
vote of members or disinterested managers or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. Any repeal or amendment of this Article XI by the Managers (pursuant to
Section 8.9 hereof) or by changes in applicable law shall, to the extent
permitted by applicable law, be prospective only, and shall not adversely affect
the indemnification of any person who may be indemnified at the time of such
repeal or amendment.
Section 11.2. Indemnification Not Exclusive. The rights of
indemnification and reimbursement provided for in 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 Certificate of Formation, this
Limited Liability Company Agreement, agreement or vote of Members, or as a
matter of law or otherwise. -----------------------------
Section 11.3. Other Indemnification Clauses. Notwithstanding the
foregoing, this Article XI shall not be construed to contradict the
indemnification provision of the Contribution Agreement. Notwithstanding
anything contained herein, this Article XI shall be ineffectual and shall not
permit or require indemnification for all, or any, losses, costs, liabilities,
claims or expenses arising, directly or indirectly, from any action or omission
permitting or requiring indemnification under the Contribution Agreement; and in
no event may any indemnity be allowed under this Agreement or pursuant to any
provision of the Act for an amount paid or payable pursuant to the
indemnification provisions of the Contribution Agreement.
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 Certificate of Formation and Limited Liability
Company Agreement 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.
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 Managers may select. --------
Section 12.7. Annual Statement. The Managers shall present at each
annual meeting 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.
Section 12.9. Binding Arbitration. Any controversy between the parties
regarding this Agreement and any claims arising out of this Agreement or
its breach shall be submitted to arbitration by either party. The
arbitration proceedings shall be conducted by a single arbitrator pursuant
to the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration shall be conducted in Dallas, Texas and the
arbitrator shall have the right to award actual damages and
------------------- attorney fees and costs, but shall not have the right
to award punitive, exemplary or consequential damages against either party.
ARTICLE XIII.
AMENDMENTS
Section 13.1. Amendments. This Agreement may be altered, amended or
repealed and a new limited liability company agreement may be adopted, only
in accordance with the provisions of Section 8.9, but otherwise at any
regular meeting or at any special meeting called for that purpose, or by
execution of a written consent in accordance with the provisions of Section
3.8. ----------
Section 13.2. When Limited Liability Company Agreement Silent. It is
expressly recognized that when the Limited Liability Company Agreement is
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.
-----------------------------------------------
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
LIMITED LIABILITY COMPANY AGREEMENT
IN WITNESS WHEREOF, the undersigned Members hereby adopt this Limited
Liability Company Agreement as the Limited Liability Company Agreement of the
Company, effective as of the 1st day of September, 1999.
Barnet Dulaney Eye Center, P.L.L.C.
By: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By:/s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Treasurer
<PAGE>
EXHIBIT A
OWNERSHIP INTERESTS
Name Ownership Percentage
Prime 60%
BDEC 40%
<PAGE>
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by Scott A. Perkins, M.D.
(the "Equity Holder"), who is an equity owner of Barnet Dulaney Eye Center,
P.L.L.C., an Arizona professional limited liability company ("BDEC"), and LASIK
Investors, L.L.C., a Delaware limited liability company ("LASIK"), for the
benefit of Prime Medical Services, Inc., a Delaware corporation ("PMSI"), Prime
Medical Operating, Inc., a Delaware corporation ("Prime"), Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Newco I"),
Prime/BDEC Acquisition, L.L.C., a Delaware limited liability company ("Newco
II"), BDEC, LASIK, Ronald W. Barnet, M.D. ("Barnet"), David D. Dulaney, M.D.
("Dulaney") and Mark Rosenberg ("Rosenberg") (PMSI, Prime, Newco I, Newco II,
BDEC, LASIK, Barnet, Dulaney and Rosenberg are referred to herein individually
as a "Beneficiary" and collectively as "Beneficiaries").
RECITALS:
WHEREAS, the Equity Holder is an equity owning member of BDEC and
LASIK.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Newco I, Newco II, Prime, PMSI, BDEC, LASIK, Barnet, Dulaney, and
Rosenberg are consummating that certain Contribution Agreement (the
"Contribution Agreement"), dated effective September 1, 1999.
WHEREAS, in order to induce each of the Beneficiaries to consummate the
transactions contemplated by the Contribution Agreement, the Equity
Holder has agreed to certain restrictions on the activities of Equity
Holder and his Affiliates (as hereinafter defined), which restrictions
the Equity Holder deems reasonable and appropriate. THEREFORE, the
parties hereto agree as follows:
AGREEMENTS:
1. Confidentiality Agreement. Equity Holder acknowledges that through
his relationship with BDEC and LASIK, he will be exposed to Proprietary
Information (as defined below) of Newco I, Newco II and/or each of their present
or future affiliates (which includes, without limitation, BDEC, LASIK, Prime,
PMSI and each of their present or future affiliates) (the party owning such
Proprietary Information is referred to as the "Discloser"), that such
Proprietary Information is unique and valuable and that such Discloser would
suffer irreparable injury if its Proprietary Information were divulged to those
in competition with Discloser. "Proprietary Information" shall be all
information concerning Discloser which Equity Holder acquires, or to which he
has access through his relationship with BDEC or LASIK, that has not been
publicly disclosed by Discloser or that is not a matter of common knowledge
among Discloser's competitors, including, but not limited to, information
relating to any inventions, processes, software, formulae, plans, devices,
compilations of information, technical data, mailing lists, management
strategies, business distribution methods, names of suppliers (of both goods and
services) and customers, names of employees and terms of employment,
arrangements entered into with suppliers and customers, including, but not
limited to, proposed expansion plans of Discloser, marketing and other business
and pricing strategies, and trade secrets of Discloser. Notwithstanding the
foregoing, Proprietary Information shall not include information or material
that would otherwise be Proprietary Information if such information or material
is owned solely by BDEC and not materially used or relied on in the conduct of
the Business (as defined in the Contribution Agreement).
Except with prior written approval of Discloser, Equity Holder agrees
that he will not, at any time after the Closing, as such term is defined in
the Contribution Agreement: (i) directly or indirectly, disclose any
Proprietary Information to any person except the employees, agents and
consultants of Newco I, Newco II and/or Discloser who need to know such
Proprietary Information in connection with their relationship with Newco I
or Newco II nor (ii) use Proprietary Information in any way, except for the
purposes and benefit of Newco I or Newco II.
Within forty-eight (48) hours of termination of his ownership of BDEC
and LASIK, whether voluntary or involuntary, Equity Holder will deliver to the
appropriate Discloser (without retaining copies thereof) all documents, records
or other memorializations including copies of documents and any notes which he
has prepared that contain Proprietary Information, all other tangible
Proprietary Information in his possession or control and all of Discloser's
credit cards, keys, equipment, vehicles, supplies and other materials that are
in his possession or under his control.
2. Non-Competition Agreement. Equity Holder, hereby agrees that, at all
times during which the provisions of ARTICLE VIII of the Contribution Agreement
are in effect, and at all times until five (5) years after either LASIK and its
affiliates (excluding PMSI, Prime, and the subsidiaries of either of them), or
Prime and its affiliates (excluding LASIK), no longer own any equity or other
interest in Newco I, Equity Holder will not directly or indirectly, either
through any kind of ownership (other than ownership of securities of a publicly
held corporation of which he 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 his own benefit or for the benefit of any other person,
corporation or other entity, without the prior written consent of each
Beneficiary, commit any of the following acts, which acts shall be considered
violations of this covenant not to compete:
(a) Except through Newco I or its subsidiaries, or Newco II,
directly or indirectly engage in, or provide, anywhere within a fifty (50) mile
radius of any center or facility that provides Refractive Surgery (as defined in
the Contribution Agreement) and is owned, directly or indirectly, partially or
wholly, by Newco I or a subsidiary of Newco I (collectively, the "Restricted
Area"), any services (other than services included in the practice of medicine)
related to (i) the operating of centers or facilities that provide Refractive
Surgery, (ii) the manufacture, maintenance, refurbishing, repair, sale, or
leasing of any equipment related to or necessary for the operating of centers or
facilities that provide Refractive Surgery, or (iii) providing any management
services, training or consulting services related to any of the activities
described in (i) or (ii);
(b) Except through Newco I or its subsidiaries, or Newco II,
directly or indirectly provide, anywhere within the Restricted Area, (i)
facilities, equipment and non-physician personnel for the performance by
physicians of Refractive Surgery, (ii) the marketing, scheduling and management
of Refractive Surgery (but excluding marketing, scheduling and management of
patients for treatment by Equity Holder), (iii) the credentialing and scheduling
of physicians to perform Refractive Surgery and (iv) the billing, collecting or
accounting for the use of any such facilities, equipment or non-physician
personnel;
(c) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Newco I or any of its subsidiaries, Prime, LASIK, BDEC, Barnet, Dulaney,
Rosenberg, or any affiliate or related entity of any of them, to withdraw,
curtail, or cancel its business with such person or entity; or
(d) Directly or indirectly hire any employee of Newco I or any of its
subsidiaries, Prime, LASIK, BDEC, Barnet, Dulaney, Rosenberg, or any
affiliate or related entity of any of them, or induce or attempt to
influence any employee of Newco I or any of its subsidiaries, Prime, LASIK,
BDEC, Barnet, Dulaney, Rosenberg, or any such affiliate or related entity
to terminate his or her employment with such person or entity.
3. Exclusivity. Equity Holder acknowledges that any acquisition or
development of a Target Center (as defined in the Contribution Agreement)
by Equity Holder through an entity not owned (wholly or partially, directly
or indirectly) by Newco I shall be subject to the provisions of Section 2
of this Agreement, regardless of whether such acquisition or development is
contemplated by or provided for in the provisions of ARTICLE VIII of the
Contribution Agreement.
4. Agreement. Equity Holder has reviewed and carefully considered the
provisions of Sections 1 and 2 of this Agreement and, having done so,
agrees that the restrictions applicable to him as set forth therein (a) are
fair and reasonable with respect to time, geographic area and scope, (b)
are not unduly burdensome to him, and (c) are reasonably required for the
protection of the interests of the Beneficiaries for whose benefit such
restrictions were agreed upon.
5. Remedies. Equity Holder agrees that a violation on his part of any
applicable covenant contained in Sections 1 or 2 of this Agreement will
cause the Beneficiaries, for whose benefit such restrictions were agreed
upon, irreparable damage for which remedies at law may be insufficient, and
for that reason, he agrees that any of the Beneficiaries 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 Beneficiaries may have, including,
specifically, recovery of additional damages.
6. Affiliates. For purposes of this Agreement, an "Affiliate" of Equity
Holder means any person married to, or any minor child of, Equity Holder and any
corporation, partnership or other entity that, at the date hereof or at any time
during the term hereof, is controlled by, or under common control with, Equity
Holder. "Control" (and its derivatives), in this context, means the possession
of, directly or indirectly, the power to direct or cause the direction of the
management of the applicable corporation, partnership or other entity either
through the ownership of voting securities (or other equity interests), by
contract, or by ownership of a membership of a nonstock corporation or other
entity enabling Equity Holder to elect one or more members of the governing
board of that nonstock corporation or other entity.
7. Control of Affiliates' Actions. Equity Holder will timely exercise
all of his rights and powers to cause each of his Affiliates to comply with
the terms of this Agreement. ------------------------------
8. Indemnity. Equity Holder agrees to indemnify, defend and hold each
Beneficiary harmless from and against any and all loss, damage, cost and
expense (including attorneys' fees) that may result from any breach or
threatened breach of this Agreement by Equity Holder or any Affiliate of
Equity Holder. ---------
9. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by an
instrument in writing executed by Equity Holder and each Beneficiary.
(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) Governing
Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Texas, and
not the conflicts of law provisions thereof.
(d) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder and Equity Holder's Affiliates, and
their respective successors and representatives. This Agreement shall inure
to the benefit of each Beneficiary and their respective successors,
representatives and assigns. -------------
(e) 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 2 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.
(f) 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 provision of this Agreement shall be construed as
though all of the parties participated equally in the drafting of this
Agreement. Consequently, Equity Holder acknowledges and agrees that any
rule of construction that a document is to be construed against the
drafting party shall not be applicable to this Agreement. ------------
(g) Defined Terms. Any capitalized terms not otherwise defined in this
Agreement shall have the same meaning as set forth in the Contribution
Agreement. -------------
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
NON-COMPETITION AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER: /s/Scott A. Perkins, M.D.
Scott A. Perkins, M.D.
<PAGE>
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by Robert B. Pinkert,
O.D. (the "Equity Holder"), who is an equity owner of Barnet Dulaney Eye Center,
P.L.L.C., an Arizona professional limited liability company ("BDEC"), and LASIK
Investors, L.L.C., a Delaware limited liability company ("LASIK"), for the
benefit of Prime Medical Services, Inc., a Delaware corporation ("PMSI"), Prime
Medical Operating, Inc., a Delaware corporation ("Prime"), Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Newco I"),
Prime/BDEC Acquisition, L.L.C., a Delaware limited liability company ("Newco
II"), BDEC, LASIK, Ronald W. Barnet, M.D. ("Barnet"), David D. Dulaney, M.D.
("Dulaney") and Mark Rosenberg ("Rosenberg") (PMSI, Prime, Newco I, Newco II,
BDEC, LASIK, Barnet, Dulaney and Rosenberg are referred to herein individually
as a "Beneficiary" and collectively as "Beneficiaries").
RECITALS:
WHEREAS, the Equity Holder is an equity owning member of BDEC and
LASIK.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Newco I, Newco II, Prime, PMSI, BDEC, LASIK, Barnet, Dulaney, and
Rosenberg are consummating that certain Contribution Agreement (the
"Contribution Agreement"), dated effective September 1, 1999.
WHEREAS, in order to induce each of the Beneficiaries to consummate the
transactions contemplated by the Contribution Agreement, the Equity
Holder has agreed to certain restrictions on the activities of Equity
Holder and his Affiliates (as hereinafter defined), which restrictions
the Equity Holder deems reasonable and appropriate. THEREFORE, the
parties hereto agree as follows:
AGREEMENTS:
1. Confidentiality Agreement. Equity Holder acknowledges that through
his relationship with BDEC and LASIK, he will be exposed to Proprietary
Information (as defined below) of Newco I, Newco II and/or each of their present
or future affiliates (which includes, without limitation, BDEC, LASIK, Prime,
PMSI and each of their present or future affiliates) (the party owning such
Proprietary Information is referred to as the "Discloser"), that such
Proprietary Information is unique and valuable and that such Discloser would
suffer irreparable injury if its Proprietary Information were divulged to those
in competition with Discloser. "Proprietary Information" shall be all
information concerning Discloser which Equity Holder acquires, or to which he
has access through his relationship with BDEC or LASIK, that has not been
publicly disclosed by Discloser or that is not a matter of common knowledge
among Discloser's competitors, including, but not limited to, information
relating to any inventions, processes, software, formulae, plans, devices,
compilations of information, technical data, mailing lists, management
strategies, business distribution methods, names of suppliers (of both goods and
services) and customers, names of employees and terms of employment,
arrangements entered into with suppliers and customers, including, but not
limited to, proposed expansion plans of Discloser, marketing and other business
and pricing strategies, and trade secrets of Discloser. Notwithstanding the
foregoing, Proprietary Information shall not include information or material
that would otherwise be Proprietary Information if such information or material
is owned solely by BDEC and not materially used or relied on in the conduct of
the Business (as defined in the Contribution Agreement).
Except with prior written approval of Discloser, Equity Holder agrees
that he will not, at any time after the Closing, as such term is defined in
the Contribution Agreement: (i) directly or indirectly, disclose any
Proprietary Information to any person except the employees, agents and
consultants of Newco I, Newco II and/or Discloser who need to know such
Proprietary Information in connection with their relationship with Newco I
or Newco II nor (ii) use Proprietary Information in any way, except for the
purposes and benefit of Newco I or Newco II.
Within forty-eight (48) hours of termination of his ownership of BDEC
and LASIK, whether voluntary or involuntary, Equity Holder will deliver to the
appropriate Discloser (without retaining copies thereof) all documents, records
or other memorializations including copies of documents and any notes which he
has prepared that contain Proprietary Information, all other tangible
Proprietary Information in his possession or control and all of Discloser's
credit cards, keys, equipment, vehicles, supplies and other materials that are
in his possession or under his control.
2. Non-Competition Agreement. Equity Holder, hereby agrees that, at all
times during which the provisions of ARTICLE VIII of the Contribution Agreement
are in effect, and at all times until five (5) years after either LASIK and its
affiliates (excluding PMSI, Prime, and the subsidiaries of either of them), or
Prime and its affiliates (excluding LASIK), no longer own any equity or other
interest in Newco I, Equity Holder will not directly or indirectly, either
through any kind of ownership (other than ownership of securities of a publicly
held corporation of which he 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 his own benefit or for the benefit of any other person,
corporation or other entity, without the prior written consent of each
Beneficiary, commit any of the following acts, which acts shall be considered
violations of this covenant not to compete:
(a) Except through Newco I or its subsidiaries, or Newco II,
directly or indirectly engage in, or provide, anywhere within a fifty (50) mile
radius of any center or facility that provides Refractive Surgery (as defined in
the Contribution Agreement) and is owned, directly or indirectly, partially or
wholly, by Newco I or a subsidiary of Newco I (collectively, the "Restricted
Area"), any services (other than services included in the practice of medicine)
related to (i) the operating of centers or facilities that provide Refractive
Surgery, (ii) the manufacture, maintenance, refurbishing, repair, sale, or
leasing of any equipment related to or necessary for the operating of centers or
facilities that provide Refractive Surgery, or (iii) providing any management
services, training or consulting services related to any of the activities
described in (i) or (ii);
(b) Except through Newco I or its subsidiaries, or Newco II,
directly or indirectly provide, anywhere within the Restricted Area, (i)
facilities, equipment and non-physician personnel for the performance by
physicians of Refractive Surgery, (ii) the marketing, scheduling and management
of Refractive Surgery (but excluding marketing, scheduling and management of
patients for treatment by Equity Holder), (iii) the credentialing and scheduling
of physicians to perform Refractive Surgery and (iv) the billing, collecting or
accounting for the use of any such facilities, equipment or non-physician
personnel;
(c) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Newco I or any of its subsidiaries, Prime, LASIK, BDEC, Barnet, Dulaney,
Rosenberg, or any affiliate or related entity of any of them, to withdraw,
curtail, or cancel its business with such person or entity; or
(d) Directly or indirectly hire any employee of Newco I or any of its
subsidiaries, Prime, LASIK, BDEC, Barnet, Dulaney, Rosenberg, or any
affiliate or related entity of any of them, or induce or attempt to
influence any employee of Newco I or any of its subsidiaries, Prime, LASIK,
BDEC, Barnet, Dulaney, Rosenberg, or any such affiliate or related entity
to terminate his or her employment with such person or entity.
3. Exclusivity. Equity Holder acknowledges that any acquisition or
development of a Target Center (as defined in the Contribution Agreement)
by Equity Holder through an entity not owned (wholly or partially, directly
or indirectly) by Newco I shall be subject to the provisions of Section 2
of this Agreement, regardless of whether such acquisition or development is
contemplated by or provided for in the provisions of ARTICLE VIII of the
Contribution Agreement.
4. Agreement. Equity Holder has reviewed and carefully considered the
provisions of Sections 1 and 2 of this Agreement and, having done so,
agrees that the restrictions applicable to him as set forth therein (a) are
fair and reasonable with respect to time, geographic area and scope, (b)
are not unduly burdensome to him, and (c) are reasonably required for the
protection of the interests of the Beneficiaries for whose benefit such
restrictions were agreed upon.
5. Remedies. Equity Holder agrees that a violation on his part of any
applicable covenant contained in Sections 1 or 2 of this Agreement will
cause the Beneficiaries, for whose benefit such restrictions were agreed
upon, irreparable damage for which remedies at law may be insufficient, and
for that reason, he agrees that any of the Beneficiaries 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 Beneficiaries may have, including,
specifically, recovery of additional damages.
6. Affiliates. For purposes of this Agreement, an "Affiliate" of Equity
Holder means any person married to, or any minor child of, Equity Holder and any
corporation, partnership or other entity that, at the date hereof or at any time
during the term hereof, is controlled by, or under common control with, Equity
Holder. "Control" (and its derivatives), in this context, means the possession
of, directly or indirectly, the power to direct or cause the direction of the
management of the applicable corporation, partnership or other entity either
through the ownership of voting securities (or other equity interests), by
contract, or by ownership of a membership of a nonstock corporation or other
entity enabling Equity Holder to elect one or more members of the governing
board of that nonstock corporation or other entity.
7. Control of Affiliates' Actions. Equity Holder will timely exercise
all of his rights and powers to cause each of his Affiliates to comply with
the terms of this Agreement. ------------------------------
8. Indemnity. Equity Holder agrees to indemnify, defend and hold each
Beneficiary harmless from and against any and all loss, damage, cost and
expense (including attorneys' fees) that may result from any breach or
threatened breach of this Agreement by Equity Holder or any Affiliate of
Equity Holder. ---------
9. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by an
instrument in writing executed by Equity Holder and each Beneficiary.
(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) Governing
Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Texas, and
not the conflicts of law provisions thereof.
(d) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder and Equity Holder's Affiliates, and
their respective successors and representatives. This Agreement shall inure
to the benefit of each Beneficiary and their respective successors,
representatives and assigns. -------------
(e) 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 2 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.
(f) 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 provision of this Agreement shall be construed as
though all of the parties participated equally in the drafting of this
Agreement. Consequently, Equity Holder acknowledges and agrees that any
rule of construction that a document is to be construed against the
drafting party shall not be applicable to this Agreement. ------------
(g) Defined Terms. Any capitalized terms not otherwise defined in this
Agreement shall have the same meaning as set forth in the Contribution
Agreement. -------------
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
NON-COMPETITION AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER: /s/ Robert B. Pinkert, O.D.
Robert B. Pinkert, O.D.
<PAGE>
PROMISSORY NOTE
Austin, Texas (LINE OF CREDIT) September 1, 1999
PROMISE TO PAY: For value received, the undersigned Borrower (whether one or
more) promises to pay to the order of Lender the Principal Amount, to the extent
advanced by Lender, together with interest on the unpaid balance of such amount,
in lawful money of the United States of America, in accordance with all the
terms, conditions, and covenants of this Note and the Loan Documents identified
below.
BORROWER: Prime/BDR Acquisition, L.L.C., a Delaware limited liability
company
BORROWER'S ADDRESS FOR NOTICE: 1301 Capital of Texas Highway, Suite C-300
Austin, Texas 78746 Attention: President
LENDER: Prime Medical Operating, Inc., a Delaware corporation
LENDER'S ADDRESS FOR PAYMENT: 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746 Attention: Chief Financial Officer
PRINCIPAL AMOUNT: Two Hundred Thousand Dollars ($200,000)
INTEREST RATE: Fifteen Percent (15%)
PAYMENT TERMS: Interest on the unpaid balance of this Note is due and payable
quarterly, beginning November 1, 1999, and continuing regularly and quarterly
thereafter on or before the first day of February, May, August, until September
1, 2000 (the "Maturity Date"), when the outstanding principal balance and all
accrued interest shall be due and payable in full. Interest will be calculated
on the unpaid principal balance. Each payment will be credited first to the
accrued interest and then to the reduction of principal.
REVOLVING LINE OF CREDIT: This Note evidences a revolving line of credit.
Subject to the terms of the Loan Agreement between Borrower and Lender of even
date herewith, all or any portion of the Principal Amount of this Note may be
borrowed, paid, prepaid, repaid, and reborrowed, from time to time prior to the
Maturity Date and in accordance with the Loan Documents. Each borrowing and
repayment hereunder will be (i) endorsed on an attachment to this Note, or (ii)
entered in the books and records of Lender. The books and records of Lender
shall be prima facie evidence of all sums due Lender. If an event of default
exists under this Note or any Loan Document, then Lender shall be under no
obligation to make any advance under this Note.
LOAN AGREEMENT: This Note is executed pursuant to and is governed by the
terms of the Loan Agreement of even date herewith, executed by Borrower and
Lender, as amended (collectively, the "Loan Agreement").
1. INTEREST PROVISIONS:
Rate: The principal balance of this Note from time to time remaining unpaid
prior to maturity shall bear interest at the Interest Rate per annum stated
above. Interest shall be calculated on the amount of each advance of the
Principal Amount of this Note from the date of each such advance.
Maximum Lawful Interest: The term "Maximum Lawful Rate" means the maximum rate
of interest and the term "Maximum Lawful Amount" means the maximum
amount of interest that is permissible under applicable state or
federal law for the type of loan evidenced by this Note and the other
Loan Documents. If the Maximum Lawful Rate is increased by statute or
other governmental action subsequent to the date of this Note, then the
new Maximum Lawful Rate shall be applicable to this Note from the
effective date thereof, unless otherwise prohibited by applicable law.
Spreadingof Interest: Because of the possibility of irregular periodic balances
of principal or premature payment, the total interest that will accrue
under this Note cannot be determined in advance. Lender does not intend
to contract for, charge, or receive more than the Maximum Lawful Rate
or Maximum Lawful Amount permitted by applicable state or federal law,
and to prevent such an occurrence Lender and Borrower agree that all
amounts of interest, whenever contracted for, charged, or received by
Lender, with respect to the loan of money evidenced by this Note, shall
be spread, prorated, or allocated over the full period of time this
Note is unpaid, including the period of any renewal or extension of
this Note. If demand for payment of this Note is made by Lender prior
to the full stated term, the total amount of interest contracted for,
charged, or received to the time of such demand shall be spread,
prorated, or allocated along with any interest thereafter accruing over
the full period of time that this Note thereafter remains unpaid for
the purpose of determining if such interest exceeds the Maximum Lawful
Amount.
Excess Interest: At maturity (whether by acceleration or otherwise) or on
earlier final payment of this Note, Lender shall compute the total
amount of interest that has been contracted for, charged, or received
by Lender or payable by Borrower under this Note and compare such
amount to the Maximum Lawful Amount that could have been contracted
for, charged, or received by Lender. If such computation reflects that
the total amount of interest that has been contracted for, charged, or
received by Lender or payable by Borrower exceeds the Maximum Lawful
Amount, then Lender shall apply such excess to the reduction of the
principal balance and not to the payment of interest; or if such excess
interest exceeds the unpaid principal balance, such excess shall be
refunded to Borrower. This provision concerning the crediting or refund
of excess interest shall control and take precedence over all other
agreements between Borrower and Lender so that under no circumstances
shall the total interest contracted for, charged, or received by Lender
exceed the Maximum Lawful Amount.
Interest After Default: At Lender's option, the unpaid principal balance shall
bear interest after maturity (whether by acceleration or otherwise) at
the "Default Interest Rate." The Default Interest Rate shall be, at
Lender's option, (i) the Maximum Lawful Rate, if such Maximum Lawful
Rate is established by applicable law; or (ii) the Interest Rate stated
on the first page of this Note plus five (5) percentage points, if no
Maximum Lawful Rate is established by applicable law; or (iii) eighteen
percent (18%) per annum; or (iv) such lesser rate of interest as Lender
in its sole discretion may choose to charge; but never more than the
Maximum Lawful Rate or at a rate that would cause the total interest
contracted for, charged, or received by Lender to exceed the Maximum
Lawful Amount.
Daily Computation of Interest: To the extent permitted by applicable law, Lender
at its option will calculate the per diem interest rate or amount based on the
actual number of days in the year (365 or 366, as the case may be), and charge
that per diem interest rate or amount each day. In no event shall Lender compute
the interest in a manner that would cause Lender to contract for, charge, or
receive interest that would exceed the Maximum Lawful Rate or the Maximum Lawful
Amount
DEFAULT PROVISIONS:
EVENTS OF DEFAULT AND ACCELERATION OF MATURITY: LENDER MAY, AFTER THIRTY (30)
DAYS' WRITTEN NOTICE TO BORROWER AND BORROWER'S FAILURE TO CURE WITHIN SUCH
30-DAY PERIOD AND WITHOUT FURTHER NOTICE OR DEMAND, (except as otherwise
required by statute), ACCELERATE THE MATURITY OF THIS NOTE AND DECLARE THE
ENTIRE UNPAID PRINCIPAL BALANCE AND ALL ACCRUED INTEREST AT ONCE DUE AND PAYABLE
IF:
There is default in the payment of any installment of principal,
interest, or any other sum required to be paid under the terms of this Note or
any of the Loan Documents; or
There is a breach or default (other than by Lender or Prime Medical
Services, Inc.) under this Note or any of the Loan Documents, including any
instrument securing the payment of this Note or any loan agreement relating to
the advance of loan proceeds.
WAIVER BY BORROWER: EXCEPT AS PROVIDED IN PARAGRAPH 2(a) HEREOF AND IN ANY
OTHER LOAN DOCUMENT, BORROWER AND ALL OTHER PARTIES LIABLE FOR THIS
NOTE WAIVE, DEMAND, NOTICE OF INTENT TO DEMAND, PRESENTMENT FOR
PAYMENT, NOTICE OF NONPAYMENT, PROTEST, NOTICE OF PROTEST, GRACE,
NOTICE OF DISHONOR, NOTICE OF INTENT TO ACCELERATE MATURITY, NOTICE OF
ACCELERATION OF MATURITY, AND DILIGENCE IN COLLECTION. EACH MAKER,
SURETY, ENDORSER, AND GUARANTOR OF THIS NOTE WAIVES AND AGREES TO ONE
OR MORE EXTENSIONS FOR ANY PERIOD OR PERIODS OF TIME, AND ANY PARTIAL
PAYMENTS, BEFORE OR AFTER MATURITY, WITHOUT PREJUDICE TO THE HOLDER OF
THIS NOTE. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR WAIVES NOTICE OF
ANY AND ALL RENEWALS, EXTENSIONS, REARRANGEMENTS, AND MODIFICATIONS OF
THIS NOTE.
Non-Waiver by Lender: Any previous extension of time, forbearance, failure to
pursue some remedy, acceptance of late payments, or acceptance of partial
payment by Lender, before or after maturity, does not constitute a waiver by
Lender of its subsequent right to strictly enforce the collection of this Note
according to its terms.
Other Remedies Not Required: Lender shall not be required to first file suit,
exhaust all remedies, or enforce its rights against any security in order to
enforce payment of this Note.
Joint and Several Liability: Each Borrower who signs this Note, and all of the
other parties liable for the payment of this Note, such as guarantors,
endorsers, and sureties, are jointly and severally liable for the payment of
this Note.
Attorney's Fees: If Lender requires the services of an attorney to enforce the
payment of this Note or the performance of the other Loan Documents, or if this
Note is collected through any lawsuit, probate, bankruptcy, or other judicial
proceeding, Borrower agrees to pay Lender an amount equal to its reasonable
attorney's fees and other collection costs. This provision shall be limited by
any applicable statutory restrictions relating to the collection of attorney's
fees.
3. MISCELLANEOUS PROVISIONS:
Subsequent Holder: All references to Lender in this Note shall also refer to any
subsequent owner or holder of this Note by transfer, assignment, endorsement, or
otherwise.
Transfer:Borrower acknowledges and agrees that Lender may transfer this Note or
partial interests in the Note to one or more transferees or
participants, including without limitation transfers provided for in
Section 8.10 of the Loan Agreement. Borrower authorizes Lender to
disseminate to any such transferee or participant or prospective
transferee or participant any information it has pertaining to the loan
evidenced by this Note, including, without limitation, credit
information on Borrower and any guarantor of this Note and any of the
type of information described in Section 8.10 of the Loan Agreement.
Other Parties Liable: All promises, waivers, agreements, and conditions
applicable to Borrower shall likewise be applicable to and binding upon any
other parties primarily or secondarily liable for the payment of this Note,
including all guarantors, endorsers, and sureties.
Successors and Assigns: The provisions of this Note shall be binding upon and
for the benefit of the successors, assigns, heirs, executors, and administrators
of Lender and Borrower.
No Duty or Special Relationship: Borrower acknowledges that Lender has no duty
of good faith to Borrower, and Borrower acknowledges that no fiduciary, trust,
or other special relationship exists between Lender and Borrower.
Modifications: Any modifications agreed to by Lender relating to the release of
liability of any of the parties primarily or secondarily liable for the payment
of this Note, or relating to the release, substitution, or subordination of all
or part of the security for this Note, shall in no way constitute a release of
liability with respect to the other parties or security not covered by such
modification.
Entire Agreement: Borrower warrants and represents that the Loan Documents
constitute the entire agreement between Borrower and Lender with respect to the
loan evidenced by this Note and agrees that no modification, amendment, or
additional agreement with respect to such loan or the advancement of funds
thereunder will be valid and enforceable unless made in writing signed by both
Borrower and Lender.
Borrower's Address for Notice: All notices required to be sent by Lender to
Borrower shall be sent by U.S. Mail, postage prepaid, to Borrower's Address for
Notice stated on the first page of this Note, until Lender shall receive written
notification from Borrower of a new address for notice.
Lender's Address for Payment: All sums payable by Borrower to Lender shall be
paid at Lender's Address for Payment stated on the first page of this Note, or
at such other address as Lender shall designate from time to time.
Business Use: Borrower warrants and represents to Lender that the proceeds of
this Note will be used solely for business or commercial purposes, and in no way
will the proceeds be used for personal, family, or household purposes.
Chapter 15 Not Applicable: It is understood that Chapter 15 of the Texas Credit
Code relating to certain revolving credit loan accounts and tri-party accounts
is not applicable to this Note.
APPLICABLE LAW: THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN TEXAS AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE
LAWS OF THE UNITED STATES OF AMERICA APPLICABLE TO TRANSACTIONS IN TEXAS.
4. LOAN DOCUMENTS:
This Note.
The Loan Agreement and the Loan Documents as defined therein.
All other documents signed in connection with the Loan Agreement or the
loan evidenced by this Note, including, without limitation, that
certain Contribution Agreement, dated effective September 1, 1999,
between and among Borrower, Lender, Prime Medical Services, Inc., a
Delaware corporation, Prime/BDEC Acquisition, L.L.C., a Delaware
limited liability company, Barnet Dulaney Eye Center, P.L.L.C., an
Arizona professional limited liability company, LASIK Investors,
L.L.C., a Delaware limited liability company, David D. Dulaney, M.D.,
Ronald W. Barnet, M.D., and Mark Rosenberg (the "Contribution
Agreement") and each Transaction Document (as such term is defined in
the Contribution Agreement).
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
PROMISSORY NOTE
EXECUTED this 1 day of September, 1999.
BORROWER:
PRIME/BDR ACQUISITION, L.L.C., a Delaware limited liability company
By: /s/ Ronald W. Barnet, M.D.
Printed Name: Ronald W. Barnet, M.D.
Title: Manager
<PAGE>
COLLOCATION AGREEMENT
BY AND BETWEEN
BARNET DULANEY EYE CENTER, P.L.L.C.
AND
PRIME/BDEC ACQUISITION, L.L.C.
<PAGE>
COLLOCATION
AGREEMENT
This COLLOCATION AGREEMENT ("Agreement"), effective as of the 1st day of
September, 1999 (the "Effective Time"), is by and between BARNET DULANEY EYE
CENTER, P.L.L.C., an Arizona professional limited liability company ("BDEC"),
and PRIME/BDEC ACQUISITION, L.L.C., a Delaware limited liability company
("Company").
W I T N E S S E T H:
WHEREAS, the Company has been organized for the purpose of providing
facilities, equipment and non-physician personnel for the performance by
physicians of Refractive Surgery (as defined herein), for the marketing,
scheduling and management of Refractive Surgery, for the credentialing and
scheduling of physicians to perform Refractive Surgery and for the billing,
collecting and accounting for the use of the facility, equipment and
non-physician personnel (the "Business");
WHEREAS, BDEC has owned or leased assets for the performance by physicians
of Refractive Surgery, including, without limitation, certain space located in a
building at 4800 North 22nd Street, Phoenix, Arizona 85016 and certain space
located in a building at 555 East River Road, Tucson, Arizona (individually a
"Facility" and collectively the "Facilities") and in connection with each
Facility, equipment, instruments, computer software used in connection with the
equipment, certain leases and contracts, the leasehold improvements, furniture,
fixtures and other fixed assets and items of personal property used primarily in
or materially relied on for the performance of Refractive Surgery (the
"Equipment and Personalty");
WHEREAS, BDEC employs non-physician personnel (the "BDEC Employees") with
expertise and experience in assisting physicians in the performance of
Refractive Surgery, in credentialing and scheduling physicians for the
performance of Refractive Surgery in the Facilities, in performing the
scheduling of patients for Refractive Surgery in the Facilities, in performing
marketing, accounting, billing and collection services for the use of the
Facilities and in managing the Facilities and all non-physician aspects of
Refractive Surgery in the Facilities (the "Support Services");
WHEREAS, BDEC employs physician and non-physician executives (the
"Managers") with expertise and experience in the management of the Facilities,
the Equipment and Personalty, the Support Services and all other elements of a
Refractive Surgery center (the "Management Services");
WHEREAS, BDEC, Prime Medical Operating, Inc.("Prime") and others entered
into that certain Contribution Agreement dated effective September 1, 1999 (the
"Contribution Agreement"), pursuant to which Prime, BDEC and others have
participated in a series of transactions that were completed simultaneously with
the execution and delivery of this Agreement, in which transactions the Company
became the owner of the Equipment and Personalty and the business conducted
therewith, excluding the practice of medicine, and in which transactions BDEC
agreed to provide to the Company the Facility and the Management Services and
Support Services on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants set forth
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby forever acknowledged and confessed, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Agreement shall mean this Collocation Agreement between the Company and
BDEC and any amendments hereto as may from time to time be adopted as
hereinafter provided.
1.2 BDEC shall mean Barnet Dulaney Eye Center, P.L.L.C.
1.3 Buildings shall mean Building P and Building T.
1.4 Building P shall mean the building located at 4800 North 22nd Street,
Phoenix, Arizona 85016, and known generally as the Barnet Dulaney Eye Center.
1.5 Building T shall mean the building located at 555 East River Road,
Tucson, Arizona, and known generally as the Barnet Dulaney Eye Center.
1.6 Business shall mean the provision of facilities, equipment and
non-physician personnel for the performance by physicians of Refractive Surgery
(as defined herein), the marketing, scheduling and management of Refractive
Surgery, the credentialing and scheduling of physicians to perform Refractive
Surgery and the billing, collecting and accounting for the use of the facility,
equipment and non-physician personnel.
1.7 Business Expense shall mean all out-of-pocket costs and expenses
incurred by BDEC solely and exclusively in the performance of its duties and
obligations under, and in accordance with, this Agreement. Business Expense
shall also include that portion (allocated based on the relative percentage
amount of each such employee's time spent working directly on the Business of
the Company) of salaries, wages and benefits for those personnel employed by
BDEC to provide services hereunder, but only to the extent such employees (i)
work directly on the Business of the Company and (ii) are either listed on
Exhibit B hereto or are subsequently employed to replace such listed employees
or are added in the same service categories related to the Business as
corresponds to the service categories applicable to the employees listed on
Exhibit B. Business Expense shall also include a reasonable allocation of the
out-of-pocket costs incurred by BDEC related to hiring such personnel.
Notwithstanding the foregoing, Business Expense shall not include any portion of
the salaries, wages or benefits related to any personnel employed or otherwise
retained or contracted by BDEC who work in any of the following departments or
fall within any of the following categories: (a) accounting, (b) accounts
receivable, (c) purchasing, (d) practice operations, (e) management information
systems and facilities support, (f) human resources, (g) credentialing, or (h)
executive management. Furthermore, Business Expense shall not include any rent
or other costs or expenses incurred by BDEC pursuant to the Base Leases. For
illustration purposes, the parties agree that Business Expense for the Phoenix
Refractive Surgery center based on the pro forma annualized facility model
attached hereto as Exhibit A for the first full year of the Term of this
Agreement would be $1,663,638, being the sum of the categories on Exhibit A
marked with an asterisk. It is the intention of the parties that Business
Expense be consistent with the methodology reflected in Exhibit A.
1.8 Company shall mean Prime/BDEC Acquisition, L.L.C.
1.9 Facility and Facilities shall have the meaning given to it in the
recitals to this Agreement.
1.10 Premises P shall mean the Facility and other space located in Building
P to which the right to use is granted in Section 2.3 hereof.
1.11 Premises T shall mean the Facility and other space located in Building
T to which the right to use is granted in Section 2.3 hereof.
1.12 Refractive Surgery shall mean, collectively, any current and/or future
surgical procedures intended to correct myopia, hyperopia or astigmatism of the
eye, excluding procedures aimed only at restoring accommodation (presbyopia) and
procedures to treat only cataracts, glaucoma, oculoplastics or retinal
abnormality.
1.13 Services Fee shall mean BDEC's compensation established and described
in Article VI hereof.
1.14 State shall mean the State of Arizona.
1.15 Term shall mean the initial and any renewal periods of duration of
this Agreement as described herein.
ARTICLE II
RIGHT TO USE THE PREMISES
2.1 Base Lease. Section 2.3 contains a grant of a right to use Premises P
and Premises T and is subject and subordinate to the terms and conditions of
those certain leases as amended ("Base Leases") pursuant to which BDEC leases
the Building P and Building T.
2.2 Users of Buildings. Building P and Building T are used for multiple
activities, including, but not limited to, Refractive Surgery, office and clinic
activities of BDEC physicians and other professionals, an ambulatory surgery
center ("ASC") and marketing, accounting, management and other administrative
activities. The various activities in each Building do not necessarily have
specific or identified space and, in some instances, more than one activity uses
a space at the same time or at different times. BDEC designates, schedules and
modifies the location and the times that each activity can use space in the
Buildings.
2.3 Grant of Right to Use. In consideration of Company's payment to
BDEC of the Purchase Price, as defined in the Contribution Agreement, and on the
terms and conditions of this Agreement, BDEC hereby grants to the Company the
non-exclusive right to use for Refractive Surgery the spaces in the Buildings
where the Equipment and Personalty are located at the times during regular
business hours and in the manner designated by BDEC (but in no event less than
forty percent (40%) of the of the business hours during each week), which might
require the using of such space while the same or adjoining space is being used
by an ASC or on a cooperative schedule with an ASC. BDEC also grants to the
Company the non-exclusive right to use and to permit its guests and invitees to
use the common areas in accordance with the Base Leases. Notwithstanding that
the foregoing grants are non-exclusive, BDEC covenants and agrees that it will
not allow any person or entity, other than the Company, to utilize any space in
the Buildings, any Equipment and Personalty or any BDEC Employees for purposes
of conducting any component of the Business.
2.4 Term and Conditions of Grant. The grants set forth in Section 2.3 above
are each for the term and on the conditions, requirements, covenants, rules and
regulations of the Base Leases and subject to Company's paying its allocated
portion of the rent, common area charges and other payments required of BDEC
under the Base Leases.
2.5 Maintenance of Base Leases. Throughout the Term of this Agreement, BDEC
covenants and agrees to maintain all Base Leases in full force and affect,
without any breach or default by BDEC thereunder.
ARTICLE III
APPOINTMENT AND AUTHORITY OF BDEC
3.1 Appointment. The Company hereby appoints BDEC as its sole and exclusive
agent for the management and performance of day-to-day operations of the
Business in the Facilities, using the Equipment and Personalty, through the
provision of Management Services and Support Services, as defined herein, and
BDEC hereby accepts such appointment, subject at all times to the provisions of
this Agreement.
3.2 Authority. Consistent with the provisions of this Agreement,
directions given by the Company and operating and capital budgets established by
the Company, BDEC shall have the responsibility and commensurate authority to
provide, or cause to be provided, personnel, business and administrative
services for the Company, which shall include those services set forth in
Article III hereof. BDEC is hereby expressly authorized to provide all such
services in whatever manner BDEC, in good faith, deems appropriate and
consistent with commercially reasonable standards to meet the day-to-day
requirements of the business functions of the Company or related to the
Business. The authority of BDEC shall extend no further than is expressly
provided herein, and shall not be extended by implication or otherwise.
Notwithstanding anything contained herein to the contrary, BDEC shall have no
authority to speak on behalf of, or to bind, the Company with respect to any
third party.
3.3 Retained Authority. The Company shall at all times retain the ultimate
responsibility for the operation of the Business and, except as delegated to
BDEC herein or by resolution of Company's managers, shall retain the authority
and power and to make all decisions with respect to its assets and rights.
3.4 Nature of Relationship. The parties acknowledge and agree that no
partnership or other form of entity, or any joint and several liability, is
intended to be created by or between them by the execution or operation of this
Agreement, and none of the foregoing should be implied.
ARTICLE IV
COVENANTS OF BDEC
4.1 Management and Support Services. BDEC shall provide the Management
Services and Support Services necessary to operate the Business as it was
operated by BDEC prior to the Effective Time, including, but not limited to the
following:
4.1.1 Marketing and Scheduling. BDEC shall conduct marketing efforts for
the Facility and shall schedule patient treatment in the Facility, in the manner
that such services were performed prior to the Effective Time.
4.1.2 Physician Matters. BDEC shall credential physicians to perform
Refractive Surgery in the Facility and shall schedule physicians to use the
Facility in the manner that such services were performed prior to the Effective
Time.
4.1.3 Supplies. As agent for the Company, BDEC shall obtain all reasonable
medical, office, and other supplies, including stationery and forms, and shall
ensure that the Company is at all times adequately stocked with such supplies as
are reasonably necessary and appropriate for the operation of the Business.
4.1.4 Licenses and Permits. BDEC shall coordinate all development and
planning processes, and apply for and use BDEC's best efforts to obtain and
maintain all federal, state, and local licenses and regulatory permits required
for or in connection with the operation of the Business.
4.1.5 Contract Negotiations. BDEC shall negotiate, either directly or on
the Company's behalf, as appropriate, all contractual arrangements with third
parties as are reasonably necessary and appropriate for the Business.
4.1.6 Financial Matters. BDEC shall establish and administer accounting
procedures, controls, and systems for the development, preparation, and
safekeeping of records and books of accounts relating to the Company, all of
which shall be prepared and maintained in accordance with generally accepted
accounting principles consistently applied. BDEC shall prepare and deliver to
the Company, and each of its members, within thirty (30) days after the end of
each fiscal year of the Company, a balance sheet, a profit and loss statement,
and a statement of sources and applications of funds and changes in working
capital reflecting the financial status of the Company and as of the end of such
prior fiscal year, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied. Additionally, BDEC shall
prepare and deliver to the board of managers of the Company, and each of the
Company's members, monthly financial statements within ten (10) days after the
end of each month, and shall prepare and deliver to the board of managers of the
Company, and each of the Company's members, such other financial statements or
records as BDEC may from time to time deem appropriate or as the board of
managers of the Company, or its members, may reasonably request. On or before
ninety (90) days prior to the end of each fiscal year of the Company, BDEC will
prepare and deliver to the board of managers of the Company, and each of the
Company's members, a proposed operating budget of projected expenses and
revenues of the Company for the next fiscal year of the Company, and
representatives of BDEC shall make themselves reasonably available to the board
of managers and the members of the Company to explain such proposed budget and
the underlying assumptions.
4.1.7 Billing and Collection. BDEC shall be solely responsible for billing
and collecting for all services provided by Company and for the use of the
Facility and Equipment and Personalty. Company shall be entitled to all monies
collected by BDEC on behalf of Company.
4.1.8 Information Systems. BDEC shall provide and maintain the information
systems it deems necessary to operate the Business. BDEC shall have reasonable
discretion to select hardware and software, provided such hardware and software
shall be adequate to operate the Business in a commercially reasonable manner,
and BDEC shall be responsible for training employees to operate any such
systems.
4.1.9 Legal Actions. As requested by the Company, BDEC shall advise and
assist the Company in instituting or defending legal actions or proceedings by
or against third parties arising out of the Business, including, without
limitation, those actions necessary for the protection and continued operation
of the Company. BDEC shall have no authority to initiate, compromise or settle
any legal action in the name of the Company, or to confess a judgment in the
name of, or on behalf of, the Company.
4.1.10 Insurance. (a) BDEC shall obtain and maintain professional and
comprehensive general liability insurance and other insurance covering Company
for the risks and in the amounts typically carried by others in the same
business as Company.
(b) BDEC shall obtain and maintain appropriate workers' compensation
coverage for BDEC's personnel and shall carry professional and comprehensive
general liability insurance covering all BDEC personnel in amounts that BDEC
deems necessary, the cost of which insurance shall be a Business Expense.
4.2 Personnel. BDEC shall employ or otherwise retain, and shall be
responsible for interviewing, selecting, hiring, training, supervising,
scheduling, and terminating, non-physician personnel as BDEC deems reasonably
necessary and appropriate for the performance of Management Services and Support
Services. Such personnel may include temporary or "floater" personnel who are
retained by BDEC to substitute for permanent personnel. BDEC shall have sole
responsibility for determining the salaries, wages, and fringe benefits of all
such personnel, for paying such salaries and wages, and for providing such
fringe benefits, and for withholding, as required by law, any sums for income
tax, unemployment insurance, social security, or any other withholding required
by applicable law or governmental requirement. BDEC shall have sole discretion
in decisions regarding the termination of personnel employed by BDEC to provide
services to the Company. BDEC shall indemnify the Company and the Compan s
managers and members and hold them harmless from and against any claim or cause
of action which alleges or is based upon any act or omission by BDEC or its
owners, managers, directors, officers or employees with respect to any employee
or former employee of BDEC. This indemnity obligation shall survive any
termination or expiration of this Agreement.
4.2.1 Non-Exclusivity. In recognition of the fact that the personnel
retained by BDEC to provide services pursuant to this Agreement may from time to
time perform services for others, this Agreement shall not prevent BDEC from
performing such services for others or restrict BDEC from using such personnel
in the performance of services for other parties which are not in the same
business as Company.
4.2.2 Equal Employment Opportunity. Without limitation of any
provision set forth herein, BDEC expressly agrees, for itself and on behalf of
the Company, to abide by any and all applicable federal and/or State equal
employment opportunity statutes, rules, and regulations, including, without
limitation, Title VII of the Civil Rights Act of 1964, the Equal Employment
Opportunity Act of 1972, the Age Discrimination in Employment Act of 1967, the
Equal Pay Act of 1963, the National Labor Relations Act, the Fair Labor
Standards Act, the Rehabilitation Act of 1973, the Occupational Safety and
Health Act of 1970, and the Americans with Disabilities Act, all as may from
time-to-time be modified or amended.
4.2.3 Labor Reports. BDEC shall for its own account or on behalf of the
Company, as appropriate, prepare, maintain, and file all requisite reports and
statements regarding income tax withholdings, unemployment insurance, social
security, workers' compensation, equal employment opportunity, or other reports
and statements required with respect to personnel provided by BDEC pursuant to
this Agreement and with respect to all personnel employed or otherwise retained
by the Company.
4.3 Conduct of Business. BDEC represents and warrants to the Company that
it is authorized to enter into and perform this Agreement and its duties
hereunder without the consent or approval of any third party which has not been
obtained. BDEC covenants and agrees to provide all of the services required of
it hereunder, and to perform all of its obligations hereunder, in a commercially
reasonable manner and in compliance with all applicable laws and legal
requirements.
ARTICLE V
COVENANTS OF COMPANY
5.1 Notices to BDEC. Company will give BDEC timely notice of operating and
capital budgets approved by the Company and directions or requests that it has
with respect to the conduct of the Business or the manner in which BDEC performs
its duties hereunder in order that BDEC shall have an opportunity to comply with
such budgets, directions or requests.
5.2 Invoices and Payment. BDEC shall deliver to the board of managers of
the Company, and to each of the members of the Company, monthly invoices setting
forth the Services Fee, Use Fees, and expense reimbursement due BDEC for the
immediately preceding month, together with such supporting documentation as
shall be reasonably necessary to document the calculation and incurrence of such
amounts in accordance with the terms of this Agreement. The Company will pay, or
authorize BDEC in writing to pay, the invoiced amounts properly due within ten
(10) days after receipt of such invoice, unless any of such amounts are
contested in good faith.
ARTICLE VI
FINANCIAL ARRANGEMENT
6.1 Amount of Services Fee. As compensation (the "Services Fee") for the
Management Services and Support Services to be rendered hereunder, BDEC shall be
entitled to receive from the Company an amount equal to Two percent (2%) of the
Company's Net Revenues (as hereinafter defined).
6.2 Determination of Net Revenues. For purposes of Section 6.1, "Net
Revenues" shall mean the total operating revenues of the Company net of revenue
deductions which include without limitation an allowance for contractual
allowances, discounts, professional fees, co-management fees and staff managed
fees and other uncollectible amounts, all as determined in accordance with the
methodology used in the preparation of Exhibit A hereto and otherwise in
accordance with generally accepted accounting principles consistently applied.
For illustration purposes, the parties agree that Net Revenues for the Phoenix
Refractive Surgery center based on the pro forma annualized facility model
attached hereto as Exhibit A for the first full year of the Term of this
Agreement would be $5,968,627.
6.3 Business Expenses. In addition to the Services Fee described in Section
6.1, the Company shall reimburse BDEC, upon submission by BDEC of an invoice and
necessary supporting documentation, for any Business Expense properly incurred
by BDEC in accordance with this Agreement.
6.4 Use Payment. Company agrees to pay (the "Use Payment") to BDEC on a
monthly basis as compensation for BDEC's grant to Company of the right to use
the Premises and common areas of the Buildings. The Use Payment for the Premises
in Building P shall be twelve percent (12%), and for the Premises in Building T
shall be thirty-six percent (36%) of the rent and all other costs and expenses
incurred by BDEC pursuant to the Base Lease for each of the respective building.
The Use Payment shall be paid in advance and shall be due and payable on the
first day of each month during the Term.
ARTICLE VII
TERM AND TERMINATION
7.1 Term. This Agreement shall be effective for an initial period (the
"Term") commencing on the Effective Date and ending September 1, 2004.
7.2 Termination. The Company may terminate this Agreement immediately upon
the occurrence of one of the following events:
(1) the dissolution or bankruptcy of BDEC; or
(2) after the expiration of a ninety (90) day period in which BDEC has
failed to remedy its failure to perform its duties under this Agreement after
having received written notice from the Company of BDEC's failure to perform its
duties under this Agreement, which notice must specify the failure to perform.
7.3 Termination by Agreement. In the event the Company and BDEC shall
mutually agree in writing, this Agreement may be terminated on the date
specified in such written agreement.
7.4 Effects of Termination. Upon termination of this Agreement, as
hereinabove provided, no party shall have any further obligations hereunder
except for (i) obligations accruing prior to the date of termination, and (ii)
obligations, promises, or covenants set forth herein that are expressly made to
extend beyond the Term, including, without limitation, payment of accrued money
due under Article VI, if any, and the authority and limited power of attorney
granted to BDEC herein, which shall survive until such time as such obligations,
promises, or covenants shall be fully paid and satisfied (all of which
provisions shall survive the expiration or termination of this Agreement).
Notwithstanding anything to the contrary herein, upon termination of this
Agreement for any reason, all accrued Service Fees, Business Expenses and Use
Payments, if any, shall become immediately due and payable to BDEC without
demand or notice.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. Any notice, request, demand, instruction, communication, or
other document required, permitted, or desired to be given hereunder shall be in
writing and, except as otherwise provided for herein, shall be deemed
effectively given: (a) on receipt if delivered personally or by commercial
courier service or if sent by prepaid telex, telegram, by facsimile or by other
instantaneous electronic transmission device, or (b) on the fifth day after
deposit (unless a different date is shown on the return receipt) if sent postage
prepaid registered or certified United States mail, return receipt requested, as
follows:
Company: Prime/BDEC Acquisition, L.L.C.
1301 Capital of Texas Highway
Suite C-300
Austin, Texas 78746
Attn.: President
Facsimile: (512) 314-4398
BDEC: Barnet Dulaney Eye Center, P.L.L.C..
4800 North 22nd Street
Phoenix, Arizona 85016
Attn.: Mark Rosenberg
Facsimile: (602) 508-4889
or to such other address, or to the attention of such other person or officer,
as either party may by written notice designate.
8.2 Governing Law. This Agreement has been executed and delivered in, and
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Texas. Proper venue for any action with respect to this Agreement
shall be Dallas County, Texas.
8.3 Assignment. Except as may be herein specifically provided to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors, and
assigns; provided, however, that neither party may assign its rights and
obligations under this Agreement without the prior written consent of the other.
8.4 No Waiver. The failure of either party to insist at any time upon the
strict observance or performance of any provision of this Agreement or to
exercise any right or remedy as provided in this Agreement shall not impair any
right or remedy of such party or be construed as a waiver or relinquishment
thereof with respect to subsequent defaults or breaches. Every right and remedy
given by this Agreement to the parties hereto may be exercised from time to time
and as often as may be deemed xpedient by the appropriate party.
8.5 Consents, Approvals, and Exercise of Discretion. Except as may be
herein specifically provided to the contrary, whenever this Agreement requires
any consent or approval to be given by either party, or either party must or may
exercise discretion, the parties agree that such consent or approval shall not
be unreasonably withheld or delayed, and such discretion shall be reasonably
exercised.
8.6 Severability. In the event any provision of this Agreement is held to
be invalid, illegal, or unenforceable for any reason and in any respect, such
invalidity, illegality, or unenforceability shall not affect the remainder of
this Agreement, if the remainder of this Agreement can be enforced to achieve
its purposes equitably to both parties.
8.7 Divisions and Headings. The division of this Agreement into articles,
sections, and subsections and the use of captions and headings in connection
therewith are solely for convenience and shall not affect in any way the meaning
or interpretation of this Agreement.
8.8 Sales and Use Tax. BDEC and the Company acknowledge and agree that
certain of the services to be provided by BDEC hereunder may be subject to state
sales and use taxes and that BDEC may have a legal obligation to collect such
taxes from the Company and to remit same to the State. The Company agrees to pay
the applicable state sales and use taxes in respect of the portion of the
Services Fee attributable to such services, and grants BDEC the right to
withdraw and disburse from the bank accounts of the Company amounts necessary to
timely and fully pay such taxes.
8.9 Entire Agreement. With respect to the subject matter of this
Agreement, this Agreement supersedes all previous contracts and constitutes the
entire agreement between the parties. Neither party shall be entitled to
benefits other than those specified herein. No oral statements or prior written
material not specifically incorporated herein shall be of any force and effect,
and no changes in or additions to this Agreement shall be recognized unless
incorporated herein by amendment in writing and signed by all parties hereto.
Such amendment(s) shall become effective on the date stipulated in such
amendment(s). The parties specifically acknowledge that, in entering into and
executing this Agreement, the parties rely solely upon the representations and
agreements contained in this Agreement and no others.
8.10 Audit Rights. During the Term of this Agreement and for a period
of two (2) years after any termination or expiration of this Agreement, the
Company and each of its members shall be entitled to audit and inspect the books
and records of BDEC for purposes of determining the propriety of all Business
Expenses, Services Fees and Use Payments charged to the Company under this
Agreement. BDEC agrees to maintain, throughout such period, detailed records
supporting all amounts charged to, or reimbursed by, the Company pursuant to
this Agreement and to cooperate fully with, and to make its employees and
records available during normal business hours to, the auditors or other
representatives of the Company or its members performing such audit. Audit
rights may not be exercised more frequently than once in every eighteen (18)
month period and all costs and expenses associated therewith shall be borne by
the party exercising audit rights unless any such inspection reveals that the
Company has overpaid, by at least $25,000, any amounts which should have been
properly paid or reimbursed to BDEC in accordance with the terms of this
Agreement. BDEC shall be entitled to receive at least thirty (30) days' prior
written notice of the exercise of audit rights prior to the beginning of such
inspection.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
COLLOCATION AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
COMPANY: PRIME/BDEC ACQUISITION, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Treasurer
BDEC: BARNET DULANEY EYE CENTER, P.L.L.C.
By: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
<PAGE>
EXHIBIT A
Pro Forma Annualized
Facility Model
<PAGE>
EXHIBIT B
EMPLOYEES
<PAGE>
MEMBERSHIP INTEREST
TRANSFER RESTRICTION AGREEMENT
This Membership Interest Transfer Restriction Agreement (this "Agreement")
is entered into effective as of the 1st day of September, 1999, by and among
LASIK Investors, L.L.C., a Delaware limited liability company (the "Company"),
Prime Medical Operating, Inc., a Delaware corporation ("Prime"), Ronald W.
Barnet, M.D. ("Barnet"), David D. Dulaney, M.D. ("Dulaney"), Mark Rosenberg
("Rosenberg"), Scott A. Perkins, M.D. ("Perkins"), and Robert B. Pinkert, O.D.
("Pinkert"). Barnet, Dulaney, Rosenberg, Perkins and Pinkert, together with any
subsequent Members in the Company who hereafter execute this Agreement, are
collectively referred to herein as the "Members".
R E C I T A L S:
WHEREAS, Barnet, Dulaney, Rosenberg, Perkins and Pinkert own all
the issued and outstanding membership interests of the Company (all such
membership interests, together with any hereafter acquired, are hereinafter
referred to as the "Membership Interests"); and
WHEREAS, this Agreement is a "Transaction Document," as defined in
that certain Contribution Agreement (the "Contribution Agreement") dated
effective September 1, 1999, by and among Prime, Prime Medical Services, Inc., a
Delaware corporation ("PMSI"), the Company, Barnet Dulaney Eye Center, P.L.L.C.,
an Arizona professional limited liability company, Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company, Prime/BDEC Acquisition, L.L.C., a
Delaware limited liability company, Barnet, Dulaney and Rosenberg.
WHEREAS, the Members, the Company and Prime desire to enter into
this Agreement to control the distribution of ownership interests in the Company
and to promote the harmonious management of the Company's affairs.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PERMITTED TRANSFERS; RESTRICTIONS AGAINST TRANSFER
As used in this Agreement, "Permitted Transfers" shall mean any transfer of all
or any part of any Member's Membership Interest to (i) the members of the
immediate family of the Member or a trust or trusts for the benefit of members
of the immediate family of the Member, provided that after any such transfer the
Member retains the sole express right to vote, or direct the votes of, the
Membership Interest, (ii) any other Member, provided that after any transfer
pursuant to this subsection (ii) is consummated, Barnet and Dulaney (or trusts
that hold Membership Interests as a result of Permitted Transfers subsection (i)
above) must collectively own in the aggregate at least fifty-one percent (51%)
of the total outstanding Membership Interests of the Company, or (iii) Prime.
Any Member transferring all or a portion of its Membership Interest pursuant to
a Permitted Transfer shall give written notice of the Permitted Transfer
(containing the same information as required for notice under Section 2.1.1) to
Prime and the other Members fifteen (15) days prior to the effective date of the
Permitted Transfer. Except for a Permitted Transfer, or as otherwise provided in
this Agreement, a Member shall not transfer, assign, pledge, hypothecate, or in
any way alienate any Membership Interest, or any interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, without the prior
written consent of the Company, the other Members and Prime, which consent may
be withheld in their sole and absolute discretion. Any purported transfer in
violation of any provision of this Agreement shall be void and ineffectual,
shall not operate to transfer any interest or title to the purported transferee,
and shall give the Company, the other Members and Prime options to purchase such
Membership Interest in the manner and on the conditions hereinafter provided. As
used in this Agreement, "Option Members" shall mean all Members of the Company
except (i) the Member who, prior to the proposed transfer or the incident
resulting in the proposed transfer of all or a portion of a Membership Interest,
owned such interest and (ii) Rosenberg.
ARTICLE II
OPTIONS
2.1 OPTION UPON VOLUNTARY TRANSFER.
2.1.1 Notice of Intention to Transfer. If a Member intends to
voluntarily transfer any of its Membership Interest, other than pursuant to a
Permitted Transfer, to any person other than the Company, and does not obtain
the written consents required in ARTICLE I hereof, the Member shall give written
notice to the other Members, Rosenberg and Prime stating (i) the intention to
transfer a Membership Interest, (ii) the amount of Membership Interest to be
transferred, (iii) the name, business and residence address of the proposed
transferee, (iv) the nature and amount of the consideration, and (v) the other
terms of the proposed sale.
2.1.2 Option to Purchase. The Option Members shall have, and may
exercise within 30 days after receipt of the notice of intent to transfer, an
option to purchase all or any portion of the Membership Interest the
transferring Member intends to transfer, for the price and upon the other terms
stated in the notice of intent to transfer. If the Option Members fail, within
such 30-day period, to exercise their purchase option (by delivery of written
notice) with respect to the entire Membership Interest being transferred, the
Option Members shall be deemed to have elected not to exercise their purchase
option with respect to such unpurchased Membership Interest. Upon any notice of
non-exercise (or deemed non-exercise) by the Option Members, Rosenberg (if not
the transferring Member) shall have, and may exercise within 30 days of receipt
of notice of such non-exercise (or deemed non-exercise), an option to purchase
all or any portion of such unpurchased Membership Interest upon the same terms
and conditions. If Rosenberg fails, within such 30-day period, to exercise his
purchase option (by delivery of written notice) with respect to the entire
unpurchased Membership Interest, Rosenberg shall be deemed to have elected not
to exercise his purchase option with respect to any remaining Membership
Interest. Upon any notice of non-exercise (or deemed non-exercise) by Rosenberg,
Prime shall have, and may exercise within 30 days of receipt of notice of such
non-exercise (or deemed non-exercise), an option to purchase all of such
remaining Membership Interest upon the same terms and conditions.
2.1.3 Death Before Closing. If a Member who proposed to transfer a
Membership Interest dies prior to the closing of the sale and purchase
contemplated by this Section 2.1, the Membership Interest of such deceased
Member shall be the subject of sale and purchase under Section 2.3.
2.1.4 Allowable Consideration. All parties hereto acknowledge and
agree that it would be impractical to exercise an option to purchase arising
pursuant to this Section 2.1 whenever the proposed consideration to be received
by the transferring Member is other than cash or cash equivalents. Therefore,
the parties agree that no transfer shall be permitted and no option shall arise
pursuant to this Section 2.1 whenever the consideration to be received from the
proposed transferee is other than cash or cash equivalents.
2.2 OPTION UPON CERTAIN INVOLUNTARY TRANSFERS.
2 2.1 Exercise Event and Notice. The filing of a voluntary or
involuntary petition of bankruptcy by or on behalf of a Member, an assignment by
a Member of any of its Membership Interest, or of any right or interest therein,
for the benefit of creditors, or the voluntary transfer, transfer by law or any
other transfer, of any Membership Interest, or of any right or interest therein
(other than transfers governed by ARTICLE I or Sections 2.1, 2.3 or 2.4 or
ARTICLE VII hereof), shall give the other Members, Rosenberg and Prime the
option to purchase the Membership Interest of such bankrupt Member or such
transferred Membership Interest as provided herein. Upon the filing of a
voluntary or involuntary petition of bankruptcy by or on behalf of a Member or
an assignment by Member of any of its Membership Interest, or of any right or
interest therein, for the benefit of creditors, the Member or its personal
representative shall promptly give written notice of such occurrence to the
other Members, Rosenberg and Prime. In the event of a transfer of Membership
Interest, as described above, the Member transferring such Membership Interest
shall promptly give written notice of such transfer to the other Members,
Rosenberg and Prime.
2.2.2 Option to Purchase. The Option Members shall have, and may
exercise within 30 days after receipt of the notice of the applicable exercise
event, an option to purchase all or any portion of the Membership Interest the
bankrupt or transferring Member intends to transfer, for the price and upon the
other terms hereinafter provided. If the Option Members fail, within such 30-day
period, to exercise their purchase option (by delivery of written notice) with
respect to the entire Membership Interest being transferred, the Option Members
shall be deemed to have elected not to exercise their purchase option with
respect to such unpurchased Membership Interest. Upon any notice of non-exercise
(or deemed non-exercise) by the Option Members, Rosenberg (if not the bankrupt
or transferring Member) shall have, and may exercise within 30 days of receipt
of notice of such non-exercise (or deemed non-exercise), an option to purchase
all or any portion of such unpurchased Membership Interest for the price and
upon the other terms hereinafter provided. If Rosenberg fails, within such
30-day period, to exercise his purchase option (by delivery of written notice)
with respect to the entire unpurchased Membership Interest, Rosenberg shall be
deemed to have elected not to exercise his purchase option with respect to any
remaining Membership Interest. Upon any notice of non-exercise (or deemed
non-exercise) by Rosenberg, Prime shall have, and may exercise within 30 days of
receipt of notice of such non-exercise (or deemed non-exercise), an option to
purchase all of such remaining Membership Interest for the price and upon the
other terms hereinafter provided.
2.3 PURCHASE AND SALE OF MEMBERSHIP INTEREST UPON DEATH.
2.3.1 Notice of Death. Upon the death of the Member, the
representative of the estate of the deceased Member shall promptly give written
notice of the death to the other Members, Rosenberg and Prime.
2.3.2 Option to Purchase. The Option Members shall have, and may
exercise within 30 days after receipt of the notice of death, an option to
purchase all or any portion of the Membership Interest of the deceased Member,
for the price and upon the other terms hereinafter provided. If the Option
Members fail, within such 30-day period, to exercise their purchase option (by
delivery of written notice) with respect to the entirety of such Membership
Interest, the Option Members shall be deemed to have elected not to exercise
their purchase option with respect to such unpurchased Membership Interest. Upon
any notice of non-exercise (or deemed non-exercise) by the Option Members,
Rosenberg (but not his estate if he is the deceased Member) shall have, and may
exercise within 30 days of receipt of notice of such non-exercise (or deemed
non-exercise), an option to purchase all or any portion of such unpurchased
Membership Interest for the price and upon the other terms hereinafter provided.
If Rosenberg fails, within such 30-day period, to exercise his purchase option
(by delivery of written notice) with respect to the entire unpurchased
Membership Interest, Rosenberg shall be deemed to have elected not to exercise
his purchase option with respect to any remaining Membership Interest. Upon any
notice of non-exercise (or deemed non-exercise) by Rosenberg, Prime shall have,
and may exercise within 30 days of receipt of notice of such non-exercise (or
deemed non-exercise), an option to purchase all of such remaining Membership
Interest for the price and upon the other terms hereinafter provided.
2.4 OPTION UPON DEATH OF A MEMBER'S SPOUSE, TERMINATION OF MARITAL RELATIONSHIP
OR PARTITION OF COMMUNITY PROPERTY.
2.4.1 Death of Member's Spouse. Each Member and each Member's
spouse agree that in the event the spouse of a Member predeceases such Member
and such Member does not succeed by the spouse's last will and testament or by
operation of law to any interest (including, without limitation, a community
property interest) of the spouse in the Membership Interest, such Member shall
have, and may exercise within 60 days after the death of the spouse, an option
to purchase all or any portion of the spouse's interest for the price and upon
the other terms hereinafter provided. If the Member fails, within such 60-day
period, to exercise his purchase option (by delivery of written notice) with
respect to the entirety of such spouse's interest, that Member shall be deemed
to have elected not to exercise his purchase option with respect to such
spouse's interest. Upon any notice of non-exercise (or deemed non-exercise) by
the Member, the Option Members shall then have, and may exercise within 30 days
after receipt of such non-exercise (or deemed non-exercise), an option to
purchase all or any portion of the deceased spouse's interest, for the price and
upon the other terms hereinafter provided. If the Option Members fail, within
such 30-day period, to exercise their purchase option (by delivery of written
notice) with respect to the entirety of such deceased spouse's interest, the
Option Members shall be deemed to have elected not to exercise their purchase
option with respect to such unpurchased deceased spouse's interest. Upon any
notice of non-exercise (or deemed non-exercise) by the Option Members, Rosenberg
(if not the Member whose spouse is deceased) shall have, and may exercise within
30 days of receipt of notice of such non-exercise (or deemed non-exercise), an
option to purchase all or any portion of such unpurchased deceased spouse's
interest for the price and upon the other terms hereinafter provided. If
Rosenberg fails, within such 30-day period, to exercise his purchase option (by
delivery of written notice) with respect to the entire unpurchased deceased
spouse's interest, Rosenberg shall be deemed to have elected not to exercise his
purchase option with respect to any remaining portion of the deceased spouse's
interest. Upon any notice of non-exercise (or deemed non-exercise) by Rosenberg,
Prime shall have, and may exercise within 30 days of receipt of notice of such
non-exercise (or deemed non-exercise), an option to purchase all of such
remaining portion of the deceased spouse's interest for the price and upon the
other terms hereinafter provided.
2.4.2 Termination of Marital Relationship or Partition of Community
Property. In the event a divorce, annulment or other proceeding for termination
of the marital relationship is filed by or against a Member, or upon the
initiation of any voluntary or involuntary attempt to partition the community
property estate between a Member and such Member's spouse for any reason, the
Member shall promptly give written notice to the other Members, Rosenberg, and
Prime, of such event. The Member shall have, and may exercise within 60 days of
giving of such notice, an option to purchase all or any portion of the departing
spouse's interest in such Membership Interest (including without limitation any
community property interest, for purposes of this Section), for the price and
upon the other terms hereinafter provided. If the Member fails, within such
60-day period, to exercise his purchase option (by delivery of written notice)
with respect to the entirety of such spouse's interest, that Member shall be
deemed to have elected not to exercise his purchase option with respect to such
spouse's interest. Upon any notice of non-exercise (or deemed non-exercise) by
the Member, the Option Members shall then have, and may exercise within 30 days
after receipt of such non-exercise (or deemed non-exercise), an option to
purchase all or any portion of the departing spouse's interest, for the price
and upon the other terms hereinafter provided. If the Option Members fail,
within such 30-day period, to exercise their purchase option (by delivery of
written notice) with respect to the entirety of such departing spouse's
interest, the Option Members shall be deemed to have elected not to exercise
their purchase option with respect to such unpurchased departing spouse's
interest. Upon any notice of non-exercise (or deemed non-exercise) by the Option
Members, Rosenberg (if not the Member whose spouse is departing) shall have, and
may exercise within 30 days of receipt of notice of such non-exercise (or deemed
non-exercise), an option to purchase all or any portion of such unpurchased
departing spouse's interest for the price and upon the other terms hereinafter
provided. If Rosenberg fails, within such 30-day period, to exercise his
purchase option (by delivery of written notice) with respect to the entire
unpurchased departing spouse's interest, Rosenberg shall be deemed to have
elected not to exercise his purchase option with respect to any remaining
portion of the departing spouse's interest. Upon any notice of non-exercise (or
deemed non-exercise) by Rosenberg, Prime shall have, and may exercise within 30
days of receipt of notice of such non-exercise (or deemed non-exercise), an
option to purchase all of such remaining portion of the departing spouse's
interest for the price and upon the other terms hereinafter provided.
2.5 ALTERNATE NOTICES.
The failure of any person, whether a party to this Agreement or
otherwise, to give notice of the occurrence of an Exercise Event (as defined in
Section 4.3) as contemplated herein shall not operate to prevent the creation of
any option which would otherwise arise pursuant to this ARTICLE II. Any party to
this Agreement who has actual knowledge of the occurrence of an Exercise Event
may give the required written notice of the occurrence of an Exercise Event, and
upon the giving of such written notice the options shall be created and become
exercisable to the same extent as if such notice was given by the party
initially contemplated above. For instance, and purely by way of example, in the
event of the death of a Member, another Member having actual knowledge of the
Member's death may give the notice initially contemplated to be given by a
representative of the estate of the deceased Member pursuant to Section 2.3.1
above, whereupon the Option Members' option described in Section 2.3.2 would
arise and become exercisable to the same extent as if the notice had been given
by the representative of the estate of the deceased Member.
ARTICLE III
EXERCISE OF OPTIONS; EFFECT OF NON-EXERCISE
3.1 MANNER OF EXERCISE OF OPTIONS.
All options granted in, or arising pursuant to, ARTICLE II shall be
exercised by a written notice to that effect delivered within the time provided
for the exercise of the option.
3.2 COMPLETE EXERCISE OF OPTIONS.
Notwithstanding anything herein to the contrary, the holders of
options granted in, or arising pursuant to, ARTICLE II must, either alone or in
the aggregate, exercise the options in such a manner as to purchase all of the
Membership Interest (or interest therein) subject to such options, and failure
to do so shall cause a forfeiture of the options.
3.3 MULTIPLE OPTION HOLDERS.
In cases where an option is held by more than one Option Member,
each purchasing Option Member shall be entitled to purchase his or her
proportionate share of the Membership Interest subject to the option. An Option
Member's proportionate share shall equal the total amount of Membership
Interests subject to the option multiplied by a fraction the numerator of which
is the amount of Membership Interests held by such Option Member and the
denominator of which shall be the amount of Membership Interests held by all
Option Members electing to exercise the option.
3.4 EFFECT OF NON-EXERCISE OF OPTIONS.
If the holders of options granted or arising pursuant to this
Agreement do not exercise their options, or such options are forfeited, as
provided herein, the person or persons acquiring the Membership Interests (or
interest therein) that were the subject of the options shall execute a
counterpart of this Agreement and become a party hereto and shall hold such
Membership Interests subject to all the terms and conditions provided herein,
and any transfer of such Membership Interests (or interest therein) shall only
be made in accordance with the terms and conditions provided herein. In the
event the person or persons acquiring the Membership Interests (or interest
therein) fail to execute a counterpart of this Agreement and become a party
hereto, such transfer shall be void and ineffectual, and shall not operate to
transfer any interest or title to the purported transferee and such Membership
Interests shall thereafter be subject to cancellation and extinguishment by the
Company, without consideration therefor. In addition, in the event of a
voluntary transfer subject to the provisions of Section 2.1, upon the lapse or
forfeiture of the options arising pursuant to that Section, the Member proposing
the transfer shall have the right to effectuate the transfer of Membership
Interests in accordance with the terms stated in the notice of intent to
transfer, and the transferee of such Membership Interests shall execute and
become a party to this Agreement and shall hold such Membership Interests
subject to all of its terms and conditions. Provided further, however, any such
transfer of Membership Interests shall be void and ineffectual, and shall not
operate to transfer any interest or title to the purported transferee, if (i)
the transfer is not upon the terms or is not to the transferee stated in the
notice of intent to transfer, or (ii) the transfer is not closed within 10 days
of receipt of written notice of the election not to exercise, or the forfeiture
of, all applicable options.
ARTICLE IV
PURCHASE PRICE
4.1 PURCHASE PRICE.
The purchase price of the Membership Interests to be purchased
pursuant to options granted, held or exercised pursuant to Sections 2.2, 2.3 and
2.4 hereof, shall be the amount calculated in accordance with Section 4.2
hereof.
4.2 CALCULATION OF PURCHASE PRICE.
When determined in accordance with this Section 4.2, the purchase
price for the Membership Interest or any portion thereof or spouse's interest
therein shall be equal to the Appraised Value of the Membership Interest as of
the Valuation Date (as defined in Section 4.3 hereof), reduced when necessary to
reflect the purchase of less than a one hundred percent (100%) interest in each
of the Membership Interests to be transferred (for example: reduced by one-half
when a spouse's interest is only an undivided one-half community property
interest in each of the Membership Interests of a Member spouse). For purposes
of this Agreement, the "Appraised Value" of a Membership Interest shall be (i)
based on the overall value of the Company as a going concern, expressed in a per
Membership Interest unit amount without consideration to whether the Membership
Interest, or interest therein, being transferred constitutes a controlling or
minority interest in the Company, and (ii) determined by a certified business
appraiser, selected by the Company, that is a member of either the American
Society of Appraisers or the Institute of Business Appraisers; but if a Member
or Prime disagrees with such determination that Member or Prime may, at its
expense, have another certified business appraiser that is a member of one or
both of the above named professional organizations determine the value, and if
the two appraisers cannot agree upon a value, they shall mutually select a third
certified business appraiser (that meets the above described membership
requirements) who shall, together with the first two appraisers, determine the
value of the Membership Interest by majority vote. The expense of such third
appraiser shall also be paid by the Member or Prime, as the case may be, who
disagrees with the value determination of the Company's original appraiser,
unless the appraised value ultimately determined is more than ten percent (10%)
greater than the value determined by the Company's original appraiser.
4.3 CERTAIN DEFINITIONS.
As used herein, the term "Valuation Date" shall mean and refer to
the end of the fiscal year of the Company immediately preceding the Exercise
Event, unless the purchasing party elects to use the alternate valuation date,
in which event the Valuation Date shall be the end of the month immediately
preceding the Exercise Event. As used herein, the term "Exercise Event" shall
mean and refer to the event or circumstance described in ARTICLE II of this
Agreement, as a result of which the Company, a Member, or Prime, as the case may
be in the first instance, becomes entitled to exercise a purchase option
hereunder.
ARTICLE V
PAYMENT OF THE PURCHASE PRICE
5.1 PAYMENT.
Except as otherwise provided in this Agreement, including Section
2.1, the purchase price for a Membership Interest to be purchased from a selling
party shall either: (i) be paid in cash; or (ii) at the option of the purchasing
party, up to seventy percent (70%) of the purchase price may be deferred with
the remainder paid in cash at the closing.
5.2 PROMISSORY NOTE.
If the purchasing party elects to defer part of the purchase price
by the execution and delivery of a promissory note, the deferred portion of the
price shall be evidenced by the promissory note of the purchasing party to the
order of the selling party payable in sixty (60) equal monthly installments of
principal and interest on or before the first day of each month beginning the
month next following the date of closing. The interest rate for such installment
promissory note shall be equal to the prime or base rate on corporate loans at
large U.S. money center commercial banks as published in the "Money Rates"
column of the Wall Street Journal on the date of exercise of the option to
purchase (or, if such option is not exercised on a date on which such rate is
published, the next following date on which such rate is published). In no event
shall the interest rate exceed the maximum legal interest rate then prevailing
for such obligations in the state of Texas. The note shall be secured by a first
lien security interest in the Membership Interest transferred and the purchasing
party shall deliver certificates evidencing the Membership Interest to the
selling party and take such further action as is reasonably necessary to perfect
the security interest.
ARTICLE VI
THE CLOSING
Unless otherwise agreed by the parties, the closing of the sale and
purchase of a Membership Interest shall take place at the principal offices of
the Company within sixty (60) days after the exercise of any option provided by
this Agreement. Each party hereto (including the spouses of the Members) shall
bear its own transaction costs, including legal and accounting fees, if any,
attributable to any transfer of a Membership Interest, or any interest therein,
pursuant to this Agreement. Upon the closing, the selling party shall deliver
its Membership Interest to the purchaser free and clear of all liens and
encumbrances, and shall deliver to the Company its resignation and that of all
of its nominees, if any, as officers and directors of the Company and any of the
Company's subsidiaries. The selling party shall deliver to the purchasing party
at closing, all appropriate documents of transfer, including without limitation
bills of sale, assignments or other instruments of conveyance. As a condition to
any closing of the sale and purchase of a Membership Interest (or any interest
therein) pursuant to this Agreement: (i) the selling party shall be indemnified
by the purchasing party (in a form reasonably satisfactory to the selling party)
for all the Company's liabilities, whether fixed or contingent, to lenders and
others, incurred prior to the closing of the transaction, (ii) the purchasing
party and/or the Company shall cause the release of any personal guaranties by
the selling party that the selling party may have granted to the Company's
lenders or other creditors or which may have otherwise been provided by the
selling party for the benefit of the Company, and (iii) if the selling party is
a creditor of the Company, the purchasing party shall unconditionally guarantee
the debt of the Company to the selling party and execute such documents and
instruments of guarantee as may be necessary in connection therewith.
Furthermore, and as a condition to closing, in the event the selling party owes
any amounts to the Company at the time of closing, such indebtedness shall be
paid in full by the selling party at or prior to the closing, or may be deducted
from and offset against the purchase price by the purchasing party, in the
purchasing party's sole discretion. In the event of a failure to close as a
result of the non-satisfaction of the conditions to closing set forth herein,
this Agreement shall remain in full force and effect and all Membership
Interests shall remain subject to the restrictions contained herein and, in
addition, the parties hereto shall be entitled to such other remedies as may be
available in the event the failure to close constitutes a breach hereof.
ARTICLE VII
LEGEND ON CERTIFICATES
All Membership Interests now or hereafter owned by the Members, or
their permitted transferees, shall be subject to the provisions of this
Agreement, and any certificates representing same shall bear the following
legend:
"THE MEMBERSHIP INTEREST REPRESENTED HEREBY AND THE SALE,
ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF ARE
SUBJECT TO CERTAIN RESTRICTIONS CONTAINED IN A MEMBERSHIP INTEREST
TRANSFER RESTRICTION AGREEMENT AMONG THE COMPANY AND THE WITHIN
NAMED MEMBER, AND ANY AMENDMENT THERETO. THE AGREEMENT LIMITS THE
USE OF THIS MEMBERSHIP INTEREST AS COLLATERAL FOR ANY LOAN WHETHER
BY PLEDGE, HYPOTHECATION OR OTHERWISE. A COPY OF THE MEMBERSHIP
INTERES TRANSFER RESTRICTION AGREEMENT AND ALL APPLICABLE
AMENDMENTS THERETO WILL BE FURNISHED BY THE COMPANY TO THE HOLDER
HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE."
ARTICLE VIII
TERMINATION OF AGREEMENT
This Agreement and all restrictions on Membership Interest transfer
created hereby shall terminate on the occurrence of any of the following events:
(a) The bankruptcy or dissolution of the Company.
(b) The ownership by one person of all of the Membership Interests of the
Company which are then subject to this Agreement.
(c) The execution of a written instrument by the Company, all of
the Members who then own Membership Interests subject to this Agreement, and
Prime which terminates the same.
(d) The date twenty-one (21) years after the death of the last survivor of
all individuals who are parties to this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 REMEDIES FOR BREACH.
The Membership Interests are unique chattels, and each party to
this Agreement shall have the remedies which are available to him, her or it for
the violation of any of the terms of this Agreement, including, but not limited
to, the equitable remedy of specific performance.
9.2 BINDING EFFECT.
This Agreement is binding upon and inures to the benefit of the
Company, its successors and permitted assigns, to the Members and their
respective heirs, personal representatives, successors and permitted assigns,
and to Prime, its successors and permitted assigns. This Agreement may not be
assigned, in whole or in part, by any party hereto without the express written
consent of all parties hereto.
9.3 PRIOR AGREEMENTS.
This Agreement supersedes all prior written and oral agreements
between the parties regarding the subject matter hereof.
9.4 GOVERNING LAWS.
This Agreement is executed under, and in conformity with, the laws
of the State of Texas and shall be governed thereby. If any provision of this
Agreement shall be determined to be invalid or unenforceable or prohibited by
the laws of the State of Texas, this Agreement shall be considered divisible as
to such provisions and such provisions shall be inoperative and shall not be a
part of the consideration moving from any party to another party. The remaining
provisions shall be valid and binding upon the parties and be of like effect as
though such invalid, unenforceable or prohibited provisions were not included
herein.
9.5 AMENDMENT.
This Agreement may be amended in whole or in part only by the
written consent of all the parties. Such amendment shall be effective as of the
date then determined by the parties and shall supersede any provisions herein
contained which are in conflict.
9.6 CAPTIONS AND GENDER.
The captions and titles herein are for convenience only and are not
intended to include or conclusively define the subject matter of the text. All
pronouns and references thereto shall refer to the masculine, feminine, and
neuter genders, singular or plural, as the identification of the persons,
entities, and companies may require. The term "person" as used in this Agreement
shall include natural persons, companies, partnerships, trusts, estates and any
other form of entity.
9.7 NOTICES.
All notices required to be given hereunder shall be deemed to be
duly given by personally delivering such notice or by mailing it by certified
mail, to the Company, to the Members, and to Prime at the following addresses
(which may be changed by giving written notice of such change to all other
parties hereto):
To the Company: LASIK Investors, L.L.C.
4800 North 22nd Street
Phoenix, Arizona 85016
To Barnet: Ronald W. Barnet, M.D.
4800 North 22nd Street
Phoenix, Arizona 85016
To Dulaney: David D. Dulaney, M.D.
4800 North 22nd Street
Phoenix, Arizona 85016
To Rosenberg: Mark Rosenberg
4800 North 22nd Street
Phoenix, Arizona 85016
To Perkins: Scott A. Perkins, M.D.
4800 North 22nd Street
Phoenix, Arizona 85016
To Pinkert: Robert B. Pinkert, O.D.
4800 North 22nd Street
Phoenix, Arizona 85016
To Prime: Prime Medical Operations, Inc.
Attention: President
1301 Capital of Texas Highway
Austin, Texas 78746
9.8 BINDING EFFECT OF THIS AGREEMENT ON ADDITIONAL MEMBERSHIP INTEREST ACQUIRED
BY A MEMBER.
In the event a Member acquires, contracts to acquire, or receives
any Membership Interests of the Company which are not subject to this Agreement
at the time of acquisition, such additional Membership Interests of the Member
shall be automatically subject to this Agreement and any certificates
representing such Membership Interests shall bear the legend prescribed herein
and this Agreement shall be amended, if necessary, to reflect the acquisition of
such Membership Interests by the Member.
9.9 EXECUTION OF DOCUMENTS.
Whenever Membership Interests are to be purchased by the Company, a
Member, or Prime pursuant to this Agreement, the transferor shall do all things
and execute and deliver all documents and make all transfers as may be necessary
to consummate such purchase. In the event that the transferor refuses to abide
by the terms and conditions specified herein, the purchaser(s) may tender
payment for such Membership Interest by mailing payment to the transferor's
attention at the address of the Company's registered office on file at the
office of the Texas Secretary of State. After payment is tendered accordingly,
the Company shall be entitled to cancel such Membership Interest on its books,
and reissue such Membership Interest to the purchaser(s) or, if the purchaser is
the Company, the Company may hold such Membership Interest as treasury stock or
cancel such Membership Interest.
9.10 ACTIONS BY THE COMPANY.
Any decision by the Company to exercise any purchase option, give
any notice or otherwise enforce any provisions of this Agreement, shall be made
by a majority vote of Members who are not then in breach of this Agreement and
whose Membership Interests are not then the subject of any option or requirement
of notice of an Exercise Event.
[Signature pages follow]
<PAGE>
S-2
SIGNATURE PAGE TO
MEMBERSHIP INTEREST
TRANSFER RESTRICTION AGREEMENT
EXECUTED as of the date first mentioned above.
COMPANY: LASIK Investors, L.L.C.
By: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
BARNET: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D.
DULANEY: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D.
ROSENBERG: /s/ Mark Rosenberg
Mark Rosenberg
Perkins: /s/ Scott A. Perkins, M.D.
Scott A. Perkins, M.D.
Pinkert: /s/ Robert B. Pinkert, O.D.
Robert B. Pinkert, O.D.
PRIME: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Treasurer
<PAGE>
SPOUSAL CONSENTS
The undersigned spouse of Ronald W. Barnet, M.D. hereunto
subscribes her name in evidence of her agreement and consent to the disposition
made of any interest she may have, including any community property interests,
in the membership interest of LASIK Investors, L.L.C., referred to in the
foregoing Agreement, and to all other provisions of such Agreement.
Signature: /s/ Teri Barnet
Printed Name: Teri Barnet
The undersigned spouse of David D. Dulaney, M.D. hereunto
subscribes her name in evidence of her agreement and consent to the disposition
made of any interest she may have, including any community property interests,
in the membership interest of LASIK Investors, L.L.C., referred to in the
foregoing Agreement, and to all other provisions of such Agreement.
Signature: /s/ Anna Maria Dulaney
Printed Name: Anna Maria Dulaney
The undersigned spouse of Mark Rosenberg hereunto subscribes her
name in evidence of her agreement and consent to the disposition made of any
interest she may have, including any community property interests, in the
membership interest of LASIK Investors, L.L.C., referred to in the foregoing
Agreement, and to all other provisions of such Agreement.
Signature: /s/ J. Rosenberg
Printed Name: J. Rosenberg
The undersigned spouse of Scott A. Perkins, M.D. hereunto
subscribes her name in evidence of her agreement and consent to the disposition
made of any interest she may have, including any community property interests,
in the membership interest of LASIK Investors, L.L.C., referred to in the
foregoing Agreement, and to all other provisions of such Agreement.
Signature: /s/ Lourdes S. Perkins
Printed Name: Lourdes S. Perkins
The undersigned spouse of Robert B. Pinkert, O.D. hereunto
subscribes her name in evidence of her agreement and consent to the disposition
made of any interest she may have, including any community property interests,
in the membership interest of LASIK Investors, L.L.C., referred to in the
foregoing Agreement, and to all other provisions of such Agreement.
Signature: /s/ Jodi C. Pinkert
Printed Name: Jodi C. Pinkert
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1 day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation (the "Secured Party") and LASIK
Investors, L.L.C., a Delaware limited liability company ("LASIK").
RECITALS:
A. LASIK and Secured Party have executed and delivered that certain
Contribution Agreement dated effective September 1, 1999, between and among
LASIK, Secured Party, Prime/BDR Acquisition, L.L.C., a Delaware limited
liability company (the "Debtor"), Prime Medical Services, Inc., a Delaware
corporation ("PMSI"), Prime/BDEC Acquisition, L.L.C., a Delaware limited
liability company, Barnet Dulaney Eye Center, P.L.L.C., an Arizona professional
limited liability company, David D. Dulaney, M.D., Ronald W. Barnet, M.D., and
Mark Rosenberg (the "Contribution Agreement"), and Debtor and Secured Party have
executed and delivered that certain Loan Agreement, dated September ____, 1999
(the "Loan Agreement"), pursuant to which Secured Party agrees to make certain
loans to Debtor on the terms and subject to the conditions provided therein.
B. Secured Party has requested that LASIK pledge the Collateral (as defined
below) to secure certain obligations and liabilities that Debtor may now or
hereafter have to Secured Party, including, without limitation, any obligations
arising under loans made pursuant to the Loan Agreement.
C. LASIK desires to enter into this Agreement as a material inducement
to Secured Party's extension of credit under the Loan Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which LASIK acknowledges, LASIK and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. LASIK hereby assigns, transfers, and
pledges to Secured Party, and LASIK hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"): --------------------------
(a) Interest in Subsidiary. All ownership interests of LASIK in Debtor,
whether now existing or hereafter acquired and including, without limitation,
that certain 40% membership interest in Debtor; ----------------------
(b) Accounts. All accounts and rights now or hereafter attributable to
any of the Collateral described in (a) above, and all rights of LASIK now
or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of
whatever nature which LASIK is now or may hereafter become entitled to
receive with respect to any Collateral described in (a) -------- above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which LASIK becomes
entitled to receive or shall receive as a result of its ownership of any other
Collateral: (i) any stock or other ownership certificate, including without
limitation, any certificate representing a stock dividend or any certificate in
connection with any recapitalization, reclassification, merger, consolidation,
conversion, sale of assets, combination, stock split, reverse stock split, or
spin-off; (ii) any option, warrant, subscription or right, whether as an
addition to or in substitution of any other Collateral; (iii) any dividends or
distributions of any kind whatsoever, whether distributable in cash, stock or
other property; (iv) any interest, premium or principal payments; and (v) any
conversion or redemption proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of the
sale, exchange, collection or other disposition of all or any portion of
the Collateral described in (a), (b) or (c) above, including without
limitation proceeds in the form of stock, accounts, chattel paper,
instruments, documents, goods, inventory and equipment. --------
The security interest in the Collateral hereby granted by LASIK to Secured Party
may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness,
duties and obligations (collectively, the "Obligations"): -----------
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other
amounts, and any other obligations) under and pursuant to the Loan
Agreement and each promissory note (collectively, the "Note") issued
pursuant to the Loan Agreement; and
(b) All liabilities and obligations of LASIK to Secured Party, PMSI or
any Prime Indemnified Parties (as defined in the Contribution Agreement)
under and pursuant to the Contribution Agreement or this Agreement.
ARTICLE II
LASIK'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
LASIK hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. LASIK has good and marketable title to
the Collateral free and clear of any liens, security interests,
shareholders agreement, calls, charge, or encumbrance, except for this
Security Interest. No financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any
recording office, except as may have been filed in favor of Secured Party
relating to this Agreement. -----------------------
2.2 Power & Authority. LASIK has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to
perfect and protect such security interest, which have been duly taken,
create a valid and perfected first priority security interest in the
Collateral securing the payment and performance of the Obligations.
-----------------
2.3 No Agreements. The Interests are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the
rights of Secured Party under this Agreement. -------------
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are
fully paid and non-assessable, and were not issued in violation of the
preemptive rights of any party or of any agreement by which LASIK or the
issuer thereof is bound. Except as expressly provided otherwise in the
Contribution Agreement or any Transaction Document (as therein ----------
defined), no restrictions or conditions exist with respect to the transfer
or voting of any securities pledged as Collateral.
ARTICLE III
LASIK'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of LASIK. As of the date hereof, (i) LASIK is solvent;
(ii) the fair saleable value of LASIK's assets exceeds its liabilities (both
fixed and contingent); (iii) LASIK has sufficient capital to satisfy all of
LASIK's obligations as they become due; (iv) no receiver, trustee, or custodian
has been appointed for, or taken possession of, all or substantially all of the
assets of LASIK, either in a proceeding brought by LASIK or in a proceeding
brought against LASIK; (v) LASIK is not the subject of a petition for relief
under the United States Bankruptcy Code or any similar federal or state
insolvency law, including without limitation a petition filed by LASIK or a
petition filed by a third party seeking relief against LASIK; and (vi) LASIK has
no intention of filing a petition for relief under the United States Bankruptcy
Code or any similar federal or state insolvency law, or of seeking any other
form of creditor relief.
3.2 Authority and Compliance. LASIK has full power and authority to
enter into this Agreement. LASIK has full power and authority to enter into
and perform its obligations under each Other Agreement. No further consent
or approval is required as a condition to the validity of this Agreement or
any Other Agreement. LASIK is in compliance with all applicable laws,
ordinances, statutes, orders, regulations, judgments, writs, or decrees of
any governmental entity to which it is subject. ------------------------
3.3 Binding Agreement. This Agreement and each Other Agreement
constitute valid and legally binding obligations of LASIK, in accordance
with their terms, subject to the applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally. -----------------
3.4 Litigation. There are no proceedings pending or, to the knowledge
of LASIK, threatened before any court or administrative agency which will
or may have a material adverse effect on the financial condition of LASIK
or upon LASIK's ability to perform its obligations under this Agreement or
any Other Agreement. ----------
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on LASIK or affecting
its property, which would conflict with or in any way prevent the
execution, delivery, or carrying out of the terms of this Agreement or any
Other Agreement. -------------------------
3.6 Ownership of Assets. LASIK has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances. -------------------
3.7 Taxes. LASIK has filed all tax returns required to be filed by
LASIK.
ARTICLE IV
LASIK'S COVENANTS WITH RESPECT TO COLLATERAL
LASIK covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, LASIK covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with LASIK's endorsement thereon and/or accompanied by proper
instruments of transfer and assignment duly executed in blank.
-------------------------------------------
4.2 Further Assurances. LASIK will contemporaneously with the execution
hereof and from time to time thereafter at its expense promptly execute and
deliver all further instruments and documents and take all further action
necessary or appropriate or that Secured Party may request in order (i) to
perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by LASIK shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by LASIK, together with such instruments of transfer as Secured
Party may request, shall immediately be delivered to or deposited with Secured
Party and held by Secured Party as Collateral under the terms of this Agreement.
If the Additional Property received by LASIK and delivered to Secured Party
pursuant to this Section shall be shares of stock or other securities, such
shares of stock or other securities shall be duly endorsed in blank or
accompanied by proper instruments of transfer and assignment duly executed in
blank with, if requested by Secured Party, signatures guaranteed by a member or
member organization in good standing of an authorized Securities Transfer Agents
Medallion Program, all in form and substance satisfactory to Secured Party.
Secured Party shall be deemed to have possession of any Collateral in transit to
Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. LASIK will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither LASIK nor any person acting on LASIK's behalf has,
or shall have any right, power, or authority to and shall not create,
incur, or permit to be placed or imposed, upon the Collateral, any lien of
any type or nature whatsoever, other than the liens in favor of Secured
Party. -----
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
LASIK will promptly notify Secured Party of any and all matters or
occurrences that may have a material adverse effect on the status or value
of the Collateral or this Agreement, including without limitation the
occurrence of an Event of Default, or an event which, with giving of notice
or lapse of time, or both, would constitute an Event of Default.
-------------------------------------------------------------
4.7 Agreements Pertaining to Collateral. LASIK will not transfer any
voting rights pertaining to the Collateral to any person or entity.
-----------------------------------
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
LASIK will not consent to or approve of the issuance of (i) any additional
interests or shares of any class of securities of such issuer, (ii) any
instrument convertible voluntarily by the holder thereof or automatically upon
the occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities.
4.9 Restrictions on Securities. LASIK will not enter into any
agreement creating, or otherwise permit to exist, any restriction or
condition upon the transfer, voting or control of any securities pledged as
Collateral, except as consented to in writing by Secured Party. As to any
securities pledged as collateral, LASIK will not consent to or approve of
any stock split, reverse stock split, stock dividend, reclassification, or
other similar act or transaction regarding the Interests unless
-------------------------- consented to in writing by Secured Party.
ARTICLE V
LASIK'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, LASIK covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against LASIK and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on LASIK's
financial condition.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, LASIK covenants and
agrees that LASIK will not, without the prior written consent of Secured Party
grant, suffer, or permit liens on, or security interests in, the Collateral.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall
exist if any one or more of the following events shall occur:
-----------------
(a) The failure of Debtor to pay any amount required to be paid under
the Loan Agreement or any Note (including, without limitation, principal,
interest and fees due thereunder) within ten (10) calendar days after such
amount is due;
(b) The failure of LASIK to pay any Obligation described in Section
1.2(b) within ten (10) calendar days after such amount is due (and, if
applicable under the terms of any contractual agreement creating or
governing such Obligation, after the expiration of any cure period
expressly required);
(c) LASIK's breach of a covenant in this Agreement;
(d) Any representation or warranty made by LASIK in this Agreement
shall be false or materially misleading, as determined in the reasonable
discretion of Secured Party;
(e) Any event of default shall occur under the terms of the Loan
Agreement and shall not be cured within the time expressly provided for
with respect thereto in the Loan Agreement;
(f) If LASIK or Debtor, or any other party obligated to pay
any portion of the Obligations: (i) becomes insolvent, or makes a transfer in
fraud of creditors, or makes an assignment for the benefit of creditors, or
admits in writing its inability to pay its debts as they become due; (ii)
generally is not paying its debts as such debts become due and Secured Party, in
good faith, determines that such event or condition could lead to a material
impairment of the Collateral, or any part thereof, or of any other payment
security for any of the Obligations; (iii) has a receiver, trustee or custodian
appointed for, or take possession of, all or substantially all of the assets of
such party or any of the Collateral, either in a proceeding brought by such
party or in a proceeding brought against such party and such appointment is not
discharged or such possession is not terminated within sixty (60) days after the
effective date thereof or such party consents to or acquiesces in such
appointment or possession; (iv) files a petition for relief under the United
States Bankruptcy Code or any other present or future federal or state
insolvency, bankruptcy or similar laws (all of the foregoing hereinafter
collectively called "Applicable Bankruptcy Law") or an involuntary petition for
relief is filed against such party under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days after the filing
thereof, or an order for relief naming such party is entered under any
Applicable Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is requested
or consented to by such party; (v) fails to have discharged within a period of
sixty (60) days any attachment, sequestration or similar writ levied upon, or
any claim against or affecting, any property of such party; or (vi) fails to pay
within ninety (90) days any final money judgment against such party; or
(g) The issuer of any securities constituting Collateral files a
petition for relief under any Applicable Bankruptcy Law, an involuntary
petition for relief is filed against any such issuer under any Applicable
Bankruptcy Law and such involuntary petition is not dismissed within thirty
(30) days after the filing thereof, or an order for relief naming any such
issuer is entered under any Applicable Bankruptcy Law.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of
Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and
exercise any rights under the Texas UCC, rights and remedies of Secured
Party under this Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of LASIK, either in Secured Party's own right or in the name of LASIK
and in the same manner and to the same extent that LASIK might reasonably so act
if this Agreement had not been made: (i) do all things requisite, convenient, or
necessary to enforce the performance and observance of all rights, remedies and
privileges of LASIK arising from the Collateral, or any part thereof, including
without limitation compromising, waiving, excusing, or in any manner releasing
or discharging any obligation of any party to or arising from the Collateral;
(ii) take possession of the books, papers, chattel paper, documents of title,
and accounts of LASIK, wherever located, relating to the Collateral; (iii) sue
or otherwise collect and receive money attributable to the Collateral; and (iv)
exercise any other lawfully available powers or remedies, and do all other
things which Secured Party deems requisite, convenient or necessary or which the
Secured Party deems proper to protect the Security Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (LASIK hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as LASIK's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against LASIK and all
persons and corporations lawfully claiming by or through or under LASIK. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in any type of offering which complies with, or is exempt from the
registration requirements of, the Securities Act of 1933, and no sale so made in
good faith by Secured Party shall be deemed to be not "commercially reasonable"
because so made.
(d) Not in limitation of any other provision of this Agreement,
Secured Party shall have all rights and remedies of a secured party under
the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Contribution Agreement, the
Loan Agreement or any Note; (d) then, to or among the amounts of fees, interest
and principal then owing and unpaid in respect of the Obligations, in such
priority as Secured Party may determine in its discretion; and (e) the remainder
of such proceeds, if any, shall be paid to LASIK. If such proceeds shall be
insufficient to discharge the entire Obligations, Secured Party shall have any
other available legal recourse against LASIK under, or for the performance of,
the Contribution Agreement, the Loan Agreement and any Note, for the deficiency,
together with interest thereon at the maximum rate permitted under applicable
law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the
same shall become due. --------------------------
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of LASIK, in respect to any of the Collateral or agreements
pertaining thereto. -----------
8.2 Secured Party Appointed Attorney-in-Fact. LASIK hereby appoints
Secured Party as attorney-in-fact of LASIK, with full authority in the place and
stead of LASIK and in the name of LASIK, Secured Party or otherwise, from time
to time on Secured Party's discretion and upon the occurrence of an Event of
Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If LASIK fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured
Party incurred in connection therewith shall be payable by LASIK under
Section 8.8. In no event, however, shall Secured Party have any obligation
or duties whatsoever to perform any covenant or agreement of LASIK
contained herein, and any such performance by Secured Party shall be
---------------------------- wholly discretionary with Secured Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for
money actually received by it hereunder, Secured Party shall have no duty
as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights -----------------------
pertaining to any Collateral.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of LASIK arising in connection with the
Collateral assigned hereunder or otherwise bind Secured Party to the performance
of any obligations respecting the Collateral, it being expressly understood that
Secured Party shall not be obligated to perform, observe, or discharge any
obligation, responsibility, duty, or liability of LASIK in respect of any of the
Collateral, including without limitation appearing in or defending any action,
expending any money or incurring any expense in connection therewith. TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, LASIK SHALL AND DOES AGREE TO
INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY AND ITS SUBSIDIARIES,
AND EACH OF THEIR OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES,
LENDERS, SUCCESSORS AND ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS,
DAMAGES, LOSSES, FINES, PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND
EXPENSES (INCLUDING COURT COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF
ANY NATURE, KIND OR DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY,
ARISING OUT OF, CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY ACT OR
OMISSION OF SECURED PARTY, OR ANYONE ACTING ON BEHALF OF SECURED PARTY, IN
CONNECTION WITH THE COLLATERAL, INCLUDING WITHOUT LIMITATION ANY MARKET
FLUCTUATIONS IN THE COLLATERAL AS A RESULT OF SECURED PARTY'S SALE OF, OR
FAILURE TO SELL, THE INTERESTS AT ANY PARTICULAR TIME WHEN IT HAS THE RIGHT TO
DO SO. THE FOREGOING INDEMNITY SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security.
Secured Party may, at the expense of LASIK, appear in and defend any action
or proceeding at law or in equity purporting to affect Secured Party's
Security Interest under this Agreement.
----------------------------------------------------------
8.7 Right of Secured Party to Prevent or Remedy Default. If LASIK shall
fail to perform any of the covenants, conditions and agreements required to be
performed and observed by LASIK under any Other Agreement, or in respect of the
Collateral (subject to any applicable default cure period), Secured Party (a)
may but shall not be obligated to take any action Secured Party deems necessary
or desirable to prevent or remedy any such default by LASIK or otherwise to
protect the Security Interest, and (b) shall have the absolute and immediate
right to take possession of the Collateral or any part thereof (to the extent
Secured Party has not previously taken possession) to such extent and as often
as the Secured Party, in its sole discretion, deems necessary or desirable in
order to prevent or to cure any such default by LASIK, or otherwise to protect
the security of this Agreement. Secured Party may advance or expend such sums of
money for the account of LASIK as Secured Party in its sole discretion deems
necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs,
expenses, charges and attorneys' fees which Secured Party may make, pay or
incur under any provision of this Agreement for the protection of its
security or for the enforcement of any of its rights hereunder, including,
without limitation, in foreclosure proceedings commenced and subsequently
abandoned. ------------------------
8.9. Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every
such remedy shall be cumulative, not in lieu of, but in addition to any
other rights or remedies given under this Agreement and all other security
documents. Any and all of Secured Party's rights and remedies may be
exercised from time to time and as often as such exercise as deemed
necessary or desirable by Secured Party. --------
8.10 LASIK's Waivers. LASIK waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.11 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. LASIK waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
LASIK agrees that Secured Party shall have no duty or obligation to LASIK to
apply to the Obligations any such other security or proceeds thereof.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall
be deemed commercially reasonable within the meaning of the Texas UCC.
-----------------------------
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to LASIK their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
LASIK: LASIK Investors, L.L.C.
4800 North 22nd Street
Phoenix, Arizona 85016
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of LASIK if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of LASIK.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise
of any power or right preclude other or further exercise thereof or the
exercise of any other power or right. No waiver by Secured Party of any
right hereunder of any default by LASIK shall be binding upon Secured Party
unless in writing, and no failure by Secured Party to exercise any power or
right hereunder or waiver of any default by LASIK ------ shall operate as a
waiver of any other or further exercise of such right or power of any
further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether
or not of the character contemplated at the date of this Agreement, and if
all transactions between Secured Party and LASIK shall be closed at any
time, shall be equally applicable to any new transactions thereafter.
--------------------
9.6 Definitions. Unless the context indicated otherwise, definitions
in the Texas Business and Commerce Code ("Texas UCC") apply to words and
phrases in this Agreement; if Texas UCC definitions conflict, Chapter 9
definitions apply. -----------
9.7 Miscellaneous. In this Agreement, whenever the context so
requires, the neuter gender includes the masculine and feminine, and the
singular number includes the plural and vice versa. The headings of
paragraphs herein are inserted only for convenience and shall in no way
define, describe or limit the scope of intent of any provisions of this
Agreement. No change, amendment, modification, cancellation, or discharge
of any provision of this Agreement shall be valid unless consented to in
------------- writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement
without approval or consent. LASIK acknowledges that Secured Party intends
to make a collateral assignment of its rights under this Agreement for the
benefit of one or more of its lenders. LASIK may not assign this Agreement
or any of its rights or obligations hereunder without the express prior
written consent of Secured Party in each instance.
--------------------------------------
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA. ---------------
9.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE LOAN AGREEMENT, THE NOTE
AND THE CONTRIBUTION AGREEMENT (AND THE OTHER AGREEMENTS CONTEMPLATED
THEREIN) REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES. ----------------
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this ___ day of September, 1999.
DEBTOR: LASIK Investors, L.L.C.
By: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name:Cheryl Williams
Title:Treasurer
<PAGE>
PROMISSORY NOTE
Austin, Texas September 1, 1999
PROMISE TO PAY: For value received, the undersigned Borrower (whether one or
more) promises to pay to the order of Lender the Principal Amount, together with
interest on the unpaid balance of such amount, in lawful money of the United
States of America, in accordance with all the terms, conditions, and covenants
of this Note and the Loan Documents identified below.
BORROWER: Prime/BDR Acquisition, L.L.C., a Delaware limited liability company
BORROWER'S ADDRESS FOR NOTICE: 1301 Capital of Texas Highway, Suite C-300
Austin, Texas 78746
Attention: President
LENDER: Prime Medical Operating, Inc., a Delaware corporation
LENDER'S ADDRESS FOR PAYMENT: 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746
Attention: Chief Financial Officer
PRINCIPAL AMOUNT: Ten Million Eight Hundred Thirty-Five Thousand Dollars
($10,835,000)
INTEREST RATE: Fifteen Percent (15%)
PAYMENT TERMS: Interest on the unpaid balance of this Note is due and payable
quarterly, beginning September 1, 1999, and continuing regularly and quarterly
thereafter on or before the first day of March, June, September, and December of
each year, until September 1, 2006 (the "Maturity Date"), when the outstanding
principal balance and all accrued interest shall be due and payable in full.
Interest will be calculated on the unpaid principal balance. Each payment will
be credited first to the accrued interest and then to the reduction of
principal.
LOAN AGREEMENT: This Note is executed pursuant to and is governed by the terms
of that certain Loan Agreement dated September 1, 1999, executed by Borrower and
Lender, as amended (collectively, the "Loan Agreement").
1. INTEREST PROVISIONS:
Rate: The principal balance of this Note from time to time remaining unpaid
prior to maturity shall bear interest at the Interest Rate per annum stated
above.
<PAGE>
Maximum Lawful Interest: The term "Maximum Lawful Rate" means the maximum
rate of interest and the term "Maximum Lawful Amount" means the maximum amount
of interest that is permissible under applicable state or federal law for the
type of loan evidenced by this Note and the other Loan Documents. If the Maximum
Lawful Rate is increased by statute or other governmental action subsequent to
the date of this Note, then the new Maximum Lawful Rate shall be applicable to
this Note from the effective date thereof, unless otherwise prohibited by
applicable law.
Spreading of Interest: Because of the possibility of irregular periodic
balances of principal or premature payment, the total interest that will accrue
under this Note cannot be determined in advance. Lender does not intend to
contract for, charge, or receive more than the Maximum Lawful Rate or Maximum
Lawful Amount permitted by applicable state or federal law, and to prevent such
an occurrence Lender and Borrower agree that all amounts of interest, whenever
contracted for, charged, or received by Lender, with respect to the loan of
money evidenced by this Note, shall be spread, prorated, or allocated over the
full period of time this Note is unpaid, including the period of any renewal or
extension of this Note. If demand for payment of this Note is made by Lender
prior to the full stated term, the total amount of interest contracted for,
charged, or received to the time of such demand shall be spread, prorated, or
allocated along with any interest thereafter accruing over the full period of
time that this Note thereafter remains unpaid for the purpose of determining if
such interest exceeds the Maximum Lawful Amount.
Excess Interest: At maturity (whether by acceleration or otherwise) or on
earlier final payment of this Note, Lender shall compute the total amount of
interest that has been contracted for, charged, or received by Lender or payable
by Borrower under this Note and compare such amount to the Maximum Lawful Amount
that could have been contracted for, charged, or received by Lender. If such
computation reflects that the total amount of interest that has been contracted
for, charged, or received by Lender or payable by Borrower exceeds the Maximum
Lawful Amount, then Lender shall apply such excess to the reduction of the
principal balance and not to the payment of interest; or if such excess interest
exceeds the unpaid principal balance, such excess shall be refunded to Borrower.
This provision concerning the crediting or refund of excess interest shall
control and take precedence over all other agreements between Borrower and
Lender so that under no circumstances shall the total interest contracted for,
charged, or received by Lender exceed the Maximum Lawful Amount.
Interest After Default: At Lender's option, the unpaid principal balance
shall bear interest after maturity (whether by acceleration or otherwise) at the
"Default Interest Rate." The Default Interest Rate shall be, at Lender's option,
(i) the Maximum Lawful Rate, if such Maximum Lawful Rate is established by
applicable law; or (ii) the Interest Rate stated on the first page of this Note
plus five (5) percentage points, if no Maximum Lawful Rate is established by
applicable law; or (iii) eighteen percent (18%) per annum; or (iv) such lesser
rate of interest as Lender in its sole discretion may choose to charge; but
never more than the Maximum Lawful Rate or at a rate that would cause the total
interest contracted for, charged, or received by Lender to exceed the Maximum
Lawful Amount.
Daily Computation of Interest: To the extent permitted by applicable law,
Lender at its option will calculate the per diem interest rate or amount based
on the actual number of days in the year (365 or 366, as the case may be), and
charge that per diem interest rate or amount each day. In no event shall Lender
compute the interest in a manner that would cause Lender to contract for,
charge, or receive interest that would exceed the Maximum Lawful Rate or the
Maximum Lawful Amount
DEFAULT PROVISIONS:
EVENTS OF DEFAULT AND ACCELERATION OF MATURITY: LENDER MAY, AFTER THIRTY (30)
DAYS' WRITTEN NOTICE TO BORROWER AND BORROWER'S FAILURE TO CURE WITHIN SUCH
30-DAY PERIOD AND WITHOUT FURTHER NOTICE OR DEMAND, (except as otherwise
required by statute), ACCELERATE THE MATURITY OF THIS NOTE AND DECLARE THE
ENTIRE UNPAID PRINCIPAL BALANCE AND ALL ACCRUED INTEREST AT ONCE DUE AND PAYABLE
IF:
There is default in the payment of any installment of principal, interest,
or any other sum required to be paid under the terms of this Note or any of the
Loan Documents; or
There is a breach or default (other than by Lender or Prime Medical
Services, Inc.) under this Note or any of the Loan Documents, including any
instrument securing the payment of this Note or any loan agreement relating to
the advance of loan proceeds.
WAIVER BY BORROWER: EXCEPT AS PROVIDED IN PARAGRAPH 2(a) HEREOF AND IN ANY OTHER
LOAN DOCUMENT, BORROWER AND ALL OTHER PARTIES LIABLE FOR THIS NOTE WAIVE,
DEMAND, NOTICE OF INTENT TO DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF
NONPAYMENT, PROTEST, NOTICE OF PROTEST, GRACE, NOTICE OF DISHONOR, NOTICE OF
INTENT TO ACCELERATE MATURITY, NOTICE OF ACCELERATION OF MATURITY, AND DILIGENCE
IN COLLECTION. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR OF THIS NOTE WAIVES
AND AGREES TO ONE OR MORE EXTENSIONS FOR ANY PERIOD OR PERIODS OF TIME, AND ANY
PARTIAL PAYMENTS, BEFORE OR AFTER MATURITY, WITHOUT PREJUDICE TO THE HOLDER OF
THIS NOTE. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR WAIVES NOTICE OF ANY AND
ALL RENEWALS, EXTENSIONS, REARRANGEMENTS, AND MODIFICATIONS OF THIS NOTE.
Non-Waiver by Lender: Any previous extension of time, forbearance, failure
to pursue some remedy, acceptance of late payments, or acceptance of partial
payment by Lender, before or after maturity, does not constitute a waiver by
Lender of its subsequent right to strictly enforce the collection of this Note
according to its terms.
Other Remedies Not Required: Lender shall not be required to first file
suit, exhaust all remedies, or enforce its rights against any security in order
to enforce payment of this Note.
Joint and Several Liability: Each Borrower who signs this Note, and all of
the other parties liable for the payment of this Note, such as guarantors,
endorsers, and sureties, are jointly and severally liable for the payment of
this Note.
Attorney's Fees: If Lender requires the services of an attorney to enforce
the payment of this Note or the performance of the other Loan Documents, or if
this Note is collected through any lawsuit, probate, bankruptcy, or other
judicial proceeding, Borrower agrees to pay Lender an amount equal to its
reasonable attorney's fees and other collection costs. This provision shall be
limited by any applicable statutory restrictions relating to the collection of
attorney's fees.
3. MISCELLANEOUS PROVISIONS:
Subsequent Holder: All references to Lender in this Note shall also refer
to any subsequent owner or holder of this Note by transfer, assignment,
endorsement, or otherwise.
Transfer: Borrower acknowledges and agrees that Lender may transfer this
Note or partial interests in the Note to one or more transferees or
participants, including without limitation transfers provided for in Section
8.10 of the Loan Agreement. Borrower authorizes Lender to disseminate to any
such transferee or participant or prospective transferee or participant any
information it has pertaining to the loan evidenced by this Note, including,
without limitation, credit information on Borrower and any guarantor of this
Note and any of the type of information described in Section 8.10 of the Loan
Agreement.
Other Parties Liable: All promises, waivers, agreements, and conditions
applicable to Borrower shall likewise be applicable to and binding upon any
other parties primarily or secondarily liable for the payment of this Note,
including all guarantors, endorsers, and sureties.
Successors and Assigns: The provisions of this Note shall be binding upon
and for the benefit of the successors, assigns, heirs, executors, and
administrators of Lender and Borrower.
No Duty or Special Relationship: Borrower acknowledges that Lender has no
duty of good faith to Borrower, and Borrower acknowledges that no fiduciary,
trust, or other special relationship exists between Lender and Borrower.
Modifications: Any modifications agreed to by Lender relating to the
release of liability of any of the parties primarily or secondarily liable for
the payment of this Note, or relating to the release, substitution, or
subordination of all or part of the security for this Note, shall in no way
constitute a release of liability with respect to the other parties or security
not covered by such modification.
Entire Agreement: Borrower warrants and represents that the Loan Documents
constitute the entire agreement between Borrower and Lender with respect to the
loan evidenced by this Note and agrees that no modification, amendment, or
additional agreement with respect to such loan or the advancement of funds
thereunder will be valid and enforceable unless made in writing signed by both
Borrower and Lender.
Borrower's Address for Notice: All notices required to be sent by Lender to
Borrower shall be sent by U.S. Mail, postage prepaid, to Borrower's Address for
Notice stated on the first page of this Note, until Lender shall receive written
notification from Borrower of a new address for notice.
Lender's Address for Payment: All sums payable by Borrower to Lender shall
be paid at Lender's Address for Payment stated on the first page of this Note,
or at such other address as Lender shall designate from time to time.
Business Use: Borrower warrants and represents to Lender that the proceeds
of this Note will be used solely for business or commercial purposes, and in no
way will the proceeds be used for personal, family, or household purposes.
Chapter 15 Not Applicable: It is understood that Chapter 15 of the Texas
Credit Code relating to certain revolving credit loan accounts and tri-party
accounts is not applicable to this Note.
APPLICABLE LAW: THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN TEXAS AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS
AND THE LAWS OF THE UNITED STATES OF AMERICA APPLICABLE TO TRANSACTIONS IN
TEXAS.
4. LOAN DOCUMENTS:
This Note.
The Loan Agreement and the Loan Documents as defined therein.
All other documents signed in connection with the Loan Agreement or the loan
evidenced by this Note, including, without limitation, that certain Contribution
Agreement, dated effective September 1, 1999, between and among Borrower,
Lender, Prime Medical Services, Inc., a Delaware corporation, Prime/BDEC
Acquisition, L.L.C., a Delaware limited liability company, Barnet Dulaney Eye
Center, P.L.L.C., an Arizona professional limited liability company, LASIK
Investors, L.L.C., a Delaware limited liability company, David D. Dulaney, M.D.,
Ronald W. Barnet, M.D., and Mark Rosenberg (the "Contribution Agreement") and
each Transaction Document (as such term is defined in the Contribution
Agreement).
[Signature page follows]
<PAGE>
EXECUTION PAGE TO
PROMISSORY NOTE
EXECUTED this 1st day of September, 1999.
BORROWER:
PRIME/BDR ACQUISITION, L.L.C., a Delaware limited liability company
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., Manager
<PAGE>
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into as of the 31st
day of January, 2000, by and between Prime Refractive Management, L.L.C., a
Delaware limited liability company, and Prime Refractive, L.L.C., a Delaware
limited liability company.
Definitions:
EFFECTIVE DATE: January 31, 2000
BORROWER: Prime Refractive, L.L.C., a Delaware limited liability company
BORROWER'S
ADDRESS: 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746
LENDER: Prime Refractive Management, L.L.C.,
a Delaware limited liability company
LENDER'S
ADDRESS: 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746
NOTES:
Working Capital Note: Promissory Note (Line of Credit) in the maximum
principal amount of $200,000 (the "Working Capital Maximum Principal
Amount") dated as of January 31, 2000, executed by Borrower, and
payable to the order of Lender as provided therein (the "Working
Capital Note").
Development Facility Notes: Promissory Notes in substantially the form
attached as Exhibit G2 to the Contribution Agreement (as hereinafter
defined), in the aggregate maximum original principal amount not to
exceed $29,165,000 (the "Development Facility Maximum Principal
Amount"), executed by Borrower and payable to the order of Lender as
provided therein (the "Development Facility Notes"). Collectively, the
Working Capital Notes and the Development Facility Notes are referred
to herein as the "Notes."
SECURITY AGREEMENTS: All documents, agreements and instruments hereinafter or
herewith executed by Borrower, LASIK Investors, L.L.C., a Delaware limited
liability company ("LASIK") or any Target Center securing this Agreement or the
obligations under any of the Notes.
LOAN DOCUMENTS: This Agreement, the Working Capital Note, the Development
Facility Notes, the Security Agreements, and all other documents, agreements,
and instruments now or hereafter existing, evidencing, securing, or otherwise
relating to this Agreement and any transactions contemplated by this Agreement,
as any of the foregoing items may be modified or supplemented from time to time.
INDEBTEDNESS: All present and future indebtedness, obligations and liabilities
of Borrower to Lender, all present and future indebtedness, obligations and
liabilities of any Target Center to Lender, and all renewals, extensions and
modifications of either of the foregoing, arising pursuant to any of the Loan
Documents and all interest accruing thereon, and all other fees, costs,
expenses, charges and attorneys' fees payable, and covenants performable, under
any of the Loan Documents (including without limitation this Agreement).
DEFINED TERMS: Terms not otherwise defined herein shall have the meaning
provided in that certain Contribution Agreement dated effective September 1,
1999, by and among Barnet Dulaney Eye Center, P.L.L.C., David D. Dulaney, M.D.,
Ronald W. Barnet, M.D., Mark Rosenberg, Prime Medical Services, Inc. ("PMSI"),
Prime Medical Operating, Inc., Borrower, LASIK, Prime/BDR Acquisition, L.L.C.
and Prime/BDEC Acquisition, L.L.C. (as amended by that certain First Amendment
to Contribution Agreement dated as of January 31, 2000, among the foregoing
parties, the "Contribution Agreement"). For the purposes hereof the terms
"Target Centers" and "Target Center" shall have the meaning set forth in the
Contribution Agreement, but shall include, upon the acquisition of a Target
Center by Borrower or any subsidiary or affiliate of Borrower, the subsidiary or
affiliate utilized to make such acquisition.
SUBORDINATION: Certain liens arising in connection with this Agreement in favor
of Lender are subordinate to liens in favor of lenders under that certain Loan
Agreement for a $14,000,000 advancing term loan (as hereinafter supplemented,
modified, or replaced, the "$14,000,000 Facility"), entered into by Secured
Party, Bank of America, N.A., as administrative agent, BankBoston, N.A., as
documentation agent and such lenders.
AGREEMENT:
Borrower has requested from Lender the credit accommodations described
below, and Lender has agreed to provide such credit accommodations on the terms
and conditions contained herein. Therefore, for good and valuable consideration,
the receipt and sufficiency of which Lender and Borrower acknowledge, Lender and
Borrower hereby agree as follows:
ARTICLE I
THE WORKING CAPITAL LOAN
1.1 The Working Capital Loan. Lender agrees to lend and Borrower agrees
to borrow an amount not to exceed the Working Capital Maximum Principal Amount
on the terms and conditions set forth herein (the "Working Capital Loan"). The
Working Capital Loan will be evidenced by the Working Capital Note.
1.2 Revolving Line of Credit. Subject to and in reliance upon the
terms, conditions, representations and warranties hereinafter set forth, Lender
agrees to make advances (the "Working Capital Advances") to Borrower from time
to time during the period from the Effective Date to and including September 1,
2000 (the "Maturity Date"), in an aggregate amount not to exceed the Working
Capital Maximum Principal Amount. Each Working Capital Advance must be either
$10,000 or a higher integral multiple of $10,000. Funds borrowed and repaid may
be reborrowed, so long as all conditions precedent to Working Capital Advances
are met. The purpose of the Working Capital Advances is to provide funds to
Borrower for working capital and for other general business purposes of
Borrower.
1.3 Interest and Repayment. Borrower shall pay the aggregate unpaid
principal amount of all Working Capital Advances in accordance with the terms of
the Working Capital Note evidencing the indebtedness resulting from such Working
Capital Advances. Interest on the Working Capital Advances shall be due and
payable in the manner and at the times set forth in the Working Capital Note,
with final maturity of the Working Capital Note being on or before the Maturity
Date.
1.4 Making Advances. Each Working Capital Advance shall be made within
two business days of written notice (or telephonic notice confirmed in writing)
given by noon (Austin, Texas time) on a business day of Lender by Borrower to
Lender specifying the amount and date thereof (which may be the same business
day) and if sent by wired funds, at Lender's option, the wiring instructions of
the deposit account of Borrower to which such Working Capital Advance is to be
deposited.
1.5 Payments and Computations. Borrower shall make each payment
hereunder and under the Working Capital Note on the day when due in lawful money
of the United States of America to Lender at Lender's Address for Payment in
same day funds. All repayments of principal on the Working Capital Note shall be
in a minimum amount of $1,000, or a higher integral multiple of $1,000. All
computations of interest shall be made by Lender on the basis of the actual
number of days (including the first day but excluding the last day) in the year
(365 or 366, as the case may be) elapsed, but in no event shall any such
computation result in an amount of interest that would cause the interest
contracted for, charged or received by Lender to be in excess of the amount that
would be payable at the Highest Lawful Rate, as herein defined.
ARTICLE II
THE DEVELOPMENT FACILITY LOANS
2.1 The Development Facility. Subject to the terms of the Contribution
Agreement and the terms, conditions, representations and warranties hereinafter
set forth, Lender agrees to lend Borrower from time to time, the amounts
necessary to acquire or develop Target Centers, in an aggregate amount not to
exceed the Development Facility Maximum Principal Amount (collectively, the
"Development Facility Loans").
2.2 Development Facility Loans. Each Development Facility Loan will
finance up to 100% of the purchase price (or development cost) of a Target
Center being acquired (or developed) by Borrower. The parties acknowledge that
the grant of any Development Facility Loan does not create any obligation on the
part of Lender to extend further Development Facility Loans. Additionally, each
Development Facility Loan is subject in all respects to Lender obtaining prior
written approval from the lenders under (but only if such approval is required
under) either the $14,000,000 Facility or that certain Loan Agreement for a
$86,000,000 revolving credit loan entered into by PMSI, Bank of America, N.A.,
as administrative agent, BankBoston, N.A., as documentation agent and other
lenders named therein and the execution and delivery of such documents by
Borrower as may be required under the Contribution Agreement, this Agreement or
any Transaction Document (as such term is defined in the Contribution
Agreement). Pursuant to the Contribution Agreement, each Development Facility
Loan must be (a) evidenced by a separate Development Facility Note executed by
Borrower, (b) secured by all of LASIK's ownership interest in Borrower as
evidenced by an Assignment and Security Agreement between Lender and LASIK,
dated as of the date of this Agreement, and (c) accompanied by Assignment and
Security Agreements executed by Borrower in the form attached as Exhibit G1 to
the Contribution Agreement. In addition, if Borrower is acquiring, directly or
indirectly, a one hundred percent (100%) interest in a Target Center
(hereinafter referred to as a "100% Target Center"), Borrower shall cause such
Target Center to execute a security agreement, acceptable in form and substance
to Lender, granting to Lender or one of Lender's subsidiaries the highest
available priority security interest in all of the assets of such Target Center.
2.3 Interest and Repayment. Borrower and Target Center shall pay the
unpaid principal amount under each Development Facility Note in accordance with
the terms of the respective Development Facility Note. Payments of interest and
principal on each Development Facility Note shall be due and payable in the
manner and at the times set forth in the respective Development Facility Note.
ARTICLE III
CONDITIONS TO WORKING CAPITAL ADVANCES AND DEVELOPMENT FACILITY LOANS
3.1 Conditions Precedent to Initial Working Capital Advance. The
obligation of Lender to make its initial Working Capital Advance is subject to
the condition precedent that Lender shall have received on or before the day of
such Working Capital Advance the following, each in form and substance
satisfactory to Lender and properly executed by Borrower or other appropriate
parties: (a) the Working Capital Note duly executed by Borrower, and (b) such
other documents, opinions, certificates and evidences as Lender may reasonably
request.
3.2 Conditions Precedent to Each Working Capital Advance/Development
Facility Loan. In addition to the conditions precedent stated elsewhere herein,
Lender shall not be obligated to make any Working Capital Advance or any
Development Facility Loan unless:
(a) the representations and warranties contained in Article IV
are true and correct in all material respects on and as of the date of
such Working Capital Advance or Development Facility Loan, as though
made on and as of such date with such changes therein;
(b) on the date of the Working Capital Advance or Development
Facility Loan, no Event of Default, and no event which, with the lapse
of time or notice or both, could become an Event of Default, has
occurred and is continuing;
(c) there shall have been no material adverse change, as
determined by Lender in its reasonable judgment, in the financial
condition or business of Borrower;
(d) there has been no breach or threatened breach by Borrower
under the Contribution Agreement or any Transaction Document (as such
term is defined in the Contribution Agreement);
(e) with respect to each Development Facility Loan, Borrower executes the
respective Development Facility Note and Borrower executes an
Assignment and Security Agreement in the form attached as Exhibit G1 to
the Contribution Agreement, and otherwise in form and substance
acceptable to Lender wherein Lender is granted a first lien perfected
security interest in all of Borrower's or Borrower's subsidiaries'
ownership interest in the Target Center and related acquisition
documents;
(f) LASIK shall have acknowledged in writing its prior grant to Lender of a
first lien perfected security interest (subordinate only to liens
granted as of the date of this Agreement by LASIK in favor of the
lenders under the $14,000,000 Facility) in all of LASIK's ownership
interest in Borrower, evidenced by that certain Assignment and Security
Agreement between LASIK and Borrower dated as of the date of this
Agreement, and LASIK shall be in compliance with all of its obligations
thereunder;
(g) if Borrower is using a Development Facility Loan to
acquire, directly or indirectly, a 100% Target Center, Borrower shall
cause such Target Center to execute a security agreement, acceptable in
form and substance to Lender, granting to Lender or one of Lender's
subsidiaries the highest available priority security interest in all of
the assets of such Target Center; and
(h) Lender shall have received such other approvals, opinions,
documents, certificates or evidences as Lender may reasonably request
(in form and substance reasonably satisfactory to Lender). Each request
for an Working Capital Advance or Development Facility Loan shall be
deemed a representation by Borrower that the conditions of this Section
3.2 have been met.
ARTICLE IV
BORROWER'S REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender as follows:
4.1 Good Standing. Borrower is a duly formed limited liability company,
duly organized and in good standing, under the laws of Delaware and has the
power to own its property and to carry on its business in each jurisdiction in
which Borrower operates.
4.2 Authority and Compliance. Borrower has full power and authority to
enter into this Agreement, to make the borrowing hereunder, to execute and
deliver the Loan Documents and to incur the indebtedness described in this
Agreement, all of which has been duly authorized by all proper and necessary
action of its managers and members. No further consent or approval of any public
authority is required as a condition to the validity of any Loan Document, and
Borrower is in compliance with all laws and regulatory requirements to which it
is subject.
4.3 Binding Agreement. This Agreement and other Loan Documents when
issued and delivered pursuant hereto for value received will constitute, valid
and legally binding obligations of Borrower in accordance with their terms.
4.4 Litigation. There are no proceedings pending or, to the knowledge
of Borrower, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition or operations of
Borrower or any subsidiary, except as disclosed to Lender in writing prior to
the date of this Agreement. To the knowledge of Borrower, there are no
proceedings pending or threatened against any Target Center.
4.5 No Conflicting Agreements. There are no provisions of Borrower's
organizational documents and no provisions of any existing agreement, mortgage,
indenture or contract binding on Borrower or affecting its property, which would
conflict with or in any way prevent the execution, delivery, or carrying out of
the terms of the Loan Documents.
4.6 Ownership of Assets. Borrower will at all times maintain its
tangible property, real and personal, in good order and repair taking into
consideration reasonable wear and tear.
4.7 Taxes. All income taxes and other taxes due and payable through the
date of this Agreement have been paid prior to becoming delinquent.
ARTICLE V
BORROWER'S AFFIRMATIVE COVENANTS
So long as Borrower may borrow under this Agreement and until payment
in full of the Working Capital Note and all Development Facility Notes, and
performance of all other obligations of Borrower and Target Centers hereunder or
thereunder, Borrower covenants and agrees to do the following:
5.1 Financial Statements.
--------------------
(a) Maintain, and cause each Target Center to maintain, a
system of accounting satisfactory to Lender and in accordance with
generally accepted accounting principles consistently applied, and will
permit Lender's officers or authorized representatives to visit and
inspect Borrower's or Target Center's books of account and other
records at such reasonable times and as often as Lender may desire
during office hours and after reasonable notice to Borrower, and pay
the reasonable fees and disbursements of any accountants or other
agents of Lender selected by Lender for the foregoing purposes. Unless
written notice of another location is given to Lender, Borrower's books
and records will be located at Borrower's Address.
(b) Furnish to Lender year end financial statements, of
Borrower and each Target Center, to include balance sheet, operating
statement and surplus reconciliation, together with an officer's
certificate of compliance with this Agreement including computations of
all quantitative covenants, within 90 days after the end of each annual
accounting period.
(c) Furnish to Lender quarterly financial statements, of
Borrower and each Target Center, to include balance sheet and profit
and loss statement, together with an officer's certificate of
compliance with this Agreement including computations of all
quantitative covenants, within 45 days of the end of each such
accounting period.
(d) With each balance sheet delivered under subsections (b) or
(c) of this Section 5.1, an aging of all Accounts Receivable.
(e) Promptly provide Lender with such additional information,
reports or statements respecting the business operations and financial
condition of Borrower or any Target Center, as Lender may reasonably
request from time to time.
5.2 Insurance. Maintain, and cause each Target Center to maintain,
insurance with responsible insurance companies on such of its respective
properties, in such amounts and against such risks as is customarily maintained
by similar businesses operating in the same vicinity, specifically to include a
policy of fire and extended coverage insurance covering all assets, and
liability insurance, all to be with such companies and in such amounts
satisfactory to Lender and to contain a mortgage clause naming Lender as its
interest may appear. Evidence of such insurance will be supplied to Lender.
5.3 Existence and Compliance. Maintain, and cause each Target Center to
maintain, its organizational existence in good standing and comply with all
laws, regulations and governmental requirements applicable to it or to any of
its property, business operations and transactions. Borrower further agrees to
provide Lender with copies of all instruments filed with the Delaware Secretary
of State amending and/or renewing Borrower's certificate of formation.
5.4 Adverse Conditions or Events. Promptly advise Lender in writing of
any condition, event or act which comes to its attention that would or might
materially affect Borrower's or any Target Center's financial condition,
Lender's rights under this Agreement or any of the Loan Documents, and of any
litigation filed against Borrower or to its knowledge against any Target Center.
5.5 Taxes. Pay all taxes as they become due and payable.
-----
5.6 Maintenance. Maintain, and cause each Target Center to maintain,
all of its respective tangible property in good condition and repair, reasonable
wear and tear excepted, and make all necessary replacements thereof, and
preserve and maintain all licenses, privileges, franchises, certificates and the
like necessary for the operation of its business.
5.7 Application of Earnings. Except as expressly contemplated in
Section 4.3(e) of the Contribution Agreement, pay all available funds toward
repayment of the Working Capital Note and any Development Facility Notes,
regardless of whether payment of such amounts exceeds the minimum required
payments under the Working Capital Note and the Development Facility Notes.
ARTICLE VI
BORROWER'S NEGATIVE COVENANTS
So long as Borrower may borrow under this Agreement and until payment
in full of the Working Capital Note and all Development Facility Notes, and
performance of all other obligations of Borrower or Target Center hereunder or
thereunder, Borrower will not, and will cause each of the Target Centers to not,
without the prior written consent of Lender:
6.1 Transfer of Assets. Enter into any merger or consolidation, or
sell, lease, assign, or otherwise dispose of or transfer any assets except in
the normal course of its business.
6.2 Change in Ownership or Structure. Dissolve or liquidate; become a
party to any merger or consolidation; reorganize as a professional corporation;
acquire by purchase, lease or otherwise all or substantially all of the assets
or capital stock of any corporation or other entity; or sell, transfer, lease,
or otherwise dispose of all or any substantial part of its respective property
or assets or business.
6.3 Liens. From and after the date hereof grant, suffer, or permit
liens on or security interests in its respective assets, or fail to promptly pay
all lawful claims, whether for labor, materials, or otherwise, except for
purchase money security interests arising in the ordinary course of its
respective business.
6.4 Loans. Make any loans, advances or investments to or in any joint
venture, corporation or other entity, except for the purchase of obligations of
Lender or U.S. Government obligations or the purchase of federally-insured
certificates of deposit.
6.5 Borrowings. Except for borrowing or incurring open accounts payable
to unaffiliated third parties in the ordinary course of business, create, incur,
assume, or liable in any manner for any indebtedness (for borrowed money,
deferred payment for the purchase of assets, lease payments, as surety or
guarantor of the debt of another, or otherwise) other than to Lender in excess
of $25,000 without Lender's prior written consent.
6.6 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
6.7 Equity Redemptions or Restructurings. Apply any of its property or
assets to the purchase, retirement or redemption of any of its equity interests
or in any way amend its capital structure.
6.8 Character of Business. Change the general character of business as
conducted at the date hereof, or engage in any type of business not reasonably
related to its business as presently and normally conducted.
ARTICLE VII
EVENTS OF DEFAULT; NOTICE; ACCELERATION
7.1 Events of Default. If one or more of the following events of
default shall occur and continue after thirty (30) days' written notice to
Borrower, all outstanding principal plus unpaid interest of the Working Capital
Note and each Development Facility Note, and any other indebtedness of Borrower
to Lender, shall automatically be due and payable immediately and Lender shall
have no further obligation to fund under this Agreement.
(a) There shall be any breach or default shall be made in the
payment of any installment of principal or interest upon the Working
Capital Note or any Development Facility Note, when due and payable,
whether at maturity or otherwise; or
(b) There shall be any breach or default (other than by Lender,
Prime Medical Operating, Inc. or Prime Medical Services, Inc.) under
any Loan Document, the Contribution Agreement, or any Transaction
Document (other than those certain Consulting Agreements with Dr.
Dulaney, Dr. Barnet and Mark Rosenberg as required pursuant to the
Contribution Agreement), or any other certificate, agreement or
document contemplated hereby or thereby; or
(c) Any representation or warranty of Borrower contained
herein or in any financial statement, certificate, report or opinion
submitted to Lender in connection with the Working Capital Loan or any
Development Facility Loan, or by Borrower pursuant to the requirements
of this Agreement, shall prove to have been incorrect or misleading in
any material respect when made; or
(d) Any judgment against Borrower or any attachment or other
levy against the property of Borrower with respect to a claim
materially affecting Borrower's financial status remains unpaid,
unstayed on appeal, undischarged, not bonded or not dismissed for a
period of 30 days; or
(e) The bankruptcy, death, or dissolution of any guarantor of the
Indebtedness; or
(f) Borrower makes an assignment for the benefit of creditors,
admits in writing its inability to pay its debts generally as they
become due, files a petition in bankruptcy, is adjudicated insolvent or
bankrupt, petitions or applies to any tribunal for any receiver or any
trustee of Borrower or any substantial part of their respective
property, commences any action relating to Borrower under any
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, or if there is commenced against Borrower any such
action, or Borrower by any act indicates its consent to or approval of
any trustee for Borrower or any substantial part of its property, or
suffers any such receivership or trustee to continue undischarged.
7.2 Lender's Remedies. Upon the occurrence of an Event of Default,
Lender, without notice of any kind, except for any notice required under this
Agreement or any other Loan Document, may, at Lender's option: (i) terminate its
obligation to fund any Working Capital Advance or any Development Facility Loan
hereunder; (ii) declare the Indebtedness, in whole or in part, immediately due
and payable; and/or (iii) exercise any other rights and remedies available to
Lender under this Agreement, any other Loan Document, or applicable laws; except
that upon the occurrence of an Event of Default described in subsection 7.1(f),
all the Indebtedness shall automatically be immediately due and payable, and
Lender's obligation to fund any Working Capital Advance or any Development
Facility Loan hereunder shall automatically terminate, without notice of any
kind (including without limitation notice of intent to accelerate and notice of
acceleration) to Borrower or to any Target Center, guarantor, or to any surety
or endorser of any of the Notes, or to any other person. Borrower, each Target
Center, and each guarantor, surety, and endorser of any of the Notes, and any
and all other parties liable for the Indebtedness or any part thereof, waive
demand, notice of intent to demand, presentment for payment, notice of
nonpayment, protest, notice of protest, grace, notice of dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, and diligence
in collection.
7.3 Right of Set-Off. Borrower hereby authorizes Lender, to the maximum
extent permitted under and in accordance with applicable laws, at any time after
the occurrence of an Event of Default which continues uncured, to set-off and
apply any and all deposits, funds or assets at any time held and any and all
other indebtedness at any time owing by Lender to or for the credit or the
account of Borrower against any and all Indebtedness, whether or not Lender
exercises any other right or remedy hereunder and whether or not such
Indebtedness are then matured.
ARTICLE VIII
GENERAL TERMS AND CONDITIONS
8.1 Notices. All notices, demands, requests, approvals and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given when (a) presented personally, or (b) three (3) days
after deposited in a regularly maintained mail receptacle of the United States
Postal Service, postage prepaid, certified, return receipt requested, or (c)
upon receipt of confirmation after sending by facsimile transmission, addressed
to Borrower or Lender, as the case may be, at the respective addresses or
facsimile number for notice set forth on the first page of this Agreement, or
such other address or facsimile number as Borrower or Lender may from time to
time designate by written notice to the other.
8.2 Entire Agreement and Modifications. The Loan Documents, together
with the Contribution Agreement and Transaction Documents, constitute the entire
understanding and agreement between the undersigned with respect to the
transactions arising in connection with the Working Capital Loan and the
Development Facility Loans, and supersede all prior written or oral
understandings and agreements between the undersigned in connection therewith.
No provision of this Agreement or the other Loan Documents may be modified,
waived, or terminated except by instrument in writing executed by the party
against whom a modification, waiver, or termination is sought to be enforced,
and, in the case of Lender, executed by a Vice President or higher level officer
of Lender.
8.3 Severability. In case any of the provisions of this Agreement shall
for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
8.4 Cumulative Rights and No Waiver. Lender shall have all of the
rights and remedies granted in the Loan Documents and available at law or in
equity, and these same rights and remedies shall be cumulative and may be
pursued separately, successively, or concurrently against Borrower, at the sole
discretion of Lender. Lender's delay in exercising any right shall not operate
as a waiver thereof, nor shall any single or partial exercise by Lender of any
right preclude any other or future exercise thereof or the exercise of any other
right. Any of Borrower's covenants and agreements may be waived by Lender but
only in writing signed by an authorized officer of Vice President level or
higher of Lender or any subsequent owner or holder of any of the Notes. Except
as otherwise expressly provided in this Agreement and in any Note, Borrower
expressly waives any presentment, demand, protest, notice of default, notice of
intent to accelerate, notice of acceleration, notice of intent to demand
payment, or other notice of any kind. No notice to or demand on Borrower in any
case shall, of itself, entitle Borrower to any other or further notice or demand
in similar or other circumstances. No delay or omission by Lender in exercising
any power or right hereunder shall impair any such right or power or be
construed as a waiver thereof, or the exercise of any other right or power
hereunder.
8.5 Form and Substance. All documents, certificates, insurance
policies, and other items required under this Agreement to be executed and/or
delivered to Lender shall be in form and substance reasonably satisfactory to
Lender.
8.6 Limitation on Interest: Maximum Rate. Lender and Borrower intend to
contract in strict compliance with applicable usury law from time to time in
effect. To effectuate this intention, Lender and Borrower stipulate and agree
that none of the terms and provisions of any Note and any other agreement among
such parties, whether now existing or arising hereafter, shall ever be construed
as a contract to pay interest for the use, forbearance or detention of money in
excess of the Maximum Rate. If, from any possible construction of any document,
interest would otherwise be payable to Lender in excess of the Maximum Rate, any
such construction shall be subject to the provisions of this Section and such
document shall be automatically reformed and the interest payable to Lender
shall be automatically reduced to the Maximum Rate permitted under applicable
law, without the necessity of the execution of any amendment or new document.
Neither Borrower, endorsers or other persons now or hereafter becoming liable
for payment of any portion of the principal or interest of any Note shall ever
be liable for any unearned interest on the principal amount or shall ever be
required to pay interest thereon in excess of the Maximum Rate that may be
lawfully charged under applicable law from time to time in effect. Lender and
any subsequent holder of any Note expressly disavow any intention to charge or
collect unearned or excessive interest or finance charges in the event the
maturity of any Note, is accelerated. If the maturity of any Note is accelerated
for any reason, whether as a result of a default under any Note, or by voluntary
prepayment, or otherwise, any amounts constituting interest, or adjudicated as
constituting interest, which are then unearned and have previously been
collected by Lender or any subsequent holder of any Note shall be applied to
reduce the principal balance thereof then outstanding, or if such amounts exceed
the unpaid balance of principal, the excess shall be refunded to Borrower (and
Target Center, as applicable). In the event Lender or any subsequent holder of
any Note ever receives, collects or applies as interest any amounts constituting
interest or adjudicated as constituting interest which would otherwise increase
the interest to an amount in excess of the amount permitted under applicable
law, such amount which would be excessive interest shall be applied to the
reduction of the unpaid principal balance of such Note, and, if the principal
balances of such Note is paid in full, any remaining excess shall be paid to
Borrower (and Target Center, as applicable). In determining whether or not the
interest paid or payable under the specific contingencies exceeds the Maximum
Rate allowed by applicable law, Borrower and Lender shall, to the maximum extent
permitted under applicable law, (i) characterize any non-principal payment as an
expense, fee or premium, rather than as interest; (ii) exclude voluntary
prepayments and the effect thereof; (iii) amortize, prorate, allocate and
spread, in equal parts, the total amount of interest throughout the entire
contemplated term of the applicable Note (as it may be renewed and extended) so
that the interest rate is uniform throughout the entire term of such Note. The
terms and provisions of this section shall control and supersede every other
provision of all existing and future agreements between Lender and Borrower (and
Target Center, as applicable). As used in this Agreement, "Maximum Rate" means
the maximum non-usurious interest rate that at any time or from time to time may
be contracted for, taken, reserved, charged or received on the unpaid principal
or accrued past due interest under applicable law and may be greater than the
applicable rate, the parties hereby stipulating and agreeing that Lender may
contract for, take, reserve, charge or receive interest up to the Maximum Rate
without penalty under any applicable law; and "applicable law" means the laws of
the State of Texas or the laws of the United States of America, whichever laws
allow the greater interest, as such laws now exist or may be changed or amended
or come into effect in the future. In the event applicable law provides for an
interest ceiling under Chapter One of Title 79, Texas Revised Civil Statutes
Annotated, as amended, that ceiling shall be the indicated rate ceiling, subject
to any right Lender may have in the future to change the method of determining
the Maximum Rate.
8.7 Third Party Beneficiary. Borrower acknowledges that the lenders under
the $14,000,000 facility are third party beneficiaries to this Agreement. Except
for the preceding sentence, this Agreement is for the sole benefit of Lender and
Borrower and is not for the benefit of any third party.
8.8 Borrower In Control. In no event shall Lender's rights and
interests under the Loan Documents be construed to give Lender the right to, or
be deemed to indicate that Lender is in control of the business, management or
properties of Borrower or any Target Center or has power over the daily
management functions and operating decisions made by Borrower or any Target
Center.
8.9 Use of Financial and Other Information. Borrower agrees that Lender
shall be permitted to investigate and verify the accuracy of any and all
information furnished to Lender in connection with the Loan Documents, including
without limitation financial statements, and to disclose such information, or
provide copies of such information, to representatives appointed by Lender,
including independent accountants, agents, attorneys, asset investigators,
appraisers and any other persons deemed necessary by Lender to such
investigation.
8.10 Collateral Assignment of Loan Documents. Lender shall have the
right to collaterally assign all of its rights under this Agreement and the
other Loan Documents to the third party beneficiaries described in Section 8.7.
Lender shall have the right to disclose in confidence such financial information
regarding Borrower as may be necessary to complete any such assignment or
attempted assignment, including without limitation, all financial statements,
projections, internal memoranda, audits, reports, payment history, appraisals
and any and all other information and documentation in Lender's files relating
to Borrower. This authorization shall be irrevocable in favor of Lender, and
Borrower waives any claims against Lender or the party receiving information
from Lender regarding disclosure of information in Lender's files, and further
waive any alleged damages which may result from such disclosure. Borrower
acknowledges that Lender intends to make a collateral assignment of its rights
under this Agreement and the Loan Documents for the benefit of one or more of
its or its parent company's lenders and will not be authorized to amend or
modify this Agreement or the Loan Documents, or grant waivers of any of its
rights thereunder without the prior written consent of some or all of such
lenders.
8.11 Further Assurances. Borrower agrees to execute and deliver, and
cause each Target Center to execute and deliver, to Lender, promptly upon
request from Lender, such other and further documents as may be reasonably
necessary or appropriate to consummate the transactions contemplated herein.
8.12 Number and Gender. Whenever used herein, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
be applicable to all genders. The duties, covenants, obligations, and warranties
of Borrower in this Agreement shall be joint and several obligations of Borrower
and of each Borrower if more than one.
8.13 Captions. The captions, headings, and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit, amplify,
or modify the terms and provisions hereof.
8.14 Continuing Agreement. This is a continuing agreement and all
rights, powers, and remedies of Lender under this Agreement and the other Loan
Documents shall continue in full force and effect until each Note is paid in
full as the same becomes due and payable and all other Indebtedness is paid and
discharged, until Lender has no further obligation to advance moneys to Borrower
under this Agreement, and until Lender, upon request of Borrower, has executed a
written termination statement. Furthermore, the parties contemplate that there
may be times when no Indebtedness is owing, but notwithstanding such occurrence,
this Agreement (and all other Loan Documents) shall remain valid and shall be in
full force and effect as to subsequent Indebtedness and Advances, provided that
Lender has not executed a written termination statement.
8.15 Applicable Law. This Agreement and the Loan Documents shall be
governed by and construed in accordance with the laws of the State of Texas and
the laws of the United States applicable to transactions within such state.
8.16 NO ORAL AGREEMENTS. THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
SIGNATURE PAGE TO
LOAN AGREEMENT
EXECUTED as of the 31st day of January, 2000.
BORROWER:
PRIME REFRACTIVE, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Chief Financial Officer
LENDER:
PRIME REFRACTIVE MANAGEMENT, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Chief Financial Officer
PROMISSORY NOTE
Austin, Texas (LINE OF CREDIT) January 31, 2000
PROMISE TO PAY: For value received, the undersigned Borrower (whether one or
more) promises to pay to the order of Lender the Principal Amount, to the extent
advanced by Lender, together with interest on the unpaid balance of such amount,
in lawful money of the United States of America, in accordance with all the
terms, conditions, and covenants of this Note and the Loan Documents identified
below.
BORROWER: Prime Refractive, L.L.C., a Delaware limited liability company
BORROWER'S ADDRESS FOR NOTICE: 1301 Capital of Texas Highway, Suite C-300
Austin, Texas 78746
Attention: President
LENDER: Prime Refractive Management, L.L.C.,
a Delaware limited liability company
LENDER'S ADDRESS FOR PAYMENT: 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746
Attention: Chief Financial Officer
PRINCIPAL AMOUNT: Two Hundred Thousand Dollars ($200,000)
INTEREST RATE: Fifteen Percent (15%)
PAYMENT TERMS: Interest on the unpaid balance of this Note is due and payable
quarterly, beginning November 1, 1999, and continuing regularly and quarterly
thereafter on or before the first day of February, May, August, until September
1, 2000 (the "Maturity Date"), when the outstanding principal balance and all
accrued interest shall be due and payable in full. Interest will be calculated
on the unpaid principal balance. Each payment will be credited first to the
accrued interest and then to the reduction of principal.
REVOLVING LINE OF CREDIT: This Note evidences a revolving line of credit.
Subject to the terms of the Loan Agreement between Borrower and Lender of even
date herewith, all or any portion of the Principal Amount of this Note may be
borrowed, paid, prepaid, repaid, and reborrowed, from time to time prior to the
Maturity Date and in accordance with the Loan Documents. Each borrowing and
repayment hereunder will be (i) endorsed on an attachment to this Note, or (ii)
entered in the books and records of Lender. The books and records of Lender
shall be prima facie evidence of all sums due Lender. If an event of default
exists under this Note or any Loan Document, then Lender shall be under no
obligation to make any advance under this Note.
LOAN AGREEMENT: This Note is executed pursuant to and is governed by the terms
of the Loan Agreement of even date herewith, executed by Borrower and Lender, as
amended (collectively, the "Loan Agreement").
1. INTEREST PROVISIONS:
(a) Rate: The principal balance of this Note from time to time remaining
unpaid prior to maturity shall bear interest at the Interest Rate per
annum stated above. Interest shall be calculated on the amount of each
advance of the Principal Amount of this Note from the date of each such
advance.
(b) Maximum Lawful Interest: The term "Maximum Lawful Rate" means the
maximum rate of interest and the term "Maximum Lawful Amount" means the
maximum amount of interest that is permissible under applicable state
or federal law for the type of loan evidenced by this Note and the
other Loan Documents. If the Maximum Lawful Rate is increased by
statute or other governmental action subsequent to the date of this
Note, then the new Maximum Lawful Rate shall be applicable to this Note
from the effective date thereof, unless otherwise prohibited by
applicable law.
(c) Spreading of Interest: Because of the possibility of irregular periodic
balances of principal or premature payment, the total interest that will
accrue under this Note cannot be determined in advance. Lender does not
intend to contract for, charge, or receive more than the Maximum Lawful
Rate or Maximum Lawful Amount permitted by applicable state or federal law,
and to prevent such an occurrence Lender and Borrower agree that all
amounts of interest, whenever contracted for, charged, or received by
Lender, with respect to the loan of money evidenced by this Note, shall be
spread, prorated, or allocated over the full period of time this Note is
unpaid, including the period of any renewal or extension of this Note. If
demand for payment of this Note is made by Lender prior to the full stated
term, the total amount of interest contracted for, charged, or received to
the time of such demand shall be spread, prorated, or allocated along with
any interest thereafter accruing over the full period of time that this
Note thereafter remains unpaid for the purpose of determining if such
interest exceeds the Maximum Lawful Amount.
(d) Excess Interest: At maturity (whether by acceleration or otherwise) or on
earlier final payment of this Note, Lender shall compute the total amount
of interest that has been contracted for, charged, or received by Lender or
payable by Borrower under this Note and compare such amount to the Maximum
Lawful Amount that could have been contracted for, charged, or received by
Lender. If such computation reflects that the total amount of interest that
has been contracted for, charged, or received by Lender or payable by
Borrower exceeds the Maximum Lawful Amount, then Lender shall apply such
excess to the reduction of the principal balance and not to the payment of
interest; or if such excess interest exceeds the unpaid principal balance,
such excess shall be refunded to Borrower. This provision concerning the
crediting or refund of excess interest shall control and take precedence
over all other agreements between Borrower and Lender so that under no
circumstances shall the total interest contracted for, charged, or received
by Lender exceed the Maximum Lawful Amount.
(e) Interest After Default: At Lender's option, the unpaid principal
balance shall bear interest after maturity (whether by acceleration or
otherwise) at the "Default Interest Rate." The Default Interest Rate
shall be, at Lender's option, (i) the Maximum Lawful Rate, if such
Maximum Lawful Rate is established by applicable law; or (ii) the
Interest Rate stated on the first page of this Note plus five (5)
percentage points, if no Maximum Lawful Rate is established by
applicable law; or (iii) eighteen percent (18%) per annum; or (iv) such
lesser rate of interest as Lender in its sole discretion may choose to
charge; but never more than the Maximum Lawful Rate or at a rate that
would cause the total interest contracted for, charged, or received by
Lender to exceed the Maximum Lawful Amount.
(f) Daily Computation of Interest: To the extent permitted by applicable
law, Lender at its option will calculate the per diem interest rate or
amount based on the actual number of days in the year (365 or 366, as
the case may be), and charge that per diem interest rate or amount each
day. In no event shall Lender compute the interest in a manner that
would cause Lender to contract for, charge, or receive interest that
would exceed the Maximum Lawful Rate or the Maximum Lawful Amount
2. DEFAULT PROVISIONS:
(a) EVENTS OF DEFAULT AND ACCELERATION OF MATURITY: LENDER MAY, AFTER
THIRTY (30) DAYS' WRITTEN NOTICE TO BORROWER AND BORROWER'S FAILURE TO
CURE WITHIN SUCH 30-DAY PERIOD AND WITHOUT FURTHER NOTICE OR DEMAND,
(except as otherwise required by statute), ACCELERATE THE MATURITY OF
THIS NOTE AND DECLARE THE ENTIRE UNPAID PRINCIPAL BALANCE AND ALL
ACCRUED INTEREST AT ONCE DUE AND PAYABLE IF:
(i) There is default in the payment of any installment of principal, interest,
or any other sum required to be paid under the terms of this Note or any of
the Loan Documents; or
(ii) There is a breach or default (other than by Lender, Prime Medical
Operating, Inc. or Prime Medical Services, Inc.) under this Note or any of
the Loan Documents, including any instrument securing the payment of this
Note or any loan agreement relating to the advance of loan proceeds.
(b) WAIVER BY BORROWER: EXCEPT AS PROVIDED IN PARAGRAPH 2(a) HEREOF AND IN
ANY OTHER LOAN DOCUMENT, BORROWER AND ALL OTHER PARTIES LIABLE FOR THIS
NOTE WAIVE, DEMAND, NOTICE OF INTENT TO DEMAND, PRESENTMENT FOR
PAYMENT, NOTICE OF NONPAYMENT, PROTEST, NOTICE OF PROTEST, GRACE,
NOTICE OF DISHONOR, NOTICE OF INTENT TO ACCELERATE MATURITY, NOTICE OF
ACCELERATION OF MATURITY, AND DILIGENCE IN COLLECTION. EACH MAKER,
SURETY, ENDORSER, AND GUARANTOR OF THIS NOTE WAIVES AND AGREES TO ONE
OR MORE EXTENSIONS FOR ANY PERIOD OR PERIODS OF TIME, AND ANY PARTIAL
PAYMENTS, BEFORE OR AFTER MATURITY, WITHOUT PREJUDICE TO THE HOLDER OF
THIS NOTE. EACH MAKER, SURETY, ENDORSER, AND GUARANTOR WAIVES NOTICE OF
ANY AND ALL RENEWALS, EXTENSIONS, REARRANGEMENTS, AND MODIFICATIONS OF
THIS NOTE.
(c) Non-Waiver by Lender: Any previous extension of time, forbearance,
failure to pursue some remedy, acceptance of late payments, or
acceptance of partial payment by Lender, before or after maturity, does
not constitute a waiver by Lender of its subsequent right to strictly
enforce the collection of this Note according to its terms.
(d) Other Remedies Not Required: Lender shall not be required to first file
suit, exhaust all remedies, or enforce its rights against any security in
order to enforce payment of this Note.
(e) Joint and Several Liability: Each Borrower who signs this Note, and all
of the other parties liable for the payment of this Note, such as
guarantors, endorsers, and sureties, are jointly and severally liable
for the payment of this Note.
(f) Attorney's Fees: If Lender requires the services of an attorney to
enforce the payment of this Note or the performance of the other Loan
Documents, or if this Note is collected through any lawsuit, probate,
bankruptcy, or other judicial proceeding, Borrower agrees to pay Lender
an amount equal to its reasonable attorney's fees and other collection
costs. This provision shall be limited by any applicable statutory
restrictions relating to the collection of attorney's fees.
3. MISCELLANEOUS PROVISIONS:
(a) Subsequent Holder: All references to Lender in this Note shall also refer
to any subsequent owner or holder of this Note by transfer, assignment,
endorsement, or otherwise.
(b) Transfer: Borrower acknowledges and agrees that Lender may transfer
this Note or partial interests in the Note to one or more transferees
or participants, including without limitation transfers provided for in
Section 8.10 of the Loan Agreement. Borrower authorizes Lender to
disseminate to any such transferee or participant or prospective
transferee or participant any information it has pertaining to the loan
evidenced by this Note, including, without limitation, credit
information on Borrower and any guarantor of this Note and any of the
type of information described in Section 8.10 of the Loan Agreement.
(c) Other Parties Liable: All promises, waivers, agreements, and conditions
applicable to Borrower shall likewise be applicable to and binding upon
any other parties primarily or secondarily liable for the payment of
this Note, including all guarantors, endorsers, and sureties.
(d) Successors and Assigns: The provisions of this Note shall be binding
upon and for the benefit of the successors, assigns, heirs, executors,
and administrators of Lender and Borrower.
(e) No Duty or Special Relationship: Borrower acknowledges that Lender has
no duty of good faith to Borrower, and Borrower acknowledges that no
fiduciary, trust, or other special relationship exists between Lender
and Borrower.
(f) Modifications: Any modifications agreed to by Lender relating to the
release of liability of any of the parties primarily or secondarily
liable for the payment of this Note, or relating to the release,
substitution, or subordination of all or part of the security for this
Note, shall in no way constitute a release of liability with respect to
the other parties or security not covered by such modification.
(g) Entire Agreement: Borrower warrants and represents that the Loan
Documents constitute the entire agreement between Borrower and Lender
with respect to the loan evidenced by this Note and agrees that no
modification, amendment, or additional agreement with respect to such
loan or the advancement of funds thereunder will be valid and
enforceable unless made in writing signed by both Borrower and Lender.
(h) Borrower's Address for Notice: All notices required to be sent by
Lender to Borrower shall be sent by U.S. Mail, postage prepaid, to
Borrower's Address for Notice stated on the first page of this Note,
until Lender shall receive written notification from Borrower of a new
address for notice.
(i) Lender's Address for Payment: All sums payable by Borrower to Lender
shall be paid at Lender's Address for Payment stated on the first page
of this Note, or at such other address as Lender shall designate from
time to time.
(j) Business Use: Borrower warrants and represents to Lender that the proceeds
of this Note will be used solely for business or commercial purposes, and
in no way will the proceeds be used for personal, family, or household
purposes.
(k) Chapter 15 Not Applicable: It is understood that Chapter 15 of the
Texas Credit Code relating to certain revolving credit loan accounts
and tri-party accounts is not applicable to this Note.
(l) APPLICABLE LAW: THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN TEXAS AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE
OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA APPLICABLE TO
TRANSACTIONS IN TEXAS.
4. LOAN DOCUMENTS:
(a) This Note.
(b) The Loan Agreement and the Loan Documents as defined therein.
(c) All other documents signed in connection with the Loan Agreement or the
loan evidenced by this Note, including, without limitation, that certain
Contribution Agreement, dated effective September 1, 1999, between and
among Borrower, Prime Medical Services, Inc., a Delaware corporation, Prime
Medical Operating, Inc., a Delaware corporation, Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company, Prime/BDEC Acquisition,
L.L.C., a Delaware limited liability company, Barnet Dulaney Eye Center,
P.L.L.C., an Arizona professional limited liability company, LASIK
Investors, L.L.C., a Delaware limited liability company, David D. Dulaney,
M.D., Ronald W. Barnet, M.D., and Mark Rosenberg (as amended by that
certain First Amendment to Contribution Agreement dated as of January 31,
2000, among the foregoing parties, the "Contribution Agreement") and each
Transaction Document (as such term is defined in the Contribution
Agreement).
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
PROMISSORY NOTE
EXECUTED as of the 31st day of January, 2000.
BORROWER:
PRIME REFRACTIVE, L.L.C., a Delaware limited liability company
By: /s/ Teena E. Belcik
Printed Name: Teena E. Belcik
Title: Treasurer
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 31st day of January, 2000, by and between Prime
Refractive Management, L.L.C., a Delaware limited liability company (the
"Secured Party") and LASIK Investors, L.L.C., a Delaware limited liability
company ("LASIK").
RECITALS:
A. LASIK and Secured Party have executed and delivered that certain
Contribution Agreement dated effective September 1, 1999, between and among
LASIK, Prime Medical Operating, Inc, a Delaware corporation, Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company, Prime Medical
Services, Inc., a Delaware corporation ("PMSI"), Prime/BDEC Acquisition, L.L.C.,
a Delaware limited liability company, Prime Refractive, L.L.C., a Delaware
limited liability company (the "Debtor"), Barnet Dulaney Eye Center, P.L.L.C.,
an Arizona professional limited liability company, David D. Dulaney, M.D.,
Ronald W. Barnet, M.D., and Mark Rosenberg (as amended by that certain First
Amendment to Contribution Agreement dated as of January 31, 2000, among the
foregoing parties, the "Contribution Agreement"), and Debtor and Secured Party
have executed and delivered that certain Loan Agreement, dated as of January 31,
2000 (the "Loan Agreement"), pursuant to which Secured Party agrees to make
certain loans to Debtor on the terms and subject to the conditions provided
therein.
B. Secured Party has requested that LASIK pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any
obligations arising under loans made pursuant to the Loan Agreement.
C. LASIK desires to enter into this Agreement as a material inducement to
Secured Party's extension of credit under the Loan Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which LASIK acknowledges, LASIK and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. LASIK hereby assigns, transfers, and
pledges to Secured Party, and LASIK hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Interest in Subsidiary. All ownership interests of LASIK in Debtor,
whether now existing or hereafter acquired and including, without limitation,
that certain 40% membership interest in Debtor;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
LASIK now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which LASIK is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which LASIK becomes
entitled to receive or shall receive as a result of its ownership of any other
Collateral: (i) any stock or other ownership certificate, including without
limitation, any certificate representing a stock dividend or any certificate in
connection with any recapitalization, reclassification, merger, consolidation,
conversion, sale of assets, combination, stock split, reverse stock split, or
spin-off; (ii) any option, warrant, subscription or right, whether as an
addition to or in substitution of any other Collateral; (iii) any dividends or
distributions of any kind whatsoever, whether distributable in cash, stock or
other property; (iv) any interest, premium or principal payments; and (v) any
conversion or redemption proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b) or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by LASIK to Secured Party
may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any other obligations) under and pursuant to the Loan Agreement and each
promissory note (collectively, the "Note") issued pursuant to the Loan
Agreement; and
(b) All liabilities and obligations of LASIK to Secured Party,
PMSI or any Prime Indemnified Parties (as defined in the Contribution Agreement)
under and pursuant to the Contribution Agreement or this Agreement.
1.3 Subordination. Liens created hereby are subordinate to liens in favor
of Lenders (as such term is defined in that certain Loan Agreement for a
$14,000,000 advancing term loan, entered into by Secured Party, Bank of America,
N.A., as administrative agent, BankBoston, N.A., as documentation agent and such
Lenders).
ARTICLE II
LASIK'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
LASIK hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. LASIK has good and marketable title to the
Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. LASIK has the lawful right, power, and authority
to grant the Security Interest in the Collateral. This Agreement, together with
all filings and other actions necessary or desirable to perfect and protect such
security interest, which have been duly taken, create a valid and perfected
first priority security interest in the Collateral securing the payment and
performance of the Obligations.
2.3 No Agreements. The Interests are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which LASIK or the issuer thereof is
bound. Except as expressly provided otherwise in the Contribution Agreement or
any Transaction Document (as therein defined), no restrictions or conditions
exist with respect to the transfer or voting of any securities pledged as
Collateral.
ARTICLE III
LASIK'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of LASIK. As of the date hereof, (i) LASIK is solvent;
(ii) the fair saleable value of LASIK's assets exceeds its liabilities (both
fixed and contingent); (iii) LASIK has sufficient capital to satisfy all of
LASIK's obligations as they become due; (iv) no receiver, trustee, or custodian
has been appointed for, or taken possession of, all or substantially all of the
assets of LASIK, either in a proceeding brought by LASIK or in a proceeding
brought against LASIK; (v) LASIK is not the subject of a petition for relief
under the United States Bankruptcy Code or any similar federal or state
insolvency law, including without limitation a petition filed by LASIK or a
petition filed by a third party seeking relief against LASIK; and (vi) LASIK has
no intention of filing a petition for relief under the United States Bankruptcy
Code or any similar federal or state insolvency law, or of seeking any other
form of creditor relief.
3.2 Authority and Compliance. LASIK has full power and authority to
enter into this Agreement. LASIK has full power and authority to enter into and
perform its obligations under each Other Agreement. No further consent or
approval is required as a condition to the validity of this Agreement or any
Other Agreement. LASIK is in compliance with all applicable laws, ordinances,
statutes, orders, regulations, judgments, writs, or decrees of any governmental
entity to which it is subject.
3.3 Binding Agreement. This Agreement and each Other Agreement
constitute valid and legally binding obligations of LASIK, in accordance with
their terms, subject to the applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of LASIK, threatened before any court or administrative agency which will or may
have a material adverse effect on the financial condition of LASIK or upon
LASIK's ability to perform its obligations under this Agreement or any Other
Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on LASIK or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement or any Other Agreement.
3.6 Ownership of Assets. LASIK has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. LASIK has filed all tax returns required to be filed by LASIK.
ARTICLE IV
LASIK'S COVENANTS WITH RESPECT TO COLLATERAL
LASIK covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, LASIK covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with LASIK's endorsement thereon and/or accompanied by proper
instruments of transfer and assignment duly executed in blank.
4.2 Further Assurances. LASIK will contemporaneously with the execution
hereof and from time to time thereafter at its expense promptly execute and
deliver all further instruments and documents and take all further action
necessary or appropriate or that Secured Party may request in order (i) to
perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by LASIK shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by LASIK, together with such instruments of transfer as Secured
Party may request, shall immediately be delivered to or deposited with Secured
Party and held by Secured Party as Collateral under the terms of this Agreement.
If the Additional Property received by LASIK and delivered to Secured Party
pursuant to this Section shall be shares of stock or other securities, such
shares of stock or other securities shall be duly endorsed in blank or
accompanied by proper instruments of transfer and assignment duly executed in
blank with, if requested by Secured Party, signatures guaranteed by a member or
member organization in good standing of an authorized Securities Transfer Agents
Medallion Program, all in form and substance satisfactory to Secured Party.
Secured Party shall be deemed to have possession of any Collateral in transit to
Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. LASIK will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither LASIK nor any person acting on LASIK's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
LASIK will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. LASIK will not transfer any voting
rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
LASIK will not consent to or approve of the issuance of (i) any additional
interests or shares of any class of securities of such issuer, (ii) any
instrument convertible voluntarily by the holder thereof or automatically upon
the occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities.
4.9 Restrictions on Securities. LASIK will not enter into any agreement
creating, or otherwise permit to exist, any restriction or condition upon the
transfer, voting or control of any securities pledged as Collateral, except as
consented to in writing by Secured Party. As to any securities pledged as
collateral, LASIK will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Interests unless consented to in writing by Secured
Party.
ARTICLE V
LASIK'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, LASIK covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against LASIK and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on LASIK's
financial condition.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, LASIK covenants and
agrees that LASIK will not, without the prior written consent of Secured Party
grant, suffer, or permit liens on, or security interests in, the Collateral.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Loan Agreement or any Note (including, without limitation,
principal, interest and fees due thereunder) within ten (10) calendar days after
such amount is due;
(b) The failure of LASIK to pay any Obligation described in
Section 1.2(b) within ten (10) calendar days after such amount is due (and, if
applicable under the terms of any contractual agreement creating or governing
such Obligation, after the expiration of any cure period expressly required);
(c) LASIK's breach of a covenant in this Agreement;
(d) Any representation or warranty made by LASIK in this Agreement shall be
false or materially misleading, as determined in the reasonable discretion of
Secured Party;
(e) Any event of default shall occur under the terms of the
Loan Agreement and shall not be cured within the time expressly provided for
with respect thereto in the Loan Agreement;
(f) If LASIK or Debtor, or any other party obligated to pay
any portion of the Obligations: (i) becomes insolvent, or makes a transfer in
fraud of creditors, or makes an assignment for the benefit of creditors, or
admits in writing its inability to pay its debts as they become due; (ii)
generally is not paying its debts as such debts become due and Secured Party, in
good faith, determines that such event or condition could lead to a material
impairment of the Collateral, or any part thereof, or of any other payment
security for any of the Obligations; (iii) has a receiver, trustee or custodian
appointed for, or take possession of, all or substantially all of the assets of
such party or any of the Collateral, either in a proceeding brought by such
party or in a proceeding brought against such party and such appointment is not
discharged or such possession is not terminated within sixty (60) days after the
effective date thereof or such party consents to or acquiesces in such
appointment or possession; (iv) files a petition for relief under the United
States Bankruptcy Code or any other present or future federal or state
insolvency, bankruptcy or similar laws (all of the foregoing hereinafter
collectively called "Applicable Bankruptcy Law") or an involuntary petition for
relief is filed against such party under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days after the filing
thereof, or an order for relief naming such party is entered under any
Applicable Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is requested
or consented to by such party; (v) fails to have discharged within a period of
sixty (60) days any attachment, sequestration or similar writ levied upon, or
any claim against or affecting, any property of such party; or (vi) fails to pay
within ninety (90) days any final money judgment against such party; or
(g) The issuer of any securities constituting Collateral files
a petition for relief under any Applicable Bankruptcy Law, an involuntary
petition for relief is filed against any such issuer under any Applicable
Bankruptcy Law and such involuntary petition is not dismissed within thirty (30)
days after the filing thereof, or an order for relief naming any such issuer is
entered under any Applicable Bankruptcy Law.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of LASIK, either in Secured Party's own right or in the name of LASIK
and in the same manner and to the same extent that LASIK might reasonably so act
if this Agreement had not been made: (i) do all things requisite, convenient, or
necessary to enforce the performance and observance of all rights, remedies and
privileges of LASIK arising from the Collateral, or any part thereof, including
without limitation compromising, waiving, excusing, or in any manner releasing
or discharging any obligation of any party to or arising from the Collateral;
(ii) take possession of the books, papers, chattel paper, documents of title,
and accounts of LASIK, wherever located, relating to the Collateral; (iii) sue
or otherwise collect and receive money attributable to the Collateral; and (iv)
exercise any other lawfully available powers or remedies, and do all other
things which Secured Party deems requisite, convenient or necessary or which the
Secured Party deems proper to protect the Security Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (LASIK hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as LASIK's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against LASIK and all
persons and corporations lawfully claiming by or through or under LASIK. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in any type of offering which complies with, or is exempt from the
registration requirements of, the Securities Act of 1933, and no sale so made in
good faith by Secured Party shall be deemed to be not "commercially reasonable"
because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Contribution Agreement, the
Loan Agreement or any Note; (d) then, to or among the amounts of fees, interest
and principal then owing and unpaid in respect of the Obligations, in such
priority as Secured Party may determine in its discretion; and (e) the remainder
of such proceeds, if any, shall be paid to LASIK. If such proceeds shall be
insufficient to discharge the entire Obligations, Secured Party shall have any
other available legal recourse against LASIK under, or for the performance of,
the Contribution Agreement, the Loan Agreement and any Note, for the deficiency,
together with interest thereon at the maximum rate permitted under applicable
law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of LASIK, in respect to any of the Collateral or agreements pertaining
thereto.
8.2 Secured Party Appointed Attorney-in-Fact. LASIK hereby appoints
Secured Party as attorney-in-fact of LASIK, with full authority in the place and
stead of LASIK and in the name of LASIK, Secured Party or otherwise, from time
to time on Secured Party's discretion and upon the occurrence of an Event of
Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If LASIK fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by LASIK under Section 8.8. In
no event, however, shall Secured Party have any obligation or duties whatsoever
to perform any covenant or agreement of LASIK contained herein, and any such
performance by Secured Party shall be wholly discretionary with Secured Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of LASIK arising in connection with the
Collateral assigned hereunder or otherwise bind Secured Party to the performance
of any obligations respecting the Collateral, it being expressly understood that
Secured Party shall not be obligated to perform, observe, or discharge any
obligation, responsibility, duty, or liability of LASIK in respect of any of the
Collateral, including without limitation appearing in or defending any action,
expending any money or incurring any expense in connection therewith. TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, LASIK SHALL AND DOES AGREE TO
INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY AND ITS SUBSIDIARIES,
AND EACH OF THEIR OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES,
LENDERS, SUCCESSORS AND ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS,
DAMAGES, LOSSES, FINES, PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND
EXPENSES (INCLUDING COURT COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF
ANY NATURE, KIND OR DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY,
ARISING OUT OF, CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY ACT OR
OMISSION OF SECURED PARTY, OR ANYONE ACTING ON BEHALF OF SECURED PARTY, IN
CONNECTION WITH THE COLLATERAL, INCLUDING WITHOUT LIMITATION ANY MARKET
FLUCTUATIONS IN THE COLLATERAL AS A RESULT OF SECURED PARTY'S SALE OF, OR
FAILURE TO SELL, THE INTERESTS AT ANY PARTICULAR TIME WHEN IT HAS THE RIGHT TO
DO SO. THE FOREGOING INDEMNITY SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of LASIK, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If LASIK shall
fail to perform any of the covenants, conditions and agreements required to be
performed and observed by LASIK under any Other Agreement, or in respect of the
Collateral (subject to any applicable default cure period), Secured Party (a)
may but shall not be obligated to take any action Secured Party deems necessary
or desirable to prevent or remedy any such default by LASIK or otherwise to
protect the Security Interest, and (b) shall have the absolute and immediate
right to take possession of the Collateral or any part thereof (to the extent
Secured Party has not previously taken possession) to such extent and as often
as the Secured Party, in its sole discretion, deems necessary or desirable in
order to prevent or to cure any such default by LASIK, or otherwise to protect
the security of this Agreement. Secured Party may advance or expend such sums of
money for the account of LASIK as Secured Party in its sole discretion deems
necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned.
8.9. Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.10 LASIK's Waivers. LASIK waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.11 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. LASIK waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
LASIK agrees that Secured Party shall have no duty or obligation to LASIK to
apply to the Obligations any such other security or proceeds thereof.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to LASIK their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
LASIK: LASIK Investors, L.L.C.
4800 North 22nd Street
Phoenix, Arizona 85016
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of LASIK if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of LASIK.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by LASIK shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by LASIK shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and LASIK shall be closed at any time, shall
be equally applicable to any new transactions thereafter.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. LASIK acknowledges that Secured Party intends to make a
collateral assignment of its rights under this Agreement for the benefit of one
or more of its lenders. LASIK may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE LOAN AGREEMENT, THE NOTE AND
THE CONTRIBUTION AGREEMENT (AND THE OTHER AGREEMENTS CONTEMPLATED THEREIN)
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED as of this 31st day of January, 2000.
DEBTOR: LASIK Investors, L.L.C.
By: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
SECURED PARTY: Prime Refractive Management, L.L.C.
By:/s/ Cheryl Williams
Name: Cheryl Williams
Title: Chief Financial Officer
LIMITED LIABILITY COMPANY AGREEMENT
OF PRIME REFRACTIVE, L.L.C.
Organized under the Delaware Limited Liability Company Act (the "Act").
ARTICLE I.
NAME AND LOCATION
Section 1.1. Name. The name of this limited liability company is Prime
Refractive, L.L.C. (the "Company").
Section 1.2. Members. The only members of the Company upon the
execution of this Limited Liability Company Agreement (this "Agreement") shall
be Prime Refractive Management, L.L.C., a Delaware limited liability company
("Prime Management"), and LASIK Investors L.L.C., a Delaware limited liability
company ("LASIK"). LASIK acknowledges and agrees that it initially owned all of
the outstanding membership interests of the Company and that Prime Management
acquired its membership interest in the Company from LASIK. For purposes of this
Agreement, the "Members" shall include such named members and any new members
admitted pursuant to the terms of this Agreement, 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 1301 Capital of Texas Hwy., Suite C-300, Austin, Texas 78746-6550, 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
Certificate of Formation of the Company are:
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
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.
Section 1.6 Contribution Agreement. The Company was initially formed
with a single member, LASIK, in connection with the transactions contemplated by
that certain Contribution Agreement dated effective September 1, 1999, by and
among Prime Medical Operating, Inc., a Delaware corporation ("PMOI"), Prime
Medical Services, Inc., a Delaware corporation ("PMSI"), LASIK, Barnet Dulaney
Eye Center, P.L.L.C., an Arizona professional limited liability company, the
Company, Prime Management, Prime/BDEC Acquisition, L.L.C., a Delaware limited
liability company, Prime/BDR Acquisition, L.L.C., a Delaware limited liability
company, David D. Dulaney, M.D., Ronald W. Barnet, M.D., and Mark Rosenberg (as
amended by that certain First Amendment to Contribution Agreement dated as of
January 31, 2000, among the foregoing parties, the "Contribution Agreement").
This agreement supercedes and replaces any prior membership agreement or other
governing or organizational document of the Company.
ARTICLE II.
MEMBERSHIP
Section 2.1. Members' Interests. The "Membership Interest" of each Member
is set forth on Exhibit A.
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, this
Agreement 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, (i) the Membership Interests of Prime Management
may be freely transferred, without consent, to any entity that is then owned or
controlled, directly or indirectly, by PMSI (or its successor in interest), (ii)
the Membership Interests of any Member may be freely assigned, pledged or
otherwise transferred, without consent, to secure any debt, liability or
obligation owed to PMOI or its subsidiaries or affiliates by the Company, any
Member or any entity affiliated with the Company, (iii) the Membership Interests
of any Member may be freely assigned, pledged or otherwise transferred, without
consent, in favor of the Lender(s) under, or by the Lender(s) as a result of the
enforcement of any security interest arising pursuant to, that certain Senior
Credit Facility of PMSI (as amended) or pursuant to that certain $14,000,000
Credit Facility of Prime Management (as amended), (iv) the Membership Interests
of any Member may be freely transferred, without consent, pursuant to and in
accordance with the express terms and conditions of the Contribution Agreement,
and (iv) the pledge by LASIK (pursuant to Section 6.3 of the Contribution
Agreement) of its right to receive distributions from the Company in respect of
its Membership Interest shall not be deemed to violate any provision of this
Agreement..
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
Delaware 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 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 Act, the Certificate of Formation or this Limited Liability
Company Agreement. 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 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
Except for each Member's initial capital contribution made in
connection with the formation of the Company, no capital contributions shall be
required of any Member without the approval of all the Members to raise
additional capital, and only then proportionately as to each Member.
ARTICLE V.
DISTRIBUTION TO MEMBERS
The Company shall not distribute (or allow to be distributed) to its
members, with respect to their respective membership interests, any cash or
other property of the Company or its subsidiaries if, at the time of the
proposed distribution, any amounts (whether principal or interest) are
outstanding under the Credit Documents or the Target Center Lending Documents
(as such terms are defined in the Contribution Agreement). Furthermore, the
Company shall pay all available cash flow in payment of the Company's
outstanding obligations, if any, under the Working Capital Line and Development
Facility (as such terms are defined in the Contribution Agreement), irrespective
of whether such payments exceed the minimum required payments under the Working
Capital Line and Development Facility. For purposes of allocating such payments
among any two or more of such outstanding obligations, such payments shall be
allocated pro rata, based upon the respective balances of such obligations,
unless (i) a greater portion of the payment is required to be paid toward a
given obligation in order to prevent a default with respect to that obligation
(but only to the extent necessary to prevent such a default) or (ii) eighty
percent (80%) of the managers of the Company elect to allocate the payments in a
different manner.
Notwithstanding the foregoing, as long as no party other than PMSI or
PMOI is in default under the Contribution Agreement or any other Transaction
Document (as defined in the Contribution Agreement, but excluding, however, the
Credit Documents and the Target Center Lending Documents), then, to the extent
that (but only to the extent that) the Company possesses the cash flow necessary
(in the reasonable discretion of a majority of its managers) to pay its
liabilities in the ordinary course consistent with past practices, the Company
agrees to make quarterly estimates of its taxable income for the current tax
year and, if not prohibited by law, distribute quarterly (the "Quarterly
Distributions") an amount that would cover the federal and state income taxes
required to be paid by its members with respect such taxable income, based on
each member's then current proportionate interest in the Company, assuming that
all members pay income taxes on the Company's taxable earnings at a rate equal
to the highest effective individual tax rate in effect from time to time (the
"Assumed Tax Rate"); provided, further, that the Company shall determine its
actual taxable income at the end of each taxable year and (A) if the Quarterly
Distributions in a given year should have been higher based on the amount of
actual taxable income for that year, promptly distribute the amounts necessary
to eliminate such deficiency or (B) if the Quarterly Distributions in a given
year should have been lower based on the amount of actual taxable income for
that year, withhold dollar for dollar from the first following Quarterly
Distribution, and then against subsequent Quarterly Distributions in a like
manner, the amounts necessary to eliminate such surplus.
Subject to the foregoing, the Managers shall determine, in their sole
discretion, the amount and timing of all distributions from the Company.
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. In no event may the Company make a
distribution to its Members if, 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 creditors is limited to specified property of the Company, exceed the fair
value of the Company's 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. Except as contemplated in this Article V, no
distributions of cash or other assets of the Company shall be made to the
Members in their capacity as owners of the Company.
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.
ARTICLE VII.
DISSOLUTION AND WINDING UP
Section 7.1. Dissolution. Notwithstanding any provision of the Act, the
Company shall be dissolved only upon the first of the following to occur:
(a) Forty (40) years from the date of filing the Certificate of
Formation of the Company;
(b) Written consent of all the then current 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 7.1(c) of this Article VII., in the event of dissolution of the Company,
the Managers (excluding any Manager(s) holding office pursuant to designation by
a Member subject to bankruptcy proceedings) 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; and
(b) The balance, if any, shall be divided between the Members in
accordance with the Members' Membership Interests.
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 Ken Shifrin, Teena Belcik, and Brad Hummel, (as the initial Manager
designees of Prime Management), David D. Dulaney, M.D., and Ronald W. Barnet,
M.D. (as the initial Manager designees of LASIK). Thereafter, for so long as
there are five (5) Managers, (a) Prime Management shall be entitled to designate
three (3) of the Managers; and (b) LASIK shall be entitled to designate the
remaining two (2) of the Managers. Notwithstanding the foregoing, a Member shall
not be entitled to designate any Manager unless its Membership Interest: (x) has
not (other than as allowed under Section 2.5 of this Agreement) been
transferred, repurchased, assigned, pledged, hypothecated or in any way
alienated; and (y) equals or exceeds forty percent (40%) of the aggregate
Membership Interests; provided, however, that if the immediately preceding
subsection (y) shall apply to LASIK solely because of an exercise by LASIK of
its put rights under Section 9.8 of the Contribution Agreement, then LASIK
shall, unless and until there is an additional decrease in it Membership
Interest other than pursuant to Section 9.8 of the Contribution Agreement, be
entitled to designate only one Manager in the manner provided above. 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 their resignation or removal pursuant to Section 8.2 or
8.3 of this Article VIII. Managers need not be residents of the State of
Delaware 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. The Member who designated a resigning manager
shall be entitled to designate the successor thereto and all Members agree to
take such action as may be necessary to cause the election of all such successor
Managers.
Section 8.3. Removal of Managers. Any Manager may be removed, for or
without cause, at any time, but only by the Member who designated such Manager,
upon the written notice to all Members. The Member who designated such removed
Manager shall be entitled to designate the successor thereto and all Members
agree to take such action as may be necessary to cause the election of all such
successor Managers.
Section 8.4. General Powers. The business of the Company shall be
managed by its Managers, which may, by the vote or written consent in accordance
with this Agreement, 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 Certificate of
Formation or this Limited Liability Company Agreement 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
Delaware.
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.
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 four (4) 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 Contribution Agreement, the Certificate of Formation or
this Agreement. 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.
Notwithstanding any voting, quorum, or other provisions of this Agreement to the
contrary, the affirmative vote of at least four (4) Managers shall be required
to effect any of the following actions:
(a) any amendment, modification or waiver of any provision of the
Company's Certificate of Formation or this Agreement;
(b) effecting any mergers, consolidations or combinations of the
Company with other entities;
(c) dissolving, liquidating, or filing bankruptcy or seeking
relief under any debtor relief law;
(d) entering into a transaction or other action with a Member or
Manager;
(e) borrowing or incurring any indebtedness, other than open
accounts payable to unaffiliated third parties, or granting any
collateral or security (by way of guaranty or otherwise) for any
indebtedness or obligation, that exceeds (in any single transaction or
directly related series of transactions) $25,000;
(f) purchasing or leasing assets or property, or entering into
any contract or obligation, which obligates the Company to pay in
excess of $25,000 in one or any directly related series of
installments;
(g) selling, leasing or otherwise transferring substantially all
of the Company's assets other than in the ordinary course of the
Company's business;
(h) except as expressly set forth in Section 9.12 of the
Contribution Agreement, allocating to the Company any costs or expenses
that are paid or incurred by any Member or its affiliates (excluding
the Company), or paid by the Company but reimbursable by any Member or
its affiliates (excluding the Company), in each instance;
(i) issuance of any ownership interest in the Company; and
(j) disposition, sale, assignment or other transfer by the
Company of any interest it owns in the Company, except that such
interest may be extinguished without the approval required under this
Section.
Section 8.10. Committees. The Managers may, by resolution passed by
eighty percent (80%) of the Managers, designate committees, each committee to
consist of two or more Managers (at least one of which must be a Manager
designee of Prime Management and one of which must be a Manager designee of
LASIK), 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 provide, by unanimous approval, that any one or more of the
Managers shall not be compensated, and may, by unanimous approval, fix any
compensation (which may include expenses) they elect to pay to any one or more
of the Managers.
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 Certificate of
Formation and this Limited Liability Company Agreement.
ARTICLE IX.
NOTICES
Section 9.1. Form of Notice. Whenever under the provisions of the Act,
the Certificate of Formation or this Limited Liability Company Agreement 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 Certificate
of Formation or this Limited Liability Company Agreement, 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
Any Manager may also serve as an officer 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: Ken Shifrin, Chairman of the Board; Joe Jenkins, M.D.,
President; Cheryl Williams, Vice President, Secretary and Chief Financial
Officer; and Mark Rosenberg, 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 Delaware Limited
Liability Company Act, and any successor statute, as amended from time-to-time.
ARTICLE XI.
INDEMNITY
Section 11.1. Indemnification. The Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action, suit
or proceeding and any inquiry or investigation that could lead to such an
action, suit or proceeding (whether or not by or in the right of the Company),
by reason of the fact that such person is or was a manager, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
director, manager, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another corporation, employee benefit plan,
other enterprise, or other entity, against all judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses (including
attorneys' fees and court costs) actually and reasonably incurred by him in
connection with such action, suit or proceeding to the fullest extent permitted
by any applicable law, and such indemnity shall inure to the benefit of the
heirs, executors and administrators of any such person so indemnified pursuant
to this Article XI. The right to indemnification under this Article XI shall be
a contract right and shall not be deemed exclusive of any other right to which
those seeking indemnification may be entitled under any law, bylaw, agreement,
vote of members or disinterested managers or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. Any repeal or amendment of this Article XI by the Members of the Company
or by changes in applicable law shall, to the extent permitted by applicable
law, be prospective only, and shall not adversely affect the indemnification of
any person who may be indemnified at the time of such repeal or amendment.
Section 11.2. Indemnification Not Exclusive. The rights of
indemnification and reimbursement provided for in 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 Certificate of Formation, this
Limited Liability Company Agreement, agreement or vote of Members, or as a
matter of law or otherwise.
Section 11.3. Other Indemnification Clauses. Notwithstanding the
foregoing, this Article XI shall not be construed to contradict the
indemnification provision of the Contribution Agreement. Notwithstanding
anything contained herein, this Article XI shall be ineffectual and shall not
permit or require indemnification for all, or any, losses, costs, liabilities,
claims or expenses arising, directly or indirectly, from any action or omission
permitting or requiring indemnification under the Contribution Agreement; and in
no event may any indemnity be allowed under this Agreement or pursuant to any
provision of the Act for an amount paid or payable pursuant to the
indemnification provisions of the Contribution Agreement.
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 Certificate of Formation and Limited Liability
Company Agreement 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.
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 Managers 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.
Section 12.9. Binding Arbitration. Any controversy between the parties
regarding this Agreement and any claims arising out of this Agreement or its
breach shall be submitted to arbitration by either party. The arbitration
proceedings shall be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration shall
be conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
ARTICLE XIII.
AMENDMENTS
Section 13.1. Amendments. This Agreement may be altered, amended or
repealed and a new limited liability company agreement may be adopted, only in
accordance with the provisions of Section 8.9, but otherwise at any regular
meeting or at any special meeting called for that purpose, or by execution of a
written consent in accordance with the provisions of Section 3.8.
Section 13.2. When Limited Liability Company Agreement Silent. It is
expressly recognized that when the Limited Liability Company Agreement is 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.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
LIMITED LIABILITY COMPANY AGREEMENT
IN WITNESS WHEREOF, the undersigned Members hereby adopt this Limited
Liability Company Agreement as the Limited Liability Company Agreement of the
Company, effective as of the 1st day of September, 1999.
LASIK Investors, L.L.C.
By: /s/ Ronald W. Barnet, M.D.
Ronald W. Barnet, M.D., manager
By: /s/ David D. Dulaney, M.D.
David D. Dulaney, M.D., manager
Prime Refractive Management, L.L.C.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Chief Financial Officer
<PAGE>
EXHIBIT A
OWNERSHIP INTERESTS
Name Ownership Percentage
Prime Management 60%
LASIK 40%
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Bradley J. Wojcik and Holly M.
Wojcik, individuals residing in Granite Bay, California, and shareholders of the
Company (individually and collectively referred to as "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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 16,487 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-10 and C-57 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $187,010.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Bradley J. and Holly M. Wojcik
8605 Woodrock Way
Granite Bay, California 95746
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Bradley J. Wojcik
Printed Name: Bradley J. Wojcik
Signature: /s/ Holly M. Wojcik
Printed Name: Holly M. Wojcik
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and BT Alex Brown,
Inc., Custodian for the benefit of Stephen G. Turner, Rollover - IRA dated
February 10, 1997, a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 97,628 authorized and issued shares of the Company's $0.01 par
value common stock presently owned by Seller and evidenced by stock certificate
number C-58 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $1,614,863.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: BT Alex Brown, Inc., Custodian for the benefit
of Stephen G. Turner, Roth - IRA
dated February 10, 1997
Seneca Capital Management
909 Montgomery Street, #500
San Francisco, California 94133
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ BT Alex Brown c/4
Stephen G. Turner IRA
E. Darlene Lewis, POA VP
Printed Name: E. Darlene Lewis
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and K.J. Townsend and
E. Townsend, Trustees under The Townsend Trust dated Ausgust 30, 1995,
individuals residing in Roseville, California, and shareholders of the Company
("collectively and indivually referred to as "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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 13,987 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-8 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $158,652.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: K.J. Townsend and E. Townsend, Trustees
The Townsend Trust dated August 30, 1995
7281 Acorn Glenn Loop
Roseville, California 95747-8156
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature:/s/ K.J. Townsend
Printed Name: K.J. Townsend, Trustee under The
Townsend Trust dated August 30, 1995
Company: Horizon Vision Center, Inc.
By:/s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Beatrice Sandler,
Trustee under the Beatrice Sandler Trust, and shareholder of the Company
(collectively referred to as "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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 25,000 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-12 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $283,571.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Beatrice Sandler
Trustee, Beatrice Sandler Trust
18607 Aceituno Street
San Diego, California 92128
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Beatrice Sandler
Printed Name: Beatrice Sandler
Trustee, Beatrice Sandler Trust
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and James Douglas Reed, an individual
residing in Folsom, California, and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,763 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-73 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,997.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: James Douglas Reed
157 Cascade Falls Drive
Folsom, California 95630
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
S-2
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ James Douglas Reed
Printed Name: James Douglas Reed
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Elizabeth Jeane Reed, an
individual residing in Folsom, California, and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,763 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-74 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,997.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Elizabeth Jean Reed
157 Cascade Falls Drive
Folsom, California 95630
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Elizabeth Jeane Reed
Printed Name: Elizabeth Jeane Reed
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Panda Investments, LLC, a
shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 16,458 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-11 and C-54 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $186,681.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Panda Investments, LLC
P.O. Box 560
Carmichael, California 95609-0560
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Panda Investments, LLC by OR
(per authorization of Trustees)
Printed Name: Panda Investments, LLC
Omer Rains
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name:David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By:/s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Carter Nice, an individual
residing in Sacramento, California and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 15,000 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-7 and C-53 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $170,143.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Carter Nice
7729 Rio Barco Way
Sacramento, California 95831
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Carter Nice
Printed Name: Carter Nice
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and C.G. Neff, Jr., an individual
residing in Zephyr Cove, Nevada and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 5,000 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-6 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $56,714.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: C.G. Neff, Jr.
600 Highway 50, Pinewild Unit 127
Zephyr Cove, Nevada 89448
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ C.G. Neff, Jr.
Printed Name: C.G. Neff, Jr.
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Frank T. Moormand and Luthera R.
Moorman, individuals residing in Sacramento, California, shareholders of the
Company (collectively and individually referred to as "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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 16,438 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-5 and C-52 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $186,454.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Frank T. or Luthera R. Moorman
3324 Club Lane
Sacramento, California 95821
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Frank T. Moormand
Printed Name: Frank T. Moormand
Signature: /s/ Luthera R. Moormand
Printed Name: Luthera R. Moormand
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Kenneth V. Miselis, an individual
residing in Stockton, California and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 27,811 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-15 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $315,456 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Kenneth V. Miselis, M.D.
5762 Acorn Court
Stockton, California 95212
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Kenneth V. Miselis, M.D.
Printed Name: Kenneth V. Miselis, M.D.
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Wayne L. Marsh and Barbara K.
Koerner, individuals residing in Sacramento, California, shareholders of the
Company (collectively and individually referred to as "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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 14,030 authorized and issued shares of the Company's $0.01 par
value common stock presently owned by Seller and evidenced by stock certificate
number C-9 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $159,140.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Wayne L. Marsh and Barbara K. Koener
2840 Echo Way
Sacramento, California 95821
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Wayne L. Marsh
Printed Name: Wayne L. Marsh
Signature: /s/ Barbara K. Koerne
Printed Name: Barbara K. Koerne
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title:President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Sandra E. and Mark
R. Mandel, Trustees under Trust Agreement dated April 12, 1989, and shareholders
of the Company (collectively and individually referred to as "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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 13,942 authorized and issued shares of the Company's $0.01 par
value common stock presently owned by Seller and evidenced by stock certificate
number C-20 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $158,142.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Sandra E. Mandel and Mark R. Mandel
Trustees under Trust Agreement dated
April 12, 1989
680 Brewer Road
Hillsborough, California 94010
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Sandra E. Mandel
Printed Name: Sandra E. Mandel, Trustees under
Trust Agreement dated April 12, 1989
Signature: /s/ Mark R. Mandel
Printed Name:Mark R. Mandel, Trustees under
Trust Agreement dated April 12, 1989
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Scott B. Lee, an individual
residing in Winters, California, and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 14,000 authorized and issued shares of the Company's $0.01 par
value common stock presently owned by Seller and evidenced by stock certificate
number C-4 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $158,800.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Scott B. Lee
26090 Country Road 34
Winters, California 95694
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
S-2
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Scott B. Lee
Printed Name: Scott B. Lee
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By:/s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Jill G. Kennedy, an individual
residing in Provo, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 14,352 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-14 and C-89 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $162,793.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Jill G. Kennedy
1385 Yale Avenue
Salt Lake City, Utah 84105
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Jill G. Kennedy
Printed Name: Jill G. Kennedy
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Laura G. Kennedy, an individual
residing in Farmington, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-79 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Laura G. Kennedy
465 W. Honey Bee Circle
Farmington, Utah 84025
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature:/s/ Laura G. Kennedy
Printed Name: Laura G. Kennedy
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and John Paul Kennedy, an individual
residing in Farmington, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-80 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: John Paul Kennedy
465 W. Honey Bee Circle
Farmington, Utah 84025
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ John Paul Kennedy
Printed Name: John Paul Kennedy
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Robert P. Kennedy,
an individual residing in Farmington, Utah and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-81 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Robert P. Kennedy
465 W. Honey Bee Circle
Farmington, Utah 84025
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Laura Kennedy
Printed Name: Laura Kennedy, Parent Guardian for
Robert P. Kennedy, a Minor, Age 1 Year
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Robert J. Hardy,
M.D., Inc., Profit Sharing Plan and Trust, a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 25,000 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-3 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $283,571.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: [INSERT SELLER'S ADDRESS]
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Robert J. Hardy, M.D.
Printed Name: Robert J. Hardy, M.D., Trustee,
Robert J. Hardy, M.D., Inc., Profit Sharing
Plan and Trust
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and David S. Grodin, an individual
residing in San Leandro, California and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 7,576 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-61 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $85,933.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: David S. Grodin
15134 Andover Street
San Leandro, California 94579
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ David S. Grodin
Printed Name: David S. Grodin
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and John Benjamin
Griffin, an individual residing in Provo, Utah and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-99 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: John Benjamin Griffin
3018 North Comanche Lane
Provo, Utah 84604
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature:/s/John R. Griffin
Printed Name: John R. Griffin, Parent Guardian for
John Benjamin Griffin, A Minor, Age 1 week
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Katherine Griffin,
an individual residing in Provo, Utah and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-78 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Katherine Griffin
1110 East 300 South
Provo, Utah 84606
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ John R. Griffin
Printed Name: John R. Griffin, Parent Guardian for
Katherine Griffin, a Minor, Age 3 Years
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and John R. Griffin, an individual
residing in Provo, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-75 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: John R. Griffin
3018 North Comanche Lane
Provo, Utah 84604
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ John R. Griffin
Printed Name: John R. Griffin
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Jill C. Griffin, an individual
residing in Provo, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-76 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Jill C. Griffin
3018 North Comanche Lane
Provo, Utah 84604
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Jill C. Griffin
Printed Name: Jill C. Griffin
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and David M. Griffin, an individual
residing in Provo, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-84 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: David M. Griffin
1110 East 300 South
Provo, Utah 84606
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ David M. Griffin
Printed Name: David M. Griffin
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Craig S. Griffin, an individual
residing in Provo, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-87 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Craig S. Griffin
c/o John R. Griffin
3018 North Comanche Lane
Provo, Utah 84604
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Craig S. Griffin
Printed Name: Craig S. Griffin
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Craig S. Griffin, an individual
residing in Provo, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-87 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Craig S. Griffin
c/o John R. Griffin
3018 North Comanche Lane
Provo, Utah 84604
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Craig S. Griffin
Printed Name: Craig S. Griffin
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Jolie M. Griffin, an individual
residing in Coralville, Iowa and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-83 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Jolie M. Griffin
2315 Mulberry Street, #4
Coralville, Iowa 52241
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Jolie M. Griffin
Printed Name: Jolie M. Griffin
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Jasmine Griffin,
an individual residing in Provo, Utah and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par
value common stock presently owned by Seller and evidenced by stock certificate
number C-77 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $19,986.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Jasmine Griffin
1110 East 300 South
Provo, Utah 84606
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ John R. Griffin
Printed Name: John R. Griffin, Parent Guardian for
Jasmine Griffin, a Minor, Age 5 Years
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Benjamin R.
Griffin, an individual residing in Provo, Utah and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-86 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Benjamin Griffin
1110 E. 300 South
Provo, Utah 84606
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ David M. Griffin
Printed Name: David M. Griffin, Parent Guardian for
Benjamin R.Griffin, A Minor, Age 1 Year
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Rebekah S. Griffin, an individual
residing in Provo, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 1,762 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-85 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $19,986.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Rebekah S. Griffin
1110 East 300 South
Provo, Utah 84606
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Rebekah S. Griffin
Printed Name: Rebekah S. Griffin
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name:Rebekah S. Griffin
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and the Griffin
Charitable Remainder Trust, a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 39,951 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-92 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $453,158.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: J. Robert Griffin, Trustee under the
Griffin Charitable Remainder
4913 Puma Way
Carmichael, California 95608
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ J. Robert Griffin, Trustee
Printed Name: J. Robert Griffin, Trustee under the
Griffin Charitable Remainder Trust
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and J. Robert Griffin,
Trustee under the Griffin & Reed, a Medical Corporation, 401 (k) Profit Sharing
Plan, a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 65,819 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-2 and C-50 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $746,576.00 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: J. Robert Griffin, Trustee under the
Griffin & Reed, a Medical Corporation,
401(k) Profit Sharing Plan
651 Fulton Avenue
Sacramento, California 95825
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ J. Robert Griffin, Trustee
Printed Name: J. Robert Griffin, Trustee under the
Griffin & Reed, A Medical Corporation,
401(k) Profit Sharing Plan
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Michael Rex Favero, D.M.D., an
individual residing in Sacramento, California and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 25,000 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-1 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $283,571.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Michael Rex Favero, D.M.D.
2237 Park Towne Circle
Sacramento, California 95825
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature:/s/ Michael Rex Favero, D.M.D.
Printed Name: Michael Rex Favero, D.M.D.
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Joyce C. Elhard, an individual
residing in Mokelumne Hill, California and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 11,363 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-62 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $128,889.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Joyce C. Elhard
18998 Penny Way
Mokelumne Hill, California 95245
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Joyce C. Elhard
Printed Name: Joyce C. Elhard
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Donna L. Davis, an individual
residing in Hayward, California and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 30,518 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-48 and C-68 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $346,161 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Donna L. Davis
27336 Greenhaven Road
Hayward, California 94542-1440
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
S-2
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Donna L. Davis
Printed Name: Donna L. Davis
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and David B. Davis, M.D., an
individual residing in Hayward, California and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 30,517 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-49 and C-67 (collectively, including such shares of common stock, the "Capital
Stock"). The purchase price for the Capital Stock shall be $346,150 (the
"Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: David B. Davis II, M.D.
1237 B Street
Hayward, CA 94541-2915
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ David B. Davis, M.D.
Printed Name: David B. Davis, M.D.
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999(the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and Kristine C. Clemens, an
individual residing in San Ramon, California and a shareholder of the Company
("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 8,983 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-21 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $101,893.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Kristine C. Clemens
134 Enchanted Way
San Ramon, California 94583
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Kristine C. Clemens
Printed Name: Kristine C. Clemens
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among PrimeSight,
L.L.C., a Delaware limited liability company ("Prime"), Horizon Vision Center,
Inc., a Nevada corporation (the "Company") and The Corporation of the President
of the Church of Jesus Christ of Latter-Day Saints, a Utah Corporation Sole, in
Salt Lake City, Utah and a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, all
of Seller's shares of capital stock of the Company, including, without
limitation, 2,115 authorized and issued shares of the Company's $0.01 par value
common stock presently owned by Seller and evidenced by stock certificate number
C-88 (collectively, including such shares of common stock, the "Capital Stock").
The purchase price for the Capital Stock shall be $23,990.00 (the "Purchase
Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties
3.1 Representations by Seller. Seller hereby represents and warrants to
Prime that each of the following matters is true and correct in all respects as
of the Closing Date (with the understanding that Prime is relying materially on
each such representation and warranty in entering into and performing this
Agreement), which representations and warranties shall also be deemed made as of
the Effective Time and which shall survive the Closing:
(a) Due Authorization. Seller has full power and authority to
enter into and perform this Agreement and each Transaction Document required to
be executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
(b) Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be duly authorized, validly issued and outstanding, fully paid,
non-assessable, and free of any liens, claims or encumbrances whatsoever.
(c) No Further Ownership. Immediately following the Closing
Date, Seller does not own (i) any shares of equity or other voting securities of
the Company, (ii) any securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) any
options or other rights to acquire from the Company, or any obligation of the
Company to issue or sell, equity or other voting securities of the Company, or
securities of the Company convertible into or exchangeable for such equity or
voting securities, and (iv) any equity equivalents, interests in the ownership
or earnings, rights to participate in the election of directors or other similar
rights of or with respect to the Company.
(d) Claims and Proceedings. No inquiry, action, or proceeding
has been asserted, instituted, or threatened against Seller 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.
3.2 Representations by the Company. The Company hereby represents and
warrants to Prime that each of the representations and warranties made by Seller
in Section 3.1 are true and correct in all respects as of both the Closing Date
and the Effective Time (with the understanding that Prime is relying materially
on the Company's representation and warranty in entering into and performing
this Agreement), and the Company's representation and warranty under this
Section shall survive the Closing.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel for Seller may
reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock; and
(c) each of them shall have delivered such good standing
certificates, officer certificates, and similar documents and certificates as
counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
Seller, regardless of when such claim, debt, obligation or liability arose, is
asserted, or may have been asserted or (iii) any obligations or liabilities with
respect to any claims arising out of actions or omissions, that occurred prior
to the Closing Date, by any of the Company's directors, officers, shareholders,
agents, employees, representatives, subsidiaries and/or affiliates.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of (i) any breach or default
by Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document, or (ii) any claim,
debt, obligation or liability of Seller, regardless of when such claim, debt,
obligation or liability arose, is asserted, or may have been asserted.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to Seller and the Company, as applicable, of the
commencement or assertion of any third party action in respect of which such
Prime Indemnified Party shall seek indemnification hereunder. Any failure to so
notify Seller and the Company shall not relieve Seller or the Company from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices
Seller and the Company. Seller and the Company shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) Seller and the Company 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) Seller and the Company 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) Seller and the Company shall not be entitled to control
(but shall be entitled to participate at its 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 Seller and the Company fails 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 Seller or the Company, without the prior
written consent of Seller and the Company.
(e) Seller and the Company 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
Seller and the Company for the full amount of such payments if the Prime
Indemnified Party is ultimately determined not to be entitled to such
indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required to indemnify another party to this Agreement in respect of
such act, omission or other matter.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. This Agreement (including, without limitation, the
provisions contained in ARTICLE VIII) is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be invalid or unenforceable but the extent of the invalidity or unenforceability
does not destroy the basis of the bargain between the parties as contained
herein, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but rather shall
be enforced to the fullest extent permitted by law.
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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: The Corporation of the President
of the Church of Jesus Christ
of Latter-Day Saints,
a Utah Corporation Sole
c/o Jill G. Kennedy
1385 Yale Avenue
Salt Lake City, Utah 84105
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of any person who is or was an
officer or director of the Company during calendar year 1999, and any employee
of the Company who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Seller: Signature: /s/ Ray Anderson
Printed Name: Ray Anderson, authorized agent
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
[Signature page for Prime follows]
<PAGE>
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Cheryl Williams, Vice President
<PAGE>
STOCK PURCHASE AGREEMENT
Among
PRIME/BDR ACQUISITION, L.L.C.
--------------------------
and
Horizon Vision Center, Inc.
--------------------
Dated September 1, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and David P. Bates,
III and Jane A. Bates, individuals residing in San Ramon, California, and
shareholders of the Company (collectively and individually referred to as
"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, Prime agrees to purchase from Seller, as of the Effective Time,
22,663 authorized and issued shares of the Company's $0.01 par value common
stock presently owned by Seller and evidenced by stock certificate number C-26
and C-47 (collectively, the "Capital Stock"). The purchase price for the Capital
Stock shall be $257,063.00 (the "Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties of the Company and Seller
Seller and the Company hereby represent and warrant to Prime, jointly
and severally, that each of the following matters is true and correct in all
respects as of the Closing Date (with the understanding that Prime is relying
materially on each such representation and warranty in entering into and
performing this Agreement), which representations and warranties shall also be
deemed made as of the Effective Time and which shall survive the Closing;
provided, however, that all representations and warranties made by Seller
hereunder shall be deemed made by Seller only to the actual knowledge of Seller.
3.1 Due Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada and
has full power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is qualified to do business and is in good
standing in the states set forth on Schedule 3.1(a) attached hereto, which
states represent every jurisdiction where such qualification is required for the
conduct of the Company's business as conducted on the Closing Date. Complete and
correct copies of the Company's Articles of Incorporation, Bylaws, all board of
directors' resolutions, all shareholders' resolutions, and all amendments
thereto, have been delivered to Prime. Schedule 3.1(b) sets forth a true and
complete list, as of the Closing Date, of all of the holders of any equity or
other ownership interest in the Company or of any right to obtain, by conversion
or otherwise, and regardless of whether presently exercisable, any equity or
other ownership interest in the Company; in each case showing the number and
type of interest or right held. Schedule 3.1(b) also identifies each of the
persons listed therein that is a physician or other licensed medical
professional, and describes each such person's license(s) and professional
title. Except as set forth on Schedule 3.1(b), immediately prior to the Closing
Date there are outstanding (i) no shares of equity or other voting securities of
the Company, (ii) no securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) no options
or other rights to acquire from the Company or Seller, and no obligation of the
Company or Seller to issue or sell, any equity or other voting securities of the
Company or any securities of the Company convertible into or exchangeable for
such equity or voting securities, and (iv) no equity equivalents, interests in
the ownership or earnings, rights to participate in the election of directors or
other similar rights of or with respect to the Company. Immediately following
the Closing of this transaction and the closings of the Related Acquisitions (as
hereinafter defined), Prime will own sixty percent (60%) of all of the voting
equity securities of the Company (after assuming the conversion, exchange or
exercise of any and all securities or rights convertible into, or exchangeable
or exercisable for, voting equity securities of the Company), and all of those
persons and entities listed on Schedule 3.1(b) will own, in the aggregate, forty
percent (40%) of all of the voting equity securities of the Company (after
assuming the conversion, exchange or exercise of any and all securities or
rights convertible into, or exchangeable or exercisable for, voting equity
securities of the Company). The Capital Stock transferred by Seller to Prime at
the Closing, as well as all other capital stock of the Company transferred to
Prime in the Related Acquisitions, will be duly authorized, validly issued and
outstanding, fully paid, non-assessable, and free of any liens, claims or
encumbrances whatsoever.
3.2 Subsidiaries. Except as set forth on Schedule 3.2 (reflecting
ownership interests and the nature of such interests), the Company does not
directly or indirectly have (or possess any options or other rights to acquire)
any subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, limited liability company, association,
joint venture, trust, or other entity.
3.3 Due Authorization. Each of the Company and Seller has full power
and authority to enter into and perform this Agreement and each Transaction
Document required to be executed by the Company or Seller in connection
herewith. The execution, delivery, and performance of this Agreement and each
such Transaction Document has been duly authorized by all necessary action of
the Company, its directors, its officers and its shareholders. This Agreement
and each such Transaction Document has been duly and validly executed and
delivered by the Company and Seller and constitutes a valid and binding
obligation of the Company and Seller, enforceable against each of them in
accordance with its terms. The execution, delivery, and performance of this
Agreement, and each Transaction Document required herein to be executed by
Seller and/or the Company do not (a) violate any federal, state, county, or
local law, rule, or regulation applicable to the Company, the Business (as
hereinafter defined), the Company's assets or the Capital Stock, (b) violate or
conflict with, or permit the cancellation of, any agreement to which the Company
is a party, or by which the Company or its properties are bound, or result in
the creation of any lien, security interest, charge, or encumbrance upon any of
such properties or the upon the Capital Stock, (c) permit the acceleration of
the maturity of any indebtedness of Seller or the Company, or any indebtedness
secured by the Capital Stock or by the property of the Company, or (d) violate
or conflict with any provision of the organizational documents of the Company.
No action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller or the Company in
connection with the execution, delivery, or performance of this Agreement (or
any Transaction Document).
3.4 Financial Statements. The unaudited balance sheet and income
statement of the Company as of and for each of the years ended March 31, 1998
and 1999, and the unaudited balance sheet and income statement of the Company as
of and for the three (3) months ended June 30, 1999 (collectively, the
"Financial Statements") are attached hereto as Exhibit A. The Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP") (except as specifically noted therein
or in Schedule 3.4) and fairly present the financial position and results of
operations of the Company as of the indicated dates and for the indicated
periods. Except for liabilities incurred in the ordinary course of business or
disclosed in Schedule 3.4, and except to the extent specifically and fully
reflected in the Financial Statements (including the notes thereto), as of the
Closing Date, the Company has no claims, debts, liabilities, or obligations,
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 the Company, its assets or the
Business). The Company and Seller each agree to indemnify and hold harmless
Prime and its affiliates from and against any and all such claims, debts,
liabilities and obligations. Except as set forth in Schedule 3.4 hereto, since
June 30, 1999 there has been no material adverse change in the assets of the
Company, the Business, or the results of operations or financial position of the
Company.
3.5 Conduct of Business; Certain Actions. As used herein, "Business"
means all of the business conducted by the Company, which shall be deemed to
include all refractive surgery modalities, now performed, offered or made
available, including, without limitation, implantable contact lenses, instromal
corneal rings, laser in situs keratomileusis photorefractive keratectomy,
automated lemellar keratoplasty, radial keratotomy, astigmatic keratotomy and
similar procedures. Except as set forth on Schedule 3.5 attached hereto, since
June 30, 1999, the Company has conducted its Business and operations of the
Business in the ordinary course and consistent with its past practices and has
not (a) purchased or retired any indebtedness, or purchased, retired, or
redeemed any ownership interest from, any director, officer, shareholder,
employee or affiliate of the Company, or engaged in any other transaction that
involves or requires distributions of money or other assets from the Company to
any director, officer, shareholder, employee or affiliate of the Company if such
other transaction is not done in the ordinary course of business and is not
consistent with past practices of the Company, (b) increased the compensation of
any directors, officers, employees, agents, contractors, vendors or other
parties, except for wage and salary increases made in the ordinary course of
business and consistent with the past practices of the Company, (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 or book value for such asset
(or group of related assets) exceeded $10,000, (e) discharged or satisfied any
lien or encumbrance or paid any obligation or liability, absolute or contingent,
other than current liabilities incurred and paid in the ordinary course of
business, (f) made or guaranteed any loans or advances to any party whatsoever,
(g) suffered or permitted any lien, security interest, claim, charge, or other
encumbrance to arise or be granted or created against or upon any of its assets,
real or personal, tangible or intangible, (h) canceled, waived, or released any
of its debts, rights, or claims against third parties, (i) amended its
organizational documents, (j) made or paid any severance or termination payment
to any director, officer, employee, agent, contractor, vendor or consultant, (k)
made any change in its method of accounting, (l) made any investment or
commitment therefor in any person, business, corporation, association,
partnership, limited liability company, joint venture, trust, or other entity,
(m) made, entered into, amended, or terminated any written employment contract,
created, made, amended, or terminated any bonus, stock option, pension,
retirement, profit sharing, or other employee benefit plan or arrangement, or
withdrawn from any "multi-employer plan" (as defined in the Internal Revenue
Code of 1986, as amended (the "Code")) so as to create any liability under ERISA
(as hereinafter defined) to any person or entity, (n) amended, terminated or
experienced a termination of any material contract, agreement, lease, franchise,
or license to which it is a party, (o) made any distributions, in cash or in
kind, to its shareholders, or to any person or entity related to or affiliated
therewith, in any capacity, except such distributions as are made in the
ordinary course of the Company's business consistent with past practices, (p)
entered into any 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.
3.6 Assets; Licenses, Permits, etc. Except as set forth on Schedule
3.6(a), the Company has good and marketable title to all of its assets, free and
clear of all liens, security interests, claims, rights of another, and
encumbrances of any kind whatsoever. The assets of the Company 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 all that are
necessary for the conduct of the Business. Attached hereto as Schedule 3.6(b) is
a list and description of all federal, state, county, and local governmental
licenses, certificates, certificates of need, permits, waivers, filings and
orders held or applied for by the Company and used or relied on (or to be used
or relied on) in connection with the Business ("Permits"). The Company has
complied in all material respects, and the Company is in compliance in all
material respects, with the terms and conditions of any such Permits. No
additional Permit is required from any federal, state, county, or local
governmental agency or body thereof in connection with the conduct of the
Business. No claim has been made by any governmental authority (and, to the
knowledge of Seller and the Company, no such claim has been threatened) to the
effect that a Permit not possessed by the Company is necessary in respect of the
Business.
3.7 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) The Company 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 the Company 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 the
financial position of the Company.
(c) The Company has not received any notice from the United
States Environmental Protection Agency that it is a potentially responsible
party under the Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund Notice"), any citation from any federal, state or local
governmental authority for non-compliance with its requirements with respect to
air, water or environmental pollution, or the improper storage, use or discharge
of any hazardous waste, other waste or other substance or other material
pertaining to its business ("Citations") or any written notice from any private
party alleging any such non-compliance; and there are no pending or unresolved
Superfund Notices, Citations or written notices from private parties alleging
any such non-compliance.
3.8 Intellectual Property Rights. There are no patents, trademarks,
trade names, or copyrights, and no applications therefor, owned by or registered
in the name of the Company or in which the Company has any right, license, or
interest. The Company is not a party to any license agreement, either as
licensor or licensee, with respect to any patents, trademarks, trade names, or
copyrights. The Company has not received any notice that it is infringing any
patent, trademark, trade name, or copyright of others.
3.9 Compliance with Laws. To the knowledge of the Company and Seller,
the Company has complied in all material respects, and the Company is in
compliance in all material respects, with all federal, state, county, and local
laws, rules, regulations and ordinances currently in effect. No claim has been
made or threatened by any governmental authority against the Company to the
effect that the business conducted by the Company fails to comply in any respect
with any law, rule, regulation, or ordinance.
3.10 Insurance. Attached hereto as Schedule 3.10 is a list of all
policies of fire, liability, business interruption, and other forms of insurance
(including, without limitation, professional liability insurance) and all
fidelity bonds held by or applicable to the Company 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 the Company and Seller, no event directly relating to the Company
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 the Company during the past three (3) years,
including without limitation any change which has resulted in any period during
which the Company had no insurance coverage. Excluding insurance policies which
have expired and been replaced, no insurance policy of the Company has been
canceled within the last three (3) years and no threat has been made to cancel
any insurance policy of the Company within such period.
3.11 Employee Benefit Matters. Except as set forth on Schedule 3.11,
the Company 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). The Company does not presently maintain and has never
maintained, or had any obligation of any nature to contribute to, a "defined
benefit plan" within the meaning of the Code.
3.12 Contracts and Agreements. Attached hereto as Schedule 3.12 is a
list of all written or oral contracts, commitments, leases, and other agreements
(including, without limitation, all promissory notes, loan agreements, and other
evidences of indebtedness, mortgages, deeds of trust, security agreements,
pledge agreements, service agreements, and similar agreements and instruments
and all confidentiality agreements) to which the Company is a party or by which
the Company or its properties are bound, pursuant to which the obligations
thereunder of any party thereto are, or are contemplated as being, in respect of
any such individual contracts, commitments, leases, or other agreements during
any year during the term thereof, $25,000 or greater, or which are otherwise
material to the Business (collectively the "Contracts" and individually, a
"Contract"). The Company is not and, to the best knowledge of the Company and
Seller, 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 Company or, to the best knowledge of the Company and Seller, by
any other party thereto) under any Contract. The Company has not waived any
material right under any Contract, and no consents or approvals (other than
those obtained in writing and delivered to Prime prior to Closing) are required
under any Contract in connection with the sale of Capital Stock or the
consummation of the transactions contemplated hereby. The Company has not
guaranteed any obligation of any other person or entity.
3.13 Claims and Proceedings. Attached hereto as Schedule 3.13 is a list
and description of all claims, actions, suits, proceedings, and investigations
pending or, to the knowledge of the Company and Seller, threatened against the
Company, 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
the Company which (individually or in the aggregate) is material, and the
Company has not been, and the Company is not now, subject to any order,
judgment, decree, stipulation, or consent of any court, governmental body, or
agency. No inquiry, action, or proceeding has been asserted, instituted, or
threatened against the Company or Seller 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
company 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 Company. The Company has provided Prime with copies of
all returns filed for and during the years ended 1998, 1997 and (to the extent
an extension was filed for any return for the year ended 1998) 1996. 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 Company's estimated Tax liabilities
for the respective periods then ended and all prior periods. As of the Closing
Date, the Company 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 the Company between June 30, 1999 and the
Closing Date. The Company has not executed any presently effective waiver or
extension of any statute of limitations against assessments and collection of
Taxes. There are no pending or threatened claims, assessments, notices,
proposals to assess, deficiencies, or audits (collectively, "Tax Actions")
against the Company with respect to any Taxes owed or allegedly owed by the
Company. There are no tax liens on any of the assets of the Company. Proper and
accurate amounts have been withheld and remitted by the Company 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 Company is not a party to any tax sharing
agreement.
3.15 Personnel. Attached hereto as Schedule 3.15 is a list of names and
current annual rates of compensation of the officers, employees or agents of the
Company who are necessary for the operation of the Business (the "Employees").
Except as set forth on Schedule 3.15, there are no bonus, profit sharing,
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable by the Company to any Employees from December
31, 1998 through the Closing Date. Schedule 3.15 attached hereto also contains a
brief description of all material terms of employment agreements and
confidentiality agreements to which the Company is a party and all severance
benefits which any director, officer, Employee or sales representative of the
Company is or may be entitled to receive. The Company 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 the
Company is a party and under which its employees are entitled to receive
benefits of any nature. There is no pending or threatened (i) labor dispute or
union organization campaign relating to the Company, (ii) claims against the
Company by any employees of the Company (other than those certain Workers'
Compensation claims specifically described on Schedule 3.13), or (iii)
terminations, resignations or retirements of any employees of the Company. None
of the employees of the Company are represented by any labor union or
organization. There is no unfair labor practice claim against the Company before
the National Labor Relations Board or any strike, labor dispute, work slowdown,
or work stoppage pending or threatened against or involving the Company.
3.16 Business Relations. The Company has no reason to believe and has
not been notified that any supplier or customer of the Company will cease or
refuse to do business with the Company in the same manner as previously
conducted with the Company as a result of or within one (1) year after the
consummation of the transactions contemplated hereby, to the extent such
cessation or refusal might affect the Business. The Company 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 Company.
3.17 Working Capital. Except as set forth on Schedule 3.17 attached
hereto, all of the accounts, notes, and loans receivable (the "Accounts
Receivable") reflected in the Financial Statements, or arising since June 30,
1999, arose from transactions occurring in the ordinary course of the Company's
business as previously conducted, are bona fide and represent amounts validly
due, subject to offsets or defenses. Except for accounts payable and other
accrued expenses incurred in the ordinary course of the Company's business since
June 30, 1999 and consistent with past practices of the Company, there are no
liabilities of the Company other than those reflected in the Financial
Statements. Adequate provision has been made for uncollectible Accounts
Receivable. Since June 30, 1999, the Company has collected its Accounts
Receivable and has paid or performed all liabilities and obligations of the
Company in the ordinary course, consistent with past practices. The Working
Capital (as hereinafter defined) of the Company existing on the Closing Date is
equal to or greater than $100,000.
3.18 Agents. Except as set forth on Schedule 3.18 attached hereto, the
Company has not designated or appointed any person (other than the Company's
employees and officers) 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 Directors, Officers, Shareholders and
Employees. The Company does not owe any indebtedness to any of its directors,
officers, shareholders, employees or affiliates, or have indebtedness owed to it
from any of its directors, officers, shareholders, employees or affiliates,
excluding indebtedness for travel advances or similar advances for expenses
incurred on behalf of and in the ordinary course of business of the Company and
consistent with the Company's past practices. As of the Effective Time and the
Closing Date all amounts due the Company from any of its directors, officers,
employees or affiliates (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, the Company does not employ or have any relationship with any
individual, corporation, partnership, or other entity whose compensation from
the Company 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 the Company from third parties in connection with the
execution, delivery, and performance of this Agreement or any of the other
contracts, documents, instruments or agreements to be entered into in connection
with or as contemplated by this Agreement (all of which are collectively
referred to as the "Transaction Documents").
3.22 Brokers. The Company has not engaged, or caused any liability to
be incurred to, any finder, broker, or sales agent (and has not paid, and will
not pay, any finders fee or similar fee or commission to any person) in
connection with the execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
3.23 Interest in Competitors, Suppliers, and Customers. Except as set
forth on Schedule 3.23 attached hereto, neither the Company nor any affiliate of
the Company, and to the knowledge of the Company and Seller, no director,
officer, employee or affiliate of the Company or any affiliate of any director,
officer, employee or affiliate of the Company, has any ownership interest in any
competitor, customer or supplier of the Company or any property used in the
operation of the Business.
3.24 Warranties. Except as set forth on Schedule 3.24, the Company 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 the Company since January 1, 1996.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
4.4 Distribution of Working Capital. In accordance with the resolutions
adopted by Horizon on August 10, 1999, the parties agree that all cash in excess
of the minimum amount of Working Capital (as hereinafter defined) required
pursuant to Section 5.2(h) shall be distributed within thirty (30) days of the
Closing (as dividends) to the shareholders of Horizon existing on August 1,
1999.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to which it is a
party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel for Seller may
reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock;
(c) each of the shareholders of the Company existing
immediately prior to the Closing (including Seller) that is a physician or other
licensed medical professional shall have executed and delivered to Prime an
Exclusive Use Agreement in substantially the form attached hereto as Exhibit B;
(d) Seller, and each of the other Company shareholders selling
Company stock to Prime in a Related Acquisition (the "Selling Shareholders"),
who will remain a shareholder of the Company after the Closing shall have
executed and delivered to Prime an Assignment and Security Agreement, in
substantially the form attached hereto as Exhibit C, granting a security
interest in such shareholder's remaining stock in the Company to secure the
performance by such shareholder under any agreement it has with Prime or any of
Prime's affiliates;
(e) the Company shall have adopted, after obtaining all
necessary approvals and consents, the Amended and Restated Bylaws, in
substantially the form attached hereto as Exhibit D, which shall contain
provisions governing its board of directors that are consistent with the
provisions of Section 9.4 of this Agreement, including, without limitation, that
the number of directors serving on its board of directors of the Company shall
be five (5);
(f) at the Closing, the Company's board of directors shall
consist of three (3) individuals designated by Prime and listed on Schedule
5.2(f) hereto, and two (2) individuals designated by a majority of the
shareholders of the Company immediately prior to Closing and listed on Schedule
5.2(f) hereto;
(g) the Company shall have delivered to Prime true and correct
copies of resignations, effective as of the Closing Date, from each of the
persons holding the offices set forth on Schedule 5.2(g) hereto, and the persons
listed on Schedule 5.2(g) hereto shall have been elected or appointed to the
office set forth opposite their name;
(h) As of the Closing Date, the amount of Working Capital of
the Company shall be at least $100,000 (for purposes of this Agreement, "Working
Capital" means the difference between (i) cash, cash equivalents, prepaid
expenses and Accounts Receivable less than sixty (60) days old and (ii) accounts
payable and other liabilities and payment obligations due in the following
twelve (12) months, all as determined in accordance with GAAP); and
(i) each of them, and each Selling Shareholder, shall have
delivered such good standing certificates, officer certificates, and similar
documents and certificates as counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
the Company, not specifically and fully reflected by item and amount on either
Schedule 3.4 or in the Financial Statements, that is or may be asserted with
respect to any acts or omissions occurring, or circumstances existing, on or
prior to the Closing Date, except for liabilities incurred in the ordinary
course of business, or (iii) any obligations or liabilities with respect to any
claims arising out of actions or omissions, that occurred prior to the Closing
Date, by any of the Company's directors, officers, shareholders, agents,
employees, representatives, subsidiaries and/or affiliates.
(b) Seller agrees to indemnify and hold harmless each of the
Prime 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 the Prime Indemnified Parties may sustain, arising out of any breach or
default by Seller of any of its representations, warranties, covenants or
agreements contained in this Agreement or any Transaction Document.
(c) Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 6.1
unless and until such time as all claims of all Prime Indemnified Parties, taken
together, exceed $10,000 in the aggregate, at which time all claims of such
Prime Indemnified Parties may be asserted individually or in combination
(beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to the Company and, if applicable, Seller (collectively in
instances involving the Seller, the "indemnifying party"), of the commencement
or assertion of any third party action in respect of which such Prime
Indemnified Party shall seek indemnification hereunder. Any failure to so notify
the indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices the
indemnifying party. The indemnifying party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) The indemnifying party 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) The indemnifying party 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) The indemnifying party shall not be entitled to control
(but shall be entitled to participate at its 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 the indemnifying party fails 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 the indemnifying party, without the prior
written consent of the indemnifying party.
(e) The indemnifying party 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 the
indemnifying party for the full amount of such payments if the Prime Indemnified
Party is ultimately determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1 shall be limited to the aggregate Purchase Price received by Seller
under this Agreement, plus the greater of (a) the value of all remaining equity
interests which Seller holds in the Company at the time of Closing or (b) the
value of all remaining equity interests which Seller holds in the Company at the
time an Indemnified Amount is required to be paid.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party shall be
entitled to assert any claim for indemnification under this Section 7.1 unless
and until such time as all claims of such Seller Indemnified Party, individually
and not in combination with other Seller Indemnified Parties, exceed $25,000 in
the aggregate, at which time all claims of such Seller Indemnified Party may be
asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Special Options to Sell or Acquire Remaining Capital Stock.
(a) Prohibition on Sale. Notwithstanding anything in this
Agreement to the contrary, Seller agrees that it will not transfer, assign,
pledge, hypothecate, or in any way alienate any of its shares of capital stock
of the Company, or any interest therein, whether voluntarily or by operation of
law, or by gift or otherwise, except in accordance with the provisions of this
Section or Section 9.3, or except pursuant to that certain Assignment and
Security Agreement by and between Prime or one of its affiliates and Seller,
dated as of the date of this Agreement (the "Security Agreement"). Any purported
transfer in violation of this Section or Section 9.3 shall be void and
ineffectual, and shall not operate to transfer any interest or title to the
purported transferee. Seller agrees that the Company may, and the Company agrees
to, issue stop-transfer orders, or take any other necessary action, to ensure
that the foregoing provisions of this Section and Section 9.3 are given full
effect.
(b) Option to Sell. Upon (i) the death, retirement (only if
Seller is a physician and only as defined below), bankruptcy, insolvency,
disability (only if Seller is a physician and only as defined below) or
incompetency of Seller, (ii) any other involuntary transfer of any capital stock
of the Company now or hereafter owned by Seller, or any interest therein
(including, without limitation, transfers of interests upon divorce or death of
a spouse of Seller, but excluding any transfers governed by Section 9.3), (iii)
relocation of Seller's primary residence outside of a two hundred (200) mile
radius of the center or facility at which Seller primarily renders services, or
(iv) if Seller is a physician or other practicing licensed professional, the
performance by Seller, during any one-month period, of greater than thirty (30%)
of his or her professional medical activities outside of a two hundred (200)
mile radius of the center or facility primarily utilized by Seller prior to the
date of this Agreement; the Seller's executor, administrator, trustee,
custodian, receiver or other legal or personal representative (the
"Representative"), or Seller, in the case of retirement or departure, shall give
written notice of that fact to the Company. In such event, the Representative or
Seller shall have a period of sixty (60) days (the "Put Period") following the
date of such death, retirement, bankruptcy, insolvency, disability, incompetency
or relocation of primary residence or practice, as the case may be, within which
time it may require that the Company purchase (subject to the remaining
provisions of this subsection) all of Seller's capital stock of the Company,
upon the terms and conditions hereinafter set forth, by giving notice of such
election in writing to the Company. The Company may, in its sole discretion,
offer all or a portion of such capital stock to its shareholders, on a pro rata
basis in relation to each shareholder's percentage ownership of the Company, but
any agreement by the shareholders to purchase all or a portion of such capital
stock shall not limit the Company's obligation to purchase within the time frame
set forth in this Section. If the Company has offered all of such capital stock
to its shareholders, and the shareholders have not committed to purchase all of
such capital stock within five (5) days from the date of offer, then the Company
may, in its sole discretion, offer all or a portion of the remaining capital
stock to Prime, in which event Prime must participate in such purchase upon the
same terms and conditions as the Company. For purposes of this Agreement, (x)
"disability" shall apply only if Seller is a physician and shall mean any
condition which in the reasonable judgment of a majority of the managers of
Prime, would impair Seller's ability to materially perform his or her routine
duties for a period of six (6) months or more, (y) "retirement" shall apply only
if Seller is a physician and shall mean the cessation of the routine practice of
medicine (provided that any physician who transfers his or her entire practice
to a licensed medical professional meeting the Company's then current
credentialing program shall not be deemed to have retired for purposes of this
subsection), and (z) "incompetent" shall mean a state of legal incompetence as
declared by a court of valid jurisdiction.
(c) Option to Buy. In the event that the option described in
Section 9(b) arises and the Representative or Seller, as the case may be, fails
to make the election described in Section 9(b) within the Put Period, Prime
shall at all times thereafter have the option to purchase all or any portion of
Seller's capital stock of the Company, upon the terms and conditions hereinafter
set forth, by giving written notice of such election in writing to Seller. In
addition, Prime may, in its sole discretion, transfer its purchase right granted
under this subsection (or stock acquired pursuant to an exercise of its purchase
right granted under this subsection) to Horizon or any of the physician
shareholders of the Company.
(d) Purchase Price. The purchase price to be paid pursuant to
this Section shall be paid in immediately available funds at the closing of the
transfer of capital stock pursuant to this Section. If the parties do not
otherwise agree within thirty (30) days of the day on which the option to
purchase or sell hereunder is exercised, then Prime shall, at its own expense,
select an appraiser to value the capital stock being transferred. If Seller or
Representative does not agree with the value determined by the appraiser of
Prime, Seller or Representative may, at its own expense, select its own
appraiser to value the capital stock being transferred. If the two appraisers
cannot agree on the value of the capital stock being transferred, the two
appraisers shall mutually select a third appraiser to value the capital stock
being transferred, and any valuation determined by such third appraiser shall be
final, binding and conclusive. The cost of any third appraiser shall be borne by
Seller.
(e) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice under either Section 9(b) or
Section 9(c). At such closing, Seller shall execute all documents and take such
other actions as may be reasonably necessary to deliver to Prime such capital
stock, and any certificates representing same, free and clear of all liens,
claims, encumbrances or restrictions of any kind or nature whatsoever, except
those imposed under the Security Agreement.
9.3 Right of First Refusal.
(a) If there is no option to sell or buy outstanding under
Section 9.2 (except in connection with a sale by a physician of all of his or
her practice upon retirement), and Seller intends to voluntarily transfer any
portion of its capital stock of the Company to any person or entity other than
Prime, then Seller shall give written notice to Prime stating (i) the intention
to transfer such capital stock, (ii) the number of shares to be transferred,
(iii) the name, business and residence address of the proposed transferee, (iv)
the nature and amount of the consideration, and (v) the other terms of the
proposed sale.
(b) Prime shall have, and may exercise within sixty (60) days
after receipt of the notice of intent to transfer, an option to purchase all or
any portion of the capital stock of the Company owned by Seller, at the per
share price and upon the other terms stated in the notice of intent to transfer.
Prime may elect to exercise its option under this Section by delivering notice
thereof to Seller. If Prime elects not to purchase all or any portion of such
capital stock prior to the expiration of said sixty (60) day period, Seller
shall have thirty (30) days to complete the sale and purchase contemplated in
the notice of intent to transfer, and after such thirty (30) day period, the
provisions of this Section shall apply fully to any such capital stock not
transferred. The purchase price pursuant to this Section shall be paid in
immediately available funds at the closing of the transfer pursuant to this
Section.
(c) Seller and Prime acknowledge and agree that it would be
impractical to exercise an option to purchase arising pursuant to this Section
whenever the proposed consideration to be received by Seller is other than cash,
cash equivalents or an obligation to pay cash by a person whose credit
worthiness and financial status is such that performance of the payment
obligation would be reasonably assured. Therefore, the parties agree that no
transfer shall be permitted and no option shall arise pursuant to this Section
whenever the consideration to be received from the proposed transferee is other
than cash, cash equivalents or an obligation to pay cash by a person whose
credit worthiness and financial status is such that performance of the payment
obligation would be reasonably assured.
(d) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice of Prime's election to purchase
pursuant to Section 9(b). At such closing, Seller shall execute all documents
and take such other actions as may be reasonably necessary to deliver to Prime
such capital stock, and any certificates representing same, free and clear of
all liens, claims, encumbrances or restrictions of any kind or nature
whatsoever, except those imposed under the Security Agreement.
9.4 Voting Agreement. Each of the parties hereto agrees that it will
vote all of the shares of capital stock of the Company owned by it, at any time
after the execution of this Agreement, in accordance with the terms of this
Section 9.4. Any additional shares of voting capital stock or other voting
securities of the Company, or the voting rights related thereto, whether
presently existing or created in the future, that may be owned, held, or
subsequently acquired in any manner, legally or beneficially, directly or
indirectly, of record or otherwise, by the parties at any time after the
execution of this Agreement, whether issued incident to any stock split, stock
dividend, increase in capitalization, recapitalization, merger, consolidation,
share exchange, reorganization, or other transaction, shall be shall be subject
to the terms of this Section (all such stock presently held or controlled,
together with such additional stock, the "Subject Shares"). At each election of
directors of the Company, the parties and any transferee or assignee of any
Subject Shares from the parties (the "Transferee") shall, in accordance with the
procedure set forth below, vote the Subject Shares as necessary to elect five
(5) persons, designated in accordance with the procedures below, to the board of
directors of the company. Three (3) of the directors (the "Prime Designees")
shall be designated in writing by Prime or its Transferee. The remaining two (2)
directors (the "Other Stockholder Designees") shall be jointly designated in
writing by stockholders of the corporation other than Prime (or any entity other
than the Company that is controlled by, controlling or under common control with
Prime) (the "Other Stockholders") holding a majority of the aggregate voting
equity stock held by all Other Stockholders. For purposes of this Section, the
Prime Designees and the Other Stockholder Designees are sometimes referred to
individually as a "Designated Director" and collectively as "Designated
Directors." During the term of this Agreement, the parties shall, in accordance
with the procedure set forth below, (i) vote their Subject Shares and use their
best efforts in any event to ensure that the number of directors which shall
constitute the entire board of directors of the Company shall remain at five
(5), (ii) vote their Subject Shares in favor of the removal of a Designated
Director if Prime or a majority in interest of the Other Stockholders (whichever
designated the respective director) instruct in writing that such Designated
Director shall be removed from office and (iii) upon any removal of a Designated
Director pursuant to (ii) above, vote their Subject Shares in favor of the
election of a replacement director designated in writing by Prime or a majority
in interest of the Other Stockholders (whichever designated the respective
director). None of the parties to this Agreement shall approve or authorize the
removal of any Designated Director unless Prime or a majority in interest of the
Other Stockholders (whichever designated the respective director) shall have
authorized in writing such Designated Director's removal. To the extent that any
party or parties entitled to designate a director pursuant to this Section fail
to designate a replacement Designated Director under this Section, the position
vacated shall remain vacant until such time as a new director is designated and
elected pursuant to the terms hereof.
Upon delivery of any written notice designating or removing one or more
directors pursuant to this Section, the parties hereto and any Transferee shall
either (i) sign a written consent, prepared for execution by the stockholders of
the Company in accordance with the Bylaws of the Company, which consent elects
or removes the director(s) designated in writing to be elected or removed in
accordance with this Section or (ii) at any annual or special shareholders
meeting at which director(s) are to be elected or removed, vote in favor of the
election or removal of the director(s) designated in writing to be elected or
removed in accordance with this Section. If necessary to fix the number of
directors constituting the entire board of directors at five (5), the parties
hereto shall either (i) sign such written consents prepared for execution by the
shareholders of the Company in accordance with the Bylaws of the Company or (ii)
at any annual or special shareholders meeting, vote in favor of such motions;
which consents or motions propose to fix the number of directors constituting
the entire board of directors at five (5).
Each of the parties hereto agrees to take such actions, and execute
such documents, agreements or instruments (including, without limitation,
consents amending the articles or bylaws of the Company), as may be necessary,
due to changes in the law or otherwise, to ensure that the provisions of this
Section 9.4 are given full effect.
9.5 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required by this Agreement to indemnify another party to this Agreement
in respect of such act, omission or other matter.
9.6 Post-Closing Capital Contributions. Without in any way limiting or
qualifying the representation and warranty with respect to Working Capital
contained in Section 3.17, all parties to this Agreement acknowledge and agree
that no shareholder of the Company, or any other party, has any obligation
existing on the Closing Date to make a capital contribution to the Company.
9.7 Stock Legend. On and after the Closing, each certificate or
document representing Seller's ownership of any of the Company's capital stock,
and each certificate or document that may be issued and delivered by the Company
upon transfer of such certificate, shall contain a legend conspicuously noted in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH
CERTAIN CONDITIONS SPECIFIED IN A CERTAIN STOCK PURCHASE
AGREEMENT DATED EFFECTIVE AS OF SEPTEMBER 1, 1999, A COMPLETE
AND CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
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 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 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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th St., Suite 400
San Leandro, California 94578
Seller: David P. and Jane A. Bates
1320 Canyon Side Avenue
San Ramon, California 94583
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of the officers of the Company
holding office immediately prior to the Closing, and any employee of the Company
who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Secretary & Manager
Seller: /s/ David P. Bates III
Printed Name: David P. Bates III
/s/ Jane A. Bates
Printed Name: Jane A. Bates
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A: Financial Statements
EXHIBIT B: Form of Exclusive Use Agreement
EXHIBIT C: Form of Assignment and Security Agreement
EXHIBIT D: Form of Amended and Restated Bylaws of Seller
<PAGE>
STOCK PURCHASE AGREEMENT
Among
PRIME/BDR ACQUISITION, L.L.C.
--------------------------
and
Horizon Vision Center, Inc.
--------------------
Dated September 1, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and John Robert
Griffin, M.D., Family Revocable Trust dated February 8, 1991, and a shareholder
of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time,
23,939 authorized and issued shares of the Company's $0.01 par value common
stock presently owned by Seller and evidenced by stock certificate number C- 22
and C-59 (collectively, the "Capital Stock"). The purchase price for the Capital
Stock shall be $271,537.00 (the "Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties of the Company and Seller
Seller and the Company hereby represent and warrant to Prime, jointly
and severally, that each of the following matters is true and correct in all
respects as of the Closing Date (with the understanding that Prime is relying
materially on each such representation and warranty in entering into and
performing this Agreement), which representations and warranties shall also be
deemed made as of the Effective Time and which shall survive the Closing;
provided, however, that all representations and warranties made by Seller
hereunder shall be deemed made by Seller only to the actual knowledge of Seller.
3.1 Due Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada and
has full power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is qualified to do business and is in good
standing in the states set forth on Schedule 3.1(a) attached hereto, which
states represent every jurisdiction where such qualification is required for the
conduct of the Company's business as conducted on the Closing Date. Complete and
correct copies of the Company's Articles of Incorporation, Bylaws, all board of
directors' resolutions, all shareholders' resolutions, and all amendments
thereto, have been delivered to Prime. Schedule 3.1(b) sets forth a true and
complete list, as of the Closing Date, of all of the holders of any equity or
other ownership interest in the Company or of any right to obtain, by conversion
or otherwise, and regardless of whether presently exercisable, any equity or
other ownership interest in the Company; in each case showing the number and
type of interest or right held. Schedule 3.1(b) also identifies each of the
persons listed therein that is a physician or other licensed medical
professional, and describes each such person's license(s) and professional
title. Except as set forth on Schedule 3.1(b), immediately prior to the Closing
Date there are outstanding (i) no shares of equity or other voting securities of
the Company, (ii) no securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) no options
or other rights to acquire from the Company or Seller, and no obligation of the
Company or Seller to issue or sell, any equity or other voting securities of the
Company or any securities of the Company convertible into or exchangeable for
such equity or voting securities, and (iv) no equity equivalents, interests in
the ownership or earnings, rights to participate in the election of directors or
other similar rights of or with respect to the Company. Immediately following
the Closing of this transaction and the closings of the Related Acquisitions (as
hereinafter defined), Prime will own sixty percent (60%) of all of the voting
equity securities of the Company (after assuming the conversion, exchange or
exercise of any and all securities or rights convertible into, or exchangeable
or exercisable for, voting equity securities of the Company), and all of those
persons and entities listed on Schedule 3.1(b) will own, in the aggregate, forty
percent (40%) of all of the voting equity securities of the Company (after
assuming the conversion, exchange or exercise of any and all securities or
rights convertible into, or exchangeable or exercisable for, voting equity
securities of the Company). The Capital Stock transferred by Seller to Prime at
the Closing, as well as all other capital stock of the Company transferred to
Prime in the Related Acquisitions, will be duly authorized, validly issued and
outstanding, fully paid, non-assessable, and free of any liens, claims or
encumbrances whatsoever.
3.2 Subsidiaries. Except as set forth on Schedule 3.2 (reflecting
ownership interests and the nature of such interests), the Company does not
directly or indirectly have (or possess any options or other rights to acquire)
any subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, limited liability company, association,
joint venture, trust, or other entity.
3.3 Due Authorization. Each of the Company and Seller has full power
and authority to enter into and perform this Agreement and each Transaction
Document required to be executed by the Company or Seller in connection
herewith. The execution, delivery, and performance of this Agreement and each
such Transaction Document has been duly authorized by all necessary action of
the Company, its directors, its officers and its shareholders. This Agreement
and each such Transaction Document has been duly and validly executed and
delivered by the Company and Seller and constitutes a valid and binding
obligation of the Company and Seller, enforceable against each of them in
accordance with its terms. The execution, delivery, and performance of this
Agreement, and each Transaction Document required herein to be executed by
Seller and/or the Company do not (a) violate any federal, state, county, or
local law, rule, or regulation applicable to the Company, the Business (as
hereinafter defined), the Company's assets or the Capital Stock, (b) violate or
conflict with, or permit the cancellation of, any agreement to which the Company
is a party, or by which the Company or its properties are bound, or result in
the creation of any lien, security interest, charge, or encumbrance upon any of
such properties or the upon the Capital Stock, (c) permit the acceleration of
the maturity of any indebtedness of Seller or the Company, or any indebtedness
secured by the Capital Stock or by the property of the Company, or (d) violate
or conflict with any provision of the organizational documents of the Company.
No action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller or the Company in
connection with the execution, delivery, or performance of this Agreement (or
any Transaction Document).
3.4 Financial Statements. The unaudited balance sheet and income
statement of the Company as of and for each of the years ended March 31, 1998
and 1999, and the unaudited balance sheet and income statement of the Company as
of and for the three (3) months ended June 30, 1999 (collectively, the
"Financial Statements") are attached hereto as Exhibit A. The Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP") (except as specifically noted therein
or in Schedule 3.4) and fairly present the financial position and results of
operations of the Company as of the indicated dates and for the indicated
periods. Except for liabilities incurred in the ordinary course of business or
disclosed in Schedule 3.4, and except to the extent specifically and fully
reflected in the Financial Statements (including the notes thereto), as of the
Closing Date, the Company has no claims, debts, liabilities, or obligations,
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 the Company, its assets or the
Business). The Company and Seller each agree to indemnify and hold harmless
Prime and its affiliates from and against any and all such claims, debts,
liabilities and obligations. Except as set forth in Schedule 3.4 hereto, since
June 30, 1999 there has been no material adverse change in the assets of the
Company, the Business, or the results of operations or financial position of the
Company.
3.5 Conduct of Business; Certain Actions. As used herein, "Business"
means all of the business conducted by the Company, which shall be deemed to
include all refractive surgery modalities, now performed, offered or made
available, including, without limitation, implantable contact lenses, instromal
corneal rings, laser in situs keratomileusis photorefractive keratectomy,
automated lemellar keratoplasty, radial keratotomy, astigmatic keratotomy and
similar procedures. Except as set forth on Schedule 3.5 attached hereto, since
June 30, 1999, the Company has conducted its Business and operations of the
Business in the ordinary course and consistent with its past practices and has
not (a) purchased or retired any indebtedness, or purchased, retired, or
redeemed any ownership interest from, any director, officer, shareholder,
employee or affiliate of the Company, or engaged in any other transaction that
involves or requires distributions of money or other assets from the Company to
any director, officer, shareholder, employee or affiliate of the Company if such
other transaction is not done in the ordinary course of business and is not
consistent with past practices of the Company, (b) increased the compensation of
any directors, officers, employees, agents, contractors, vendors or other
parties, except for wage and salary increases made in the ordinary course of
business and consistent with the past practices of the Company, (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 or book value for such asset
(or group of related assets) exceeded $10,000, (e) discharged or satisfied any
lien or encumbrance or paid any obligation or liability, absolute or contingent,
other than current liabilities incurred and paid in the ordinary course of
business, (f) made or guaranteed any loans or advances to any party whatsoever,
(g) suffered or permitted any lien, security interest, claim, charge, or other
encumbrance to arise or be granted or created against or upon any of its assets,
real or personal, tangible or intangible, (h) canceled, waived, or released any
of its debts, rights, or claims against third parties, (i) amended its
organizational documents, (j) made or paid any severance or termination payment
to any director, officer, employee, agent, contractor, vendor or consultant, (k)
made any change in its method of accounting, (l) made any investment or
commitment therefor in any person, business, corporation, association,
partnership, limited liability company, joint venture, trust, or other entity,
(m) made, entered into, amended, or terminated any written employment contract,
created, made, amended, or terminated any bonus, stock option, pension,
retirement, profit sharing, or other employee benefit plan or arrangement, or
withdrawn from any "multi-employer plan" (as defined in the Internal Revenue
Code of 1986, as amended (the "Code")) so as to create any liability under ERISA
(as hereinafter defined) to any person or entity, (n) amended, terminated or
experienced a termination of any material contract, agreement, lease, franchise,
or license to which it is a party, (o) made any distributions, in cash or in
kind, to its shareholders, or to any person or entity related to or affiliated
therewith, in any capacity, except such distributions as are made in the
ordinary course of the Company's business consistent with past practices, (p)
entered into any 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.
3.6 Assets; Licenses, Permits, etc. Except as set forth on Schedule
3.6(a), the Company has good and marketable title to all of its assets, free and
clear of all liens, security interests, claims, rights of another, and
encumbrances of any kind whatsoever. The assets of the Company 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 all that are
necessary for the conduct of the Business. Attached hereto as Schedule 3.6(b) is
a list and description of all federal, state, county, and local governmental
licenses, certificates, certificates of need, permits, waivers, filings and
orders held or applied for by the Company and used or relied on (or to be used
or relied on) in connection with the Business ("Permits"). The Company has
complied in all material respects, and the Company is in compliance in all
material respects, with the terms and conditions of any such Permits. No
additional Permit is required from any federal, state, county, or local
governmental agency or body thereof in connection with the conduct of the
Business. No claim has been made by any governmental authority (and, to the
knowledge of Seller and the Company, no such claim has been threatened) to the
effect that a Permit not possessed by the Company is necessary in respect of the
Business.
3.7 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) The Company 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 the Company 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 the
financial position of the Company.
(c) The Company has not received any notice from the United
States Environmental Protection Agency that it is a potentially responsible
party under the Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund Notice"), any citation from any federal, state or local
governmental authority for non-compliance with its requirements with respect to
air, water or environmental pollution, or the improper storage, use or discharge
of any hazardous waste, other waste or other substance or other material
pertaining to its business ("Citations") or any written notice from any private
party alleging any such non-compliance; and there are no pending or unresolved
Superfund Notices, Citations or written notices from private parties alleging
any such non-compliance.
3.8 Intellectual Property Rights. There are no patents, trademarks,
trade names, or copyrights, and no applications therefor, owned by or registered
in the name of the Company or in which the Company has any right, license, or
interest. The Company is not a party to any license agreement, either as
licensor or licensee, with respect to any patents, trademarks, trade names, or
copyrights. The Company has not received any notice that it is infringing any
patent, trademark, trade name, or copyright of others.
3.9 Compliance with Laws. To the knowledge of the Company and Seller,
the Company has complied in all material respects, and the Company is in
compliance in all material respects, with all federal, state, county, and local
laws, rules, regulations and ordinances currently in effect. No claim has been
made or threatened by any governmental authority against the Company to the
effect that the business conducted by the Company fails to comply in any respect
with any law, rule, regulation, or ordinance.
3.10 Insurance. Attached hereto as Schedule 3.10 is a list of all
policies of fire, liability, business interruption, and other forms of insurance
(including, without limitation, professional liability insurance) and all
fidelity bonds held by or applicable to the Company 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 the Company and Seller, no event directly relating to the Company
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 the Company during the past three (3) years,
including without limitation any change which has resulted in any period during
which the Company had no insurance coverage. Excluding insurance policies which
have expired and been replaced, no insurance policy of the Company has been
canceled within the last three (3) years and no threat has been made to cancel
any insurance policy of the Company within such period.
3.11 Employee Benefit Matters. Except as set forth on Schedule 3.11,
the Company 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). The Company does not presently maintain and has never
maintained, or had any obligation of any nature to contribute to, a "defined
benefit plan" within the meaning of the Code.
3.12 Contracts and Agreements. Attached hereto as Schedule 3.12 is a
list of all written or oral contracts, commitments, leases, and other agreements
(including, without limitation, all promissory notes, loan agreements, and other
evidences of indebtedness, mortgages, deeds of trust, security agreements,
pledge agreements, service agreements, and similar agreements and instruments
and all confidentiality agreements) to which the Company is a party or by which
the Company or its properties are bound, pursuant to which the obligations
thereunder of any party thereto are, or are contemplated as being, in respect of
any such individual contracts, commitments, leases, or other agreements during
any year during the term thereof, $25,000 or greater, or which are otherwise
material to the Business (collectively the "Contracts" and individually, a
"Contract"). The Company is not and, to the best knowledge of the Company and
Seller, 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 Company or, to the best knowledge of the Company and Seller, by
any other party thereto) under any Contract. The Company has not waived any
material right under any Contract, and no consents or approvals (other than
those obtained in writing and delivered to Prime prior to Closing) are required
under any Contract in connection with the sale of Capital Stock or the
consummation of the transactions contemplated hereby. The Company has not
guaranteed any obligation of any other person or entity.
3.13 Claims and Proceedings. Attached hereto as Schedule 3.13 is a list
and description of all claims, actions, suits, proceedings, and investigations
pending or, to the knowledge of the Company and Seller, threatened against the
Company, 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
the Company which (individually or in the aggregate) is material, and the
Company has not been, and the Company is not now, subject to any order,
judgment, decree, stipulation, or consent of any court, governmental body, or
agency. No inquiry, action, or proceeding has been asserted, instituted, or
threatened against the Company or Seller 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
company 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 Company. The Company has provided Prime with copies of
all returns filed for and during the years ended 1998, 1997 and (to the extent
an extension was filed for any return for the year ended 1998) 1996. 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 Company's estimated Tax liabilities
for the respective periods then ended and all prior periods. As of the Closing
Date, the Company 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 the Company between June 30, 1999 and the
Closing Date. The Company has not executed any presently effective waiver or
extension of any statute of limitations against assessments and collection of
Taxes. There are no pending or threatened claims, assessments, notices,
proposals to assess, deficiencies, or audits (collectively, "Tax Actions")
against the Company with respect to any Taxes owed or allegedly owed by the
Company. There are no tax liens on any of the assets of the Company. Proper and
accurate amounts have been withheld and remitted by the Company 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 Company is not a party to any tax sharing
agreement.
3.15 Personnel. Attached hereto as Schedule 3.15 is a list of names and
current annual rates of compensation of the officers, employees or agents of the
Company who are necessary for the operation of the Business (the "Employees").
Except as set forth on Schedule 3.15, there are no bonus, profit sharing,
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable by the Company to any Employees from December
31, 1998 through the Closing Date. Schedule 3.15 attached hereto also contains a
brief description of all material terms of employment agreements and
confidentiality agreements to which the Company is a party and all severance
benefits which any director, officer, Employee or sales representative of the
Company is or may be entitled to receive. The Company 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 the
Company is a party and under which its employees are entitled to receive
benefits of any nature. There is no pending or threatened (i) labor dispute or
union organization campaign relating to the Company, (ii) claims against the
Company by any employees of the Company (other than those certain Workers'
Compensation claims specifically described on Schedule 3.13), or (iii)
terminations, resignations or retirements of any employees of the Company. None
of the employees of the Company are represented by any labor union or
organization. There is no unfair labor practice claim against the Company before
the National Labor Relations Board or any strike, labor dispute, work slowdown,
or work stoppage pending or threatened against or involving the Company.
3.16 Business Relations. The Company has no reason to believe and has
not been notified that any supplier or customer of the Company will cease or
refuse to do business with the Company in the same manner as previously
conducted with the Company as a result of or within one (1) year after the
consummation of the transactions contemplated hereby, to the extent such
cessation or refusal might affect the Business. The Company 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 Company.
3.17 Working Capital. Except as set forth on Schedule 3.17 attached
hereto, all of the accounts, notes, and loans receivable (the "Accounts
Receivable") reflected in the Financial Statements, or arising since June 30,
1999, arose from transactions occurring in the ordinary course of the Company's
business as previously conducted, are bona fide and represent amounts validly
due, subject to offsets or defenses. Except for accounts payable and other
accrued expenses incurred in the ordinary course of the Company's business since
June 30, 1999 and consistent with past practices of the Company, there are no
liabilities of the Company other than those reflected in the Financial
Statements. Adequate provision has been made for uncollectible Accounts
Receivable. Since June 30, 1999, the Company has collected its Accounts
Receivable and has paid or performed all liabilities and obligations of the
Company in the ordinary course, consistent with past practices. The Working
Capital (as hereinafter defined) of the Company existing on the Closing Date is
equal to or greater than $100,000.
3.18 Agents. Except as set forth on Schedule 3.18 attached hereto, the
Company has not designated or appointed any person (other than the Company's
employees and officers) 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 Directors, Officers, Shareholders and
Employees. The Company does not owe any indebtedness to any of its directors,
officers, shareholders, employees or affiliates, or have indebtedness owed to it
from any of its directors, officers, shareholders, employees or affiliates,
excluding indebtedness for travel advances or similar advances for expenses
incurred on behalf of and in the ordinary course of business of the Company and
consistent with the Company's past practices. As of the Effective Time and the
Closing Date all amounts due the Company from any of its directors, officers,
employees or affiliates (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, the Company does not employ or have any relationship with any
individual, corporation, partnership, or other entity whose compensation from
the Company 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 the Company from third parties in connection with the
execution, delivery, and performance of this Agreement or any of the other
contracts, documents, instruments or agreements to be entered into in connection
with or as contemplated by this Agreement (all of which are collectively
referred to as the "Transaction Documents").
3.22 Brokers. The Company has not engaged, or caused any liability to
be incurred to, any finder, broker, or sales agent (and has not paid, and will
not pay, any finders fee or similar fee or commission to any person) in
connection with the execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
3.23 Interest in Competitors, Suppliers, and Customers. Except as set
forth on Schedule 3.23 attached hereto, neither the Company nor any affiliate of
the Company, and to the knowledge of the Company and Seller, no director,
officer, employee or affiliate of the Company or any affiliate of any director,
officer, employee or affiliate of the Company, has any ownership interest in any
competitor, customer or supplier of the Company or any property used in the
operation of the Business.
3.24 Warranties. Except as set forth on Schedule 3.24, the Company 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 the Company since January 1, 1996.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
4.4 Distribution of Working Capital. In accordance with the resolutions
adopted by Horizon on August 10, 1999, the parties agree that all cash in excess
of the minimum amount of Working Capital (as hereinafter defined) required
pursuant to Section 5.2(h) shall be distributed within thirty (30) days of the
Closing (as dividends) to the shareholders of Horizon existing on August 1,
1999.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to which it is a
party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel for Seller may
reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock;
(c) each of the shareholders of the Company existing
immediately prior to the Closing (including Seller) that is a physician or other
licensed medical professional shall have executed and delivered to Prime an
Exclusive Use Agreement in substantially the form attached hereto as Exhibit B;
(d) Seller, and each of the other Company shareholders selling
Company stock to Prime in a Related Acquisition (the "Selling Shareholders"),
who will remain a shareholder of the Company after the Closing shall have
executed and delivered to Prime an Assignment and Security Agreement, in
substantially the form attached hereto as Exhibit C, granting a security
interest in such shareholder's remaining stock in the Company to secure the
performance by such shareholder under any agreement it has with Prime or any of
Prime's affiliates;
(e) the Company shall have adopted, after obtaining all
necessary approvals and consents, the Amended and Restated Bylaws, in
substantially the form attached hereto as Exhibit D, which shall contain
provisions governing its board of directors that are consistent with the
provisions of Section 9.4 of this Agreement, including, without limitation, that
the number of directors serving on its board of directors of the Company shall
be five (5);
(f) at the Closing, the Company's board of directors shall
consist of three (3) individuals designated by Prime and listed on Schedule
5.2(f) hereto, and two (2) individuals designated by a majority of the
shareholders of the Company immediately prior to Closing and listed on Schedule
5.2(f) hereto;
(g) the Company shall have delivered to Prime true and correct
copies of resignations, effective as of the Closing Date, from each of the
persons holding the offices set forth on Schedule 5.2(g) hereto, and the persons
listed on Schedule 5.2(g) hereto shall have been elected or appointed to the
office set forth opposite their name;
(h) As of the Closing Date, the amount of Working Capital of
the Company shall be at least $100,000 (for purposes of this Agreement, "Working
Capital" means the difference between (i) cash, cash equivalents, prepaid
expenses and Accounts Receivable less than sixty (60) days old and (ii) accounts
payable and other liabilities and payment obligations due in the following
twelve (12) months, all as determined in accordance with GAAP); and
(i) each of them, and each Selling Shareholder, shall have
delivered such good standing certificates, officer certificates, and similar
documents and certificates as counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
the Company, not specifically and fully reflected by item and amount on either
Schedule 3.4 or in the Financial Statements, that is or may be asserted with
respect to any acts or omissions occurring, or circumstances existing, on or
prior to the Closing Date, except for liabilities incurred in the ordinary
course of business, or (iii) any obligations or liabilities with respect to any
claims arising out of actions or omissions, that occurred prior to the Closing
Date, by any of the Company's directors, officers, shareholders, agents,
employees, representatives, subsidiaries and/or affiliates.
(b) Seller agrees to indemnify and hold harmless each of the
Prime 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 the Prime Indemnified Parties may sustain, arising out of any breach or
default by Seller of any of its representations, warranties, covenants or
agreements contained in this Agreement or any Transaction Document.
(c) Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 6.1
unless and until such time as all claims of all Prime Indemnified Parties, taken
together, exceed $10,000 in the aggregate, at which time all claims of such
Prime Indemnified Parties may be asserted individually or in combination
(beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to the Company and, if applicable, Seller (collectively in
instances involving the Seller, the "indemnifying party"), of the commencement
or assertion of any third party action in respect of which such Prime
Indemnified Party shall seek indemnification hereunder. Any failure to so notify
the indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices the
indemnifying party. The indemnifying party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) The indemnifying party 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) The indemnifying party 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) The indemnifying party shall not be entitled to control
(but shall be entitled to participate at its 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 the indemnifying party fails 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 the indemnifying party, without the prior
written consent of the indemnifying party.
(e) The indemnifying party 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 the
indemnifying party for the full amount of such payments if the Prime Indemnified
Party is ultimately determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1 shall be limited to the aggregate Purchase Price received by Seller
under this Agreement, plus the greater of (a) the value of all remaining equity
interests which Seller holds in the Company at the time of Closing or (b) the
value of all remaining equity interests which Seller holds in the Company at the
time an Indemnified Amount is required to be paid.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party shall be
entitled to assert any claim for indemnification under this Section 7.1 unless
and until such time as all claims of such Seller Indemnified Party, individually
and not in combination with other Seller Indemnified Parties, exceed $25,000 in
the aggregate, at which time all claims of such Seller Indemnified Party may be
asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Special Options to Sell or Acquire Remaining Capital Stock.
(a) Prohibition on Sale. Notwithstanding anything in this
Agreement to the contrary, Seller agrees that it will not transfer, assign,
pledge, hypothecate, or in any way alienate any of its shares of capital stock
of the Company, or any interest therein, whether voluntarily or by operation of
law, or by gift or otherwise, except in accordance with the provisions of this
Section or Section 9.3, or except pursuant to that certain Assignment and
Security Agreement by and between Prime or one of its affiliates and Seller,
dated as of the date of this Agreement (the "Security Agreement"). Any purported
transfer in violation of this Section or Section 9.3 shall be void and
ineffectual, and shall not operate to transfer any interest or title to the
purported transferee. Seller agrees that the Company may, and the Company agrees
to, issue stop-transfer orders, or take any other necessary action, to ensure
that the foregoing provisions of this Section and Section 9.3 are given full
effect.
(b) Option to Sell. Upon (i) the death, retirement (only if
Seller is a physician and only as defined below), bankruptcy, insolvency,
disability (only if Seller is a physician and only as defined below) or
incompetency of Seller, (ii) any other involuntary transfer of any capital stock
of the Company now or hereafter owned by Seller, or any interest therein
(including, without limitation, transfers of interests upon divorce or death of
a spouse of Seller, but excluding any transfers governed by Section 9.3), (iii)
relocation of Seller's primary residence outside of a two hundred (200) mile
radius of the center or facility at which Seller primarily renders services, or
(iv) if Seller is a physician or other practicing licensed professional, the
performance by Seller, during any one-month period, of greater than thirty (30%)
of his or her professional medical activities outside of a two hundred (200)
mile radius of the center or facility primarily utilized by Seller prior to the
date of this Agreement; the Seller's executor, administrator, trustee,
custodian, receiver or other legal or personal representative (the
"Representative"), or Seller, in the case of retirement or departure, shall give
written notice of that fact to the Company. In such event, the Representative or
Seller shall have a period of sixty (60) days (the "Put Period") following the
date of such death, retirement, bankruptcy, insolvency, disability, incompetency
or relocation of primary residence or practice, as the case may be, within which
time it may require that the Company purchase (subject to the remaining
provisions of this subsection) all of Seller's capital stock of the Company,
upon the terms and conditions hereinafter set forth, by giving notice of such
election in writing to the Company. The Company may, in its sole discretion,
offer all or a portion of such capital stock to its shareholders, on a pro rata
basis in relation to each shareholder's percentage ownership of the Company, but
any agreement by the shareholders to purchase all or a portion of such capital
stock shall not limit the Company's obligation to purchase within the time frame
set forth in this Section. If the Company has offered all of such capital stock
to its shareholders, and the shareholders have not committed to purchase all of
such capital stock within five (5) days from the date of offer, then the Company
may, in its sole discretion, offer all or a portion of the remaining capital
stock to Prime, in which event Prime must participate in such purchase upon the
same terms and conditions as the Company. For purposes of this Agreement, (x)
"disability" shall apply only if Seller is a physician and shall mean any
condition which in the reasonable judgment of a majority of the managers of
Prime, would impair Seller's ability to materially perform his or her routine
duties for a period of six (6) months or more, (y) "retirement" shall apply only
if Seller is a physician and shall mean the cessation of the routine practice of
medicine (provided that any physician who transfers his or her entire practice
to a licensed medical professional meeting the Company's then current
credentialing program shall not be deemed to have retired for purposes of this
subsection), and (z) "incompetent" shall mean a state of legal incompetence as
declared by a court of valid jurisdiction.
(c) Option to Buy. In the event that the option described in
Section 9(b) arises and the Representative or Seller, as the case may be, fails
to make the election described in Section 9(b) within the Put Period, Prime
shall at all times thereafter have the option to purchase all or any portion of
Seller's capital stock of the Company, upon the terms and conditions hereinafter
set forth, by giving written notice of such election in writing to Seller. In
addition, Prime may, in its sole discretion, transfer its purchase right granted
under this subsection (or stock acquired pursuant to an exercise of its purchase
right granted under this subsection) to Horizon or any of the physician
shareholders of the Company.
(d) Purchase Price. The purchase price to be paid pursuant to
this Section shall be paid in immediately available funds at the closing of the
transfer of capital stock pursuant to this Section. If the parties do not
otherwise agree within thirty (30) days of the day on which the option to
purchase or sell hereunder is exercised, then Prime shall, at its own expense,
select an appraiser to value the capital stock being transferred. If Seller or
Representative does not agree with the value determined by the appraiser of
Prime, Seller or Representative may, at its own expense, select its own
appraiser to value the capital stock being transferred. If the two appraisers
cannot agree on the value of the capital stock being transferred, the two
appraisers shall mutually select a third appraiser to value the capital stock
being transferred, and any valuation determined by such third appraiser shall be
final, binding and conclusive. The cost of any third appraiser shall be borne by
Seller.
(e) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice under either Section 9(b) or
Section 9(c). At such closing, Seller shall execute all documents and take such
other actions as may be reasonably necessary to deliver to Prime such capital
stock, and any certificates representing same, free and clear of all liens,
claims, encumbrances or restrictions of any kind or nature whatsoever, except
those imposed under the Security Agreement.
9.3 Right of First Refusal.
(a) If there is no option to sell or buy outstanding under
Section 9.2 (except in connection with a sale by a physician of all of his or
her practice upon retirement), and Seller intends to voluntarily transfer any
portion of its capital stock of the Company to any person or entity other than
Prime, then Seller shall give written notice to Prime stating (i) the intention
to transfer such capital stock, (ii) the number of shares to be transferred,
(iii) the name, business and residence address of the proposed transferee, (iv)
the nature and amount of the consideration, and (v) the other terms of the
proposed sale.
(b) Prime shall have, and may exercise within sixty (60) days
after receipt of the notice of intent to transfer, an option to purchase all or
any portion of the capital stock of the Company owned by Seller, at the per
share price and upon the other terms stated in the notice of intent to transfer.
Prime may elect to exercise its option under this Section by delivering notice
thereof to Seller. If Prime elects not to purchase all or any portion of such
capital stock prior to the expiration of said sixty (60) day period, Seller
shall have thirty (30) days to complete the sale and purchase contemplated in
the notice of intent to transfer, and after such thirty (30) day period, the
provisions of this Section shall apply fully to any such capital stock not
transferred. The purchase price pursuant to this Section shall be paid in
immediately available funds at the closing of the transfer pursuant to this
Section.
(c) Seller and Prime acknowledge and agree that it would be
impractical to exercise an option to purchase arising pursuant to this Section
whenever the proposed consideration to be received by Seller is other than cash,
cash equivalents or an obligation to pay cash by a person whose credit
worthiness and financial status is such that performance of the payment
obligation would be reasonably assured. Therefore, the parties agree that no
transfer shall be permitted and no option shall arise pursuant to this Section
whenever the consideration to be received from the proposed transferee is other
than cash, cash equivalents or an obligation to pay cash by a person whose
credit worthiness and financial status is such that performance of the payment
obligation would be reasonably assured.
(d) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice of Prime's election to purchase
pursuant to Section 9(b). At such closing, Seller shall execute all documents
and take such other actions as may be reasonably necessary to deliver to Prime
such capital stock, and any certificates representing same, free and clear of
all liens, claims, encumbrances or restrictions of any kind or nature
whatsoever, except those imposed under the Security Agreement.
9.4 Voting Agreement. Each of the parties hereto agrees that it will
vote all of the shares of capital stock of the Company owned by it, at any time
after the execution of this Agreement, in accordance with the terms of this
Section 9.4. Any additional shares of voting capital stock or other voting
securities of the Company, or the voting rights related thereto, whether
presently existing or created in the future, that may be owned, held, or
subsequently acquired in any manner, legally or beneficially, directly or
indirectly, of record or otherwise, by the parties at any time after the
execution of this Agreement, whether issued incident to any stock split, stock
dividend, increase in capitalization, recapitalization, merger, consolidation,
share exchange, reorganization, or other transaction, shall be shall be subject
to the terms of this Section (all such stock presently held or controlled,
together with such additional stock, the "Subject Shares"). At each election of
directors of the Company, the parties and any transferee or assignee of any
Subject Shares from the parties (the "Transferee") shall, in accordance with the
procedure set forth below, vote the Subject Shares as necessary to elect five
(5) persons, designated in accordance with the procedures below, to the board of
directors of the company. Three (3) of the directors (the "Prime Designees")
shall be designated in writing by Prime or its Transferee. The remaining two (2)
directors (the "Other Stockholder Designees") shall be jointly designated in
writing by stockholders of the corporation other than Prime (or any entity other
than the Company that is controlled by, controlling or under common control with
Prime) (the "Other Stockholders") holding a majority of the aggregate voting
equity stock held by all Other Stockholders. For purposes of this Section, the
Prime Designees and the Other Stockholder Designees are sometimes referred to
individually as a "Designated Director" and collectively as "Designated
Directors." During the term of this Agreement, the parties shall, in accordance
with the procedure set forth below, (i) vote their Subject Shares and use their
best efforts in any event to ensure that the number of directors which shall
constitute the entire board of directors of the Company shall remain at five
(5), (ii) vote their Subject Shares in favor of the removal of a Designated
Director if Prime or a majority in interest of the Other Stockholders (whichever
designated the respective director) instruct in writing that such Designated
Director shall be removed from office and (iii) upon any removal of a Designated
Director pursuant to (ii) above, vote their Subject Shares in favor of the
election of a replacement director designated in writing by Prime or a majority
in interest of the Other Stockholders (whichever designated the respective
director). None of the parties to this Agreement shall approve or authorize the
removal of any Designated Director unless Prime or a majority in interest of the
Other Stockholders (whichever designated the respective director) shall have
authorized in writing such Designated Director's removal. To the extent that any
party or parties entitled to designate a director pursuant to this Section fail
to designate a replacement Designated Director under this Section, the position
vacated shall remain vacant until such time as a new director is designated and
elected pursuant to the terms hereof.
Upon delivery of any written notice designating or removing one or more
directors pursuant to this Section, the parties hereto and any Transferee shall
either (i) sign a written consent, prepared for execution by the stockholders of
the Company in accordance with the Bylaws of the Company, which consent elects
or removes the director(s) designated in writing to be elected or removed in
accordance with this Section or (ii) at any annual or special shareholders
meeting at which director(s) are to be elected or removed, vote in favor of the
election or removal of the director(s) designated in writing to be elected or
removed in accordance with this Section. If necessary to fix the number of
directors constituting the entire board of directors at five (5), the parties
hereto shall either (i) sign such written consents prepared for execution by the
shareholders of the Company in accordance with the Bylaws of the Company or (ii)
at any annual or special shareholders meeting, vote in favor of such motions;
which consents or motions propose to fix the number of directors constituting
the entire board of directors at five (5).
Each of the parties hereto agrees to take such actions, and execute
such documents, agreements or instruments (including, without limitation,
consents amending the articles or bylaws of the Company), as may be necessary,
due to changes in the law or otherwise, to ensure that the provisions of this
Section 9.4 are given full effect.
9.5 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required by this Agreement to indemnify another party to this Agreement
in respect of such act, omission or other matter.
9.6 Post-Closing Capital Contributions. Without in any way limiting or
qualifying the representation and warranty with respect to Working Capital
contained in Section 3.17, all parties to this Agreement acknowledge and agree
that no shareholder of the Company, or any other party, has any obligation
existing on the Closing Date to make a capital contribution to the Company.
9.7 Stock Legend. On and after the Closing, each certificate or
document representing Seller's ownership of any of the Company's capital stock,
and each certificate or document that may be issued and delivered by the Company
upon transfer of such certificate, shall contain a legend conspicuously noted in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH
CERTAIN CONDITIONS SPECIFIED IN A CERTAIN STOCK PURCHASE
AGREEMENT DATED EFFECTIVE AS OF SEPTEMBER 1, 1999, A COMPLETE
AND CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
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 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 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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: John Robert Griffin, M.D., Trustee
Family Revocable Trust
dated February 8, 1991
4913 Puma Way
Carmichael, California 95608
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of the officers of the Company
holding office immediately prior to the Closing, and any employee of the Company
who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
Seller: /s/ John Robert Griffin, M.D., Trustee
Printed Name: John Robert Griffin, M.D., Trustee under
the John Robert Griffin, M.D. Family
Revocable Trust dated February 1, 1991
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A: Financial Statements
EXHIBIT B: Form of Exclusive Use Agreement
EXHIBIT C: Form of Assignment and Security Agreement
EXHIBIT D: Form of Amended and Restated Bylaws of Seller
<PAGE>
STOCK PURCHASE AGREEMENT
Among
PRIME/BDR ACQUISITION, L.L.C.
--------------------------
and
Horizon Vision Center, Inc.
--------------------
Dated September 1, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Mark R. Mandel,
M.D., Trustee under Trust Agreement dated April 12, 1989, and a shareholder of
the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time,
79,914 authorized and issued shares of the Company's $0.01 par value common
stock presently owned by Seller and evidenced by stock certificate number C-24,
C-36, C-41, C-44 and C-95 (collectively, the "Capital Stock"). The purchase
price for the Capital Stock shall be $906,453.00 (the "Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties of the Company and Seller
Seller and the Company hereby represent and warrant to Prime, jointly
and severally, that each of the following matters is true and correct in all
respects as of the Closing Date (with the understanding that Prime is relying
materially on each such representation and warranty in entering into and
performing this Agreement), which representations and warranties shall also be
deemed made as of the Effective Time and which shall survive the Closing;
provided, however, that all representations and warranties made by Seller
hereunder shall be deemed made by Seller only to the actual knowledge of Seller.
3.1 Due Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada and
has full power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is qualified to do business and is in good
standing in the states set forth on Schedule 3.1(a) attached hereto, which
states represent every jurisdiction where such qualification is required for the
conduct of the Company's business as conducted on the Closing Date. Complete and
correct copies of the Company's Articles of Incorporation, Bylaws, all board of
directors' resolutions, all shareholders' resolutions, and all amendments
thereto, have been delivered to Prime. Schedule 3.1(b) sets forth a true and
complete list, as of the Closing Date, of all of the holders of any equity or
other ownership interest in the Company or of any right to obtain, by conversion
or otherwise, and regardless of whether presently exercisable, any equity or
other ownership interest in the Company; in each case showing the number and
type of interest or right held. Schedule 3.1(b) also identifies each of the
persons listed therein that is a physician or other licensed medical
professional, and describes each such person's license(s) and professional
title. Except as set forth on Schedule 3.1(b), immediately prior to the Closing
Date there are outstanding (i) no shares of equity or other voting securities of
the Company, (ii) no securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) no options
or other rights to acquire from the Company or Seller, and no obligation of the
Company or Seller to issue or sell, any equity or other voting securities of the
Company or any securities of the Company convertible into or exchangeable for
such equity or voting securities, and (iv) no equity equivalents, interests in
the ownership or earnings, rights to participate in the election of directors or
other similar rights of or with respect to the Company. Immediately following
the Closing of this transaction and the closings of the Related Acquisitions (as
hereinafter defined), Prime will own sixty percent (60%) of all of the voting
equity securities of the Company (after assuming the conversion, exchange or
exercise of any and all securities or rights convertible into, or exchangeable
or exercisable for, voting equity securities of the Company), and all of those
persons and entities listed on Schedule 3.1(b) will own, in the aggregate, forty
percent (40%) of all of the voting equity securities of the Company (after
assuming the conversion, exchange or exercise of any and all securities or
rights convertible into, or exchangeable or exercisable for, voting equity
securities of the Company). The Capital Stock transferred by Seller to Prime at
the Closing, as well as all other capital stock of the Company transferred to
Prime in the Related Acquisitions, will be duly authorized, validly issued and
outstanding, fully paid, non-assessable, and free of any liens, claims or
encumbrances whatsoever.
3.2 Subsidiaries. Except as set forth on Schedule 3.2 (reflecting
ownership interests and the nature of such interests), the Company does not
directly or indirectly have (or possess any options or other rights to acquire)
any subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, limited liability company, association,
joint venture, trust, or other entity.
3.3 Due Authorization. Each of the Company and Seller has full power
and authority to enter into and perform this Agreement and each Transaction
Document required to be executed by the Company or Seller in connection
herewith. The execution, delivery, and performance of this Agreement and each
such Transaction Document has been duly authorized by all necessary action of
the Company, its directors, its officers and its shareholders. This Agreement
and each such Transaction Document has been duly and validly executed and
delivered by the Company and Seller and constitutes a valid and binding
obligation of the Company and Seller, enforceable against each of them in
accordance with its terms. The execution, delivery, and performance of this
Agreement, and each Transaction Document required herein to be executed by
Seller and/or the Company do not (a) violate any federal, state, county, or
local law, rule, or regulation applicable to the Company, the Business (as
hereinafter defined), the Company's assets or the Capital Stock, (b) violate or
conflict with, or permit the cancellation of, any agreement to which the Company
is a party, or by which the Company or its properties are bound, or result in
the creation of any lien, security interest, charge, or encumbrance upon any of
such properties or the upon the Capital Stock, (c) permit the acceleration of
the maturity of any indebtedness of Seller or the Company, or any indebtedness
secured by the Capital Stock or by the property of the Company, or (d) violate
or conflict with any provision of the organizational documents of the Company.
No action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller or the Company in
connection with the execution, delivery, or performance of this Agreement (or
any Transaction Document).
3.4 Financial Statements. The unaudited balance sheet and income
statement of the Company as of and for each of the years ended March 31, 1998
and 1999, and the unaudited balance sheet and income statement of the Company as
of and for the three (3) months ended June 30, 1999 (collectively, the
"Financial Statements") are attached hereto as Exhibit A. The Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP") (except as specifically noted therein
or in Schedule 3.4) and fairly present the financial position and results of
operations of the Company as of the indicated dates and for the indicated
periods. Except for liabilities incurred in the ordinary course of business or
disclosed in Schedule 3.4, and except to the extent specifically and fully
reflected in the Financial Statements (including the notes thereto), as of the
Closing Date, the Company has no claims, debts, liabilities, or obligations,
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 the Company, its assets or the
Business). The Company and Seller each agree to indemnify and hold harmless
Prime and its affiliates from and against any and all such claims, debts,
liabilities and obligations. Except as set forth in Schedule 3.4 hereto, since
June 30, 1999 there has been no material adverse change in the assets of the
Company, the Business, or the results of operations or financial position of the
Company.
3.5 Conduct of Business; Certain Actions. As used herein, "Business"
means all of the business conducted by the Company, which shall be deemed to
include all refractive surgery modalities, now performed, offered or made
available, including, without limitation, implantable contact lenses, instromal
corneal rings, laser in situs keratomileusis photorefractive keratectomy,
automated lemellar keratoplasty, radial keratotomy, astigmatic keratotomy and
similar procedures. Except as set forth on Schedule 3.5 attached hereto, since
June 30, 1999, the Company has conducted its Business and operations of the
Business in the ordinary course and consistent with its past practices and has
not (a) purchased or retired any indebtedness, or purchased, retired, or
redeemed any ownership interest from, any director, officer, shareholder,
employee or affiliate of the Company, or engaged in any other transaction that
involves or requires distributions of money or other assets from the Company to
any director, officer, shareholder, employee or affiliate of the Company if such
other transaction is not done in the ordinary course of business and is not
consistent with past practices of the Company, (b) increased the compensation of
any directors, officers, employees, agents, contractors, vendors or other
parties, except for wage and salary increases made in the ordinary course of
business and consistent with the past practices of the Company, (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 or book value for such asset
(or group of related assets) exceeded $10,000, (e) discharged or satisfied any
lien or encumbrance or paid any obligation or liability, absolute or contingent,
other than current liabilities incurred and paid in the ordinary course of
business, (f) made or guaranteed any loans or advances to any party whatsoever,
(g) suffered or permitted any lien, security interest, claim, charge, or other
encumbrance to arise or be granted or created against or upon any of its assets,
real or personal, tangible or intangible, (h) canceled, waived, or released any
of its debts, rights, or claims against third parties, (i) amended its
organizational documents, (j) made or paid any severance or termination payment
to any director, officer, employee, agent, contractor, vendor or consultant, (k)
made any change in its method of accounting, (l) made any investment or
commitment therefor in any person, business, corporation, association,
partnership, limited liability company, joint venture, trust, or other entity,
(m) made, entered into, amended, or terminated any written employment contract,
created, made, amended, or terminated any bonus, stock option, pension,
retirement, profit sharing, or other employee benefit plan or arrangement, or
withdrawn from any "multi-employer plan" (as defined in the Internal Revenue
Code of 1986, as amended (the "Code")) so as to create any liability under ERISA
(as hereinafter defined) to any person or entity, (n) amended, terminated or
experienced a termination of any material contract, agreement, lease, franchise,
or license to which it is a party, (o) made any distributions, in cash or in
kind, to its shareholders, or to any person or entity related to or affiliated
therewith, in any capacity, except such distributions as are made in the
ordinary course of the Company's business consistent with past practices, (p)
entered into any 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.
3.6 Assets; Licenses, Permits, etc. Except as set forth on Schedule
3.6(a), the Company has good and marketable title to all of its assets, free and
clear of all liens, security interests, claims, rights of another, and
encumbrances of any kind whatsoever. The assets of the Company 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 all that are
necessary for the conduct of the Business. Attached hereto as Schedule 3.6(b) is
a list and description of all federal, state, county, and local governmental
licenses, certificates, certificates of need, permits, waivers, filings and
orders held or applied for by the Company and used or relied on (or to be used
or relied on) in connection with the Business ("Permits"). The Company has
complied in all material respects, and the Company is in compliance in all
material respects, with the terms and conditions of any such Permits. No
additional Permit is required from any federal, state, county, or local
governmental agency or body thereof in connection with the conduct of the
Business. No claim has been made by any governmental authority (and, to the
knowledge of Seller and the Company, no such claim has been threatened) to the
effect that a Permit not possessed by the Company is necessary in respect of the
Business.
3.7 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) The Company 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 the Company 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 the
financial position of the Company.
(c) The Company has not received any notice from the United
States Environmental Protection Agency that it is a potentially responsible
party under the Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund Notice"), any citation from any federal, state or local
governmental authority for non-compliance with its requirements with respect to
air, water or environmental pollution, or the improper storage, use or discharge
of any hazardous waste, other waste or other substance or other material
pertaining to its business ("Citations") or any written notice from any private
party alleging any such non-compliance; and there are no pending or unresolved
Superfund Notices, Citations or written notices from private parties alleging
any such non-compliance.
3.8 Intellectual Property Rights. There are no patents, trademarks,
trade names, or copyrights, and no applications therefor, owned by or registered
in the name of the Company or in which the Company has any right, license, or
interest. The Company is not a party to any license agreement, either as
licensor or licensee, with respect to any patents, trademarks, trade names, or
copyrights. The Company has not received any notice that it is infringing any
patent, trademark, trade name, or copyright of others.
3.9 Compliance with Laws. To the knowledge of the Company and Seller,
the Company has complied in all material respects, and the Company is in
compliance in all material respects, with all federal, state, county, and local
laws, rules, regulations and ordinances currently in effect. No claim has been
made or threatened by any governmental authority against the Company to the
effect that the business conducted by the Company fails to comply in any respect
with any law, rule, regulation, or ordinance.
3.10 Insurance. Attached hereto as Schedule 3.10 is a list of all
policies of fire, liability, business interruption, and other forms of insurance
(including, without limitation, professional liability insurance) and all
fidelity bonds held by or applicable to the Company 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 the Company and Seller, no event directly relating to the Company
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 the Company during the past three (3) years,
including without limitation any change which has resulted in any period during
which the Company had no insurance coverage. Excluding insurance policies which
have expired and been replaced, no insurance policy of the Company has been
canceled within the last three (3) years and no threat has been made to cancel
any insurance policy of the Company within such period.
3.11 Employee Benefit Matters. Except as set forth on Schedule 3.11,
the Company 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). The Company does not presently maintain and has never
maintained, or had any obligation of any nature to contribute to, a "defined
benefit plan" within the meaning of the Code.
3.12 Contracts and Agreements. Attached hereto as Schedule 3.12 is a
list of all written or oral contracts, commitments, leases, and other agreements
(including, without limitation, all promissory notes, loan agreements, and other
evidences of indebtedness, mortgages, deeds of trust, security agreements,
pledge agreements, service agreements, and similar agreements and instruments
and all confidentiality agreements) to which the Company is a party or by which
the Company or its properties are bound, pursuant to which the obligations
thereunder of any party thereto are, or are contemplated as being, in respect of
any such individual contracts, commitments, leases, or other agreements during
any year during the term thereof, $25,000 or greater, or which are otherwise
material to the Business (collectively the "Contracts" and individually, a
"Contract"). The Company is not and, to the best knowledge of the Company and
Seller, 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 Company or, to the best knowledge of the Company and Seller, by
any other party thereto) under any Contract. The Company has not waived any
material right under any Contract, and no consents or approvals (other than
those obtained in writing and delivered to Prime prior to Closing) are required
under any Contract in connection with the sale of Capital Stock or the
consummation of the transactions contemplated hereby. The Company has not
guaranteed any obligation of any other person or entity.
3.13 Claims and Proceedings. Attached hereto as Schedule 3.13 is a list
and description of all claims, actions, suits, proceedings, and investigations
pending or, to the knowledge of the Company and Seller, threatened against the
Company, 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
the Company which (individually or in the aggregate) is material, and the
Company has not been, and the Company is not now, subject to any order,
judgment, decree, stipulation, or consent of any court, governmental body, or
agency. No inquiry, action, or proceeding has been asserted, instituted, or
threatened against the Company or Seller 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
company 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 Company. The Company has provided Prime with copies of
all returns filed for and during the years ended 1998, 1997 and (to the extent
an extension was filed for any return for the year ended 1998) 1996. 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 Company's estimated Tax liabilities
for the respective periods then ended and all prior periods. As of the Closing
Date, the Company 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 the Company between June 30, 1999 and the
Closing Date. The Company has not executed any presently effective waiver or
extension of any statute of limitations against assessments and collection of
Taxes. There are no pending or threatened claims, assessments, notices,
proposals to assess, deficiencies, or audits (collectively, "Tax Actions")
against the Company with respect to any Taxes owed or allegedly owed by the
Company. There are no tax liens on any of the assets of the Company. Proper and
accurate amounts have been withheld and remitted by the Company 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 Company is not a party to any tax sharing
agreement.
3.15 Personnel. Attached hereto as Schedule 3.15 is a list of names and
current annual rates of compensation of the officers, employees or agents of the
Company who are necessary for the operation of the Business (the "Employees").
Except as set forth on Schedule 3.15, there are no bonus, profit sharing,
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable by the Company to any Employees from December
31, 1998 through the Closing Date. Schedule 3.15 attached hereto also contains a
brief description of all material terms of employment agreements and
confidentiality agreements to which the Company is a party and all severance
benefits which any director, officer, Employee or sales representative of the
Company is or may be entitled to receive. The Company 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 the
Company is a party and under which its employees are entitled to receive
benefits of any nature. There is no pending or threatened (i) labor dispute or
union organization campaign relating to the Company, (ii) claims against the
Company by any employees of the Company (other than those certain Workers'
Compensation claims specifically described on Schedule 3.13), or (iii)
terminations, resignations or retirements of any employees of the Company. None
of the employees of the Company are represented by any labor union or
organization. There is no unfair labor practice claim against the Company before
the National Labor Relations Board or any strike, labor dispute, work slowdown,
or work stoppage pending or threatened against or involving the Company.
3.16 Business Relations. The Company has no reason to believe and has
not been notified that any supplier or customer of the Company will cease or
refuse to do business with the Company in the same manner as previously
conducted with the Company as a result of or within one (1) year after the
consummation of the transactions contemplated hereby, to the extent such
cessation or refusal might affect the Business. The Company 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 Company.
3.17 Working Capital. Except as set forth on Schedule 3.17 attached
hereto, all of the accounts, notes, and loans receivable (the "Accounts
Receivable") reflected in the Financial Statements, or arising since June 30,
1999, arose from transactions occurring in the ordinary course of the Company's
business as previously conducted, are bona fide and represent amounts validly
due, subject to offsets or defenses. Except for accounts payable and other
accrued expenses incurred in the ordinary course of the Company's business since
June 30, 1999 and consistent with past practices of the Company, there are no
liabilities of the Company other than those reflected in the Financial
Statements. Adequate provision has been made for uncollectible Accounts
Receivable. Since June 30, 1999, the Company has collected its Accounts
Receivable and has paid or performed all liabilities and obligations of the
Company in the ordinary course, consistent with past practices. The Working
Capital (as hereinafter defined) of the Company existing on the Closing Date is
equal to or greater than $100,000.
3.18 Agents. Except as set forth on Schedule 3.18 attached hereto, the
Company has not designated or appointed any person (other than the Company's
employees and officers) 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 Directors, Officers, Shareholders and
Employees. The Company does not owe any indebtedness to any of its directors,
officers, shareholders, employees or affiliates, or have indebtedness owed to it
from any of its directors, officers, shareholders, employees or affiliates,
excluding indebtedness for travel advances or similar advances for expenses
incurred on behalf of and in the ordinary course of business of the Company and
consistent with the Company's past practices. As of the Effective Time and the
Closing Date all amounts due the Company from any of its directors, officers,
employees or affiliates (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, the Company does not employ or have any relationship with any
individual, corporation, partnership, or other entity whose compensation from
the Company 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 the Company from third parties in connection with the
execution, delivery, and performance of this Agreement or any of the other
contracts, documents, instruments or agreements to be entered into in connection
with or as contemplated by this Agreement (all of which are collectively
referred to as the "Transaction Documents").
3.22 Brokers. The Company has not engaged, or caused any liability to
be incurred to, any finder, broker, or sales agent (and has not paid, and will
not pay, any finders fee or similar fee or commission to any person) in
connection with the execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
3.23 Interest in Competitors, Suppliers, and Customers. Except as set
forth on Schedule 3.23 attached hereto, neither the Company nor any affiliate of
the Company, and to the knowledge of the Company and Seller, no director,
officer, employee or affiliate of the Company or any affiliate of any director,
officer, employee or affiliate of the Company, has any ownership interest in any
competitor, customer or supplier of the Company or any property used in the
operation of the Business.
3.24 Warranties. Except as set forth on Schedule 3.24, the Company 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 the Company since January 1, 1996.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
4.4 Distribution of Working Capital. In accordance with the resolutions
adopted by Horizon on August 10, 1999, the parties agree that all cash in excess
of the minimum amount of Working Capital (as hereinafter defined) required
pursuant to Section 5.2(h) shall be distributed within thirty (30) days of the
Closing (as dividends) to the shareholders of Horizon existing on August 1,
1999.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to which it is a
party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel for Seller may
reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock;
(c) each of the shareholders of the Company existing
immediately prior to the Closing (including Seller) that is a physician or other
licensed medical professional shall have executed and delivered to Prime an
Exclusive Use Agreement in substantially the form attached hereto as Exhibit B;
(d) Seller, and each of the other Company shareholders selling
Company stock to Prime in a Related Acquisition (the "Selling Shareholders"),
who will remain a shareholder of the Company after the Closing shall have
executed and delivered to Prime an Assignment and Security Agreement, in
substantially the form attached hereto as Exhibit C, granting a security
interest in such shareholder's remaining stock in the Company to secure the
performance by such shareholder under any agreement it has with Prime or any of
Prime's affiliates;
(e) the Company shall have adopted, after obtaining all
necessary approvals and consents, the Amended and Restated Bylaws, in
substantially the form attached hereto as Exhibit D, which shall contain
provisions governing its board of directors that are consistent with the
provisions of Section 9.4 of this Agreement, including, without limitation, that
the number of directors serving on its board of directors of the Company shall
be five (5);
(f) at the Closing, the Company's board of directors shall
consist of three (3) individuals designated by Prime and listed on Schedule
5.2(f) hereto, and two (2) individuals designated by a majority of the
shareholders of the Company immediately prior to Closing and listed on Schedule
5.2(f) hereto;
(g) the Company shall have delivered to Prime true and correct
copies of resignations, effective as of the Closing Date, from each of the
persons holding the offices set forth on Schedule 5.2(g) hereto, and the persons
listed on Schedule 5.2(g) hereto shall have been elected or appointed to the
office set forth opposite their name;
(h) As of the Closing Date, the amount of Working Capital of
the Company shall be at least $100,000 (for purposes of this Agreement, "Working
Capital" means the difference between (i) cash, cash equivalents, prepaid
expenses and Accounts Receivable less than sixty (60) days old and (ii) accounts
payable and other liabilities and payment obligations due in the following
twelve (12) months, all as determined in accordance with GAAP); and
(i) each of them, and each Selling Shareholder, shall have
delivered such good standing certificates, officer certificates, and similar
documents and certificates as counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
the Company, not specifically and fully reflected by item and amount on either
Schedule 3.4 or in the Financial Statements, that is or may be asserted with
respect to any acts or omissions occurring, or circumstances existing, on or
prior to the Closing Date, except for liabilities incurred in the ordinary
course of business, or (iii) any obligations or liabilities with respect to any
claims arising out of actions or omissions, that occurred prior to the Closing
Date, by any of the Company's directors, officers, shareholders, agents,
employees, representatives, subsidiaries and/or affiliates.
(b) Seller agrees to indemnify and hold harmless each of the
Prime 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 the Prime Indemnified Parties may sustain, arising out of any breach or
default by Seller of any of its representations, warranties, covenants or
agreements contained in this Agreement or any Transaction Document.
(c) Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 6.1
unless and until such time as all claims of all Prime Indemnified Parties, taken
together, exceed $10,000 in the aggregate, at which time all claims of such
Prime Indemnified Parties may be asserted individually or in combination
(beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to the Company and, if applicable, Seller (collectively in
instances involving the Seller, the "indemnifying party"), of the commencement
or assertion of any third party action in respect of which such Prime
Indemnified Party shall seek indemnification hereunder. Any failure to so notify
the indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices the
indemnifying party. The indemnifying party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) The indemnifying party 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) The indemnifying party 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) The indemnifying party shall not be entitled to control
(but shall be entitled to participate at its 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 the indemnifying party fails 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 the indemnifying party, without the prior
written consent of the indemnifying party.
(e) The indemnifying party 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 the
indemnifying party for the full amount of such payments if the Prime Indemnified
Party is ultimately determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1 shall be limited to the aggregate Purchase Price received by Seller
under this Agreement, plus the greater of (a) the value of all remaining equity
interests which Seller holds in the Company at the time of Closing or (b) the
value of all remaining equity interests which Seller holds in the Company at the
time an Indemnified Amount is required to be paid.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party shall be
entitled to assert any claim for indemnification under this Section 7.1 unless
and until such time as all claims of such Seller Indemnified Party, individually
and not in combination with other Seller Indemnified Parties, exceed $25,000 in
the aggregate, at which time all claims of such Seller Indemnified Party may be
asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Special Options to Sell or Acquire Remaining Capital Stock.
(a) Prohibition on Sale. Notwithstanding anything in this
Agreement to the contrary, Seller agrees that it will not transfer, assign,
pledge, hypothecate, or in any way alienate any of its shares of capital stock
of the Company, or any interest therein, whether voluntarily or by operation of
law, or by gift or otherwise, except in accordance with the provisions of this
Section or Section 9.3, or except pursuant to that certain Assignment and
Security Agreement by and between Prime or one of its affiliates and Seller,
dated as of the date of this Agreement (the "Security Agreement"). Any purported
transfer in violation of this Section or Section 9.3 shall be void and
ineffectual, and shall not operate to transfer any interest or title to the
purported transferee. Seller agrees that the Company may, and the Company agrees
to, issue stop-transfer orders, or take any other necessary action, to ensure
that the foregoing provisions of this Section and Section 9.3 are given full
effect.
(b) Option to Sell. Upon (i) the death, retirement (only if
Seller is a physician and only as defined below), bankruptcy, insolvency,
disability (only if Seller is a physician and only as defined below) or
incompetency of Seller, (ii) any other involuntary transfer of any capital stock
of the Company now or hereafter owned by Seller, or any interest therein
(including, without limitation, transfers of interests upon divorce or death of
a spouse of Seller, but excluding any transfers governed by Section 9.3), (iii)
relocation of Seller's primary residence outside of a two hundred (200) mile
radius of the center or facility at which Seller primarily renders services, or
(iv) if Seller is a physician or other practicing licensed professional, the
performance by Seller, during any one-month period, of greater than thirty (30%)
of his or her professional medical activities outside of a two hundred (200)
mile radius of the center or facility primarily utilized by Seller prior to the
date of this Agreement; the Seller's executor, administrator, trustee,
custodian, receiver or other legal or personal representative (the
"Representative"), or Seller, in the case of retirement or departure, shall give
written notice of that fact to the Company. In such event, the Representative or
Seller shall have a period of sixty (60) days (the "Put Period") following the
date of such death, retirement, bankruptcy, insolvency, disability, incompetency
or relocation of primary residence or practice, as the case may be, within which
time it may require that the Company purchase (subject to the remaining
provisions of this subsection) all of Seller's capital stock of the Company,
upon the terms and conditions hereinafter set forth, by giving notice of such
election in writing to the Company. The Company may, in its sole discretion,
offer all or a portion of such capital stock to its shareholders, on a pro rata
basis in relation to each shareholder's percentage ownership of the Company, but
any agreement by the shareholders to purchase all or a portion of such capital
stock shall not limit the Company's obligation to purchase within the time frame
set forth in this Section. If the Company has offered all of such capital stock
to its shareholders, and the shareholders have not committed to purchase all of
such capital stock within five (5) days from the date of offer, then the Company
may, in its sole discretion, offer all or a portion of the remaining capital
stock to Prime, in which event Prime must participate in such purchase upon the
same terms and conditions as the Company. For purposes of this Agreement, (x)
"disability" shall apply only if Seller is a physician and shall mean any
condition which in the reasonable judgment of a majority of the managers of
Prime, would impair Seller's ability to materially perform his or her routine
duties for a period of six (6) months or more, (y) "retirement" shall apply only
if Seller is a physician and shall mean the cessation of the routine practice of
medicine (provided that any physician who transfers his or her entire practice
to a licensed medical professional meeting the Company's then current
credentialing program shall not be deemed to have retired for purposes of this
subsection), and (z) "incompetent" shall mean a state of legal incompetence as
declared by a court of valid jurisdiction.
(c) Option to Buy. In the event that the option described in
Section 9(b) arises and the Representative or Seller, as the case may be, fails
to make the election described in Section 9(b) within the Put Period, Prime
shall at all times thereafter have the option to purchase all or any portion of
Seller's capital stock of the Company, upon the terms and conditions hereinafter
set forth, by giving written notice of such election in writing to Seller. In
addition, Prime may, in its sole discretion, transfer its purchase right granted
under this subsection (or stock acquired pursuant to an exercise of its purchase
right granted under this subsection) to Horizon or any of the physician
shareholders of the Company.
(d) Purchase Price. The purchase price to be paid pursuant to
this Section shall be paid in immediately available funds at the closing of the
transfer of capital stock pursuant to this Section. If the parties do not
otherwise agree within thirty (30) days of the day on which the option to
purchase or sell hereunder is exercised, then Prime shall, at its own expense,
select an appraiser to value the capital stock being transferred. If Seller or
Representative does not agree with the value determined by the appraiser of
Prime, Seller or Representative may, at its own expense, select its own
appraiser to value the capital stock being transferred. If the two appraisers
cannot agree on the value of the capital stock being transferred, the two
appraisers shall mutually select a third appraiser to value the capital stock
being transferred, and any valuation determined by such third appraiser shall be
final, binding and conclusive. The cost of any third appraiser shall be borne by
Seller.
(e) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice under either Section 9(b) or
Section 9(c). At such closing, Seller shall execute all documents and take such
other actions as may be reasonably necessary to deliver to Prime such capital
stock, and any certificates representing same, free and clear of all liens,
claims, encumbrances or restrictions of any kind or nature whatsoever, except
those imposed under the Security Agreement.
9.3 Right of First Refusal.
(a) If there is no option to sell or buy outstanding under
Section 9.2 (except in connection with a sale by a physician of all of his or
her practice upon retirement), and Seller intends to voluntarily transfer any
portion of its capital stock of the Company to any person or entity other than
Prime, then Seller shall give written notice to Prime stating (i) the intention
to transfer such capital stock, (ii) the number of shares to be transferred,
(iii) the name, business and residence address of the proposed transferee, (iv)
the nature and amount of the consideration, and (v) the other terms of the
proposed sale.
(b) Prime shall have, and may exercise within sixty (60) days
after receipt of the notice of intent to transfer, an option to purchase all or
any portion of the capital stock of the Company owned by Seller, at the per
share price and upon the other terms stated in the notice of intent to transfer.
Prime may elect to exercise its option under this Section by delivering notice
thereof to Seller. If Prime elects not to purchase all or any portion of such
capital stock prior to the expiration of said sixty (60) day period, Seller
shall have thirty (30) days to complete the sale and purchase contemplated in
the notice of intent to transfer, and after such thirty (30) day period, the
provisions of this Section shall apply fully to any such capital stock not
transferred. The purchase price pursuant to this Section shall be paid in
immediately available funds at the closing of the transfer pursuant to this
Section.
(c) Seller and Prime acknowledge and agree that it would be
impractical to exercise an option to purchase arising pursuant to this Section
whenever the proposed consideration to be received by Seller is other than cash,
cash equivalents or an obligation to pay cash by a person whose credit
worthiness and financial status is such that performance of the payment
obligation would be reasonably assured. Therefore, the parties agree that no
transfer shall be permitted and no option shall arise pursuant to this Section
whenever the consideration to be received from the proposed transferee is other
than cash, cash equivalents or an obligation to pay cash by a person whose
credit worthiness and financial status is such that performance of the payment
obligation would be reasonably assured.
(d) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice of Prime's election to purchase
pursuant to Section 9(b). At such closing, Seller shall execute all documents
and take such other actions as may be reasonably necessary to deliver to Prime
such capital stock, and any certificates representing same, free and clear of
all liens, claims, encumbrances or restrictions of any kind or nature
whatsoever, except those imposed under the Security Agreement.
9.4 Voting Agreement. Each of the parties hereto agrees that it will
vote all of the shares of capital stock of the Company owned by it, at any time
after the execution of this Agreement, in accordance with the terms of this
Section 9.4. Any additional shares of voting capital stock or other voting
securities of the Company, or the voting rights related thereto, whether
presently existing or created in the future, that may be owned, held, or
subsequently acquired in any manner, legally or beneficially, directly or
indirectly, of record or otherwise, by the parties at any time after the
execution of this Agreement, whether issued incident to any stock split, stock
dividend, increase in capitalization, recapitalization, merger, consolidation,
share exchange, reorganization, or other transaction, shall be shall be subject
to the terms of this Section (all such stock presently held or controlled,
together with such additional stock, the "Subject Shares"). At each election of
directors of the Company, the parties and any transferee or assignee of any
Subject Shares from the parties (the "Transferee") shall, in accordance with the
procedure set forth below, vote the Subject Shares as necessary to elect five
(5) persons, designated in accordance with the procedures below, to the board of
directors of the company. Three (3) of the directors (the "Prime Designees")
shall be designated in writing by Prime or its Transferee. The remaining two (2)
directors (the "Other Stockholder Designees") shall be jointly designated in
writing by stockholders of the corporation other than Prime (or any entity other
than the Company that is controlled by, controlling or under common control with
Prime) (the "Other Stockholders") holding a majority of the aggregate voting
equity stock held by all Other Stockholders. For purposes of this Section, the
Prime Designees and the Other Stockholder Designees are sometimes referred to
individually as a "Designated Director" and collectively as "Designated
Directors." During the term of this Agreement, the parties shall, in accordance
with the procedure set forth below, (i) vote their Subject Shares and use their
best efforts in any event to ensure that the number of directors which shall
constitute the entire board of directors of the Company shall remain at five
(5), (ii) vote their Subject Shares in favor of the removal of a Designated
Director if Prime or a majority in interest of the Other Stockholders (whichever
designated the respective director) instruct in writing that such Designated
Director shall be removed from office and (iii) upon any removal of a Designated
Director pursuant to (ii) above, vote their Subject Shares in favor of the
election of a replacement director designated in writing by Prime or a majority
in interest of the Other Stockholders (whichever designated the respective
director). None of the parties to this Agreement shall approve or authorize the
removal of any Designated Director unless Prime or a majority in interest of the
Other Stockholders (whichever designated the respective director) shall have
authorized in writing such Designated Director's removal. To the extent that any
party or parties entitled to designate a director pursuant to this Section fail
to designate a replacement Designated Director under this Section, the position
vacated shall remain vacant until such time as a new director is designated and
elected pursuant to the terms hereof.
Upon delivery of any written notice designating or removing one or more
directors pursuant to this Section, the parties hereto and any Transferee shall
either (i) sign a written consent, prepared for execution by the stockholders of
the Company in accordance with the Bylaws of the Company, which consent elects
or removes the director(s) designated in writing to be elected or removed in
accordance with this Section or (ii) at any annual or special shareholders
meeting at which director(s) are to be elected or removed, vote in favor of the
election or removal of the director(s) designated in writing to be elected or
removed in accordance with this Section. If necessary to fix the number of
directors constituting the entire board of directors at five (5), the parties
hereto shall either (i) sign such written consents prepared for execution by the
shareholders of the Company in accordance with the Bylaws of the Company or (ii)
at any annual or special shareholders meeting, vote in favor of such motions;
which consents or motions propose to fix the number of directors constituting
the entire board of directors at five (5).
Each of the parties hereto agrees to take such actions, and execute
such documents, agreements or instruments (including, without limitation,
consents amending the articles or bylaws of the Company), as may be necessary,
due to changes in the law or otherwise, to ensure that the provisions of this
Section 9.4 are given full effect.
9.5 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required by this Agreement to indemnify another party to this Agreement
in respect of such act, omission or other matter.
9.6 Post-Closing Capital Contributions. Without in any way limiting or
qualifying the representation and warranty with respect to Working Capital
contained in Section 3.17, all parties to this Agreement acknowledge and agree
that no shareholder of the Company, or any other party, has any obligation
existing on the Closing Date to make a capital contribution to the Company.
9.7 Stock Legend. On and after the Closing, each certificate or
document representing Seller's ownership of any of the Company's capital stock,
and each certificate or document that may be issued and delivered by the Company
upon transfer of such certificate, shall contain a legend conspicuously noted in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH
CERTAIN CONDITIONS SPECIFIED IN A CERTAIN STOCK PURCHASE
AGREEMENT DATED EFFECTIVE AS OF SEPTEMBER 1, 1999, A COMPLETE
AND CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
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 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 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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Mark R. Mandel, M.D., Trustee
under Trust Agreement
dated April 12, 1989
680 Brewer Road
Hillsborough, California 94010
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of the officers of the Company
holding office immediately prior to the Closing, and any employee of the Company
who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
Seller: /s/ Mark R. Mandel, M.D.
Printed Name: Mark R. Mandel, M.D.
Trustee under Trust Agreement
dated April 12, 1989
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A: Financial Statements
EXHIBIT B: Form of Exclusive Use Agreement
EXHIBIT C: Form of Assignment and Security Agreement
EXHIBIT D: Form of Amended and Restated Bylaws of Seller
<PAGE>
STOCK PURCHASE AGREEMENT
Among
PRIME/BDR ACQUISITION, L.L.C.
--------------------------
and
Horizon Vision Center, Inc.
--------------------
Dated September 1, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Bradley J.
Sandler, M.D. an individual residing in Suisun City, California and a
shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time,
44,780 authorized and issued shares of the Company's $0.01 par value common
stock presently owned by Seller and evidenced by stock certificate number C-97
(collectively, the "Capital Stock"). The purchase price for the Capital Stock
shall be $507,933.00 (the "Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is 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 limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties of the Company and Seller
Seller and the Company hereby represent and warrant to Prime, jointly
and severally, that each of the following matters is true and correct in all
respects as of the Closing Date (with the understanding that Prime is relying
materially on each such representation and warranty in entering into and
performing this Agreement), which representations and warranties shall also be
deemed made as of the Effective Time and which shall survive the Closing;
provided, however, that all representations and warranties made by Seller
hereunder shall be deemed made by Seller only to the actual knowledge of Seller.
3.1 Due Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada and
has full power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is qualified to do business and is in good
standing in the states set forth on Schedule 3.1(a) attached hereto, which
states represent every jurisdiction where such qualification is required for the
conduct of the Company's business as conducted on the Closing Date. Complete and
correct copies of the Company's Articles of Incorporation, Bylaws, all board of
directors' resolutions, all shareholders' resolutions, and all amendments
thereto, have been delivered to Prime. Schedule 3.1(b) sets forth a true and
complete list, as of the Closing Date, of all of the holders of any equity or
other ownership interest in the Company or of any right to obtain, by conversion
or otherwise, and regardless of whether presently exercisable, any equity or
other ownership interest in the Company; in each case showing the number and
type of interest or right held. Schedule 3.1(b) also identifies each of the
persons listed therein that is a physician or other licensed medical
professional, and describes each such person's license(s) and professional
title. Except as set forth on Schedule 3.1(b), immediately prior to the Closing
Date there are outstanding (i) no shares of equity or other voting securities of
the Company, (ii) no securities of the Company convertible into or exchangeable
for shares of equity or other voting securities of the Company, (iii) no options
or other rights to acquire from the Company or Seller, and no obligation of the
Company or Seller to issue or sell, any equity or other voting securities of the
Company or any securities of the Company convertible into or exchangeable for
such equity or voting securities, and (iv) no equity equivalents, interests in
the ownership or earnings, rights to participate in the election of directors or
other similar rights of or with respect to the Company. Immediately following
the Closing of this transaction and the closings of the Related Acquisitions (as
hereinafter defined), Prime will own sixty percent (60%) of all of the voting
equity securities of the Company (after assuming the conversion, exchange or
exercise of any and all securities or rights convertible into, or exchangeable
or exercisable for, voting equity securities of the Company), and all of those
persons and entities listed on Schedule 3.1(b) will own, in the aggregate, forty
percent (40%) of all of the voting equity securities of the Company (after
assuming the conversion, exchange or exercise of any and all securities or
rights convertible into, or exchangeable or exercisable for, voting equity
securities of the Company). The Capital Stock transferred by Seller to Prime at
the Closing, as well as all other capital stock of the Company transferred to
Prime in the Related Acquisitions, will be duly authorized, validly issued and
outstanding, fully paid, non-assessable, and free of any liens, claims or
encumbrances whatsoever.
3.2 Subsidiaries. Except as set forth on Schedule 3.2 (reflecting
ownership interests and the nature of such interests), the Company does not
directly or indirectly have (or possess any options or other rights to acquire)
any subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, limited liability company, association,
joint venture, trust, or other entity.
3.3 Due Authorization. Each of the Company and Seller has full power
and authority to enter into and perform this Agreement and each Transaction
Document required to be executed by the Company or Seller in connection
herewith. The execution, delivery, and performance of this Agreement and each
such Transaction Document has been duly authorized by all necessary action of
the Company, its directors, its officers and its shareholders. This Agreement
and each such Transaction Document has been duly and validly executed and
delivered by the Company and Seller and constitutes a valid and binding
obligation of the Company and Seller, enforceable against each of them in
accordance with its terms. The execution, delivery, and performance of this
Agreement, and each Transaction Document required herein to be executed by
Seller and/or the Company do not (a) violate any federal, state, county, or
local law, rule, or regulation applicable to the Company, the Business (as
hereinafter defined), the Company's assets or the Capital Stock, (b) violate or
conflict with, or permit the cancellation of, any agreement to which the Company
is a party, or by which the Company or its properties are bound, or result in
the creation of any lien, security interest, charge, or encumbrance upon any of
such properties or the upon the Capital Stock, (c) permit the acceleration of
the maturity of any indebtedness of Seller or the Company, or any indebtedness
secured by the Capital Stock or by the property of the Company, or (d) violate
or conflict with any provision of the organizational documents of the Company.
No action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller or the Company in
connection with the execution, delivery, or performance of this Agreement (or
any Transaction Document).
3.4 Financial Statements. The unaudited balance sheet and income
statement of the Company as of and for each of the years ended March 31, 1998
and 1999, and the unaudited balance sheet and income statement of the Company as
of and for the three (3) months ended June 30, 1999 (collectively, the
"Financial Statements") are attached hereto as Exhibit A. The Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP") (except as specifically noted therein
or in Schedule 3.4) and fairly present the financial position and results of
operations of the Company as of the indicated dates and for the indicated
periods. Except for liabilities incurred in the ordinary course of business or
disclosed in Schedule 3.4, and except to the extent specifically and fully
reflected in the Financial Statements (including the notes thereto), as of the
Closing Date, the Company has no claims, debts, liabilities, or obligations,
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 the Company, its assets or the
Business). The Company and Seller each agree to indemnify and hold harmless
Prime and its affiliates from and against any and all such claims, debts,
liabilities and obligations. Except as set forth in Schedule 3.4 hereto, since
June 30, 1999 there has been no material adverse change in the assets of the
Company, the Business, or the results of operations or financial position of the
Company.
3.5 Conduct of Business; Certain Actions. As used herein, "Business"
means all of the business conducted by the Company, which shall be deemed to
include all refractive surgery modalities, now performed, offered or made
available, including, without limitation, implantable contact lenses, instromal
corneal rings, laser in situs keratomileusis photorefractive keratectomy,
automated lemellar keratoplasty, radial keratotomy, astigmatic keratotomy and
similar procedures. Except as set forth on Schedule 3.5 attached hereto, since
June 30, 1999, the Company has conducted its Business and operations of the
Business in the ordinary course and consistent with its past practices and has
not (a) purchased or retired any indebtedness, or purchased, retired, or
redeemed any ownership interest from, any director, officer, shareholder,
employee or affiliate of the Company, or engaged in any other transaction that
involves or requires distributions of money or other assets from the Company to
any director, officer, shareholder, employee or affiliate of the Company if such
other transaction is not done in the ordinary course of business and is not
consistent with past practices of the Company, (b) increased the compensation of
any directors, officers, employees, agents, contractors, vendors or other
parties, except for wage and salary increases made in the ordinary course of
business and consistent with the past practices of the Company, (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 or book value for such asset
(or group of related assets) exceeded $10,000, (e) discharged or satisfied any
lien or encumbrance or paid any obligation or liability, absolute or contingent,
other than current liabilities incurred and paid in the ordinary course of
business, (f) made or guaranteed any loans or advances to any party whatsoever,
(g) suffered or permitted any lien, security interest, claim, charge, or other
encumbrance to arise or be granted or created against or upon any of its assets,
real or personal, tangible or intangible, (h) canceled, waived, or released any
of its debts, rights, or claims against third parties, (i) amended its
organizational documents, (j) made or paid any severance or termination payment
to any director, officer, employee, agent, contractor, vendor or consultant, (k)
made any change in its method of accounting, (l) made any investment or
commitment therefor in any person, business, corporation, association,
partnership, limited liability company, joint venture, trust, or other entity,
(m) made, entered into, amended, or terminated any written employment contract,
created, made, amended, or terminated any bonus, stock option, pension,
retirement, profit sharing, or other employee benefit plan or arrangement, or
withdrawn from any "multi-employer plan" (as defined in the Internal Revenue
Code of 1986, as amended (the "Code")) so as to create any liability under ERISA
(as hereinafter defined) to any person or entity, (n) amended, terminated or
experienced a termination of any material contract, agreement, lease, franchise,
or license to which it is a party, (o) made any distributions, in cash or in
kind, to its shareholders, or to any person or entity related to or affiliated
therewith, in any capacity, except such distributions as are made in the
ordinary course of the Company's business consistent with past practices, (p)
entered into any 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.
3.6 Assets; Licenses, Permits, etc. Except as set forth on Schedule
3.6(a), the Company has good and marketable title to all of its assets, free and
clear of all liens, security interests, claims, rights of another, and
encumbrances of any kind whatsoever. The assets of the Company 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 all that are
necessary for the conduct of the Business. Attached hereto as Schedule 3.6(b) is
a list and description of all federal, state, county, and local governmental
licenses, certificates, certificates of need, permits, waivers, filings and
orders held or applied for by the Company and used or relied on (or to be used
or relied on) in connection with the Business ("Permits"). The Company has
complied in all material respects, and the Company is in compliance in all
material respects, with the terms and conditions of any such Permits. No
additional Permit is required from any federal, state, county, or local
governmental agency or body thereof in connection with the conduct of the
Business. No claim has been made by any governmental authority (and, to the
knowledge of Seller and the Company, no such claim has been threatened) to the
effect that a Permit not possessed by the Company is necessary in respect of the
Business.
3.7 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) The Company 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 the Company 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 the
financial position of the Company.
(c) The Company has not received any notice from the United
States Environmental Protection Agency that it is a potentially responsible
party under the Comprehensive Environmental Response, Compensation and Liability
Act ("Superfund Notice"), any citation from any federal, state or local
governmental authority for non-compliance with its requirements with respect to
air, water or environmental pollution, or the improper storage, use or discharge
of any hazardous waste, other waste or other substance or other material
pertaining to its business ("Citations") or any written notice from any private
party alleging any such non-compliance; and there are no pending or unresolved
Superfund Notices, Citations or written notices from private parties alleging
any such non-compliance.
3.8 Intellectual Property Rights. There are no patents, trademarks,
trade names, or copyrights, and no applications therefor, owned by or registered
in the name of the Company or in which the Company has any right, license, or
interest. The Company is not a party to any license agreement, either as
licensor or licensee, with respect to any patents, trademarks, trade names, or
copyrights. The Company has not received any notice that it is infringing any
patent, trademark, trade name, or copyright of others.
3.9 Compliance with Laws. To the knowledge of the Company and Seller,
the Company has complied in all material respects, and the Company is in
compliance in all material respects, with all federal, state, county, and local
laws, rules, regulations and ordinances currently in effect. No claim has been
made or threatened by any governmental authority against the Company to the
effect that the business conducted by the Company fails to comply in any respect
with any law, rule, regulation, or ordinance.
3.10 Insurance. Attached hereto as Schedule 3.10 is a list of all
policies of fire, liability, business interruption, and other forms of insurance
(including, without limitation, professional liability insurance) and all
fidelity bonds held by or applicable to the Company 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 the Company and Seller, no event directly relating to the Company
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 the Company during the past three (3) years,
including without limitation any change which has resulted in any period during
which the Company had no insurance coverage. Excluding insurance policies which
have expired and been replaced, no insurance policy of the Company has been
canceled within the last three (3) years and no threat has been made to cancel
any insurance policy of the Company within such period.
3.11 Employee Benefit Matters. Except as set forth on Schedule 3.11,
the Company 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). The Company does not presently maintain and has never
maintained, or had any obligation of any nature to contribute to, a "defined
benefit plan" within the meaning of the Code.
3.12 Contracts and Agreements. Attached hereto as Schedule 3.12 is a
list of all written or oral contracts, commitments, leases, and other agreements
(including, without limitation, all promissory notes, loan agreements, and other
evidences of indebtedness, mortgages, deeds of trust, security agreements,
pledge agreements, service agreements, and similar agreements and instruments
and all confidentiality agreements) to which the Company is a party or by which
the Company or its properties are bound, pursuant to which the obligations
thereunder of any party thereto are, or are contemplated as being, in respect of
any such individual contracts, commitments, leases, or other agreements during
any year during the term thereof, $25,000 or greater, or which are otherwise
material to the Business (collectively the "Contracts" and individually, a
"Contract"). The Company is not and, to the best knowledge of the Company and
Seller, 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 Company or, to the best knowledge of the Company and Seller, by
any other party thereto) under any Contract. The Company has not waived any
material right under any Contract, and no consents or approvals (other than
those obtained in writing and delivered to Prime prior to Closing) are required
under any Contract in connection with the sale of Capital Stock or the
consummation of the transactions contemplated hereby. The Company has not
guaranteed any obligation of any other person or entity.
3.13 Claims and Proceedings. Attached hereto as Schedule 3.13 is a list
and description of all claims, actions, suits, proceedings, and investigations
pending or, to the knowledge of the Company and Seller, threatened against the
Company, 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
the Company which (individually or in the aggregate) is material, and the
Company has not been, and the Company is not now, subject to any order,
judgment, decree, stipulation, or consent of any court, governmental body, or
agency. No inquiry, action, or proceeding has been asserted, instituted, or
threatened against the Company or Seller 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
company 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 Company. The Company has provided Prime with copies of
all returns filed for and during the years ended 1998, 1997 and (to the extent
an extension was filed for any return for the year ended 1998) 1996. 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 Company's estimated Tax liabilities
for the respective periods then ended and all prior periods. As of the Closing
Date, the Company 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 the Company between June 30, 1999 and the
Closing Date. The Company has not executed any presently effective waiver or
extension of any statute of limitations against assessments and collection of
Taxes. There are no pending or threatened claims, assessments, notices,
proposals to assess, deficiencies, or audits (collectively, "Tax Actions")
against the Company with respect to any Taxes owed or allegedly owed by the
Company. There are no tax liens on any of the assets of the Company. Proper and
accurate amounts have been withheld and remitted by the Company 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 Company is not a party to any tax sharing
agreement.
3.15 Personnel. Attached hereto as Schedule 3.15 is a list of names and
current annual rates of compensation of the officers, employees or agents of the
Company who are necessary for the operation of the Business (the "Employees").
Except as set forth on Schedule 3.15, there are no bonus, profit sharing,
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable by the Company to any Employees from December
31, 1998 through the Closing Date. Schedule 3.15 attached hereto also contains a
brief description of all material terms of employment agreements and
confidentiality agreements to which the Company is a party and all severance
benefits which any director, officer, Employee or sales representative of the
Company is or may be entitled to receive. The Company 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 the
Company is a party and under which its employees are entitled to receive
benefits of any nature. There is no pending or threatened (i) labor dispute or
union organization campaign relating to the Company, (ii) claims against the
Company by any employees of the Company (other than those certain Workers'
Compensation claims specifically described on Schedule 3.13), or (iii)
terminations, resignations or retirements of any employees of the Company. None
of the employees of the Company are represented by any labor union or
organization. There is no unfair labor practice claim against the Company before
the National Labor Relations Board or any strike, labor dispute, work slowdown,
or work stoppage pending or threatened against or involving the Company.
3.16 Business Relations. The Company has no reason to believe and has
not been notified that any supplier or customer of the Company will cease or
refuse to do business with the Company in the same manner as previously
conducted with the Company as a result of or within one (1) year after the
consummation of the transactions contemplated hereby, to the extent such
cessation or refusal might affect the Business. The Company 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 Company.
3.17 Working Capital. Except as set forth on Schedule 3.17 attached
hereto, all of the accounts, notes, and loans receivable (the "Accounts
Receivable") reflected in the Financial Statements, or arising since June 30,
1999, arose from transactions occurring in the ordinary course of the Company's
business as previously conducted, are bona fide and represent amounts validly
due, subject to offsets or defenses. Except for accounts payable and other
accrued expenses incurred in the ordinary course of the Company's business since
June 30, 1999 and consistent with past practices of the Company, there are no
liabilities of the Company other than those reflected in the Financial
Statements. Adequate provision has been made for uncollectible Accounts
Receivable. Since June 30, 1999, the Company has collected its Accounts
Receivable and has paid or performed all liabilities and obligations of the
Company in the ordinary course, consistent with past practices. The Working
Capital (as hereinafter defined) of the Company existing on the Closing Date is
equal to or greater than $100,000.
3.18 Agents. Except as set forth on Schedule 3.18 attached hereto, the
Company has not designated or appointed any person (other than the Company's
employees and officers) 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 Directors, Officers, Shareholders and
Employees. The Company does not owe any indebtedness to any of its directors,
officers, shareholders, employees or affiliates, or have indebtedness owed to it
from any of its directors, officers, shareholders, employees or affiliates,
excluding indebtedness for travel advances or similar advances for expenses
incurred on behalf of and in the ordinary course of business of the Company and
consistent with the Company's past practices. As of the Effective Time and the
Closing Date all amounts due the Company from any of its directors, officers,
employees or affiliates (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, the Company does not employ or have any relationship with any
individual, corporation, partnership, or other entity whose compensation from
the Company 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 the Company from third parties in connection with the
execution, delivery, and performance of this Agreement or any of the other
contracts, documents, instruments or agreements to be entered into in connection
with or as contemplated by this Agreement (all of which are collectively
referred to as the "Transaction Documents").
3.22 Brokers. The Company has not engaged, or caused any liability to
be incurred to, any finder, broker, or sales agent (and has not paid, and will
not pay, any finders fee or similar fee or commission to any person) in
connection with the execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
3.23 Interest in Competitors, Suppliers, and Customers. Except as set
forth on Schedule 3.23 attached hereto, neither the Company nor any affiliate of
the Company, and to the knowledge of the Company and Seller, no director,
officer, employee or affiliate of the Company or any affiliate of any director,
officer, employee or affiliate of the Company, has any ownership interest in any
competitor, customer or supplier of the Company or any property used in the
operation of the Business.
3.24 Warranties. Except as set forth on Schedule 3.24, the Company 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 the Company since January 1, 1996.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
4.4 Distribution of Working Capital. In accordance with the resolutions
adopted by Horizon on August 10, 1999, the parties agree that all cash in excess
of the minimum amount of Working Capital (as hereinafter defined) required
pursuant to Section 5.2(h) shall be distributed within thirty (30) days of the
Closing (as dividends) to the shareholders of Horizon existing on August 1,
1999.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to which it is a
party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel for Seller may
reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock;
(c) each of the shareholders of the Company existing
immediately prior to the Closing (including Seller) that is a physician or other
licensed medical professional shall have executed and delivered to Prime an
Exclusive Use Agreement in substantially the form attached hereto as Exhibit B;
(d) Seller, and each of the other Company shareholders selling
Company stock to Prime in a Related Acquisition (the "Selling Shareholders"),
who will remain a shareholder of the Company after the Closing shall have
executed and delivered to Prime an Assignment and Security Agreement, in
substantially the form attached hereto as Exhibit C, granting a security
interest in such shareholder's remaining stock in the Company to secure the
performance by such shareholder under any agreement it has with Prime or any of
Prime's affiliates;
(e) the Company shall have adopted, after obtaining all
necessary approvals and consents, the Amended and Restated Bylaws, in
substantially the form attached hereto as Exhibit D, which shall contain
provisions governing its board of directors that are consistent with the
provisions of Section 9.4 of this Agreement, including, without limitation, that
the number of directors serving on its board of directors of the Company shall
be five (5);
(f) at the Closing, the Company's board of directors shall
consist of three (3) individuals designated by Prime and listed on Schedule
5.2(f) hereto, and two (2) individuals designated by a majority of the
shareholders of the Company immediately prior to Closing and listed on Schedule
5.2(f) hereto;
(g) the Company shall have delivered to Prime true and correct
copies of resignations, effective as of the Closing Date, from each of the
persons holding the offices set forth on Schedule 5.2(g) hereto, and the persons
listed on Schedule 5.2(g) hereto shall have been elected or appointed to the
office set forth opposite their name;
(h) As of the Closing Date, the amount of Working Capital of
the Company shall be at least $100,000 (for purposes of this Agreement, "Working
Capital" means the difference between (i) cash, cash equivalents, prepaid
expenses and Accounts Receivable less than sixty (60) days old and (ii) accounts
payable and other liabilities and payment obligations due in the following
twelve (12) months, all as determined in accordance with GAAP); and
(i) each of them, and each Selling Shareholder, shall have
delivered such good standing certificates, officer certificates, and similar
documents and certificates as counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of (i) any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document, (ii) any claim, debt, obligation or liability of
the Company, not specifically and fully reflected by item and amount on either
Schedule 3.4 or in the Financial Statements, that is or may be asserted with
respect to any acts or omissions occurring, or circumstances existing, on or
prior to the Closing Date, except for liabilities incurred in the ordinary
course of business, or (iii) any obligations or liabilities with respect to any
claims arising out of actions or omissions, that occurred prior to the Closing
Date, by any of the Company's directors, officers, shareholders, agents,
employees, representatives, subsidiaries and/or affiliates.
(b) Seller agrees to indemnify and hold harmless each of the
Prime 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 the Prime Indemnified Parties may sustain, arising out of any breach or
default by Seller of any of its representations, warranties, covenants or
agreements contained in this Agreement or any Transaction Document.
(c) Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 6.1
unless and until such time as all claims of all Prime Indemnified Parties, taken
together, exceed $10,000 in the aggregate, at which time all claims of such
Prime Indemnified Parties may be asserted individually or in combination
(beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to the Company and, if applicable, Seller (collectively in
instances involving the Seller, the "indemnifying party"), of the commencement
or assertion of any third party action in respect of which such Prime
Indemnified Party shall seek indemnification hereunder. Any failure to so notify
the indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices the
indemnifying party. The indemnifying party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) The indemnifying party 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) The indemnifying party 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) The indemnifying party shall not be entitled to control
(but shall be entitled to participate at its 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 the indemnifying party fails 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 the indemnifying party, without the prior
written consent of the indemnifying party.
(e) The indemnifying party 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 the
indemnifying party for the full amount of such payments if the Prime Indemnified
Party is ultimately determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1 shall be limited to the aggregate Purchase Price received by Seller
under this Agreement, plus the greater of (a) the value of all remaining equity
interests which Seller holds in the Company at the time of Closing or (b) the
value of all remaining equity interests which Seller holds in the Company at the
time an Indemnified Amount is required to be paid.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party shall be
entitled to assert any claim for indemnification under this Section 7.1 unless
and until such time as all claims of such Seller Indemnified Party, individually
and not in combination with other Seller Indemnified Parties, exceed $25,000 in
the aggregate, at which time all claims of such Seller Indemnified Party may be
asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Special Options to Sell or Acquire Remaining Capital Stock.
(a) Prohibition on Sale. Notwithstanding anything in this
Agreement to the contrary, Seller agrees that it will not transfer, assign,
pledge, hypothecate, or in any way alienate any of its shares of capital stock
of the Company, or any interest therein, whether voluntarily or by operation of
law, or by gift or otherwise, except in accordance with the provisions of this
Section or Section 9.3, or except pursuant to that certain Assignment and
Security Agreement by and between Prime or one of its affiliates and Seller,
dated as of the date of this Agreement (the "Security Agreement"). Any purported
transfer in violation of this Section or Section 9.3 shall be void and
ineffectual, and shall not operate to transfer any interest or title to the
purported transferee. Seller agrees that the Company may, and the Company agrees
to, issue stop-transfer orders, or take any other necessary action, to ensure
that the foregoing provisions of this Section and Section 9.3 are given full
effect.
(b) Option to Sell. Upon (i) the death, retirement (only if
Seller is a physician and only as defined below), bankruptcy, insolvency,
disability (only if Seller is a physician and only as defined below) or
incompetency of Seller, (ii) any other involuntary transfer of any capital stock
of the Company now or hereafter owned by Seller, or any interest therein
(including, without limitation, transfers of interests upon divorce or death of
a spouse of Seller, but excluding any transfers governed by Section 9.3), (iii)
relocation of Seller's primary residence outside of a two hundred (200) mile
radius of the center or facility at which Seller primarily renders services, or
(iv) if Seller is a physician or other practicing licensed professional, the
performance by Seller, during any one-month period, of greater than thirty (30%)
of his or her professional medical activities outside of a two hundred (200)
mile radius of the center or facility primarily utilized by Seller prior to the
date of this Agreement; the Seller's executor, administrator, trustee,
custodian, receiver or other legal or personal representative (the
"Representative"), or Seller, in the case of retirement or departure, shall give
written notice of that fact to the Company. In such event, the Representative or
Seller shall have a period of sixty (60) days (the "Put Period") following the
date of such death, retirement, bankruptcy, insolvency, disability, incompetency
or relocation of primary residence or practice, as the case may be, within which
time it may require that the Company purchase (subject to the remaining
provisions of this subsection) all of Seller's capital stock of the Company,
upon the terms and conditions hereinafter set forth, by giving notice of such
election in writing to the Company. The Company may, in its sole discretion,
offer all or a portion of such capital stock to its shareholders, on a pro rata
basis in relation to each shareholder's percentage ownership of the Company, but
any agreement by the shareholders to purchase all or a portion of such capital
stock shall not limit the Company's obligation to purchase within the time frame
set forth in this Section. If the Company has offered all of such capital stock
to its shareholders, and the shareholders have not committed to purchase all of
such capital stock within five (5) days from the date of offer, then the Company
may, in its sole discretion, offer all or a portion of the remaining capital
stock to Prime, in which event Prime must participate in such purchase upon the
same terms and conditions as the Company. For purposes of this Agreement, (x)
"disability" shall apply only if Seller is a physician and shall mean any
condition which in the reasonable judgment of a majority of the managers of
Prime, would impair Seller's ability to materially perform his or her routine
duties for a period of six (6) months or more, (y) "retirement" shall apply only
if Seller is a physician and shall mean the cessation of the routine practice of
medicine (provided that any physician who transfers his or her entire practice
to a licensed medical professional meeting the Company's then current
credentialing program shall not be deemed to have retired for purposes of this
subsection), and (z) "incompetent" shall mean a state of legal incompetence as
declared by a court of valid jurisdiction.
(c) Option to Buy. In the event that the option described in
Section 9(b) arises and the Representative or Seller, as the case may be, fails
to make the election described in Section 9(b) within the Put Period, Prime
shall at all times thereafter have the option to purchase all or any portion of
Seller's capital stock of the Company, upon the terms and conditions hereinafter
set forth, by giving written notice of such election in writing to Seller. In
addition, Prime may, in its sole discretion, transfer its purchase right granted
under this subsection (or stock acquired pursuant to an exercise of its purchase
right granted under this subsection) to Horizon or any of the physician
shareholders of the Company.
(d) Purchase Price. The purchase price to be paid pursuant to
this Section shall be paid in immediately available funds at the closing of the
transfer of capital stock pursuant to this Section. If the parties do not
otherwise agree within thirty (30) days of the day on which the option to
purchase or sell hereunder is exercised, then Prime shall, at its own expense,
select an appraiser to value the capital stock being transferred. If Seller or
Representative does not agree with the value determined by the appraiser of
Prime, Seller or Representative may, at its own expense, select its own
appraiser to value the capital stock being transferred. If the two appraisers
cannot agree on the value of the capital stock being transferred, the two
appraisers shall mutually select a third appraiser to value the capital stock
being transferred, and any valuation determined by such third appraiser shall be
final, binding and conclusive. The cost of any third appraiser shall be borne by
Seller.
(e) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice under either Section 9(b) or
Section 9(c). At such closing, Seller shall execute all documents and take such
other actions as may be reasonably necessary to deliver to Prime such capital
stock, and any certificates representing same, free and clear of all liens,
claims, encumbrances or restrictions of any kind or nature whatsoever, except
those imposed under the Security Agreement.
9.3 Right of First Refusal.
(a) If there is no option to sell or buy outstanding under
Section 9.2 (except in connection with a sale by a physician of all of his or
her practice upon retirement), and Seller intends to voluntarily transfer any
portion of its capital stock of the Company to any person or entity other than
Prime, then Seller shall give written notice to Prime stating (i) the intention
to transfer such capital stock, (ii) the number of shares to be transferred,
(iii) the name, business and residence address of the proposed transferee, (iv)
the nature and amount of the consideration, and (v) the other terms of the
proposed sale.
(b) Prime shall have, and may exercise within sixty (60) days
after receipt of the notice of intent to transfer, an option to purchase all or
any portion of the capital stock of the Company owned by Seller, at the per
share price and upon the other terms stated in the notice of intent to transfer.
Prime may elect to exercise its option under this Section by delivering notice
thereof to Seller. If Prime elects not to purchase all or any portion of such
capital stock prior to the expiration of said sixty (60) day period, Seller
shall have thirty (30) days to complete the sale and purchase contemplated in
the notice of intent to transfer, and after such thirty (30) day period, the
provisions of this Section shall apply fully to any such capital stock not
transferred. The purchase price pursuant to this Section shall be paid in
immediately available funds at the closing of the transfer pursuant to this
Section.
(c) Seller and Prime acknowledge and agree that it would be
impractical to exercise an option to purchase arising pursuant to this Section
whenever the proposed consideration to be received by Seller is other than cash,
cash equivalents or an obligation to pay cash by a person whose credit
worthiness and financial status is such that performance of the payment
obligation would be reasonably assured. Therefore, the parties agree that no
transfer shall be permitted and no option shall arise pursuant to this Section
whenever the consideration to be received from the proposed transferee is other
than cash, cash equivalents or an obligation to pay cash by a person whose
credit worthiness and financial status is such that performance of the payment
obligation would be reasonably assured.
(d) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice of Prime's election to purchase
pursuant to Section 9(b). At such closing, Seller shall execute all documents
and take such other actions as may be reasonably necessary to deliver to Prime
such capital stock, and any certificates representing same, free and clear of
all liens, claims, encumbrances or restrictions of any kind or nature
whatsoever, except those imposed under the Security Agreement.
9.4 Voting Agreement. Each of the parties hereto agrees that it will
vote all of the shares of capital stock of the Company owned by it, at any time
after the execution of this Agreement, in accordance with the terms of this
Section 9.4. Any additional shares of voting capital stock or other voting
securities of the Company, or the voting rights related thereto, whether
presently existing or created in the future, that may be owned, held, or
subsequently acquired in any manner, legally or beneficially, directly or
indirectly, of record or otherwise, by the parties at any time after the
execution of this Agreement, whether issued incident to any stock split, stock
dividend, increase in capitalization, recapitalization, merger, consolidation,
share exchange, reorganization, or other transaction, shall be shall be subject
to the terms of this Section (all such stock presently held or controlled,
together with such additional stock, the "Subject Shares"). At each election of
directors of the Company, the parties and any transferee or assignee of any
Subject Shares from the parties (the "Transferee") shall, in accordance with the
procedure set forth below, vote the Subject Shares as necessary to elect five
(5) persons, designated in accordance with the procedures below, to the board of
directors of the company. Three (3) of the directors (the "Prime Designees")
shall be designated in writing by Prime or its Transferee. The remaining two (2)
directors (the "Other Stockholder Designees") shall be jointly designated in
writing by stockholders of the corporation other than Prime (or any entity other
than the Company that is controlled by, controlling or under common control with
Prime) (the "Other Stockholders") holding a majority of the aggregate voting
equity stock held by all Other Stockholders. For purposes of this Section, the
Prime Designees and the Other Stockholder Designees are sometimes referred to
individually as a "Designated Director" and collectively as "Designated
Directors." During the term of this Agreement, the parties shall, in accordance
with the procedure set forth below, (i) vote their Subject Shares and use their
best efforts in any event to ensure that the number of directors which shall
constitute the entire board of directors of the Company shall remain at five
(5), (ii) vote their Subject Shares in favor of the removal of a Designated
Director if Prime or a majority in interest of the Other Stockholders (whichever
designated the respective director) instruct in writing that such Designated
Director shall be removed from office and (iii) upon any removal of a Designated
Director pursuant to (ii) above, vote their Subject Shares in favor of the
election of a replacement director designated in writing by Prime or a majority
in interest of the Other Stockholders (whichever designated the respective
director). None of the parties to this Agreement shall approve or authorize the
removal of any Designated Director unless Prime or a majority in interest of the
Other Stockholders (whichever designated the respective director) shall have
authorized in writing such Designated Director's removal. To the extent that any
party or parties entitled to designate a director pursuant to this Section fail
to designate a replacement Designated Director under this Section, the position
vacated shall remain vacant until such time as a new director is designated and
elected pursuant to the terms hereof.
Upon delivery of any written notice designating or removing one or more
directors pursuant to this Section, the parties hereto and any Transferee shall
either (i) sign a written consent, prepared for execution by the stockholders of
the Company in accordance with the Bylaws of the Company, which consent elects
or removes the director(s) designated in writing to be elected or removed in
accordance with this Section or (ii) at any annual or special shareholders
meeting at which director(s) are to be elected or removed, vote in favor of the
election or removal of the director(s) designated in writing to be elected or
removed in accordance with this Section. If necessary to fix the number of
directors constituting the entire board of directors at five (5), the parties
hereto shall either (i) sign such written consents prepared for execution by the
shareholders of the Company in accordance with the Bylaws of the Company or (ii)
at any annual or special shareholders meeting, vote in favor of such motions;
which consents or motions propose to fix the number of directors constituting
the entire board of directors at five (5).
Each of the parties hereto agrees to take such actions, and execute
such documents, agreements or instruments (including, without limitation,
consents amending the articles or bylaws of the Company), as may be necessary,
due to changes in the law or otherwise, to ensure that the provisions of this
Section 9.4 are given full effect.
9.5 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required by this Agreement to indemnify another party to this Agreement
in respect of such act, omission or other matter.
9.6 Post-Closing Capital Contributions. Without in any way limiting or
qualifying the representation and warranty with respect to Working Capital
contained in Section 3.17, all parties to this Agreement acknowledge and agree
that no shareholder of the Company, or any other party, has any obligation
existing on the Closing Date to make a capital contribution to the Company.
9.7 Stock Legend. On and after the Closing, each certificate or
document representing Seller's ownership of any of the Company's capital stock,
and each certificate or document that may be issued and delivered by the Company
upon transfer of such certificate, shall contain a legend conspicuously noted in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH
CERTAIN CONDITIONS SPECIFIED IN A CERTAIN STOCK PURCHASE
AGREEMENT DATED EFFECTIVE AS OF SEPTEMBER 1, 1999, A COMPLETE
AND CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
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 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 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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Bradley J. Sandler, M.D.
403 Calle De Caballo
Suisun City, CA 94585-1501
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to (i) Prime, it
shall mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins and (ii) the Company, it shall mean
such items as are within the actual knowledge of the officers of the Company
holding office immediately prior to the Closing, and any employee of the Company
who remains an employee of the Company after the Closing.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title:Secretary & Manager
Seller: /s/ Bradley J. Sandler, M.D.
Printed Name: Bradley J. Sandler, M.D.
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A: Financial Statements
EXHIBIT B: Form of Exclusive Use Agreement
EXHIBIT C: Form of Assignment and Security Agreement
EXHIBIT D: Form of Amended and Restated Bylaws of Seller
<PAGE>
STOCK PURCHASE AGREEMENT
Among
PRIME/BDR ACQUISITION, L.L.C.
--------------------------
and
Horizon Vision Center, Inc.
--------------------
Dated September 1, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and D. Brent Reed and
Carellyn S. Reed, individuals residing in Folsom, California shareholders of the
Company ("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, Prime agrees to purchase from Seller, as of the Effective Time,
73,520 authorized and issued shares of the Company's $0.01 par value common
stock presently owned by Seller and evidenced by stock certificate number C-25
and C-94 (collectively, the "Capital Stock"). The purchase price for the Capital
Stock shall be $833,926.00 (the "Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is relying materially on such representations and
warranties in entering into and performing this Agreement and each of the other
contracts, documents, instruments or agreements to be entered into in connection
with or as contemplated by this Agreement, all of which are collectively
referred to as the "Transaction Documents"):
2.1 Due Organization and Principal Executive Office. Prime is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties of Seller
Seller hereby represents and warrants to Prime that each of the
following matters is true and correct in all respects as of the Closing Date
(with the understanding that Prime is relying materially on each such
representation and warranty in entering into and performing this Agreement),
which representations and warranties shall also be deemed made as of the
Effective Time and which shall survive the Closing:
3.1 Due Authorization. Seller has full power and authority to enter
into and perform this Agreement and each Transaction Document required to be
executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
3.2 Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be free of any liens, claims or encumbrances whatsoever.
3.3 Ownership. Immediately following the Closing Date, except as set
forth on Schedule 3.3, Seller does not own (i) any shares of equity or other
voting securities of the Company, (ii) any securities of the Company convertible
into or exchangeable for shares of equity or other voting securities of the
Company, (iii) any options or other rights to acquire from the Company, or any
obligation of the Company to issue or sell, equity or other voting securities of
the Company, or securities of the Company convertible into or exchangeable for
such equity or voting securities, and (iv) any equity equivalents, interests in
the ownership or earnings, rights to participate in the election of directors or
other similar rights of or with respect to the Company.
3.4 Claims and Proceedings. No inquiry, action, or proceeding has been
asserted, instituted, or threatened against Seller 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.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
4.4 Distribution of Working Capital. In accordance with the resolutions
adopted by Horizon on August 10, 1999, the parties agree that all cash in excess
of the minimum amount of Working Capital (as hereinafter defined) required
pursuant to Section 5.2(h) shall be distributed within thirty (30) days of the
Closing (as dividends) to the shareholders of Horizon existing on August 1,
1999.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock;
(c) each of the shareholders of the Company existing
immediately prior to the Closing (including Seller) that is a physician or other
licensed medical professional shall have executed and delivered to Prime an
Exclusive Use Agreement in substantially the form attached hereto as Exhibit A;
(d) Seller, and each of the other Company shareholders selling
Company stock to Prime in a Related Acquisition (the "Selling Shareholders"),
who will remain a shareholder of the Company after the Closing shall have
executed and delivered to Prime an Assignment and Security Agreement, in
substantially the form attached hereto as Exhibit B, granting a security
interest in such shareholder's remaining stock in the Company to secure the
performance by such shareholder under any agreement it has with Prime or any of
Prime's affiliates;
(e) the Company shall have adopted, after obtaining all
necessary approvals and consents, the Amended and Restated Bylaws, in
substantially the form attached hereto as Exhibit C, which shall contain
provisions governing its board of directors that are consistent with the
provisions of Section 9.4 of this Agreement, including, without limitation, that
the number of directors serving on its board of directors of the Company shall
be five (5);
(f) at the Closing, the Company's board of directors shall
consist of three (3) individuals designated by Prime and listed on Schedule
5.2(f) hereto, and two (2) individuals designated by a majority of the
shareholders of the Company immediately prior to Closing and listed on Schedule
5.2(f) hereto;
(g) the Company shall have delivered to Prime true and correct
copies of resignations, effective as of the Closing Date, from each of the
persons holding the offices set forth on Schedule 5.2(g) hereto, and the persons
listed on Schedule 5.2(g) hereto shall have been elected or appointed to the
office set forth opposite their name;
(h) As of the Closing Date, the amount of Working Capital of
the Company shall be at least $100,000 (for purposes of this Agreement, "Working
Capital" means the difference between (i) cash, cash equivalents, prepaid
expenses and Accounts Receivable less than sixty (60) days old and (ii) accounts
payable and other liabilities and payment obligations due in the following
twelve (12) months, all as determined in accordance with GAAP); and
(i) each of them, and each Selling Shareholder, shall have
delivered such good standing certificates, officer certificates, and similar
documents and certificates as counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of any breach or default by
Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to the Company and, if applicable, Seller (collectively in
instances involving the Seller, the "indemnifying party"), of the commencement
or assertion of any third party action in respect of which such Prime
Indemnified Party shall seek indemnification hereunder. Any failure to so notify
the indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices the
indemnifying party. The indemnifying party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) The indemnifying party 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) The indemnifying party 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) The indemnifying party shall not be entitled to control
(but shall be entitled to participate at its 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 the indemnifying party fails 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 the indemnifying party, without the prior
written consent of the indemnifying party.
(e) The indemnifying party 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 the
indemnifying party for the full amount of such payments if the Prime Indemnified
Party is ultimately determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement, plus the greater of (a) the value of all remaining
equity interests which Seller holds in the Company at the time of Closing or (b)
the value of all remaining equity interests which Seller holds in the Company at
the time an Indemnified Amount is required to be paid.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Special Options to Sell or Acquire Remaining Capital Stock.
(a) Prohibition on Sale. Notwithstanding anything in this
Agreement to the contrary, Seller agrees that it will not transfer, assign,
pledge, hypothecate, or in any way alienate any of its shares of capital stock
of the Company, or any interest therein, whether voluntarily or by operation of
law, or by gift or otherwise, except in accordance with the provisions of this
Section or Section 9.3, or except pursuant to that certain Assignment and
Security Agreement by and between Prime or one of its affiliates and Seller,
dated as of the date of this Agreement (the "Security Agreement"). Any purported
transfer in violation of this Section or Section 9.3 shall be void and
ineffectual, and shall not operate to transfer any interest or title to the
purported transferee. Seller agrees that the Company may, and the Company agrees
to, issue stop-transfer orders, or take any other necessary action, to ensure
that the foregoing provisions of this Section and Section 9.3 are given full
effect.
(b) Option to Sell. Upon (i) the death, retirement (only if
Seller is a physician and only as defined below), bankruptcy, insolvency,
disability (only if Seller is a physician and only as defined below) or
incompetency of Seller, (ii) any other involuntary transfer of any capital stock
of the Company now or hereafter owned by Seller, or any interest therein
(including, without limitation, transfers of interests upon divorce or death of
a spouse of Seller, but excluding any transfers governed by Section 9.3), or
(iii) the performance by Seller, during any one-month period, of greater than
thirty (30%) of his or her professional medical activities outside of a two
hundred (200) mile radius of the center or facility primarily utilized by Seller
prior to the date of this Agreement; the Seller's executor, administrator,
trustee, custodian, receiver or other legal or personal representative (the
"Representative"), or Seller, in the case of retirement or departure, shall give
written notice of that fact to the Company. In such event, the Representative or
Seller shall have a period of sixty (60) days (the "Put Period") following the
date of such death, retirement, bankruptcy, insolvency, disability, incompetency
or shift in the geographical location of Seller's practice, as the case may be,
within which time it may require that the Company purchase (subject to the
remaining provisions of this subsection) all of Seller's capital stock of the
Company, upon the terms and conditions hereinafter set forth, by giving notice
of such election in writing to Company. The Company may, in its sole discretion,
offer all or a portion of such capital stock to its shareholders, on a pro rata
basis in relation to each shareholder's percentage ownership of the Company, but
any agreement by the shareholders to purchase all or a portion of such capital
stock shall not limit the Company's obligation to purchase within the time frame
set forth in this Section. If the Company has offered all of such capital stock
to its shareholders, and the shareholders have not committed to purchase all of
such capital stock within five (5) days from the date of offer, then the Company
may, in its sole discretion, offer all or a portion of the remaining capital
stock to Prime, in which event Prime must participate in such purchase upon the
same terms and conditions as the Company. For purposes of this Agreement, (x)
"disability" shall apply only if Seller is a physician and shall mean any
condition which in the reasonable judgment of a majority of the managers of
Prime, would impair Seller's ability to materially perform his or her routine
duties for a period of six (6) months or more, (y) "retirement" shall apply only
if Seller is a physician and shall mean the cessation of the routine practice of
medicine (provided that any physician who transfers his or her entire practice
to a licensed medical professional meeting the Company's then current
credentialing program shall not be deemed to have retired for purposes of this
subsection), and (z) "incompetent" shall mean a state of legal incompetence as
declared by a court of valid jurisdiction.
(c) Option to Buy. In the event that the option described in
Section 9(b) arises and the Representative or Seller, as the case may be, fails
to make the election described in Section 9(b) within the Put Period, Prime
shall at all times thereafter have the option to purchase all or any portion of
Seller's capital stock of the Company, upon the terms and conditions hereinafter
set forth, by giving written notice of such election in writing to Seller. In
addition, Prime may, in its sole discretion, transfer its purchase right granted
under this subsection (or stock acquired pursuant to an exercise of its purchase
right granted under this subsection) to Horizon or any of the physician
shareholders of the Company.
(d) Purchase Price. The purchase price to be paid pursuant to
this Section shall be paid in immediately available funds at the closing of the
transfer of capital stock pursuant to this Section. If the parties do not
otherwise agree within thirty (30) days of the day on which the option to
purchase or sell hereunder is exercised, then Prime shall, at its own expense,
select an appraiser to value the capital stock being transferred. If Seller or
Representative does not agree with the value determined by the appraiser of
Prime, Seller or Representative may, at its own expense, select its own
appraiser to value the capital stock being transferred. If the two appraisers
cannot agree on the value of the capital stock being transferred, the two
appraisers shall mutually select a third appraiser to value the capital stock
being transferred, and any valuation determined by such third appraiser shall be
final, binding and conclusive. The cost of any third appraiser shall be borne by
Seller.
(e) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice under either Section 9(b) or
Section 9(c). At such closing, Seller shall execute all documents and take such
other actions as may be reasonably necessary to deliver to Prime such capital
stock, and any certificates representing same, free and clear of all liens,
claims, encumbrances or restrictions of any kind or nature whatsoever, except
those imposed under the Security Agreement.
9.3 Right of First Refusal.
(a) If there is no option to sell or buy outstanding under
Section 9.2 (except in connection with a sale by a physician of all of his or
her practice upon retirement), and Seller intends to voluntarily transfer any
portion of its capital stock of the Company to any person or entity other than
Prime, then Seller shall give written notice to Prime stating (i) the intention
to transfer such capital stock, (ii) the number of shares to be transferred,
(iii) the name, business and residence address of the proposed transferee, (iv)
the nature and amount of the consideration, and (v) the other terms of the
proposed sale.
(b) Prime shall have, and may exercise within sixty (60) days
after receipt of the notice of intent to transfer, an option to purchase all or
any portion of the capital stock of the Company owned by Seller, at the per
share price and upon the other terms stated in the notice of intent to transfer.
Prime may elect to exercise its option under this Section by delivering notice
thereof to Seller. If Prime elects not to purchase all or any portion of such
capital stock prior to the expiration of said sixty (60) day period, Seller
shall have thirty (30) days to complete the sale and purchase contemplated in
the notice of intent to transfer, and after such thirty (30) day period, the
provisions of this Section shall apply fully to any such capital stock not
transferred. The purchase price pursuant to this Section shall be paid in
immediately available funds at the closing of the transfer pursuant to this
Section.
(c) Seller and Prime acknowledge and agree that it would be
impractical to exercise an option to purchase arising pursuant to this Section
whenever the proposed consideration to be received by Seller is other than cash,
cash equivalents or an obligation to pay cash by a person whose credit
worthiness and financial status is such that performance of the payment
obligation would be reasonably assured. Therefore, the parties agree that no
transfer shall be permitted and no option shall arise pursuant to this Section
whenever the consideration to be received from the proposed transferee is other
than cash, cash equivalents or an obligation to pay cash by a person whose
credit worthiness and financial status is such that performance of the payment
obligation would be reasonably assured.
(d) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice of Prime's election to purchase
pursuant to Section 9(b). At such closing, Seller shall execute all documents
and take such other actions as may be reasonably necessary to deliver to Prime
such capital stock, and any certificates representing same, free and clear of
all liens, claims, encumbrances or restrictions of any kind or nature
whatsoever, except those imposed under the Security Agreement.
9.4 Voting Agreement. Each of the parties hereto agrees that it will
vote all of the shares of capital stock of the Company owned by it, at any time
after the execution of this Agreement, in accordance with the terms of this
Section 9.4. Any additional shares of voting capital stock or other voting
securities of the Company, or the voting rights related thereto, whether
presently existing or created in the future, that may be owned, held, or
subsequently acquired in any manner, legally or beneficially, directly or
indirectly, of record or otherwise, by the parties at any time after the
execution of this Agreement, whether issued incident to any stock split, stock
dividend, increase in capitalization, recapitalization, merger, consolidation,
share exchange, reorganization, or other transaction, shall be shall be subject
to the terms of this Section (all such stock presently held or controlled,
together with such additional stock, the "Subject Shares"). At each election of
directors of the Company, the parties and any transferee or assignee of any
Subject Shares from the parties (the "Transferee") shall, in accordance with the
procedure set forth below, vote the Subject Shares as necessary to elect five
(5) persons, designated in accordance with the procedures below, to the board of
directors of the company. Three (3) of the directors (the "Prime Designees")
shall be designated in writing by Prime or its Transferee. The remaining two (2)
directors (the "Other Stockholder Designees") shall be jointly designated in
writing by stockholders of the corporation other than Prime (or any entity other
than the Company that is controlled by, controlling or under common control with
Prime) (the "Other Stockholders") holding a majority of the aggregate voting
equity stock held by all Other Stockholders. For purposes of this Section, the
Prime Designees and the Other Stockholder Designees are sometimes referred to
individually as a "Designated Director" and collectively as "Designated
Directors." During the term of this Agreement, the parties shall, in accordance
with the procedure set forth below, (i) vote their Subject Shares and use their
best efforts in any event to ensure that the number of directors which shall
constitute the entire board of directors of the Company shall remain at five
(5), (ii) vote their Subject Shares in favor of the removal of a Designated
Director if Prime or a majority in interest of the Other Stockholders (whichever
designated the respective director) instruct in writing that such Designated
Director shall be removed from office and (iii) upon any removal of a Designated
Director pursuant to (ii) above, vote their Subject Shares in favor of the
election of a replacement director designated in writing by Prime or a majority
in interest of the Other Stockholders (whichever designated the respective
director). None of the parties to this Agreement shall approve or authorize the
removal of any Designated Director unless Prime or a majority in interest of the
Other Stockholders (whichever designated the respective director) shall have
authorized in writing such Designated Director's removal. To the extent that any
party or parties entitled to designate a director pursuant to this Section fail
to designate a replacement Designated Director under this Section, the position
vacated shall remain vacant until such time as a new director is designated and
elected pursuant to the terms hereof.
Upon delivery of any written notice designating or removing one or more
directors pursuant to this Section, the parties hereto and any Transferee shall
either (i) sign a written consent, prepared for execution by the stockholders of
the Company in accordance with the Bylaws of the Company, which consent elects
or removes the director(s) designated in writing to be elected or removed in
accordance with this Section or (ii) at any annual or special shareholders
meeting at which director(s) are to be elected or removed, vote in favor of the
election or removal of the director(s) designated in writing to be elected or
removed in accordance with this Section. If necessary to fix the number of
directors constituting the entire board of directors at five (5), the parties
hereto shall either (i) sign such written consents prepared for execution by the
shareholders of the Company in accordance with the Bylaws of the Company or (ii)
at any annual or special shareholders meeting, vote in favor of such motions;
which consents or motions propose to fix the number of directors constituting
the entire board of directors at five (5).
Each of the parties hereto agrees to take such actions, and execute
such documents, agreements or instruments (including, without limitation,
consents amending the articles or bylaws of the Company), as may be necessary,
due to changes in the law or otherwise, to ensure that the provisions of this
Section 9.4 are given full effect.
9.5 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required by this Agreement to indemnify another party to this Agreement
in respect of such act, omission or other matter.
9.6 Post-Closing Capital Contributions. All parties to this Agreement
acknowledge and agree that no shareholder of the Company, or any other party,
has any obligation existing on the Closing Date to make a capital contribution
to the Company.
9.7 Stock Legend. On and after the Closing, each certificate or
document representing Seller's ownership of any of the Company's capital stock,
and each certificate or document that may be issued and delivered by the Company
upon transfer of such certificate, shall contain a legend conspicuously noted in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, SHARES MAY BE TRANSFERRED ONLY IN
COMPLIANCE WITH CERTAIN CONDITIONS SPECIFIED IN A CERTAIN
STOCK PURCHASE AGREEMENT DATED EFFECTIVE AS OF SEPTEMBER 1,
1999, A COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. 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 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 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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: D. Brent Reed and Carellyn S. Reed
157 Cascade Falls Drive
Folsom, California 95630
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to Prime, it shall
mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same instrument. Any party hereto may execute this Agreement by
signing any one counterpart.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
Seller: /s/ D. Brent Reed
Printed Name: D. Brent Reed
/s/ Carellyn S. Reed
Printed Name: Carellyn S. Reed
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A: Form of Exclusive Use Agreement
EXHIBIT B: Form of Assignment and Security Agreement
EXHIBIT C: Form of Amended and Restated Bylaws of Seller
<PAGE>
STOCK PURCHASE AGREEMENT
Among
PRIME/BDR ACQUISITION, L.L.C.
--------------------------
and
Horizon Vision Center, Inc.
--------------------
Dated September 1, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Severin Family
Trust, and shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time,
39,369 authorized and issued shares of the Company's $0.01 par value common
stock presently owned by Seller and evidenced by stock certificate number C-27,
C-35, C-40, and C-45 (collectively, the "Capital Stock"). The purchase price for
the Capital Stock shall be $446,557.00 (the "Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is relying materially on such representations and
warranties in entering into and performing this Agreement and each of the other
contracts, documents, instruments or agreements to be entered into in connection
with or as contemplated by this Agreement, all of which are collectively
referred to as the "Transaction Documents"):
2.1 Due Organization and Principal Executive Office. Prime is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties of Seller
Seller hereby represents and warrants to Prime that each of the
following matters is true and correct in all respects as of the Closing Date
(with the understanding that Prime is relying materially on each such
representation and warranty in entering into and performing this Agreement),
which representations and warranties shall also be deemed made as of the
Effective Time and which shall survive the Closing:
3.1 Due Authorization. Seller has full power and authority to enter
into and perform this Agreement and each Transaction Document required to be
executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
3.2 Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be free of any liens, claims or encumbrances whatsoever.
3.3 Ownership. Immediately following the Closing Date, except as set
forth on Schedule 3.3, Seller does not own (i) any shares of equity or other
voting securities of the Company, (ii) any securities of the Company convertible
into or exchangeable for shares of equity or other voting securities of the
Company, (iii) any options or other rights to acquire from the Company, or any
obligation of the Company to issue or sell, equity or other voting securities of
the Company, or securities of the Company convertible into or exchangeable for
such equity or voting securities, and (iv) any equity equivalents, interests in
the ownership or earnings, rights to participate in the election of directors or
other similar rights of or with respect to the Company.
3.4 Claims and Proceedings. No inquiry, action, or proceeding has been
asserted, instituted, or threatened against Seller 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.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
4.4 Distribution of Working Capital. In accordance with the resolutions
adopted by Horizon on August 10, 1999, the parties agree that all cash in excess
of the minimum amount of Working Capital (as hereinafter defined) required
pursuant to Section 5.2(h) shall be distributed within thirty (30) days of the
Closing (as dividends) to the shareholders of Horizon existing on August 1,
1999.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock;
(c) each of the shareholders of the Company existing
immediately prior to the Closing (including Seller) that is a physician or other
licensed medical professional shall have executed and delivered to Prime an
Exclusive Use Agreement in substantially the form attached hereto as Exhibit A;
(d) Seller, and each of the other Company shareholders selling
Company stock to Prime in a Related Acquisition (the "Selling Shareholders"),
who will remain a shareholder of the Company after the Closing shall have
executed and delivered to Prime an Assignment and Security Agreement, in
substantially the form attached hereto as Exhibit B, granting a security
interest in such shareholder's remaining stock in the Company to secure the
performance by such shareholder under any agreement it has with Prime or any of
Prime's affiliates;
(e) the Company shall have adopted, after obtaining all
necessary approvals and consents, the Amended and Restated Bylaws, in
substantially the form attached hereto as Exhibit C, which shall contain
provisions governing its board of directors that are consistent with the
provisions of Section 9.4 of this Agreement, including, without limitation, that
the number of directors serving on its board of directors of the Company shall
be five (5);
(f) at the Closing, the Company's board of directors shall
consist of three (3) individuals designated by Prime and listed on Schedule
5.2(f) hereto, and two (2) individuals designated by a majority of the
shareholders of the Company immediately prior to Closing and listed on Schedule
5.2(f) hereto;
(g) the Company shall have delivered to Prime true and correct
copies of resignations, effective as of the Closing Date, from each of the
persons holding the offices set forth on Schedule 5.2(g) hereto, and the persons
listed on Schedule 5.2(g) hereto shall have been elected or appointed to the
office set forth opposite their name;
(h) As of the Closing Date, the amount of Working Capital of
the Company shall be at least $100,000 (for purposes of this Agreement, "Working
Capital" means the difference between (i) cash, cash equivalents, prepaid
expenses and Accounts Receivable less than sixty (60) days old and (ii) accounts
payable and other liabilities and payment obligations due in the following
twelve (12) months, all as determined in accordance with GAAP); and
(i) each of them, and each Selling Shareholder, shall have
delivered such good standing certificates, officer certificates, and similar
documents and certificates as counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of any breach or default by
Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to the Company and, if applicable, Seller (collectively in
instances involving the Seller, the "indemnifying party"), of the commencement
or assertion of any third party action in respect of which such Prime
Indemnified Party shall seek indemnification hereunder. Any failure to so notify
the indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices the
indemnifying party. The indemnifying party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) The indemnifying party 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) The indemnifying party 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) The indemnifying party shall not be entitled to control
(but shall be entitled to participate at its 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 the indemnifying party fails 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 the indemnifying party, without the prior
written consent of the indemnifying party.
(e) The indemnifying party 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 the
indemnifying party for the full amount of such payments if the Prime Indemnified
Party is ultimately determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement, plus the greater of (a) the value of all remaining
equity interests which Seller holds in the Company at the time of Closing or (b)
the value of all remaining equity interests which Seller holds in the Company at
the time an Indemnified Amount is required to be paid.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Special Options to Sell or Acquire Remaining Capital Stock.
(a) Prohibition on Sale. Notwithstanding anything in this
Agreement to the contrary, Seller agrees that it will not transfer, assign,
pledge, hypothecate, or in any way alienate any of its shares of capital stock
of the Company, or any interest therein, whether voluntarily or by operation of
law, or by gift or otherwise, except in accordance with the provisions of this
Section or Section 9.3, or except pursuant to that certain Assignment and
Security Agreement by and between Prime or one of its affiliates and Seller,
dated as of the date of this Agreement (the "Security Agreement"). Any purported
transfer in violation of this Section or Section 9.3 shall be void and
ineffectual, and shall not operate to transfer any interest or title to the
purported transferee. Seller agrees that the Company may, and the Company agrees
to, issue stop-transfer orders, or take any other necessary action, to ensure
that the foregoing provisions of this Section and Section 9.3 are given full
effect.
(b) Option to Sell. Upon (i) the death, retirement (only if
Seller is a physician and only as defined below), bankruptcy, insolvency,
disability (only if Seller is a physician and only as defined below) or
incompetency of Seller, (ii) any other involuntary transfer of any capital stock
of the Company now or hereafter owned by Seller, or any interest therein
(including, without limitation, transfers of interests upon divorce or death of
a spouse of Seller, but excluding any transfers governed by Section 9.3), or
(iii) the performance by Seller, during any one-month period, of greater than
thirty (30%) of his or her professional medical activities outside of a two
hundred (200) mile radius of the center or facility primarily utilized by Seller
prior to the date of this Agreement; the Seller's executor, administrator,
trustee, custodian, receiver or other legal or personal representative (the
"Representative"), or Seller, in the case of retirement or departure, shall give
written notice of that fact to the Company. In such event, the Representative or
Seller shall have a period of sixty (60) days (the "Put Period") following the
date of such death, retirement, bankruptcy, insolvency, disability, incompetency
or shift in the geographical location of Seller's practice, as the case may be,
within which time it may require that the Company purchase (subject to the
remaining provisions of this subsection) all of Seller's capital stock of the
Company, upon the terms and conditions hereinafter set forth, by giving notice
of such election in writing to Company. The Company may, in its sole discretion,
offer all or a portion of such capital stock to its shareholders, on a pro rata
basis in relation to each shareholder's percentage ownership of the Company, but
any agreement by the shareholders to purchase all or a portion of such capital
stock shall not limit the Company's obligation to purchase within the time frame
set forth in this Section. If the Company has offered all of such capital stock
to its shareholders, and the shareholders have not committed to purchase all of
such capital stock within five (5) days from the date of offer, then the Company
may, in its sole discretion, offer all or a portion of the remaining capital
stock to Prime, in which event Prime must participate in such purchase upon the
same terms and conditions as the Company. For purposes of this Agreement, (x)
"disability" shall apply only if Seller is a physician and shall mean any
condition which in the reasonable judgment of a majority of the managers of
Prime, would impair Seller's ability to materially perform his or her routine
duties for a period of six (6) months or more, (y) "retirement" shall apply only
if Seller is a physician and shall mean the cessation of the routine practice of
medicine (provided that any physician who transfers his or her entire practice
to a licensed medical professional meeting the Company's then current
credentialing program shall not be deemed to have retired for purposes of this
subsection), and (z) "incompetent" shall mean a state of legal incompetence as
declared by a court of valid jurisdiction.
(c) Option to Buy. In the event that the option described in
Section 9(b) arises and the Representative or Seller, as the case may be, fails
to make the election described in Section 9(b) within the Put Period, Prime
shall at all times thereafter have the option to purchase all or any portion of
Seller's capital stock of the Company, upon the terms and conditions hereinafter
set forth, by giving written notice of such election in writing to Seller. In
addition, Prime may, in its sole discretion, transfer its purchase right granted
under this subsection (or stock acquired pursuant to an exercise of its purchase
right granted under this subsection) to Horizon or any of the physician
shareholders of the Company.
(d) Purchase Price. The purchase price to be paid pursuant to
this Section shall be paid in immediately available funds at the closing of the
transfer of capital stock pursuant to this Section. If the parties do not
otherwise agree within thirty (30) days of the day on which the option to
purchase or sell hereunder is exercised, then Prime shall, at its own expense,
select an appraiser to value the capital stock being transferred. If Seller or
Representative does not agree with the value determined by the appraiser of
Prime, Seller or Representative may, at its own expense, select its own
appraiser to value the capital stock being transferred. If the two appraisers
cannot agree on the value of the capital stock being transferred, the two
appraisers shall mutually select a third appraiser to value the capital stock
being transferred, and any valuation determined by such third appraiser shall be
final, binding and conclusive. The cost of any third appraiser shall be borne by
Seller.
(e) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice under either Section 9(b) or
Section 9(c). At such closing, Seller shall execute all documents and take such
other actions as may be reasonably necessary to deliver to Prime such capital
stock, and any certificates representing same, free and clear of all liens,
claims, encumbrances or restrictions of any kind or nature whatsoever, except
those imposed under the Security Agreement.
9.3 Right of First Refusal.
(a) If there is no option to sell or buy outstanding under
Section 9.2 (except in connection with a sale by a physician of all of his or
her practice upon retirement), and Seller intends to voluntarily transfer any
portion of its capital stock of the Company to any person or entity other than
Prime, then Seller shall give written notice to Prime stating (i) the intention
to transfer such capital stock, (ii) the number of shares to be transferred,
(iii) the name, business and residence address of the proposed transferee, (iv)
the nature and amount of the consideration, and (v) the other terms of the
proposed sale.
(b) Prime shall have, and may exercise within sixty (60) days
after receipt of the notice of intent to transfer, an option to purchase all or
any portion of the capital stock of the Company owned by Seller, at the per
share price and upon the other terms stated in the notice of intent to transfer.
Prime may elect to exercise its option under this Section by delivering notice
thereof to Seller. If Prime elects not to purchase all or any portion of such
capital stock prior to the expiration of said sixty (60) day period, Seller
shall have thirty (30) days to complete the sale and purchase contemplated in
the notice of intent to transfer, and after such thirty (30) day period, the
provisions of this Section shall apply fully to any such capital stock not
transferred. The purchase price pursuant to this Section shall be paid in
immediately available funds at the closing of the transfer pursuant to this
Section.
(c) Seller and Prime acknowledge and agree that it would be
impractical to exercise an option to purchase arising pursuant to this Section
whenever the proposed consideration to be received by Seller is other than cash,
cash equivalents or an obligation to pay cash by a person whose credit
worthiness and financial status is such that performance of the payment
obligation would be reasonably assured. Therefore, the parties agree that no
transfer shall be permitted and no option shall arise pursuant to this Section
whenever the consideration to be received from the proposed transferee is other
than cash, cash equivalents or an obligation to pay cash by a person whose
credit worthiness and financial status is such that performance of the payment
obligation would be reasonably assured.
(d) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice of Prime's election to purchase
pursuant to Section 9(b). At such closing, Seller shall execute all documents
and take such other actions as may be reasonably necessary to deliver to Prime
such capital stock, and any certificates representing same, free and clear of
all liens, claims, encumbrances or restrictions of any kind or nature
whatsoever, except those imposed under the Security Agreement.
9.4 Voting Agreement. Each of the parties hereto agrees that it will
vote all of the shares of capital stock of the Company owned by it, at any time
after the execution of this Agreement, in accordance with the terms of this
Section 9.4. Any additional shares of voting capital stock or other voting
securities of the Company, or the voting rights related thereto, whether
presently existing or created in the future, that may be owned, held, or
subsequently acquired in any manner, legally or beneficially, directly or
indirectly, of record or otherwise, by the parties at any time after the
execution of this Agreement, whether issued incident to any stock split, stock
dividend, increase in capitalization, recapitalization, merger, consolidation,
share exchange, reorganization, or other transaction, shall be shall be subject
to the terms of this Section (all such stock presently held or controlled,
together with such additional stock, the "Subject Shares"). At each election of
directors of the Company, the parties and any transferee or assignee of any
Subject Shares from the parties (the "Transferee") shall, in accordance with the
procedure set forth below, vote the Subject Shares as necessary to elect five
(5) persons, designated in accordance with the procedures below, to the board of
directors of the company. Three (3) of the directors (the "Prime Designees")
shall be designated in writing by Prime or its Transferee. The remaining two (2)
directors (the "Other Stockholder Designees") shall be jointly designated in
writing by stockholders of the corporation other than Prime (or any entity other
than the Company that is controlled by, controlling or under common control with
Prime) (the "Other Stockholders") holding a majority of the aggregate voting
equity stock held by all Other Stockholders. For purposes of this Section, the
Prime Designees and the Other Stockholder Designees are sometimes referred to
individually as a "Designated Director" and collectively as "Designated
Directors." During the term of this Agreement, the parties shall, in accordance
with the procedure set forth below, (i) vote their Subject Shares and use their
best efforts in any event to ensure that the number of directors which shall
constitute the entire board of directors of the Company shall remain at five
(5), (ii) vote their Subject Shares in favor of the removal of a Designated
Director if Prime or a majority in interest of the Other Stockholders (whichever
designated the respective director) instruct in writing that such Designated
Director shall be removed from office and (iii) upon any removal of a Designated
Director pursuant to (ii) above, vote their Subject Shares in favor of the
election of a replacement director designated in writing by Prime or a majority
in interest of the Other Stockholders (whichever designated the respective
director). None of the parties to this Agreement shall approve or authorize the
removal of any Designated Director unless Prime or a majority in interest of the
Other Stockholders (whichever designated the respective director) shall have
authorized in writing such Designated Director's removal. To the extent that any
party or parties entitled to designate a director pursuant to this Section fail
to designate a replacement Designated Director under this Section, the position
vacated shall remain vacant until such time as a new director is designated and
elected pursuant to the terms hereof.
Upon delivery of any written notice designating or removing one or more
directors pursuant to this Section, the parties hereto and any Transferee shall
either (i) sign a written consent, prepared for execution by the stockholders of
the Company in accordance with the Bylaws of the Company, which consent elects
or removes the director(s) designated in writing to be elected or removed in
accordance with this Section or (ii) at any annual or special shareholders
meeting at which director(s) are to be elected or removed, vote in favor of the
election or removal of the director(s) designated in writing to be elected or
removed in accordance with this Section. If necessary to fix the number of
directors constituting the entire board of directors at five (5), the parties
hereto shall either (i) sign such written consents prepared for execution by the
shareholders of the Company in accordance with the Bylaws of the Company or (ii)
at any annual or special shareholders meeting, vote in favor of such motions;
which consents or motions propose to fix the number of directors constituting
the entire board of directors at five (5).
Each of the parties hereto agrees to take such actions, and execute
such documents, agreements or instruments (including, without limitation,
consents amending the articles or bylaws of the Company), as may be necessary,
due to changes in the law or otherwise, to ensure that the provisions of this
Section 9.4 are given full effect.
9.5 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required by this Agreement to indemnify another party to this Agreement
in respect of such act, omission or other matter.
9.6 Post-Closing Capital Contributions. All parties to this Agreement
acknowledge and agree that no shareholder of the Company, or any other party,
has any obligation existing on the Closing Date to make a capital contribution
to the Company.
9.7 Stock Legend. On and after the Closing, each certificate or
document representing Seller's ownership of any of the Company's capital stock,
and each certificate or document that may be issued and delivered by the Company
upon transfer of such certificate, shall contain a legend conspicuously noted in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, SHARES MAY BE TRANSFERRED ONLY IN
COMPLIANCE WITH CERTAIN CONDITIONS SPECIFIED IN A CERTAIN
STOCK PURCHASE AGREEMENT DATED EFFECTIVE AS OF SEPTEMBER 1,
1999, A COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. 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 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 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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Severin Family Trust
Sanford L. Severin, Trustee
1040 McCauley Road
Danville, California 94526
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to Prime, it shall
mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same instrument. Any party hereto may execute this Agreement by
signing any one counterpart.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
Seller: /s/ Sanford L. Severin
Printed Name: Sanford L. Severin,
Trustee under the Sevenin
Family Trust
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A: Form of Exclusive Use Agreement
EXHIBIT B: Form of Assignment and Security Agreement
EXHIBIT C: Form of Amended and Restated Bylaws of Seller
<PAGE>
STOCK PURCHASE AGREEMENT
Among
PRIME/BDR ACQUISITION, L.L.C.
--------------------------
and
Horizon Vision Center, Inc.
--------------------
Dated September 1, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and the Stephen and
Andrea Turner Family Trust, a shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time, 7,920
authorized and issued shares of the Company's $0.01 par value common stock
presently owned by Seller and evidenced by stock certificate number C-28 and
C-38 (collectively, the "Capital Stock"). The purchase price for the Capital
Stock shall be $131,004.00 (the "Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is relying materially on such representations and
warranties in entering into and performing this Agreement and each of the other
contracts, documents, instruments or agreements to be entered into in connection
with or as contemplated by this Agreement, all of which are collectively
referred to as the "Transaction Documents"):
2.1 Due Organization and Principal Executive Office. Prime is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties of Seller
Seller hereby represents and warrants to Prime that each of the
following matters is true and correct in all respects as of the Closing Date
(with the understanding that Prime is relying materially on each such
representation and warranty in entering into and performing this Agreement),
which representations and warranties shall also be deemed made as of the
Effective Time and which shall survive the Closing:
3.1 Due Authorization. Seller has full power and authority to enter
into and perform this Agreement and each Transaction Document required to be
executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
3.2 Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be free of any liens, claims or encumbrances whatsoever.
3.3 Ownership. Immediately following the Closing Date, except as set
forth on Schedule 3.3, Seller does not own (i) any shares of equity or other
voting securities of the Company, (ii) any securities of the Company convertible
into or exchangeable for shares of equity or other voting securities of the
Company, (iii) any options or other rights to acquire from the Company, or any
obligation of the Company to issue or sell, equity or other voting securities of
the Company, or securities of the Company convertible into or exchangeable for
such equity or voting securities, and (iv) any equity equivalents, interests in
the ownership or earnings, rights to participate in the election of directors or
other similar rights of or with respect to the Company.
3.4 Claims and Proceedings. No inquiry, action, or proceeding has been
asserted, instituted, or threatened against Seller 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.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
4.4 Distribution of Working Capital. In accordance with the resolutions
adopted by Horizon on August 10, 1999, the parties agree that all cash in excess
of the minimum amount of Working Capital (as hereinafter defined) required
pursuant to Section 5.2(h) shall be distributed within thirty (30) days of the
Closing (as dividends) to the shareholders of Horizon existing on August 1,
1999.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock;
(c) each of the shareholders of the Company existing
immediately prior to the Closing (including Seller) that is a physician or other
licensed medical professional shall have executed and delivered to Prime an
Exclusive Use Agreement in substantially the form attached hereto as Exhibit A;
(d) Seller, and each of the other Company shareholders selling
Company stock to Prime in a Related Acquisition (the "Selling Shareholders"),
who will remain a shareholder of the Company after the Closing shall have
executed and delivered to Prime an Assignment and Security Agreement, in
substantially the form attached hereto as Exhibit B, granting a security
interest in such shareholder's remaining stock in the Company to secure the
performance by such shareholder under any agreement it has with Prime or any of
Prime's affiliates;
(e) the Company shall have adopted, after obtaining all
necessary approvals and consents, the Amended and Restated Bylaws, in
substantially the form attached hereto as Exhibit C, which shall contain
provisions governing its board of directors that are consistent with the
provisions of Section 9.4 of this Agreement, including, without limitation, that
the number of directors serving on its board of directors of the Company shall
be five (5);
(f) at the Closing, the Company's board of directors shall
consist of three (3) individuals designated by Prime and listed on Schedule
5.2(f) hereto, and two (2) individuals designated by a majority of the
shareholders of the Company immediately prior to Closing and listed on Schedule
5.2(f) hereto;
(g) the Company shall have delivered to Prime true and correct
copies of resignations, effective as of the Closing Date, from each of the
persons holding the offices set forth on Schedule 5.2(g) hereto, and the persons
listed on Schedule 5.2(g) hereto shall have been elected or appointed to the
office set forth opposite their name;
(h) As of the Closing Date, the amount of Working Capital of
the Company shall be at least $100,000 (for purposes of this Agreement, "Working
Capital" means the difference between (i) cash, cash equivalents, prepaid
expenses and Accounts Receivable less than sixty (60) days old and (ii) accounts
payable and other liabilities and payment obligations due in the following
twelve (12) months, all as determined in accordance with GAAP); and
(i) each of them, and each Selling Shareholder, shall have
delivered such good standing certificates, officer certificates, and similar
documents and certificates as counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of any breach or default by
Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to the Company and, if applicable, Seller (collectively in
instances involving the Seller, the "indemnifying party"), of the commencement
or assertion of any third party action in respect of which such Prime
Indemnified Party shall seek indemnification hereunder. Any failure to so notify
the indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices the
indemnifying party. The indemnifying party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) The indemnifying party 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) The indemnifying party 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) The indemnifying party shall not be entitled to control
(but shall be entitled to participate at its 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 the indemnifying party fails 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 the indemnifying party, without the prior
written consent of the indemnifying party.
(e) The indemnifying party 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 the
indemnifying party for the full amount of such payments if the Prime Indemnified
Party is ultimately determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement, plus the greater of (a) the value of all remaining
equity interests which Seller holds in the Company at the time of Closing or (b)
the value of all remaining equity interests which Seller holds in the Company at
the time an Indemnified Amount is required to be paid.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Special Options to Sell or Acquire Remaining Capital Stock.
(a) Prohibition on Sale. Notwithstanding anything in this
Agreement to the contrary, Seller agrees that it will not transfer, assign,
pledge, hypothecate, or in any way alienate any of its shares of capital stock
of the Company, or any interest therein, whether voluntarily or by operation of
law, or by gift or otherwise, except in accordance with the provisions of this
Section or Section 9.3, or except pursuant to that certain Assignment and
Security Agreement by and between Prime or one of its affiliates and Seller,
dated as of the date of this Agreement (the "Security Agreement"). Any purported
transfer in violation of this Section or Section 9.3 shall be void and
ineffectual, and shall not operate to transfer any interest or title to the
purported transferee. Seller agrees that the Company may, and the Company agrees
to, issue stop-transfer orders, or take any other necessary action, to ensure
that the foregoing provisions of this Section and Section 9.3 are given full
effect.
(b) Option to Sell. Upon (i) the death, retirement (only if
Seller is a physician and only as defined below), bankruptcy, insolvency,
disability (only if Seller is a physician and only as defined below) or
incompetency of Seller, (ii) any other involuntary transfer of any capital stock
of the Company now or hereafter owned by Seller, or any interest therein
(including, without limitation, transfers of interests upon divorce or death of
a spouse of Seller, but excluding any transfers governed by Section 9.3), or
(iii) the performance by Seller, during any one-month period, of greater than
thirty (30%) of his or her professional medical activities outside of a two
hundred (200) mile radius of the center or facility primarily utilized by Seller
prior to the date of this Agreement; the Seller's executor, administrator,
trustee, custodian, receiver or other legal or personal representative (the
"Representative"), or Seller, in the case of retirement or departure, shall give
written notice of that fact to the Company. In such event, the Representative or
Seller shall have a period of sixty (60) days (the "Put Period") following the
date of such death, retirement, bankruptcy, insolvency, disability, incompetency
or shift in the geographical location of Seller's practice, as the case may be,
within which time it may require that the Company purchase (subject to the
remaining provisions of this subsection) all of Seller's capital stock of the
Company, upon the terms and conditions hereinafter set forth, by giving notice
of such election in writing to Company. The Company may, in its sole discretion,
offer all or a portion of such capital stock to its shareholders, on a pro rata
basis in relation to each shareholder's percentage ownership of the Company, but
any agreement by the shareholders to purchase all or a portion of such capital
stock shall not limit the Company's obligation to purchase within the time frame
set forth in this Section. If the Company has offered all of such capital stock
to its shareholders, and the shareholders have not committed to purchase all of
such capital stock within five (5) days from the date of offer, then the Company
may, in its sole discretion, offer all or a portion of the remaining capital
stock to Prime, in which event Prime must participate in such purchase upon the
same terms and conditions as the Company. For purposes of this Agreement, (x)
"disability" shall apply only if Seller is a physician and shall mean any
condition which in the reasonable judgment of a majority of the managers of
Prime, would impair Seller's ability to materially perform his or her routine
duties for a period of six (6) months or more, (y) "retirement" shall apply only
if Seller is a physician and shall mean the cessation of the routine practice of
medicine (provided that any physician who transfers his or her entire practice
to a licensed medical professional meeting the Company's then current
credentialing program shall not be deemed to have retired for purposes of this
subsection), and (z) "incompetent" shall mean a state of legal incompetence as
declared by a court of valid jurisdiction.
(c) Option to Buy. In the event that the option described in
Section 9(b) arises and the Representative or Seller, as the case may be, fails
to make the election described in Section 9(b) within the Put Period, Prime
shall at all times thereafter have the option to purchase all or any portion of
Seller's capital stock of the Company, upon the terms and conditions hereinafter
set forth, by giving written notice of such election in writing to Seller. In
addition, Prime may, in its sole discretion, transfer its purchase right granted
under this subsection (or stock acquired pursuant to an exercise of its purchase
right granted under this subsection) to Horizon or any of the physician
shareholders of the Company.
(d) Purchase Price. The purchase price to be paid pursuant to
this Section shall be paid in immediately available funds at the closing of the
transfer of capital stock pursuant to this Section. If the parties do not
otherwise agree within thirty (30) days of the day on which the option to
purchase or sell hereunder is exercised, then Prime shall, at its own expense,
select an appraiser to value the capital stock being transferred. If Seller or
Representative does not agree with the value determined by the appraiser of
Prime, Seller or Representative may, at its own expense, select its own
appraiser to value the capital stock being transferred. If the two appraisers
cannot agree on the value of the capital stock being transferred, the two
appraisers shall mutually select a third appraiser to value the capital stock
being transferred, and any valuation determined by such third appraiser shall be
final, binding and conclusive. The cost of any third appraiser shall be borne by
Seller.
(e) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice under either Section 9(b) or
Section 9(c). At such closing, Seller shall execute all documents and take such
other actions as may be reasonably necessary to deliver to Prime such capital
stock, and any certificates representing same, free and clear of all liens,
claims, encumbrances or restrictions of any kind or nature whatsoever, except
those imposed under the Security Agreement.
9.3 Right of First Refusal.
(a) If there is no option to sell or buy outstanding under
Section 9.2 (except in connection with a sale by a physician of all of his or
her practice upon retirement), and Seller intends to voluntarily transfer any
portion of its capital stock of the Company to any person or entity other than
Prime, then Seller shall give written notice to Prime stating (i) the intention
to transfer such capital stock, (ii) the number of shares to be transferred,
(iii) the name, business and residence address of the proposed transferee, (iv)
the nature and amount of the consideration, and (v) the other terms of the
proposed sale.
(b) Prime shall have, and may exercise within sixty (60) days
after receipt of the notice of intent to transfer, an option to purchase all or
any portion of the capital stock of the Company owned by Seller, at the per
share price and upon the other terms stated in the notice of intent to transfer.
Prime may elect to exercise its option under this Section by delivering notice
thereof to Seller. If Prime elects not to purchase all or any portion of such
capital stock prior to the expiration of said sixty (60) day period, Seller
shall have thirty (30) days to complete the sale and purchase contemplated in
the notice of intent to transfer, and after such thirty (30) day period, the
provisions of this Section shall apply fully to any such capital stock not
transferred. The purchase price pursuant to this Section shall be paid in
immediately available funds at the closing of the transfer pursuant to this
Section.
(c) Seller and Prime acknowledge and agree that it would be
impractical to exercise an option to purchase arising pursuant to this Section
whenever the proposed consideration to be received by Seller is other than cash,
cash equivalents or an obligation to pay cash by a person whose credit
worthiness and financial status is such that performance of the payment
obligation would be reasonably assured. Therefore, the parties agree that no
transfer shall be permitted and no option shall arise pursuant to this Section
whenever the consideration to be received from the proposed transferee is other
than cash, cash equivalents or an obligation to pay cash by a person whose
credit worthiness and financial status is such that performance of the payment
obligation would be reasonably assured.
(d) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice of Prime's election to purchase
pursuant to Section 9(b). At such closing, Seller shall execute all documents
and take such other actions as may be reasonably necessary to deliver to Prime
such capital stock, and any certificates representing same, free and clear of
all liens, claims, encumbrances or restrictions of any kind or nature
whatsoever, except those imposed under the Security Agreement.
9.4 Voting Agreement. Each of the parties hereto agrees that it will
vote all of the shares of capital stock of the Company owned by it, at any time
after the execution of this Agreement, in accordance with the terms of this
Section 9.4. Any additional shares of voting capital stock or other voting
securities of the Company, or the voting rights related thereto, whether
presently existing or created in the future, that may be owned, held, or
subsequently acquired in any manner, legally or beneficially, directly or
indirectly, of record or otherwise, by the parties at any time after the
execution of this Agreement, whether issued incident to any stock split, stock
dividend, increase in capitalization, recapitalization, merger, consolidation,
share exchange, reorganization, or other transaction, shall be shall be subject
to the terms of this Section (all such stock presently held or controlled,
together with such additional stock, the "Subject Shares"). At each election of
directors of the Company, the parties and any transferee or assignee of any
Subject Shares from the parties (the "Transferee") shall, in accordance with the
procedure set forth below, vote the Subject Shares as necessary to elect five
(5) persons, designated in accordance with the procedures below, to the board of
directors of the company. Three (3) of the directors (the "Prime Designees")
shall be designated in writing by Prime or its Transferee. The remaining two (2)
directors (the "Other Stockholder Designees") shall be jointly designated in
writing by stockholders of the corporation other than Prime (or any entity other
than the Company that is controlled by, controlling or under common control with
Prime) (the "Other Stockholders") holding a majority of the aggregate voting
equity stock held by all Other Stockholders. For purposes of this Section, the
Prime Designees and the Other Stockholder Designees are sometimes referred to
individually as a "Designated Director" and collectively as "Designated
Directors." During the term of this Agreement, the parties shall, in accordance
with the procedure set forth below, (i) vote their Subject Shares and use their
best efforts in any event to ensure that the number of directors which shall
constitute the entire board of directors of the Company shall remain at five
(5), (ii) vote their Subject Shares in favor of the removal of a Designated
Director if Prime or a majority in interest of the Other Stockholders (whichever
designated the respective director) instruct in writing that such Designated
Director shall be removed from office and (iii) upon any removal of a Designated
Director pursuant to (ii) above, vote their Subject Shares in favor of the
election of a replacement director designated in writing by Prime or a majority
in interest of the Other Stockholders (whichever designated the respective
director). None of the parties to this Agreement shall approve or authorize the
removal of any Designated Director unless Prime or a majority in interest of the
Other Stockholders (whichever designated the respective director) shall have
authorized in writing such Designated Director's removal. To the extent that any
party or parties entitled to designate a director pursuant to this Section fail
to designate a replacement Designated Director under this Section, the position
vacated shall remain vacant until such time as a new director is designated and
elected pursuant to the terms hereof.
Upon delivery of any written notice designating or removing one or more
directors pursuant to this Section, the parties hereto and any Transferee shall
either (i) sign a written consent, prepared for execution by the stockholders of
the Company in accordance with the Bylaws of the Company, which consent elects
or removes the director(s) designated in writing to be elected or removed in
accordance with this Section or (ii) at any annual or special shareholders
meeting at which director(s) are to be elected or removed, vote in favor of the
election or removal of the director(s) designated in writing to be elected or
removed in accordance with this Section. If necessary to fix the number of
directors constituting the entire board of directors at five (5), the parties
hereto shall either (i) sign such written consents prepared for execution by the
shareholders of the Company in accordance with the Bylaws of the Company or (ii)
at any annual or special shareholders meeting, vote in favor of such motions;
which consents or motions propose to fix the number of directors constituting
the entire board of directors at five (5).
Each of the parties hereto agrees to take such actions, and execute
such documents, agreements or instruments (including, without limitation,
consents amending the articles or bylaws of the Company), as may be necessary,
due to changes in the law or otherwise, to ensure that the provisions of this
Section 9.4 are given full effect.
9.5 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required by this Agreement to indemnify another party to this Agreement
in respect of such act, omission or other matter.
9.6 Post-Closing Capital Contributions. All parties to this Agreement
acknowledge and agree that no shareholder of the Company, or any other party,
has any obligation existing on the Closing Date to make a capital contribution
to the Company.
9.7 Stock Legend. On and after the Closing, each certificate or
document representing Seller's ownership of any of the Company's capital stock,
and each certificate or document that may be issued and delivered by the Company
upon transfer of such certificate, shall contain a legend conspicuously noted in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, SHARES MAY BE TRANSFERRED ONLY IN
COMPLIANCE WITH CERTAIN CONDITIONS SPECIFIED IN A CERTAIN
STOCK PURCHASE AGREEMENT DATED EFFECTIVE AS OF SEPTEMBER 1,
1999, A COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. 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 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 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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Stephen and Andrea Turner Family Trust
250 Stonewall Road
Berkeley, California 94705
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to Prime, it shall
mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same instrument. Any party hereto may execute this Agreement by
signing any one counterpart.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
Seller: /s/ Stephen G. Turner, M.D.
/s/ Andrea J. Turner
Printed Name: Stephen G. Turner, M.D.,
Trustee under the Stephen and
Andrea Turner Family Trust
Andrea J. Turner, Trustee
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A: Form of Exclusive Use Agreement
EXHIBIT B: Form of Assignment and Security Agreement
EXHIBIT C: Form of Amended and Restated Bylaws of Seller
<PAGE>
STOCK PURCHASE AGREEMENT
Among
PRIME/BDR ACQUISITION, L.L.C.
--------------------------
and
Horizon Vision Center, Inc.
--------------------
Dated September 1, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into to be
effective as of September 1, 1999 (the "Effective Time"), among Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company ("Prime"), Horizon
Vision Center, Inc., a Nevada corporation (the "Company") and Medical Vision
Technology Profit, Sharing Plan for the benefit of Stephen Wilmarth, M.D., a
shareholder of the Company ("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, Prime agrees to purchase from Seller, as of the Effective Time,
13,876 authorized and issued shares of the Company's $0.01 par value common
stock presently owned by Seller and evidenced by stock certificate number C-31
(collectively, the "Capital Stock"). The purchase price for the Capital Stock
shall be $157,393.00 (the "Purchase Price").
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 Payment of Purchase Price. The Purchase Price is to be paid to Seller
at the Closing by check or money order.
ARTICLE II
Representations and Warranties of Prime
Prime represents and warrants to Seller that each of the following
matters is true and correct in all respects as of the Closing (with the
understanding that Seller is relying materially on such representations and
warranties in entering into and performing this Agreement and each of the other
contracts, documents, instruments or agreements to be entered into in connection
with or as contemplated by this Agreement, all of which are collectively
referred to as the "Transaction Documents"):
2.1 Due Organization and Principal Executive Office. Prime is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. Prime is
controlled by Prime Medical Operating, Inc., a Delaware corporation ("PMOI"),
and PMOI is a direct or indirect wholly owned subsidiary of PMSI. 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 Transaction Document required to
be executed by Prime in connection herewith. This Agreement and each Transaction
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 Transaction
Document required herein to be executed by Prime will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Prime or
its properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which Prime is a party or by which it or its properties are bound,
(c) permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of, Prime or (d) violate or conflict with
any provision of the organizational documents of Prime. No action, consent, or
approval of, or filing with, any federal, state, county, or local governmental
authority is required by Prime in connection with the execution, delivery or
performance of this Agreement or any Transaction Document.
2.3 Brokers and Finders. Prime has not engaged, or caused to be
incurred any liability to, any finder, broker, or sales agent (and has not paid,
and will not pay, any finder's fee or similar fee or commission to any person)
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.
2.4 Claims and Proceedings. Prime is not a party to any claims,
actions, suits, proceedings, or investigations, at law or in equity, before or
by any court, municipal or other governmental department, commission, board,
agency, or instrumentality which seeks to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the validity
of such transactions or any part thereof or seeking damages on account thereof;
and, to the knowledge of Prime, no such claim, action, suit, proceeding or
investigation is threatened.
ARTICLE III
Representations and Warranties of Seller
Seller hereby represents and warrants to Prime that each of the
following matters is true and correct in all respects as of the Closing Date
(with the understanding that Prime is relying materially on each such
representation and warranty in entering into and performing this Agreement),
which representations and warranties shall also be deemed made as of the
Effective Time and which shall survive the Closing:
3.1 Due Authorization. Seller has full power and authority to enter
into and perform this Agreement and each Transaction Document required to be
executed by Seller in connection herewith. This Agreement and each such
Transaction Document has been duly and validly executed and delivered by Seller
and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms. The execution, delivery, and performance of
this Agreement, and each Transaction Document required herein to be executed by
Seller do not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to Seller or the Capital Stock, (b) violate or conflict
with, or permit the cancellation of, any agreement to which Seller is a party,
or by which Seller or the Capital Stock is bound, or result in the creation of
any lien, security interest, charge, or encumbrance upon the Capital Stock, or
(c) permit the acceleration of the maturity of any indebtedness of Seller. No
action, consent, waiver or approval of, or filing with, any federal, state,
county or local governmental authority is required by Seller in connection with
the execution, delivery, or performance of this Agreement (or any Transaction
Document).
3.2 Stock Transferred. The Capital Stock transferred by Seller to Prime at
the Closing will be free of any liens, claims or encumbrances whatsoever.
3.3 Ownership. Immediately following the Closing Date, except as set
forth on Schedule 3.3, Seller does not own (i) any shares of equity or other
voting securities of the Company, (ii) any securities of the Company convertible
into or exchangeable for shares of equity or other voting securities of the
Company, (iii) any options or other rights to acquire from the Company, or any
obligation of the Company to issue or sell, equity or other voting securities of
the Company, or securities of the Company convertible into or exchangeable for
such equity or voting securities, and (iv) any equity equivalents, interests in
the ownership or earnings, rights to participate in the election of directors or
other similar rights of or with respect to the Company.
3.4 Claims and Proceedings. No inquiry, action, or proceeding has been
asserted, instituted, or threatened against Seller 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.
ARTICLE IV
Covenants
4.1 Cooperation Relating to Financial Statements. The Company agrees to
cooperate with Prime in the preparation of any financial statements of the
Company which Prime or its affiliates may be required by any applicable law to
prepare.
4.2 Capital Contributions. The parties acknowledge and agree that any
capital contributions to the Company after the date of this Agreement shall be
governed by the organizational documents of the Company.
4.3 Issuance of Stock. The Company agrees that it will not after the
Closing, without the prior written consent of Prime in each instance, issue any
equity securities or other ownership interests in the Company, or any securities
or rights convertible into, or exchangeable or exercisable for, any such equity
securities or other ownership interests in the Company.
4.4 Distribution of Working Capital. In accordance with the resolutions
adopted by Horizon on August 10, 1999, the parties agree that all cash in excess
of the minimum amount of Working Capital (as hereinafter defined) required
pursuant to Section 5.2(h) shall be distributed within thirty (30) days of the
Closing (as dividends) to the shareholders of Horizon existing on August 1,
1999.
ARTICLE V
Conditions to Closing
5.1 Prime's Closing Obligations. At the Closing, Prime shall (each of which
is a condition to the obligations of Seller to close):
(a) deliver the Purchase Price to Seller;
(b) execute and deliver each of the Transaction Documents to
which it is a party; and
(c) deliver such good standing certificates, officer
certificates, and similar documents and certificates as counsel
for Seller may reasonably require.
5.2 Seller's and the Company's Closing Obligations. At the Closing, Seller
and the Company agree that (each of which is a condition to the obligations of
Prime to close):
(a) each of them will execute and deliver each of the Transaction Documents
to which it is a party;
(b) a sufficient number of the shareholders of the Company
shall have entered into stock purchase agreements (the "Related Acquisitions")
for the sale of all or part of their capital stock of the Company, pursuant to
which, immediately after the Closing of this transaction, Prime will own not
less than sixty percent (60%) of the Company's issued and outstanding capital
stock, considering all classes of stock, and assuming the conversion, exercise
or exchange of all rights, options, or other securities convertible into or
exercisable or exchangeable for any shares of the Company's capital stock;
(c) each of the shareholders of the Company existing
immediately prior to the Closing (including Seller) that is a physician or other
licensed medical professional shall have executed and delivered to Prime an
Exclusive Use Agreement in substantially the form attached hereto as Exhibit A;
(d) Seller, and each of the other Company shareholders selling
Company stock to Prime in a Related Acquisition (the "Selling Shareholders"),
who will remain a shareholder of the Company after the Closing shall have
executed and delivered to Prime an Assignment and Security Agreement, in
substantially the form attached hereto as Exhibit B, granting a security
interest in such shareholder's remaining stock in the Company to secure the
performance by such shareholder under any agreement it has with Prime or any of
Prime's affiliates;
(e) the Company shall have adopted, after obtaining all
necessary approvals and consents, the Amended and Restated Bylaws, in
substantially the form attached hereto as Exhibit C, which shall contain
provisions governing its board of directors that are consistent with the
provisions of Section 9.4 of this Agreement, including, without limitation, that
the number of directors serving on its board of directors of the Company shall
be five (5);
(f) at the Closing, the Company's board of directors shall
consist of three (3) individuals designated by Prime and listed on Schedule
5.2(f) hereto, and two (2) individuals designated by a majority of the
shareholders of the Company immediately prior to Closing and listed on Schedule
5.2(f) hereto;
(g) the Company shall have delivered to Prime true and correct
copies of resignations, effective as of the Closing Date, from each of the
persons holding the offices set forth on Schedule 5.2(g) hereto, and the persons
listed on Schedule 5.2(g) hereto shall have been elected or appointed to the
office set forth opposite their name;
(h) As of the Closing Date, the amount of Working Capital of
the Company shall be at least $100,000 (for purposes of this Agreement, "Working
Capital" means the difference between (i) cash, cash equivalents, prepaid
expenses and Accounts Receivable less than sixty (60) days old and (ii) accounts
payable and other liabilities and payment obligations due in the following
twelve (12) months, all as determined in accordance with GAAP); and
(i) each of them, and each Selling Shareholder, shall have
delivered such good standing certificates, officer certificates, and similar
documents and certificates as counsel for Prime may have reasonably requested.
ARTICLE VI
Indemnification of Prime
6.1 Indemnification of Prime.
(a) The Company agrees to indemnify and hold harmless Prime,
each subsidiary and/or affiliate of Prime (including, without limitation, PMOI
and PMSI) and each shareholder, member, partner (or other owner), officer,
director, agent, employee, representative and affiliate of any of the foregoing
(collectively, the "Prime Indemnified Parties") from and against any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Indemnified Costs") in connection with the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"third-party action") which any of the Prime Indemnified Parties may sustain,
arising out of any breach or default by Seller or the Company of any of the
representations, warranties, covenants or agreements contained in this Agreement
or any Transaction Document.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(a) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $25,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
(b) Seller agrees to indemnify and hold harmless each Prime
Indemnified Party from and against any and all Indemnified Costs in connection
with the commencement or assertion of any third-party action which any of the
Prime Indemnified Parties may sustain, arising out of any breach or default by
Seller of any of its representations, warranties, covenants or agreements
contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Prime Indemnified Party
shall be entitled to assert any claim for indemnification under this Section
6.1(b) unless and until such time as all claims of all Prime Indemnified
Parties, taken together, exceed $10,000 in the aggregate, at which time all
claims of such Prime Indemnified Parties may be asserted individually or in
combination (beginning with the first dollar).
6.2 Defense of Third-Party Claims. A Prime Indemnified Party shall give
prompt written notice to the Company and, if applicable, Seller (collectively in
instances involving the Seller, the "indemnifying party"), of the commencement
or assertion of any third party action in respect of which such Prime
Indemnified Party shall seek indemnification hereunder. Any failure to so notify
the indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such Prime Indemnified Party under this ARTICLE
unless the failure to give such notice materially and adversely prejudices the
indemnifying party. The indemnifying party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Prime Indemnified Party shall be entitled, at his, her, or its own
expense, to participate in the defense of such third-party action;
(b) The indemnifying party 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) The indemnifying party 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) The indemnifying party shall not be entitled to control
(but shall be entitled to participate at its 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 the indemnifying party fails 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 the indemnifying party, without the prior
written consent of the indemnifying party.
(e) The indemnifying party 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 the
indemnifying party for the full amount of such payments if the Prime Indemnified
Party is ultimately determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
6.3 Limitation of Seller's Liability. Notwithstanding anything to the
contrary contained in this ARTICLE, the aggregate liability of Seller to all
Prime Indemnified Parties for all Indemnified Amounts payable by Seller under
Section 6.1(b) shall be limited to the aggregate Purchase Price received by
Seller under this Agreement, plus the greater of (a) the value of all remaining
equity interests which Seller holds in the Company at the time of Closing or (b)
the value of all remaining equity interests which Seller holds in the Company at
the time an Indemnified Amount is required to be paid.
ARTICLE VII
Indemnification of Seller and the Company
7.1 Indemnification of Seller and the Company. Prime agrees to
indemnify and hold harmless Seller and the Company, and each of the Company's
directors, officers, shareholders, agents, employees and representatives
(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 the Seller Indemnified Parties may sustain, arising
out of any breach or default by Prime of any of the representations, warranties,
covenants or agreements contained in this Agreement or any Transaction Document.
Notwithstanding the foregoing, no Seller Indemnified Party
shall be entitled to assert any claim for indemnification under this Section 7.1
unless and until such time as all claims of such Seller Indemnified Party,
individually and not in combination with other Seller Indemnified Parties,
exceed $25,000 in the aggregate, at which time all claims of such Seller
Indemnified Party may be asserted (beginning with the first dollar).
7.2 Defense of Third-Party Claims. A Seller Indemnified Party shall
give prompt written notice to Prime of the commencement or assertion of any
third party action in respect of which such Seller Indemnified Party shall seek
indemnification hereunder. Any failure so to notify Prime shall not relieve
Prime from any liability that it may have to such Seller Indemnified Party under
this ARTICLE unless the failure to give such notice materially and adversely
prejudices Prime. Prime shall have the right to assume control of the defense
of, settle, or otherwise dispose of such third-party action on such terms as it
deems appropriate; provided, however, that:
(a) The Seller Indemnified Party shall be entitled, at his or its own
expense, to participate in the defense of such third-party action;
(b) Prime shall obtain the prior written approval of the
Seller Indemnified Party, which approval shall not be unreasonably withheld,
before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief would be
imposed against the Seller Indemnified Party;
(c) Prime shall not consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the execution and delivery of a release from all liability in respect of such
third-party action by each claimant or plaintiff to, and in favor of, each
Seller Indemnified Party; and
(d) Prime shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the Seller
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
as to which Prime fails to assume the defense within thirty (30) days; provided,
however, that the Seller Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment which would give rise to liability (other than
liability to Seller Indemnified Parties under this Agreement) on the part of
Prime without the prior written consent of Prime.
(e) Prime shall make payments of all amounts required to be
made pursuant to the foregoing provisions of this ARTICLE to or for the account
of the Seller Indemnified Party from time to time promptly upon receipt of bills
or invoices relating thereto or when otherwise due and payable, provided that
the Seller Indemnified Party has agreed in writing to reimburse Prime for the
full amount of such payments if the Seller Indemnified Party is ultimately
determined not to be entitled to such indemnification.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this ARTICLE
and, in connection therewith, shall furnish such records, information, and
testimony and attend such conferences, discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.
ARTICLE VIII
Restrictive Covenants
8.1 Confidentiality Agreement. Seller and the Company each agree that
it has been and may continue to be, through its relationship with Prime, be
exposed to confidential information and trade secrets pertaining to, or arising
from, the business of Prime and/or each of Prime's present or future affiliates
(which includes, without limitation, Prime, PMOI, PMSI and each of their present
or future affiliates) (individually and collectively, "Discloser"), that such
information and trade secrets are unique and valuable and that Discloser would
suffer irreparable injury if this information or trade secrets were divulged to
those in competition with Discloser. Therefore, Seller and the Company each
agree to keep in strict secrecy and confidence, both during and after the period
during which Prime owns any interest in the Company, any and all information
concerning Discloser which Seller or the Company acquires, or to which Seller or
the Company has access through its relationship with Discloser, that has not
been publicly disclosed by Discloser or that is not a matter of common knowledge
by Discloser'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 Discloser, marketing and other
business and pricing strategies, and trade secrets of Discloser.
Except with prior written approval of Discloser, neither Seller nor the
Company will: (i) directly or indirectly, disclose any Proprietary Information
to any person except authorized personnel of Discloser or (ii) use Proprietary
Information in any way. Within forty-eight (48) hours of the time at which
Prime's and its affiliates' aggregate voting equity interests in the Company
constitute less than fifty percent (50%) of the outstanding voting equity
interests of the Company, whether the disposition resulting in such ownership is
voluntary or involuntary, each of Seller and the Company will deliver to Prime
(without retaining copies thereof) all documents, records or other
memorializations including copies of documents and any notes which Seller or the
Company has prepared, that contain Proprietary Information or relate to
Discloser's business, all other tangible Proprietary Information in Seller's or
the Company's possession or control, and all of Discloser's credit cards, keys,
equipment, vehicles, supplies and other materials that are in possession or
under Seller's or the Company's control.
8.2 Agreement by Seller and the Company. Seller and the Company each
hereby agrees that, until the fifth (5th) anniversary of the Closing Date,
neither Seller nor the Company will directly or indirectly, either through any
kind of ownership (other than ownership of securities of a publicly held
corporation of which it owns less than five percent (5%) of any class of
outstanding securities), or as a principal, shareholder, 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, 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) Except through the Company, engage in or provide any
services that are provided by the Company, directly or indirectly, anywhere
within a two hundred (200) mile radius of any center or facility at any time
operated by the Company or any of the Company's affiliates, including, without
limitation, any services related to, (i) the operating of laser refractive
surgical centers, (ii) the manufacture, maintenance, refurbishing, repair, sale,
or leasing of any equipment related to or necessary for the operating of laser
refractive surgical centers, or (iii) providing any management services,
training or consulting services related to any of the activities described in
(i) or (ii);
(b) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with
Prime, or any affiliate or related entity of Prime, to withdraw, curtail, or
cancel its business with Prime or such affiliate or related entity; or
(c) Directly or indirectly hire any employee of Prime, or any
affiliate or related entity of Prime, or induce or attempt to influence any
employee of Prime or any such affiliate or related entity to terminate his or
her employment with Prime or any such affiliate or related entity.
8.3 Restrictions Reasonable. Seller and the Company have each reviewed
and carefully considered the provisions of this ARTICLE and, having done so,
agrees that the restrictions applicable to it as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to it, and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
8.4 Remedies. Seller and the Company each 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, Seller and the Company each 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 Right of Set Off. Seller and the Company each agrees that Prime
shall have rights of offset against distributions to Seller in respect of any
ownership interest it may have in the Company immediately following the Closing
or at any time thereafter arising, for any and all debts, obligations or
liabilities that Seller may have to Prime, including, without limitation, any
liability arising out of or relating to any obligation arising under Seller's or
the Company's indemnity obligations under this Agreement or any Transaction
Document. Seller hereby authorizes the Company, and appoints the Company as its
attorney in fact, to pay such offset amounts to Prime and to take all other
actions necessary in connection with such payment. The Company agrees to
promptly remit any and all such offset amounts to Prime upon request.
9.2 Special Options to Sell or Acquire Remaining Capital Stock.
(a) Prohibition on Sale. Notwithstanding anything in this
Agreement to the contrary, Seller agrees that it will not transfer, assign,
pledge, hypothecate, or in any way alienate any of its shares of capital stock
of the Company, or any interest therein, whether voluntarily or by operation of
law, or by gift or otherwise, except in accordance with the provisions of this
Section or Section 9.3, or except pursuant to that certain Assignment and
Security Agreement by and between Prime or one of its affiliates and Seller,
dated as of the date of this Agreement (the "Security Agreement"). Any purported
transfer in violation of this Section or Section 9.3 shall be void and
ineffectual, and shall not operate to transfer any interest or title to the
purported transferee. Seller agrees that the Company may, and the Company agrees
to, issue stop-transfer orders, or take any other necessary action, to ensure
that the foregoing provisions of this Section and Section 9.3 are given full
effect.
(b) Option to Sell. Upon (i) the death, retirement (only if
Seller is a physician and only as defined below), bankruptcy, insolvency,
disability (only if Seller is a physician and only as defined below) or
incompetency of Seller, (ii) any other involuntary transfer of any capital stock
of the Company now or hereafter owned by Seller, or any interest therein
(including, without limitation, transfers of interests upon divorce or death of
a spouse of Seller, but excluding any transfers governed by Section 9.3), or
(iii) the performance by Seller, during any one-month period, of greater than
thirty (30%) of his or her professional medical activities outside of a two
hundred (200) mile radius of the center or facility primarily utilized by Seller
prior to the date of this Agreement; the Seller's executor, administrator,
trustee, custodian, receiver or other legal or personal representative (the
"Representative"), or Seller, in the case of retirement or departure, shall give
written notice of that fact to the Company. In such event, the Representative or
Seller shall have a period of sixty (60) days (the "Put Period") following the
date of such death, retirement, bankruptcy, insolvency, disability, incompetency
or shift in the geographical location of Seller's practice, as the case may be,
within which time it may require that the Company purchase (subject to the
remaining provisions of this subsection) all of Seller's capital stock of the
Company, upon the terms and conditions hereinafter set forth, by giving notice
of such election in writing to Company. The Company may, in its sole discretion,
offer all or a portion of such capital stock to its shareholders, on a pro rata
basis in relation to each shareholder's percentage ownership of the Company, but
any agreement by the shareholders to purchase all or a portion of such capital
stock shall not limit the Company's obligation to purchase within the time frame
set forth in this Section. If the Company has offered all of such capital stock
to its shareholders, and the shareholders have not committed to purchase all of
such capital stock within five (5) days from the date of offer, then the Company
may, in its sole discretion, offer all or a portion of the remaining capital
stock to Prime, in which event Prime must participate in such purchase upon the
same terms and conditions as the Company. For purposes of this Agreement, (x)
"disability" shall apply only if Seller is a physician and shall mean any
condition which in the reasonable judgment of a majority of the managers of
Prime, would impair Seller's ability to materially perform his or her routine
duties for a period of six (6) months or more, (y) "retirement" shall apply only
if Seller is a physician and shall mean the cessation of the routine practice of
medicine (provided that any physician who transfers his or her entire practice
to a licensed medical professional meeting the Company's then current
credentialing program shall not be deemed to have retired for purposes of this
subsection), and (z) "incompetent" shall mean a state of legal incompetence as
declared by a court of valid jurisdiction.
(c) Option to Buy. In the event that the option described in
Section 9(b) arises and the Representative or Seller, as the case may be, fails
to make the election described in Section 9(b) within the Put Period, Prime
shall at all times thereafter have the option to purchase all or any portion of
Seller's capital stock of the Company, upon the terms and conditions hereinafter
set forth, by giving written notice of such election in writing to Seller. In
addition, Prime may, in its sole discretion, transfer its purchase right granted
under this subsection (or stock acquired pursuant to an exercise of its purchase
right granted under this subsection) to Horizon or any of the physician
shareholders of the Company.
(d) Purchase Price. The purchase price to be paid pursuant to
this Section shall be paid in immediately available funds at the closing of the
transfer of capital stock pursuant to this Section. If the parties do not
otherwise agree within thirty (30) days of the day on which the option to
purchase or sell hereunder is exercised, then Prime shall, at its own expense,
select an appraiser to value the capital stock being transferred. If Seller or
Representative does not agree with the value determined by the appraiser of
Prime, Seller or Representative may, at its own expense, select its own
appraiser to value the capital stock being transferred. If the two appraisers
cannot agree on the value of the capital stock being transferred, the two
appraisers shall mutually select a third appraiser to value the capital stock
being transferred, and any valuation determined by such third appraiser shall be
final, binding and conclusive. The cost of any third appraiser shall be borne by
Seller.
(e) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice under either Section 9(b) or
Section 9(c). At such closing, Seller shall execute all documents and take such
other actions as may be reasonably necessary to deliver to Prime such capital
stock, and any certificates representing same, free and clear of all liens,
claims, encumbrances or restrictions of any kind or nature whatsoever, except
those imposed under the Security Agreement.
9.3 Right of First Refusal.
(a) If there is no option to sell or buy outstanding under
Section 9.2 (except in connection with a sale by a physician of all of his or
her practice upon retirement), and Seller intends to voluntarily transfer any
portion of its capital stock of the Company to any person or entity other than
Prime, then Seller shall give written notice to Prime stating (i) the intention
to transfer such capital stock, (ii) the number of shares to be transferred,
(iii) the name, business and residence address of the proposed transferee, (iv)
the nature and amount of the consideration, and (v) the other terms of the
proposed sale.
(b) Prime shall have, and may exercise within sixty (60) days
after receipt of the notice of intent to transfer, an option to purchase all or
any portion of the capital stock of the Company owned by Seller, at the per
share price and upon the other terms stated in the notice of intent to transfer.
Prime may elect to exercise its option under this Section by delivering notice
thereof to Seller. If Prime elects not to purchase all or any portion of such
capital stock prior to the expiration of said sixty (60) day period, Seller
shall have thirty (30) days to complete the sale and purchase contemplated in
the notice of intent to transfer, and after such thirty (30) day period, the
provisions of this Section shall apply fully to any such capital stock not
transferred. The purchase price pursuant to this Section shall be paid in
immediately available funds at the closing of the transfer pursuant to this
Section.
(c) Seller and Prime acknowledge and agree that it would be
impractical to exercise an option to purchase arising pursuant to this Section
whenever the proposed consideration to be received by Seller is other than cash,
cash equivalents or an obligation to pay cash by a person whose credit
worthiness and financial status is such that performance of the payment
obligation would be reasonably assured. Therefore, the parties agree that no
transfer shall be permitted and no option shall arise pursuant to this Section
whenever the consideration to be received from the proposed transferee is other
than cash, cash equivalents or an obligation to pay cash by a person whose
credit worthiness and financial status is such that performance of the payment
obligation would be reasonably assured.
(d) The closing of any purchase and sale of capital stock
pursuant to this Section shall take place at the principal office of Prime or
such other place designated by Prime and Seller, on the thirtieth day (or if
such thirtieth day is not a business day, the next business day following the
thirtieth day) following the delivery of notice of Prime's election to purchase
pursuant to Section 9(b). At such closing, Seller shall execute all documents
and take such other actions as may be reasonably necessary to deliver to Prime
such capital stock, and any certificates representing same, free and clear of
all liens, claims, encumbrances or restrictions of any kind or nature
whatsoever, except those imposed under the Security Agreement.
9.4 Voting Agreement. Each of the parties hereto agrees that it will
vote all of the shares of capital stock of the Company owned by it, at any time
after the execution of this Agreement, in accordance with the terms of this
Section 9.4. Any additional shares of voting capital stock or other voting
securities of the Company, or the voting rights related thereto, whether
presently existing or created in the future, that may be owned, held, or
subsequently acquired in any manner, legally or beneficially, directly or
indirectly, of record or otherwise, by the parties at any time after the
execution of this Agreement, whether issued incident to any stock split, stock
dividend, increase in capitalization, recapitalization, merger, consolidation,
share exchange, reorganization, or other transaction, shall be shall be subject
to the terms of this Section (all such stock presently held or controlled,
together with such additional stock, the "Subject Shares"). At each election of
directors of the Company, the parties and any transferee or assignee of any
Subject Shares from the parties (the "Transferee") shall, in accordance with the
procedure set forth below, vote the Subject Shares as necessary to elect five
(5) persons, designated in accordance with the procedures below, to the board of
directors of the company. Three (3) of the directors (the "Prime Designees")
shall be designated in writing by Prime or its Transferee. The remaining two (2)
directors (the "Other Stockholder Designees") shall be jointly designated in
writing by stockholders of the corporation other than Prime (or any entity other
than the Company that is controlled by, controlling or under common control with
Prime) (the "Other Stockholders") holding a majority of the aggregate voting
equity stock held by all Other Stockholders. For purposes of this Section, the
Prime Designees and the Other Stockholder Designees are sometimes referred to
individually as a "Designated Director" and collectively as "Designated
Directors." During the term of this Agreement, the parties shall, in accordance
with the procedure set forth below, (i) vote their Subject Shares and use their
best efforts in any event to ensure that the number of directors which shall
constitute the entire board of directors of the Company shall remain at five
(5), (ii) vote their Subject Shares in favor of the removal of a Designated
Director if Prime or a majority in interest of the Other Stockholders (whichever
designated the respective director) instruct in writing that such Designated
Director shall be removed from office and (iii) upon any removal of a Designated
Director pursuant to (ii) above, vote their Subject Shares in favor of the
election of a replacement director designated in writing by Prime or a majority
in interest of the Other Stockholders (whichever designated the respective
director). None of the parties to this Agreement shall approve or authorize the
removal of any Designated Director unless Prime or a majority in interest of the
Other Stockholders (whichever designated the respective director) shall have
authorized in writing such Designated Director's removal. To the extent that any
party or parties entitled to designate a director pursuant to this Section fail
to designate a replacement Designated Director under this Section, the position
vacated shall remain vacant until such time as a new director is designated and
elected pursuant to the terms hereof.
Upon delivery of any written notice designating or removing one or more
directors pursuant to this Section, the parties hereto and any Transferee shall
either (i) sign a written consent, prepared for execution by the stockholders of
the Company in accordance with the Bylaws of the Company, which consent elects
or removes the director(s) designated in writing to be elected or removed in
accordance with this Section or (ii) at any annual or special shareholders
meeting at which director(s) are to be elected or removed, vote in favor of the
election or removal of the director(s) designated in writing to be elected or
removed in accordance with this Section. If necessary to fix the number of
directors constituting the entire board of directors at five (5), the parties
hereto shall either (i) sign such written consents prepared for execution by the
shareholders of the Company in accordance with the Bylaws of the Company or (ii)
at any annual or special shareholders meeting, vote in favor of such motions;
which consents or motions propose to fix the number of directors constituting
the entire board of directors at five (5).
Each of the parties hereto agrees to take such actions, and execute
such documents, agreements or instruments (including, without limitation,
consents amending the articles or bylaws of the Company), as may be necessary,
due to changes in the law or otherwise, to ensure that the provisions of this
Section 9.4 are given full effect.
9.5 Limited Waiver of Indemnity. Each party to this Agreement waives
any right to indemnification by, and agrees not to seek any indemnification
from, the Company for any act, omission or other matter (whether arising under
the Company's organizational documents or otherwise), to the extent that such
party is required by this Agreement to indemnify another party to this Agreement
in respect of such act, omission or other matter.
9.6 Post-Closing Capital Contributions. All parties to this Agreement
acknowledge and agree that no shareholder of the Company, or any other party,
has any obligation existing on the Closing Date to make a capital contribution
to the Company.
9.7 Stock Legend. On and after the Closing, each certificate or
document representing Seller's ownership of any of the Company's capital stock,
and each certificate or document that may be issued and delivered by the Company
upon transfer of such certificate, shall contain a legend conspicuously noted in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THEY MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
IN ADDITION, SHARES MAY BE TRANSFERRED ONLY IN
COMPLIANCE WITH CERTAIN CONDITIONS SPECIFIED IN A CERTAIN
STOCK PURCHASE AGREEMENT DATED EFFECTIVE AS OF SEPTEMBER 1,
1999, A COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
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 PMSI. Any assignment in violation of
the foregoing shall be null and void. Subject to the preceding sentences of this
Section, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
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
legal counsel and accountants.
10.4 Severability. 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 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 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: 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
Company: Horizon Vision Centers, Inc.
14895 East 14th Street, Suite 400
San Leandro, California 94578
Seller: Medical Vision Technology Profit Sharing Plan
FBO Stephen Wilmarth, M.D.
9824 Carlton Court
Granite Bay, California 95746
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.
10.9 Construction, Knowledge and Materiality. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments. For purposes of this
Agreement, whenever there are references to "material" or "materially," such
terms shall be deemed to mean an economic impact exceeding $10,000 with respect
to the fact or matter being referred to or described. As used herein, "day" or
"days" refers to calendar days unless otherwise specified in each instance. When
the term "knowledge" is used in this Agreement in reference to Prime, it shall
mean such items as are within the actual knowledge of Ken Shifrin, Cheryl
Williams, Mark Rosenberg and Dr. Jenkins.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
10.11 Arbitration. Any controversy between the parties regarding this
Agreement and any claims arising out of this Agreement or its breach shall be
submitted to binding arbitration by either party. The arbitration proceedings
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be
conducted in Dallas, Texas and the arbitrator shall have the right to award
actual damages and attorney fees and costs, but shall not have the right to
award punitive, exemplary or consequential damages against either party.
10.12 Counterparts. This Agreement may be executed in several counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same instrument. Any party hereto may execute this Agreement by
signing any one counterpart.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Prime: Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
Seller: /s/ Stephen Wilmarth, M.D.
Printed Name: Stephen Wilmarth, M.D.,
Trustee under the Medical Vision
Technology Profit Sharing Plan,
for the benefit of Stephen
Wilmarth, M.D.
Company: Horizon Vision Center, Inc.
By: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
<PAGE>
TABLE OF EXHIBITS
EXHIBIT A: Form of Exclusive Use Agreement
EXHIBIT B: Form of Assignment and Security Agreement
EXHIBIT C: Form of Amended and Restated Bylaws of Seller
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and David P. Bates III and
Jane A. Bates (collectively referred to as the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: David P. Bates III and Jane A. Bates
1320 Canyon Side Avenue
San Ramon, California 94583
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR:
/s/ David Bates
Printed Name: David Bates
/s/ Jane A. Bates
Printed Name: Jane A. Bates
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
<PAGE>
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and John Robert Griffin,
M.D., Family Revocable Trust dated February 8, 1991 (the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: John Robert Griffin, M.D., Trustee under the
Family Revocable Trust dated February 8, 1991
4913 Puma Way
Carmichael, California 95608
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR: /s/ John Robert Griffin, M.D., Trustee
Printed Name: John Robert Griffin, M.D.,
Trustee under the John Robert Griffin, M.D.
Family Revocable Trust dated February 8, 1991
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
<PAGE>
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and Christian K. Kim, M.D.
(the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: Christian K. Kim, M.D.
40 Presidio Drive
Novato, California 94949
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR: /s/ Christian K. Kim, M.D.
Printed Name: Christian K. Kim, M.D.
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Secretary and Manager
<PAGE>
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and Mark R. Mandel, M.D.,
Trustee under the Trust Agreement dated April 12, 1989 (the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: Mark R. Mandel, M.D., Trustee under Trust
Agreement dated April 12, 1989
680 Brewer Road
Hillsborough, California 94010
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR: /s/ Mark R. Mandel, M.D.
Printed Name: Mark R. Mandel, M.D.,
under Trustee Agreement dated
April 12, 1989
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
<PAGE>
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and D. Brent Reed and
Carellyn S. Reed (collectively and individually referred to as the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: D. Brent Reed and Carellyn S. Reed
157 Cascade Falls Drive
Folsom, California 95630
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR: /s/ D. Brent Reed
Printed Name: D. Brent Reed
/s/ Carellyn S. Reed
Printed Name: Carellyn S. Reed
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
<PAGE>
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and Bradley J. Sandler, M.D.
(the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: Bradley J. Sandler, M.D.
403 Calle De Caballo
Suisun City, California 94585-1501
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR: /s/ Bradley J. Sandler, M.D.
Printed Name: Bradley J. Sandler, M.D.
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Secretary and Manager
<PAGE>
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and the Severin Family Trust
(the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: The Severin Family Trust
Sanford L. Severin, Trustee
1040 McCauley Road
Danville, California 94526
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR: /s/ Sanford L. Severin, Trustee
Printed Name: Sanford L. Severin,
Trustee under the Severin Family Trust
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
<PAGE>
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and the Stephen and Andrea
Turner Family Trust (the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: Stephen and Andrea Turner Family Trust
250 Stonewall Road
Berkeley, California 94705
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR: /s/ Stephen G. Turner, M.D.
Printed Name: Stephen G. Turner, M.D.
Trustee under the Stephen and Andrea
Turner Family Trust
/s/ Andrea J. Turner
Printed Name: Andrea J. Turner
Trustee under the Stephen and Andrea
Turner Family Trust
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
<PAGE>
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and Stephen Wilmarth, M.D.
(the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: Medical Vision Technology Profit Sharing Plan
FBO Stephen Wilmarth, M.D.
9824 Carlton Court
Granite Bay, California 95746
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR: /s/ Stephen Wilmarth, M.D.
Printed Name: Stephen Wilmarth, M.D.
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
<PAGE>
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation ("PMOI"), Prime/BDR Acquisition, L.L.C.,
a Delaware limited liability company ("Prime") (PMOI and Prime are referred to
herein, jointly and severally, as "Secured Party") and Medical Vision Technology
Profit Sharing Plan for the benefit of Stephen Wilmarth, M.D. (the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Stock Purchase Agreement dated as of September 1, 1999 (the "Purchase
Agreement"), pursuant to which Secured Party purchased from Debtor certain
shares of the $0.01 par value common stock of Horizon Vision Center, Inc, a
Nevada corporation ("Horizon").
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any indemnity
obligations arising under the Purchase Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's purchase of Debtor's shares of Horizon under the Purchase
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Shares of Horizon. From and after the date of this
Agreement, (i) all shares of the common stock of Horizon owned or acquired in
any manner by Debtor or Secured Party, (collectively, the "Shares"), (ii) any
replacements, substitutions, or exchanges of the certificates representing the
Shares, and (iii) any and all options, rescission rights, registration rights,
conversion rights, subscription rights, contractual or quasi-contractual rights,
warrants, redemption rights, redemption proceeds, calls, preemptive rights and
all other rights and benefits pertaining to the Shares;
(b) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) above, and all rights of
Debtor now or hereafter arising under any agreement pertaining to the Collateral
described in (a) above, including without limitation all distributions,
proceeds, fees, dividends, preferences, payments or other benefits of whatever
nature which Debtor is now or may hereafter become entitled to receive with
respect to any Collateral described in (a) above;
(c) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any of the
Collateral described in this Section 1.1: (i) any stock certificate, including
without limitation, any certificate representing a stock dividend or any
certificate in connection with any recapitalization, reclassification, merger,
consolidation, conversion, sale of assets, combination of shares, stock split,
reverse stock split or spin-off; (ii) any option, warrant, subscription or
right, whether as an addition to or in substitution of any of the Collateral
described in this Section 1.1; (iii) any dividends or distributions of any kind
whatsoever, whether distributable in cash, stock or other property; (iv) any
interest, premium or principal payments; and (v) any conversion or redemption
proceeds; and
(d) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), or (c) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
(including, without limitation, any principal, interest, fees and other amounts,
and any indemnity obligations) under and pursuant to the Purchase Agreement,
this Agreement and/or any other contract or agreement between Secured Party and
Debtor or any affiliate of Debtor (collectively, "Other Agreements"; and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party of any kind or character,
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, arising from, connected with, or related to the Purchase Agreement or
any Other Agreement, or any other document, agreement, or instrument executed in
connection either of them, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Debtor and/or any
affiliate of Debtor to Secured Party under any documents or agreements
evidencing, securing, governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and expenses
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party to Debtor, or expended by Secured Party for the account of Debtor or
otherwise owing by Debtor to Secured Party, in respect of the Obligations, and
all other sums expended or advanced by Secured Party pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Shares are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is solvent;
(ii) the fair saleable value of Debtor's assets exceeds Debtor's liabilities
(both fixed and contingent); (iii) Debtor has sufficient capital to satisfy all
of Debtor's obligations as they become due; (iv) no receiver, trustee, or
custodian has been appointed for, or taken possession of, all or substantially
all of the assets of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor; (v) Debtor is not the subject of a petition
for relief under the United States Bankruptcy Code or any similar federal or
state insolvency law, including without limitation a petition filed by Debtor or
a petition filed by a third party seeking relief against Debtor; and (vi) Debtor
has no intention of filing a petition for relief under the United States
Bankruptcy Code or any similar federal or state insolvency law, or of seeking
any other form of creditor relief, within the two-year period immediately
following the date of this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under the Purchase Agreement and each Other Agreement.
No further consent or approval is required as a condition to the validity of
this Agreement, the Purchase Agreement or any Other Agreement. Debtor is in
compliance with all applicable laws, ordinances, statutes, orders, regulations,
judgments, writs, or decrees of any governmental entity to which it is subject.
3.3 Binding Agreement. This Agreement, the Purchase Agreement and each
Other Agreement constitute valid and legally binding obligations of Debtor, in
accordance with their terms, subject to (a) the applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (b) restrictions imposed by any court of competent
jurisdiction on the enforcement of non-competition and exclusive use restrictive
covenants imposed under the Purchase Agreement or any Other Agreement.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement, the Purchase
Agreement or any Other Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement, the Purchase Agreement
or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(c) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
shares of any class of securities of such issuer, (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Debtor (i) shall comply with his obligations under
the Purchase Agreement and each Other Document, and (ii) may consent to any
issuance of shares of Horizon if such issuance has been approved by a majority
of the Board of Directors of Horizon.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Shares unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall promptly advise Secured Party in writing of any litigation
filed against Debtor and of any condition, event or act which comes to its
attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Purchase Agreement (including, without limitation, the indemnity
provisions contained therein), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
(15) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation within (15) calendar days
after such amount is due; and
(c) Debtor's breach of a covenant in this Agreement or any
other failure to perform its obligations under this Agreement or any Other
Agreement.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(b) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(c) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
(d) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Purchase Agreement or any Other
Agreement; (d) then, to or among the amounts of fees, interest and principal
then owing and unpaid in respect of the Obligations, in such priority as Secured
Party may determine in its discretion; and (e) the remainder of such proceeds,
if any, shall be paid to Debtor. If such proceeds shall be insufficient to
discharge the entire Obligations, Secured Party shall have any other available
legal recourse against Debtor under, or for the performance of, the Purchase
Agreement and any Other Agreement between Debtor and Secured Party, for the
deficiency, together with interest thereon at the maximum rate permitted under
applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of the Purchase Agreement or Other
Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY, ITS
OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS, EMPLOYEES, LENDERS, SUCCESSORS AND
ASSIGNS, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, FINES,
PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS AND EXPENSES (INCLUDING COURT
COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION) OF ANY NATURE, KIND OR
DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF,
CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART), ANY UNINTENTIONAL ACT OR
OMISSION (OR INTENTIONAL ACT OR OMISSION SO LONG AS SUCH ACT OR OMISSION DOES
NOT CONSTITUTE NEGLIGENCE) OF SECURED PARTY (OR ANYONE ACTING ON BEHALF OF
SECURED PARTY) IN CONNECTION WITH THE COLLATERAL. THE FOREGOING INDEMNITY SHALL
SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under the Purchase Agreement or Other
Agreement, or in respect of the Collateral (subject to any applicable default
cure period), Secured Party (a) may but shall not be obligated to take any
action Secured Party deems necessary or desirable to prevent or remedy any such
default by Debtor or otherwise to protect the Security Interest, and (b) shall
have the absolute and immediate right to take possession of the Collateral or
any part thereof (to the extent Secured Party has not previously taken
possession) to such extent and as often as the Secured Party, in its sole
discretion, deems necessary or desirable in order to prevent or to cure any such
default by Debtor, or otherwise to protect the security of this Agreement.
Secured Party may advance or expend such sums of money for the account of Debtor
as Secured Party in its sole discretion deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of the Purchase Agreement, any Other
Agreement or the Collateral, shall be a part of the Obligations and shall be
paid by Debtor to Secured Party, upon demand, and shall bear interest until paid
at the maximum rate of interest permitted by applicable law, from the date
incurred by Secured Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
8.14 Relationship Among Secured Party. Either or both of Secured Party
are entitled to enforce any and all rights granted to Secured Party in this
Agreement, and to take any other action allowed to be taken by Secured Party
under this Agreement. Neither Secured Party is under any obligation to act
jointly or in concert with the other Secured Party pursuant to this Agreement.
Any action required to be taken by Debtor, or notice required to be given by
Debtor, shall be taken or given with respect to both of Secured Party.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: Stephen Wilmarth, M.D.
9824 Carlton Court
Granite Bay, California 95746
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor may not assign this Agreement or any of its rights
or obligations hereunder without the express prior written consent of Secured
Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT AND THE PURCHASE AGREEMENT REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature page follows]
<PAGE>
S-1
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1st day of September, 1999.
DEBTOR: /s/ Stephen Wilmarth, M.D.
Printed Name: Stephen Wilmarth, M.D.,
Trustee under Medical Vision Technology
Profit Sharing Plan for the benefit of
Stephen Wilmarth, M.D.
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
Prime/BDR Acquisition, L.L.C.
By: /s/ Cheryl Williams
Name: Cheryl Williams
Title: Vice President
<PAGE>
EXCLUSIVE USE AGREEMENT
This Exclusive Use Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by the undersigned
shareholder (the "Equity Holder") of Horizon Vision Center, Inc., a Nevada
corporation ("Horizon") for the benefit of Horizon and Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company ("Prime") and the parent companies
and affiliates of each of Horizon and Prime.
RECITALS:
WHEREAS, the Equity Holder is a shareholder of Horizon.
WHEREAS, the Equity Holder is a physician or other licensed medical
professional.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Prime and Horizon are consummating that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated September 1, 1999.
WHEREAS, in order to induce Horizon and Prime to consummate the
transactions contemplated by the Stock Purchase Agreement, the Equity Holder has
agreed, for a period of five (5) years, to perform all Refractive Surgery
Services (as defined herein) exclusively at the facilities of, and using the
equipment of, Horizon.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Exclusive Use. Except as expressly otherwise provided below, during
the term of this Agreement, the Equity Holder hereby agrees that, without the
prior written consent of both Horizon and Prime, the Equity Holder will perform,
and will direct all other medically trained or licensed medical professionals
under the direction or control of Equity Holder to perform, all Refractive
Surgery Services only at the facilities of, and using the equipment of, Horizon.
For purposes of this Agreement, "Refractive Surgery Services" shall include all
refractive surgery modalities, now or at any time during the term of this
Agreement performed, offered or made available, including, without limitation,
implantable contact lenses, instromal corneal rings, laser in situs
keratomileusis photorefractive keratectomy, radial keratotomy, automated
lemellar keratoplasty, astigmatic keratotomy and similar or replacement
procedures.
Provided, however, that nothing in this Agreement shall be construed to
require Equity Holder to perform Refractive Surgery Services at the facilities
of, or use the equipment of, Horizon, if in Equity Holder's professional medical
judgment, such use would be detrimental to Equity Holder's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery Services
to be paid for, or reimbursed by, Medicare, Medicaid, Champus, or any other
state or federal health care program, or in any other instance where the
operation of this Agreement would constitute a violation of applicable law.
2. Access. Horizon and Prime each agree that during the term of this
Agreement, and for as long Equity Holder continues to meet the credentialing
requirements of Horizon's credentialing program as in effect from time to time,
Equity Holder shall be given access to Horizon's facilities, equipment and staff
in the same manner such access has generally been provided to Equity Holder
prior to the date of this Agreement.
3. Other Agreements. Horizon and Prime each agree that during the term
of this Agreement and for as long as Equity Holder continues to meet the
credentialing requirements of Horizon's credentialing program as in effect from
time to time, Equity Holder's compensation arrangement will be modified to
incorporate the terms of any compensation arrangement with any other physician
utilizing the facilities, equipment and staff, to the extent such other terms
are substantially more favorable than the terms enjoyed by Equity Holder.
4. Allocation of Procedures. Horizon and Prime each agree that
inquiries generated by Horizon and not by a particular physician shall be
distributed among the physician shareholders of Horizon (including Equity
Holder) in a manner consistent with the allocation methods employed by Horizon
prior to the date of this Agreement, limited, however, in instances where a
physician is not available to perform the procedure.
5. Term. The term of this Agreement shall begin on the Effective Date and
shall continue for a period of five (5) years thereafter.
6. Breach. The Equity Holder agrees that a violation of any covenant
contained in Section 1 will irreparably damage Horizon and Prime for which
remedies at law may be insufficient, and for that reason, the Equity Holder
further agrees that Horizon and Prime shall each 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 Horizon and Prime may have, including, specifically, recovery of additional
damages.
7. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by
an instrument in writing executed by each of the parties hereto.
(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.
(d) Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Texas, and not
the conflicts of law provisions thereof.
(e) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder. This Agreement shall inure to
the benefit of Horizon, Prime and their respective successors,
representatives and assigns.
(f) Assignment. This Agreement and the rights granted hereunder
may not be assigned by Equity Holder without the written consent of
both Horizon and Prime.
(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 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.
(h) Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable
but the extent of the invalidity or unenforceability does not destroy
the basis of the bargain between the parties as contained herein, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but
rather shall be enforced to the fullest extent permitted by law.
[Signature page to follow]
-------------------------
<PAGE>
SIGNATURE PAGE TO
EXCLUSIVE USE AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER:
Signature: /s/ J. Robert Griffin, M.D.
Printed Name: J. Robert Griffin
Title:
(if signing in a representative capacity)
HORIZON: Horizon Vision Centers, Inc.
Signature: /s/ David P. Bates III
Printed Name: David P. Bates III
Title: President
PRIME: Prime/BDR Acquisition, L.L.C.
Signature: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
<PAGE>
EXCLUSIVE USE AGREEMENT
This Exclusive Use Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by the undersigned
shareholder (the "Equity Holder") of Horizon Vision Center, Inc., a Nevada
corporation ("Horizon") for the benefit of Horizon and Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company ("Prime") and the parent companies
and affiliates of each of Horizon and Prime.
RECITALS:
WHEREAS, the Equity Holder is a shareholder of Horizon.
WHEREAS, the Equity Holder is a physician or other licensed medical
professional.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Prime and Horizon are consummating that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated September 1, 1999.
WHEREAS, in order to induce Horizon and Prime to consummate the
transactions contemplated by the Stock Purchase Agreement, the Equity Holder has
agreed, for a period of five (5) years, to perform all Refractive Surgery
Services (as defined herein) exclusively at the facilities of, and using the
equipment of, Horizon.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Exclusive Use. Except as expressly otherwise provided below, during
the term of this Agreement, the Equity Holder hereby agrees that, without the
prior written consent of both Horizon and Prime, the Equity Holder will perform,
and will direct all other medically trained or licensed medical professionals
under the direction or control of Equity Holder to perform, all Refractive
Surgery Services only at the facilities of, and using the equipment of, Horizon.
For purposes of this Agreement, "Refractive Surgery Services" shall include all
refractive surgery modalities, now or at any time during the term of this
Agreement performed, offered or made available, including, without limitation,
implantable contact lenses, instromal corneal rings, laser in situs
keratomileusis photorefractive keratectomy, radial keratotomy, automated
lemellar keratoplasty, astigmatic keratotomy and similar or replacement
procedures.
Provided, however, that nothing in this Agreement shall be construed to
require Equity Holder to perform Refractive Surgery Services at the facilities
of, or use the equipment of, Horizon, if in Equity Holder's professional medical
judgment, such use would be detrimental to Equity Holder's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery Services
to be paid for, or reimbursed by, Medicare, Medicaid, Champus, or any other
state or federal health care program, or in any other instance where the
operation of this Agreement would constitute a violation of applicable law.
2. Access. Horizon and Prime each agree that during the term of this
Agreement, and for as long Equity Holder continues to meet the credentialing
requirements of Horizon's credentialing program as in effect from time to time,
Equity Holder shall be given access to Horizon's facilities, equipment and staff
in the same manner such access has generally been provided to Equity Holder
prior to the date of this Agreement.
3. Other Agreements. Horizon and Prime each agree that during the term
of this Agreement and for as long as Equity Holder continues to meet the
credentialing requirements of Horizon's credentialing program as in effect from
time to time, Equity Holder's compensation arrangement will be modified to
incorporate the terms of any compensation arrangement with any other physician
utilizing the facilities, equipment and staff, to the extent such other terms
are substantially more favorable than the terms enjoyed by Equity Holder.
4. Allocation of Procedures. Horizon and Prime each agree that
inquiries generated by Horizon and not by a particular physician shall be
distributed among the physician shareholders of Horizon (including Equity
Holder) in a manner consistent with the allocation methods employed by Horizon
prior to the date of this Agreement, limited, however, in instances where a
physician is not available to perform the procedure.
5. Term. The term of this Agreement shall begin on the Effective Date and
shall continue for a period of five (5) years thereafter.
6. Breach. The Equity Holder agrees that a violation of any covenant
contained in Section 1 will irreparably damage Horizon and Prime for which
remedies at law may be insufficient, and for that reason, the Equity Holder
further agrees that Horizon and Prime shall each 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 Horizon and Prime may have, including, specifically, recovery of additional
damages.
7. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by
an instrument in writing executed by each of the parties hereto.
(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.
(d) Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Texas, and not
the conflicts of law provisions thereof.
(e) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder. This Agreement shall inure to
the benefit of Horizon, Prime and their respective successors,
representatives and assigns.
(f) Assignment. This Agreement and the rights granted hereunder
may not be assigned by Equity Holder without the written consent of
both Horizon and Prime.
(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 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.
(h) Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable
but the extent of the invalidity or unenforceability does not destroy
the basis of the bargain between the parties as contained herein, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but
rather shall be enforced to the fullest extent permitted by law.
[Signature page to follow]
-------------------------
<PAGE>
SIGNATURE PAGE TO
EXCLUSIVE USE AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER:
Signature: /s/ Christian S. Kim, M.D.
Printed Name: Christian S. Kim, M.D.
Title:
(if signing in a representative capacity)
HORIZON: Horizon Vision Centers, Inc.
Signature: /s/ David Bates
Printed Name: David Bates
Title: President
PRIME: Prime/BDR Acquisition, L.L.C.
Signature: /s/ Cheryl Williams
Printed Name:Cheryl Williams
Title: Vice President
<PAGE>
EXCLUSIVE USE AGREEMENT
This Exclusive Use Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by the undersigned
shareholder (the "Equity Holder") of Horizon Vision Center, Inc., a Nevada
corporation ("Horizon") for the benefit of Horizon and Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company ("Prime") and the parent companies
and affiliates of each of Horizon and Prime.
RECITALS:
WHEREAS, the Equity Holder is a shareholder of Horizon.
WHEREAS, the Equity Holder is a physician or other licensed medical
professional.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Prime and Horizon are consummating that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated September 1, 1999.
WHEREAS, in order to induce Horizon and Prime to consummate the
transactions contemplated by the Stock Purchase Agreement, the Equity Holder has
agreed, for a period of five (5) years, to perform all Refractive Surgery
Services (as defined herein) exclusively at the facilities of, and using the
equipment of, Horizon.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Exclusive Use. Except as expressly otherwise provided below, during
the term of this Agreement, the Equity Holder hereby agrees that, without the
prior written consent of both Horizon and Prime, the Equity Holder will perform,
and will direct all other medically trained or licensed medical professionals
under the direction or control of Equity Holder to perform, all Refractive
Surgery Services only at the facilities of, and using the equipment of, Horizon.
For purposes of this Agreement, "Refractive Surgery Services" shall include all
refractive surgery modalities, now or at any time during the term of this
Agreement performed, offered or made available, including, without limitation,
implantable contact lenses, instromal corneal rings, laser in situs
keratomileusis photorefractive keratectomy, radial keratotomy, automated
lemellar keratoplasty, astigmatic keratotomy and similar or replacement
procedures.
Provided, however, that nothing in this Agreement shall be construed to
require Equity Holder to perform Refractive Surgery Services at the facilities
of, or use the equipment of, Horizon, if in Equity Holder's professional medical
judgment, such use would be detrimental to Equity Holder's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery Services
to be paid for, or reimbursed by, Medicare, Medicaid, Champus, or any other
state or federal health care program, or in any other instance where the
operation of this Agreement would constitute a violation of applicable law.
2. Access. Horizon and Prime each agree that during the term of this
Agreement, and for as long Equity Holder continues to meet the credentialing
requirements of Horizon's credentialing program as in effect from time to time,
Equity Holder shall be given access to Horizon's facilities, equipment and staff
in the same manner such access has generally been provided to Equity Holder
prior to the date of this Agreement.
3. Other Agreements. Horizon and Prime each agree that during the term
of this Agreement and for as long as Equity Holder continues to meet the
credentialing requirements of Horizon's credentialing program as in effect from
time to time, Equity Holder's compensation arrangement will be modified to
incorporate the terms of any compensation arrangement with any other physician
utilizing the facilities, equipment and staff, to the extent such other terms
are substantially more favorable than the terms enjoyed by Equity Holder.
4. Allocation of Procedures. Horizon and Prime each agree that
inquiries generated by Horizon and not by a particular physician shall be
distributed among the physician shareholders of Horizon (including Equity
Holder) in a manner consistent with the allocation methods employed by Horizon
prior to the date of this Agreement, limited, however, in instances where a
physician is not available to perform the procedure.
5. Term. The term of this Agreement shall begin on the Effective Date and
shall continue for a period of five (5) years thereafter.
6. Breach. The Equity Holder agrees that a violation of any covenant
contained in Section 1 will irreparably damage Horizon and Prime for which
remedies at law may be insufficient, and for that reason, the Equity Holder
further agrees that Horizon and Prime shall each 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 Horizon and Prime may have, including, specifically, recovery of additional
damages.
7. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by
an instrument in writing executed by each of the parties hereto.
(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.
(d) Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Texas, and not
the conflicts of law provisions thereof.
(e) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder. This Agreement shall inure to
the benefit of Horizon, Prime and their respective successors,
representatives and assigns.
(f) Assignment. This Agreement and the rights granted hereunder
may not be assigned by Equity Holder without the written consent of
both Horizon and Prime.
(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 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.
(h) Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable
but the extent of the invalidity or unenforceability does not destroy
the basis of the bargain between the parties as contained herein, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but
rather shall be enforced to the fullest extent permitted by law.
[Signature page to follow]
-------------------------
<PAGE>
SIGNATURE PAGE TO
EXCLUSIVE USE AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER:
Signature: /s/ Mark R. Mandel, M.D.
Printed Name: Mark R. Mandel, M.D.
Title:
(if signing in a representative capacity)
HORIZON: Horizon Vision Centers, Inc.
Signature: /s/ David Bates
Printed Name: David Bates
Title: President
PRIME: Prime/BDR Acquisition, L.L.C.
Signature: /s/ Cheryl Williams
Printed Name:Cheryl Williams
Title: Vice President
<PAGE>
EXCLUSIVE USE AGREEMENT
This Exclusive Use Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by the undersigned
shareholder (the "Equity Holder") of Horizon Vision Center, Inc., a Nevada
corporation ("Horizon") for the benefit of Horizon and Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company ("Prime") and the parent companies
and affiliates of each of Horizon and Prime.
RECITALS:
WHEREAS, the Equity Holder is a shareholder of Horizon.
WHEREAS, the Equity Holder is a physician or other licensed medical
professional.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Prime and Horizon are consummating that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated September 1, 1999.
WHEREAS, in order to induce Horizon and Prime to consummate the
transactions contemplated by the Stock Purchase Agreement, the Equity Holder has
agreed, for a period of five (5) years, to perform all Refractive Surgery
Services (as defined herein) exclusively at the facilities of, and using the
equipment of, Horizon.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Exclusive Use. Except as expressly otherwise provided below, during
the term of this Agreement, the Equity Holder hereby agrees that, without the
prior written consent of both Horizon and Prime, the Equity Holder will perform,
and will direct all other medically trained or licensed medical professionals
under the direction or control of Equity Holder to perform, all Refractive
Surgery Services only at the facilities of, and using the equipment of, Horizon.
For purposes of this Agreement, "Refractive Surgery Services" shall include all
refractive surgery modalities, now or at any time during the term of this
Agreement performed, offered or made available, including, without limitation,
implantable contact lenses, instromal corneal rings, laser in situs
keratomileusis photorefractive keratectomy, radial keratotomy, automated
lemellar keratoplasty, astigmatic keratotomy and similar or replacement
procedures.
Provided, however, that nothing in this Agreement shall be construed to
require Equity Holder to perform Refractive Surgery Services at the facilities
of, or use the equipment of, Horizon, if in Equity Holder's professional medical
judgment, such use would be detrimental to Equity Holder's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery Services
to be paid for, or reimbursed by, Medicare, Medicaid, Champus, or any other
state or federal health care program, or in any other instance where the
operation of this Agreement would constitute a violation of applicable law.
2. Access. Horizon and Prime each agree that during the term of this
Agreement, and for as long Equity Holder continues to meet the credentialing
requirements of Horizon's credentialing program as in effect from time to time,
Equity Holder shall be given access to Horizon's facilities, equipment and staff
in the same manner such access has generally been provided to Equity Holder
prior to the date of this Agreement.
3. Other Agreements. Horizon and Prime each agree that during the term
of this Agreement and for as long as Equity Holder continues to meet the
credentialing requirements of Horizon's credentialing program as in effect from
time to time, Equity Holder's compensation arrangement will be modified to
incorporate the terms of any compensation arrangement with any other physician
utilizing the facilities, equipment and staff, to the extent such other terms
are substantially more favorable than the terms enjoyed by Equity Holder.
4. Allocation of Procedures. Horizon and Prime each agree that
inquiries generated by Horizon and not by a particular physician shall be
distributed among the physician shareholders of Horizon (including Equity
Holder) in a manner consistent with the allocation methods employed by Horizon
prior to the date of this Agreement, limited, however, in instances where a
physician is not available to perform the procedure.
5. Term. The term of this Agreement shall begin on the Effective Date and
shall continue for a period of five (5) years thereafter.
6. Breach. The Equity Holder agrees that a violation of any covenant
contained in Section 1 will irreparably damage Horizon and Prime for which
remedies at law may be insufficient, and for that reason, the Equity Holder
further agrees that Horizon and Prime shall each 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 Horizon and Prime may have, including, specifically, recovery of additional
damages.
7. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by
an instrument in writing executed by each of the parties hereto.
(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.
(d) Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Texas, and not
the conflicts of law provisions thereof.
(e) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder. This Agreement shall inure to
the benefit of Horizon, Prime and their respective successors,
representatives and assigns.
(f) Assignment. This Agreement and the rights granted hereunder
may not be assigned by Equity Holder without the written consent of
both Horizon and Prime.
(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 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.
(h) Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable
but the extent of the invalidity or unenforceability does not destroy
the basis of the bargain between the parties as contained herein, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but
rather shall be enforced to the fullest extent permitted by law.
[Signature page to follow]
-------------------------
<PAGE>
SIGNATURE PAGE TO
EXCLUSIVE USE AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER:
Signature: /s/ D. Brent Reed, M.D.
Printed Name: D. Brent Reed, M.D.
Title:
(if signing in a representative capacity)
HORIZON: Horizon Vision Centers, Inc.
Signature: /s/ David Bates
Printed Name: David Bates
Title: President
PRIME: Prime/BDR Acquisition, L.L.C.
Signature: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
<PAGE>
EXCLUSIVE USE AGREEMENT
This Exclusive Use Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by the undersigned
shareholder (the "Equity Holder") of Horizon Vision Center, Inc., a Nevada
corporation ("Horizon") for the benefit of Horizon and Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company ("Prime") and the parent companies
and affiliates of each of Horizon and Prime.
RECITALS:
WHEREAS, the Equity Holder is a shareholder of Horizon.
WHEREAS, the Equity Holder is a physician or other licensed medical
professional.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Prime and Horizon are consummating that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated September 1, 1999.
WHEREAS, in order to induce Horizon and Prime to consummate the
transactions contemplated by the Stock Purchase Agreement, the Equity Holder has
agreed, for a period of five (5) years, to perform all Refractive Surgery
Services (as defined herein) exclusively at the facilities of, and using the
equipment of, Horizon.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Exclusive Use. Except as expressly otherwise provided below, during
the term of this Agreement, the Equity Holder hereby agrees that, without the
prior written consent of both Horizon and Prime, the Equity Holder will perform,
and will direct all other medically trained or licensed medical professionals
under the direction or control of Equity Holder to perform, all Refractive
Surgery Services only at the facilities of, and using the equipment of, Horizon.
For purposes of this Agreement, "Refractive Surgery Services" shall include all
refractive surgery modalities, now or at any time during the term of this
Agreement performed, offered or made available, including, without limitation,
implantable contact lenses, instromal corneal rings, laser in situs
keratomileusis photorefractive keratectomy, radial keratotomy, automated
lemellar keratoplasty, astigmatic keratotomy and similar or replacement
procedures.
Provided, however, that nothing in this Agreement shall be construed to
require Equity Holder to perform Refractive Surgery Services at the facilities
of, or use the equipment of, Horizon, if in Equity Holder's professional medical
judgment, such use would be detrimental to Equity Holder's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery Services
to be paid for, or reimbursed by, Medicare, Medicaid, Champus, or any other
state or federal health care program, or in any other instance where the
operation of this Agreement would constitute a violation of applicable law.
2. Access. Horizon and Prime each agree that during the term of this
Agreement, and for as long Equity Holder continues to meet the credentialing
requirements of Horizon's credentialing program as in effect from time to time,
Equity Holder shall be given access to Horizon's facilities, equipment and staff
in the same manner such access has generally been provided to Equity Holder
prior to the date of this Agreement.
3. Other Agreements. Horizon and Prime each agree that during the term
of this Agreement and for as long as Equity Holder continues to meet the
credentialing requirements of Horizon's credentialing program as in effect from
time to time, Equity Holder's compensation arrangement will be modified to
incorporate the terms of any compensation arrangement with any other physician
utilizing the facilities, equipment and staff, to the extent such other terms
are substantially more favorable than the terms enjoyed by Equity Holder.
4. Allocation of Procedures. Horizon and Prime each agree that
inquiries generated by Horizon and not by a particular physician shall be
distributed among the physician shareholders of Horizon (including Equity
Holder) in a manner consistent with the allocation methods employed by Horizon
prior to the date of this Agreement, limited, however, in instances where a
physician is not available to perform the procedure.
5. Term. The term of this Agreement shall begin on the Effective Date and
shall continue for a period of five (5) years thereafter.
6. Breach. The Equity Holder agrees that a violation of any covenant
contained in Section 1 will irreparably damage Horizon and Prime for which
remedies at law may be insufficient, and for that reason, the Equity Holder
further agrees that Horizon and Prime shall each 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 Horizon and Prime may have, including, specifically, recovery of additional
damages.
7. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by
an instrument in writing executed by each of the parties hereto.
(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.
(d) Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Texas, and not
the conflicts of law provisions thereof.
(e) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder. This Agreement shall inure to
the benefit of Horizon, Prime and their respective successors,
representatives and assigns.
(f) Assignment. This Agreement and the rights granted hereunder
may not be assigned by Equity Holder without the written consent of
both Horizon and Prime.
(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 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.
(h) Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable
but the extent of the invalidity or unenforceability does not destroy
the basis of the bargain between the parties as contained herein, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but
rather shall be enforced to the fullest extent permitted by law.
[Signature page to follow]
-------------------------
<PAGE>
SIGNATURE PAGE TO
EXCLUSIVE USE AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER:
Signature: /s/ Bradley J. Sandler, M.D.
Printed Name: Bradley J. Sandler, M.D.
Title:
(if signing in a representative capacity)
HORIZON: Horizon Vision Centers, Inc.
Signature: /s/ David Bates
Printed Name: David Bates
Title: President
PRIME: Prime/BDR Acquisition, L.L.C.
Signature: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
<PAGE>
EXCLUSIVE USE AGREEMENT
This Exclusive Use Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by the undersigned
shareholder (the "Equity Holder") of Horizon Vision Center, Inc., a Nevada
corporation ("Horizon") for the benefit of Horizon and Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company ("Prime") and the parent companies
and affiliates of each of Horizon and Prime.
RECITALS:
WHEREAS, the Equity Holder is a shareholder of Horizon.
WHEREAS, the Equity Holder is a physician or other licensed medical
professional.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Prime and Horizon are consummating that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated September 1, 1999.
WHEREAS, in order to induce Horizon and Prime to consummate the
transactions contemplated by the Stock Purchase Agreement, the Equity Holder has
agreed, for a period of five (5) years, to perform all Refractive Surgery
Services (as defined herein) exclusively at the facilities of, and using the
equipment of, Horizon.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Exclusive Use. Except as expressly otherwise provided below, during
the term of this Agreement, the Equity Holder hereby agrees that, without the
prior written consent of both Horizon and Prime, the Equity Holder will perform,
and will direct all other medically trained or licensed medical professionals
under the direction or control of Equity Holder to perform, all Refractive
Surgery Services only at the facilities of, and using the equipment of, Horizon.
For purposes of this Agreement, "Refractive Surgery Services" shall include all
refractive surgery modalities, now or at any time during the term of this
Agreement performed, offered or made available, including, without limitation,
implantable contact lenses, instromal corneal rings, laser in situs
keratomileusis photorefractive keratectomy, radial keratotomy, automated
lemellar keratoplasty, astigmatic keratotomy and similar or replacement
procedures.
Provided, however, that nothing in this Agreement shall be construed to
require Equity Holder to perform Refractive Surgery Services at the facilities
of, or use the equipment of, Horizon, if in Equity Holder's professional medical
judgment, such use would be detrimental to Equity Holder's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery Services
to be paid for, or reimbursed by, Medicare, Medicaid, Champus, or any other
state or federal health care program, or in any other instance where the
operation of this Agreement would constitute a violation of applicable law.
2. Access. Horizon and Prime each agree that during the term of this
Agreement, and for as long Equity Holder continues to meet the credentialing
requirements of Horizon's credentialing program as in effect from time to time,
Equity Holder shall be given access to Horizon's facilities, equipment and staff
in the same manner such access has generally been provided to Equity Holder
prior to the date of this Agreement.
3. Other Agreements. Horizon and Prime each agree that during the term
of this Agreement and for as long as Equity Holder continues to meet the
credentialing requirements of Horizon's credentialing program as in effect from
time to time, Equity Holder's compensation arrangement will be modified to
incorporate the terms of any compensation arrangement with any other physician
utilizing the facilities, equipment and staff, to the extent such other terms
are substantially more favorable than the terms enjoyed by Equity Holder.
4. Allocation of Procedures. Horizon and Prime each agree that
inquiries generated by Horizon and not by a particular physician shall be
distributed among the physician shareholders of Horizon (including Equity
Holder) in a manner consistent with the allocation methods employed by Horizon
prior to the date of this Agreement, limited, however, in instances where a
physician is not available to perform the procedure.
5. Term. The term of this Agreement shall begin on the Effective Date and
shall continue for a period of five (5) years thereafter.
6. Breach. The Equity Holder agrees that a violation of any covenant
contained in Section 1 will irreparably damage Horizon and Prime for which
remedies at law may be insufficient, and for that reason, the Equity Holder
further agrees that Horizon and Prime shall each 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 Horizon and Prime may have, including, specifically, recovery of additional
damages.
7. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by
an instrument in writing executed by each of the parties hereto.
(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.
(d) Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Texas, and not
the conflicts of law provisions thereof.
(e) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder. This Agreement shall inure to
the benefit of Horizon, Prime and their respective successors,
representatives and assigns.
(f) Assignment. This Agreement and the rights granted hereunder
may not be assigned by Equity Holder without the written consent of
both Horizon and Prime.
(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 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.
(h) Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable
but the extent of the invalidity or unenforceability does not destroy
the basis of the bargain between the parties as contained herein, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but
rather shall be enforced to the fullest extent permitted by law.
[Signature page to follow]
-------------------------
<PAGE>
SIGNATURE PAGE TO
EXCLUSIVE USE AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER:
Signature: /s/ Sanford L. Severin, M.D.
Printed Name: Sanford L. Severin, M.D.
Title:
(if signing in a representative capacity)
HORIZON: Horizon Vision Centers, Inc.
Signature: /s/ David Bates
Printed Name: David Bates
Title: President
PRIME: Prime/BDR Acquisition, L.L.C.
Signature: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
<PAGE>
EXCLUSIVE USE AGREEMENT
This Exclusive Use Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by the undersigned
shareholder (the "Equity Holder") of Horizon Vision Center, Inc., a Nevada
corporation ("Horizon") for the benefit of Horizon and Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company ("Prime") and the parent companies
and affiliates of each of Horizon and Prime.
RECITALS:
WHEREAS, the Equity Holder is a shareholder of Horizon.
WHEREAS, the Equity Holder is a physician or other licensed medical
professional.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Prime and Horizon are consummating that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated September 1, 1999.
WHEREAS, in order to induce Horizon and Prime to consummate the
transactions contemplated by the Stock Purchase Agreement, the Equity Holder has
agreed, for a period of five (5) years, to perform all Refractive Surgery
Services (as defined herein) exclusively at the facilities of, and using the
equipment of, Horizon.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Exclusive Use. Except as expressly otherwise provided below, during
the term of this Agreement, the Equity Holder hereby agrees that, without the
prior written consent of both Horizon and Prime, the Equity Holder will perform,
and will direct all other medically trained or licensed medical professionals
under the direction or control of Equity Holder to perform, all Refractive
Surgery Services only at the facilities of, and using the equipment of, Horizon.
For purposes of this Agreement, "Refractive Surgery Services" shall include all
refractive surgery modalities, now or at any time during the term of this
Agreement performed, offered or made available, including, without limitation,
implantable contact lenses, instromal corneal rings, laser in situs
keratomileusis photorefractive keratectomy, radial keratotomy, automated
lemellar keratoplasty, astigmatic keratotomy and similar or replacement
procedures.
Provided, however, that nothing in this Agreement shall be construed to
require Equity Holder to perform Refractive Surgery Services at the facilities
of, or use the equipment of, Horizon, if in Equity Holder's professional medical
judgment, such use would be detrimental to Equity Holder's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery Services
to be paid for, or reimbursed by, Medicare, Medicaid, Champus, or any other
state or federal health care program, or in any other instance where the
operation of this Agreement would constitute a violation of applicable law.
2. Access. Horizon and Prime each agree that during the term of this
Agreement, and for as long Equity Holder continues to meet the credentialing
requirements of Horizon's credentialing program as in effect from time to time,
Equity Holder shall be given access to Horizon's facilities, equipment and staff
in the same manner such access has generally been provided to Equity Holder
prior to the date of this Agreement.
3. Other Agreements. Horizon and Prime each agree that during the term
of this Agreement and for as long as Equity Holder continues to meet the
credentialing requirements of Horizon's credentialing program as in effect from
time to time, Equity Holder's compensation arrangement will be modified to
incorporate the terms of any compensation arrangement with any other physician
utilizing the facilities, equipment and staff, to the extent such other terms
are substantially more favorable than the terms enjoyed by Equity Holder.
4. Allocation of Procedures. Horizon and Prime each agree that
inquiries generated by Horizon and not by a particular physician shall be
distributed among the physician shareholders of Horizon (including Equity
Holder) in a manner consistent with the allocation methods employed by Horizon
prior to the date of this Agreement, limited, however, in instances where a
physician is not available to perform the procedure.
5. Term. The term of this Agreement shall begin on the Effective Date and
shall continue for a period of five (5) years thereafter.
6. Breach. The Equity Holder agrees that a violation of any covenant
contained in Section 1 will irreparably damage Horizon and Prime for which
remedies at law may be insufficient, and for that reason, the Equity Holder
further agrees that Horizon and Prime shall each 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 Horizon and Prime may have, including, specifically, recovery of additional
damages.
7. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by
an instrument in writing executed by each of the parties hereto.
(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.
(d) Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Texas, and not
the conflicts of law provisions thereof.
(e) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder. This Agreement shall inure to
the benefit of Horizon, Prime and their respective successors,
representatives and assigns.
(f) Assignment. This Agreement and the rights granted hereunder
may not be assigned by Equity Holder without the written consent of
both Horizon and Prime.
(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 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.
(h) Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable
but the extent of the invalidity or unenforceability does not destroy
the basis of the bargain between the parties as contained herein, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but
rather shall be enforced to the fullest extent permitted by law.
[Signature page to follow]
-------------------------
<PAGE>
SIGNATURE PAGE TO
EXCLUSIVE USE AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER:
Signature: /s/ Stephen G. Turner, M.D.
Printed Name: Stephen G. Turner, M.D.
Title:
(if signing in a representative capacity)
HORIZON: Horizon Vision Centers, Inc.
Signature: /s/ David Bates
Printed Name: David Bates
Title: President
PRIME: Prime/BDR Acquisition, L.L.C.
Signature: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
<PAGE>
EXCLUSIVE USE AGREEMENT
This Exclusive Use Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by the undersigned
shareholder (the "Equity Holder") of Horizon Vision Center, Inc., a Nevada
corporation ("Horizon") for the benefit of Horizon and Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company ("Prime") and the parent companies
and affiliates of each of Horizon and Prime.
RECITALS:
WHEREAS, the Equity Holder is a shareholder of Horizon.
WHEREAS, the Equity Holder is a physician or other licensed medical
professional.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Prime and Horizon are consummating that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated September 1, 1999.
WHEREAS, in order to induce Horizon and Prime to consummate the
transactions contemplated by the Stock Purchase Agreement, the Equity Holder has
agreed, for a period of five (5) years, to perform all Refractive Surgery
Services (as defined herein) exclusively at the facilities of, and using the
equipment of, Horizon.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Exclusive Use. Except as expressly otherwise provided below, during
the term of this Agreement, the Equity Holder hereby agrees that, without the
prior written consent of both Horizon and Prime, the Equity Holder will perform,
and will direct all other medically trained or licensed medical professionals
under the direction or control of Equity Holder to perform, all Refractive
Surgery Services only at the facilities of, and using the equipment of, Horizon.
For purposes of this Agreement, "Refractive Surgery Services" shall include all
refractive surgery modalities, now or at any time during the term of this
Agreement performed, offered or made available, including, without limitation,
implantable contact lenses, instromal corneal rings, laser in situs
keratomileusis photorefractive keratectomy, radial keratotomy, automated
lemellar keratoplasty, astigmatic keratotomy and similar or replacement
procedures.
Provided, however, that nothing in this Agreement shall be construed to
require Equity Holder to perform Refractive Surgery Services at the facilities
of, or use the equipment of, Horizon, if in Equity Holder's professional medical
judgment, such use would be detrimental to Equity Holder's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery Services
to be paid for, or reimbursed by, Medicare, Medicaid, Champus, or any other
state or federal health care program, or in any other instance where the
operation of this Agreement would constitute a violation of applicable law.
2. Access. Horizon and Prime each agree that during the term of this
Agreement, and for as long Equity Holder continues to meet the credentialing
requirements of Horizon's credentialing program as in effect from time to time,
Equity Holder shall be given access to Horizon's facilities, equipment and staff
in the same manner such access has generally been provided to Equity Holder
prior to the date of this Agreement.
3. Other Agreements. Horizon and Prime each agree that during the term
of this Agreement and for as long as Equity Holder continues to meet the
credentialing requirements of Horizon's credentialing program as in effect from
time to time, Equity Holder's compensation arrangement will be modified to
incorporate the terms of any compensation arrangement with any other physician
utilizing the facilities, equipment and staff, to the extent such other terms
are substantially more favorable than the terms enjoyed by Equity Holder.
4. Allocation of Procedures. Horizon and Prime each agree that
inquiries generated by Horizon and not by a particular physician shall be
distributed among the physician shareholders of Horizon (including Equity
Holder) in a manner consistent with the allocation methods employed by Horizon
prior to the date of this Agreement, limited, however, in instances where a
physician is not available to perform the procedure.
5. Term. The term of this Agreement shall begin on the Effective Date and
shall continue for a period of five (5) years thereafter.
6. Breach. The Equity Holder agrees that a violation of any covenant
contained in Section 1 will irreparably damage Horizon and Prime for which
remedies at law may be insufficient, and for that reason, the Equity Holder
further agrees that Horizon and Prime shall each 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 Horizon and Prime may have, including, specifically, recovery of additional
damages.
7. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by
an instrument in writing executed by each of the parties hereto.
(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.
(d) Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Texas, and not
the conflicts of law provisions thereof.
(e) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder. This Agreement shall inure to
the benefit of Horizon, Prime and their respective successors,
representatives and assigns.
(f) Assignment. This Agreement and the rights granted hereunder
may not be assigned by Equity Holder without the written consent of
both Horizon and Prime.
(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 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.
(h) Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable
but the extent of the invalidity or unenforceability does not destroy
the basis of the bargain between the parties as contained herein, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but
rather shall be enforced to the fullest extent permitted by law.
[Signature page to follow]
-------------------------
<PAGE>
S-1
SIGNATURE PAGE TO
EXCLUSIVE USE AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER:
Signature: /s/ Stephen Wilmarth, M.D.
Printed Name: Stephen Wilmarth
Title:
(if signing in a representative capacity)
HORIZON: Horizon Vision Centers, Inc.
Signature: /s/ David P. Bates
Printed Name: David P. Bates
Title: President
PRIME: Prime/BDR Acquisition, L.L.C.
Signature: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
<PAGE>
EXCLUSIVE USE AGREEMENT
This Exclusive Use Agreement (this "Agreement") is entered into as of
the 1st day of September, 1999 (the "Effective Date"), by the undersigned
shareholder (the "Equity Holder") of Horizon Vision Center, Inc., a Nevada
corporation ("Horizon") for the benefit of Horizon and Prime/BDR Acquisition,
L.L.C., a Delaware limited liability company ("Prime") and the parent companies
and affiliates of each of Horizon and Prime.
RECITALS:
WHEREAS, the Equity Holder is a shareholder of Horizon.
WHEREAS, the Equity Holder is a physician or other licensed medical
professional.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Prime and Horizon are consummating that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated September 1, 1999.
WHEREAS, in order to induce Horizon and Prime to consummate the
transactions contemplated by the Stock Purchase Agreement, the Equity Holder has
agreed, for a period of five (5) years, to perform all Refractive Surgery
Services (as defined herein) exclusively at the facilities of, and using the
equipment of, Horizon.
THEREFORE, the parties hereto agree as follows:
AGREEMENTS:
1. Exclusive Use. Except as expressly otherwise provided below, during
the term of this Agreement, the Equity Holder hereby agrees that, without the
prior written consent of both Horizon and Prime, the Equity Holder will perform,
and will direct all other medically trained or licensed medical professionals
under the direction or control of Equity Holder to perform, all Refractive
Surgery Services only at the facilities of, and using the equipment of, Horizon.
For purposes of this Agreement, "Refractive Surgery Services" shall include all
refractive surgery modalities, now or at any time during the term of this
Agreement performed, offered or made available, including, without limitation,
implantable contact lenses, instromal corneal rings, laser in situs
keratomileusis photorefractive keratectomy, radial keratotomy, automated
lemellar keratoplasty, astigmatic keratotomy and similar or replacement
procedures.
Provided, however, that nothing in this Agreement shall be construed to
require Equity Holder to perform Refractive Surgery Services at the facilities
of, or use the equipment of, Horizon, if in Equity Holder's professional medical
judgment, such use would be detrimental to Equity Holder's patients. Provided
further, that this Agreement shall not apply to any Refractive Surgery Services
to be paid for, or reimbursed by, Medicare, Medicaid, Champus, or any other
state or federal health care program, or in any other instance where the
operation of this Agreement would constitute a violation of applicable law.
2. Access. Horizon and Prime each agree that during the term of this
Agreement, and for as long Equity Holder continues to meet the credentialing
requirements of Horizon's credentialing program as in effect from time to time,
Equity Holder shall be given access to Horizon's facilities, equipment and staff
in the same manner such access has generally been provided to Equity Holder
prior to the date of this Agreement.
3. Other Agreements. Horizon and Prime each agree that during the term
of this Agreement and for as long as Equity Holder continues to meet the
credentialing requirements of Horizon's credentialing program as in effect from
time to time, Equity Holder's compensation arrangement will be modified to
incorporate the terms of any compensation arrangement with any other physician
utilizing the facilities, equipment and staff, to the extent such other terms
are substantially more favorable than the terms enjoyed by Equity Holder.
4. Allocation of Procedures. Horizon and Prime each agree that
inquiries generated by Horizon and not by a particular physician shall be
distributed among the physician shareholders of Horizon (including Equity
Holder) in a manner consistent with the allocation methods employed by Horizon
prior to the date of this Agreement, limited, however, in instances where a
physician is not available to perform the procedure.
5. Term. The term of this Agreement shall begin on the Effective Date and
shall continue for a period of five (5) years thereafter.
6. Breach. The Equity Holder agrees that a violation of any covenant
contained in Section 1 will irreparably damage Horizon and Prime for which
remedies at law may be insufficient, and for that reason, the Equity Holder
further agrees that Horizon and Prime shall each 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 Horizon and Prime may have, including, specifically, recovery of additional
damages.
7. Miscellaneous.
(a) Amendments. This Agreement may be modified or amended only by
an instrument in writing executed by each of the parties hereto.
(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.
(d) Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Texas, and not
the conflicts of law provisions thereof.
(e) Parties Bound. This Agreement shall be binding upon and be
enforceable against the Equity Holder. This Agreement shall inure to
the benefit of Horizon, Prime and their respective successors,
representatives and assigns.
(f) Assignment. This Agreement and the rights granted hereunder
may not be assigned by Equity Holder without the written consent of
both Horizon and Prime.
(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 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.
(h) Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable
laws, ordinances, rules and regulations. If any provision of this
Agreement, or the application thereof to any person or circumstance,
shall, for any reason and to any extent, be invalid or unenforceable
but the extent of the invalidity or unenforceability does not destroy
the basis of the bargain between the parties as contained herein, the
remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be effected thereby, but
rather shall be enforced to the fullest extent permitted by law.
[Signature page to follow]
-------------------------
<PAGE>
S-1
SIGNATURE PAGE TO
EXCLUSIVE USE AGREEMENT
EXECUTED to be effective as of the date first above written.
EQUITY HOLDER:
Signature: /s/ Robert J. Hardy
Printed Name: Robert J. Hardy
Title:
(if signing in a representative capacity)
PRIME: Prime/BDR Acquisition, L.L.C.
Signature: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
AMENDED AND RESTATED BYLAWS
for the regulation
of
HORIZON VISION CENTERS, INC.
(a Nevada corporation incorporated January 30, 1996)
ARTICLE I - MEETING OF STOCKHOLDERS
Section 1. ANNUAL MEETINGS. The annual meeting of the stockholders of
the corporation shall be held once each year at such place within or without the
State of Nevada as shall be designated by the Board of Directors, and if not
designated by the Board, then as designated by the Chairman of the Board or the
President, for the purpose of electing directors of the corporation to serve
during the ensuing year and for the transaction of such other business as may be
properly brought before the annual meeting. The annual meeting of stockholders
shall be held during the fifth or sixth month following the conclusion of the
corporation's fiscal year on such date which is not a weekend or legal holiday,
and at such time, as shall be designated by the Board of Directors, and if not
designated by the Board, then as designated by the Chairman of the Board or the
President, for the purpose.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders may
be held at the principal office of the corporation, within or without the State
of Nevada, whenever called by the Board of Directors by the Chairman of the
Board, or by the President of the corporation, only for the purpose of
transacting such business as shall be specified in the notice of such special
meeting which may provide, however, for the transaction of other matters as may
be properly brought before the special meeting.
Section 3. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Written notice of each
annual or special meeting of stockholders shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting to each stockholder
entitled to vote thereat. Such notice shall state the place, date and hour of
the meeting and (i) in the case of a special meeting, the general nature of the
business to be transacted, and no other business may be transacted, or (ii) in
the case of the annual meeting, the election of directors and those other
matters which the Board, at the time of the mailing of the notice, intends to
present for action by the stockholders, but subject to the provisions of
applicable law, any proper matter may be presented at the meeting for such
action. The notice of any meeting at which directors are to be elected shall
include the names of nominees intended at the time of the notice to be presented
by management for election.
Notice of a stockholders' meeting shall be given either personally or
by mail or by other means of written communication, addressed to the stockholder
at the address of such stockholder appearing on the books of the corporation or
given by the stockholder to the corporation for the purpose of notice, or, if no
such address appears or is given, at the place where the principal office of the
corporation is located, either within or without the State of Nevada, or by
publication at least once in a newspaper of general circulation in the county in
which the principal office is located. Notice by mail shall be deemed to have
been given at the time a written notice is deposited in the United States mails,
postage prepaid. Any other written notice shall be deemed to have been given at
the time it is personally delivered to the recipient or is delivered to a common
carrier for transmission, or actually transmitted by the person giving the
notice by electronic means, to the recipient.
Section 4. QUORUM AND REQUIRED APPROVALS. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of stockholders. If a quorum is present, the affirmative vote of
a majority of the shares represented and voting at the meeting (which shares
voting affirmatively also constitute at least a majority of the required quorum)
shall be the act of the stockholders, unless the vote of a greater number or
voting by classes is required by law or by the Articles, except as provided
below in this Section 4 and in Section 5 of this Article I. Except with respect
to the matters listed below which require the approval by at least eighty
percent (80%) of the shares entitled to vote, the stockholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
Notwithstanding the foregoing, the following acts and transactions
shall require the affirmative vote of not less than eighty percent (80%) of the
shares entitled to vote, represented in person or by proxy:
(a) Unless pursuant to any contractual agreement to which the Company is a party
on the date of adoption of these Amended and Restated Bylaws, any issuance of
any capital stock of the corporation (or rights to acquire capital stock,
through conversion, exchange, exercise of options or otherwise);
(b) Unless pursuant to any contractual agreement to which the Company is a party
on the date of adoption of these Amended and Restated Bylaws, any redemption of
any shares of capital stock of the corporation by the corporation;
(c) The sale of all or substantially all of the assets of the corporation;
(d) Any merger or reorganization of or by the corporation;
(e) Liquidation or dissolution of the corporation; and
(f) Any amendment to these Bylaws or to the Articles.
Section 5. ADJOURNED MEETINGS AND NOTICE THEREOF. Any stockholders
meeting, whether or not a quorum is present, may be adjourned from time to time
by the vote of a majority of the shares represented either in person or by
proxy, but in the absence of a quorum (except as provided in Section 4 of this
Article) no other business may be transacted at such meeting.
It shall not be necessary to give any notice of the time and place of
the adjourned meeting or of the business to be transacted thereat, other than by
announcement at the meeting at which such adjournment is taken; provided,
however, when any stockholders meeting is adjourned for more than 45 days or, if
after adjournment a new record date is fixed for the adjourned meeting, notice
of the adjourned meeting shall be given as in the case of an original meeting.
Section 6. VOTING. The stockholders entitled to notice of any meeting
or to vote at any such meeting shall be only persons in whose names shares stand
on the stock records of the corporation on the record date determined in
accordance with Section 7 of this Article.
Elections of directors and other voting on proposal presented to
stockholders meeting need not be by ballot if dispensed by the meeting;
provided, however, that all elections for directors and other proposals to be
voted upon must be by ballot upon demand made by any stockholder at the meeting
and before the voting begins.
In any election of directors, the provisions of Article II shall
control.
Except as otherwise set forth in Article II with respect to the
election of Directors, voting shall in all cases be subject to the provisions of
Section 78.355 of the Nevada General Corporation Law and to the following
provisions:
(a) Subject to clause (g), shares held by an administrator, executor,
guardian, conservator or custodian may be voted by such holder either in person
or by proxy, without a transfer of such shares into the holder's name; and
shares standing in the name of a trustee may be voted by the trustee, either in
person or by proxy, but no trustee shall be entitled to vote shares held by such
trustee without a transfer of such shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into the receiver's name if authority
to do so is contained in the order of the court by which such receiver was
appointed.
(c) Except where otherwise agreed in writing between the parties with a
copy furnished to the corporation, a stockholder whose shares are pledged shall
be entitled to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by the minor,
in person or by proxy, whether or not the corporation has notice, actual or
constructive, of the nonage, unless a guardian of the minor's property has been
appointed and written notice of such appointment given to the corporation.
(e) Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxyholder as the by-laws of
such other corporation may prescribe or, in the absence of such provision, as
the Board of Directors of such other corporation may determine or, in the
absence of such determination, by the chairman of the board, president or any
vice president of such other corporation, or by any other person authorized to
do so by the chairman of the board, president or any vice president of such
other corporation. Shares which are purported to be voted or any proxy purported
to be executed in the name of a corporation (whether or not any title of the
person signing is indicated) shall be presumed to be voted or the proxy executed
in accordance with the provisions of this clause, unless the contrary is shown.
(f) Shares of the corporation owned by any subsidiary shall not be
entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary capacity, and shares
of the issuing corporation held in a fiduciary capacity by any subsidiary, shall
not be entitled to vote on any matter, except to the extent that the settlor or
beneficial owner possesses and exercises a right to vote or to give the
corporation binding instructions as to how to vote such shares.
(h) If shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
husband and wife as community property, tenants by the entirety, voting
trustees, persons entitled to vote under a stockholder voting agreement or
otherwise, or if two or more persons (including proxyholders) have the same
fiduciary relationship respecting the same shares, unless the Secretary of the
corporation is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect:
(i) If only one votes, such acts binds all;
(ii) If more than one vote, the act of the majority so
voting binds all;
(iii) If more than one vote, but the vote is evenly split on
any particular matter, each faction may vote the securities in question
proportionately.
If the instrument so filed or the registration of the shares shows that any such
tenancy is held in unequal interests, a majority or even split for the purpose
of this Section shall be a majority or even split in interest.
Section 7. RECORD DATE. The Board may fix, in advance, a record date
for the determination of the stockholders entitled to notice of any meeting or
to vote or entitled to receive payment of any dividend or other distribution, or
any allotment of rights, or to exercise rights in respect of any other lawful
action. The record date so fixed shall be not more than 60 days nor less than 10
days prior to the date of the meeting nor more than 60 days prior to any other
action. When a record dates is so fixed, only stockholders of record on that
date are entitled to notice of and to vote at the meeting or to receive the
dividend, distribution, or allotment of rights, or to exercise of the rights, as
the case may be, notwithstanding any transfer of shares on the books of the
corporation after the record date. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting unless the Board fixes a new record date for the
adjourned meeting. The Board shall fix a new record date if the meeting is
adjourned for more than forty-five (45) days.
If no record date is fixed by the Board, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held. The record date for determining stockholders for any purpose other than
set forth in this Section 7 or Section 9 of this Article I shall be at the close
of business on the day on which the Board adopts the resolution relating
thereto, or the sixtieth day prior to the date of such other action, whichever
is later.
Section 8. CONSENT OF ABSENTEES. The transactions of any meeting of
stockholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by the Nevada General Corporation Law to be
included in the notice but not so included, if such objection is expressly made
at the meeting. Neither the business to be transacted at nor the purpose of any
regular or special meeting of stockholders need be specified in any written
waiver of notice, consent to the holding of the meeting or approval of the
minutes thereof.
Section 9. ACTION WITHOUT MEETING. Subject to Section 78-320 of the
Nevada General Corporation Law, any action which, under any provision of these
Bylaws of the Nevada General Corporation Law, may be taken at any annual or
special meeting of stockholders, may be taken without a meeting and without
prior notice of a consent in writing, setting forth the action so taken, shall
be signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Unless a record date for voting purposes be fixed as provided in Section 7 of
this Article, the record date for determining stockholders entitled to give
consent pursuant to this Section 7, when no prior action by the Board has been
taken, shall be the day on which the first written consent is given. In no
instance where action is authorized by written consent need a meeting of
stockholders be called or notice given. The written consent must be filed with
the minutes of proceedings of the stockholders of the corporation.
Section 10. PROXIES. Every person entitled to vote shares has the right
to do so either in person or by one or more persons authorized by a written
proxy executed by such stockholder and filed with the Secretary. Any proxy duly
executed is not revoked and continues in full force and effect until revoked by
the person executing it prior to the vote pursuant thereto. Such revocation may
be effected either, (i) by a writing delivered to the Secretary of the
Corporation stating that the proxy is revoked, (ii) by a subsequent proxy
executed by the person executing the prior proxy and presented to the meeting,
or (iii) by attendance at the meeting and voting in person by the person
executing the prior proxy and presented to the meeting, or (iii) by attendance
at the meeting and voting in person by the person executing the proxy; provided,
however, that no proxy shall be valid after the expiration of eleven months from
the date of its execution unless otherwise provided in the proxy.
Section 11. INSPECTORS OF ELECTION. In advance of or at the
commencement of any meeting of stockholders, the Board or the Chairman of the
Board may appoint inspectors of election to act at such meeting and any
adjournment thereof. If inspectors of election be not so appointed, or if any
persons so appointed fail to appear or refuse to act, the chairman of any such
meeting may, and on the request of any stockholder or stockholder's proxy shall,
make such appointment at the meeting. The number of inspectors shall be either
one or three. If appointed at a meeting on the request of one or more
stockholders or proxies, the majority of shares present shall determine whether
one or three inspectors are to be appointed.
The duties of such inspectors shall include: determining the number of
shares outstanding and the voting power of each; determining the shares
represented at the meeting; determining the existence of a quorum; determining
the authenticity, validity and effect of proxies; receiving votes, ballots or
consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; counting and tabulating all votes
or consents; determining when the polls shall close; determining the result; and
doing such acts as may be proper to conduct the election or vote with fairness
to all stockholders. If there are three inspectors of election, the decision,
act or certificate of a majority is effective in all respects as the decision,
act or certificate of all.
Section 12. STOCKHOLDERS LIST. At each meeting of the stockholders a
full, true and complete list, in alphabetical order, of all the stockholders
entitled to vote at such meeting, and indicating the number of shares held by
each, certified by the Secretary of the corporation or by any employee of a
Transfer Agent duly appointed to act as such by the Board, shall be furnished.
Only the persons in whose names shares of stock are registered on the books of
the corporation on the record date for the meeting, as evidenced by the list of
stockholders so furnished, shall be entitled to attend and vote at such meeting.
Proxies and powers of attorney to vote must be filed with the Secretary of the
corporation before an election or a meeting of the stockholders, or they cannot
be used at such election or meeting.
Section 13. CONDUCT OF MEETINGS. The Chairman of the Board, if there be
such an officer, or the President shall preside as chairman at all meetings of
the stockholders. The chairman shall conduct each such meeting in a businesslike
and fair manner, but shall not be obligated to follow any technical, formal or
parliamentary rules or principles of procedure. The chairman's rulings on
procedural matters shall be conclusive and binding on all stockholders, unless
at the time of a ruling a request for a vote is made to the stockholders holding
shares entitled to vote and which are represented in person or by proxy at the
meeting, in which case the decision of a majority of such shares shall be
conclusive and binding on all stockholders. Without limiting the generality of
the foregoing, the chairman shall have all of the powers usually vested in the
chairman of a meeting of stockholders.
ARTICLE II - DIRECTORS
Section 1. (a) NUMBER AND TERM. The Board of Directors of the
corporation shall consist of and be fixed at exactly five (5) persons who,
subject to the provisions for certain stockholders to designate Directors as
contemplated below, shall be elected by the stockholders annually, at the annual
meeting of the corporation's stockholders, and who shall hold office until the
next annual meeting of stockholders and until their successors are elected and
shall qualify. Pursuant to certain contractual agreements by and among the
corporation and certain of its stockholders pursuant to which Prime (as
hereinafter defined) acquired certain of its shares of stock of the corporation
(collectively, the "Voting Agreement"), two (2) of the five (5) Director
positions shall be occupied by individuals designated by a majority vote of
shares held by stockholders of the corporation excluding shares held by
Prime/BDR Acquisition, L.L.C., a Delaware limited liability company ("Prime")
(and any entity controlled by, controlling or under common control with Prime),
and the remaining three (3) Director positions shall be occupied by individuals
designated by Prime. Pursuant to the Voting Agreement, at any time, Prime or all
the other stockholders other than Prime (the "Other Stockholders") designating a
Director shall be entitled, upon written notice to all other stockholders, to
remove and replace any one or more Directors occupying a position subject to its
or their designation rights. In the event that less than all of the holders of
any capital stock shall be a party to the Voting Agreement, the provisions
contained herein shall control; provided, however, that the Voting Agreement
shall be enforceable among the parties thereto (including the corporation)
according to its terms and shall not be amended, altered or affected by the
provisions hereof in any way. The terms of the Voting Agreement shall be deemed
incorporated into these Bylaws for purposes of electing Directors. Any action by
the Other Stockholders with respect to the election, removal or replacement of
the two (2) Directors that may be designated by the Other Stockholders shall
require the affirmative vote of Other Stockholders holding a majority of the
shares of stock held by all Other Stockholders.
(b) QUALIFICATIONS. Directors shall be natural persons age 18 or older.
Directors need not be stockholders of the corporation, and need not be citizens
of the United States.
Section 2. AUTHORITY. The Board of Directors is vested with the
complete and unrestrained authority in the management of all the affairs of the
corporation, and is authorized to exercise for such purpose as the general agent
of the corporation, its entire corporate authority.
Section 3. FILLING VACANCIES. When any vacancy occurs among the
Directors by death, resignation, disqualification, an increase in the authorized
number of directors, or other cause, the stockholders, at any regular or special
meeting, or at any adjourned meeting thereof, as provided in the Voting
Agreement, shall elect a successor to hold office for the unexpired portion of
the term of the Director whose place shall have become vacant and until his or
her successor shall have been elected and shall qualify.
Section 4. PLACE AND TIME OF MEETINGS. Meetings of the Directors may be
held at the principal office of the corporation designated by the Board of
Directors, whether within or without the State of Nevada or the United States,
at any time set forth in notice of meeting given as provided in these Bylaws.
Meetings of the Directors may also be held elsewhere at such place or places and
at such time or times as the Board of Directors may from time to time determine,
or as shall be set forth in a notice of meeting given as provided in these
Bylaws, unless by special resolution the Board shall restrict or limit the place
or dates and time at which meetings of the Board are to be held.
Section 5. ANNUAL, REGULAR AND SPECIAL MEETINGS; NOTICE
(a) Without notice or call, the Board of Directors may hold its first
annual meeting for the year immediately after the annual meeting of the
stockholders or immediately after the election of Directors at such annual
meeting.
(b) Regular meetings of the Board of Directors, not more frequently
than once each month, may be held at the principal office of the corporation, or
elsewhere, as scheduled by action of the Board of Directors by its Chairman of
the Board or its President. Notice of such regular meetings shall be given by
regular mail, by telephone if the person is successfully contacted, by
telegraph, by facsimile telephone written communication, or by delivery in
person via courier service, to each Director by the President, the Secretary or
any Assistant Secretary at least ten (10) business days prior to the day fixed
for such meetings; but no regular meeting or any action taken thereat shall be
held void or invalid if such notice is not given to any Director that (i) was in
attendance at a meeting of the Board of Directors which fixed the time, date and
place of such regular meeting of the Board of Directors; or (ii) waives notice
of the regular meeting; or (iii) attends the regular meeting in person or by
telephone conference call; or (iv) executes a consent to action taken at the
meeting after having received the minutes of such regular meeting.
(c) Special meetings of the Board of Directors may be held on the call
of the Chairman of the Board, if there be such an officer, the President, the
Secretary or any Assistant Secretary on at least seventy-two (72) hours prior
written notice to all Directors. Notice of such special meetings shall be given
by regular mail (but only if mailed at least seven (7) business days prior to
such special meeting), by telephone if the person is successfully contacted, by
telegraph, by facsimile telephone written communication, or by delivery in
person via courier service, to each Director by the President, the Secretary or
any Assistant Secretary; but no regular meeting or any action taken thereat
shall be held void or invalid if such notice is not given to any Director that
(i) was in attendance at a meeting of the Board of Directors which fixed the
time, date and place of such special meeting of the Board of Directors; or (ii)
waives notice of the special meeting; or (iii) attends the special meeting in
person or by telephone conference call; or (iv) executes a consent to action
taken at the meeting after having received the minutes of such special meeting.
(d) Provided a quorum shall be present, any meeting of the Board of
Directors, no matter where held, at which all of the members shall be present,
even though without notice, or of which notice shall have been waived by all
absentees, shall be valid for all purposes unless otherwise indicated in the
notice calling the meeting or in the waiver of notice. Any and all business may
be transacted by any meeting of the Board of Directors, either regular or
special.
Section 6. ADJOURNMENT. A majority of the directors present, whether or
not a quorum is present, may adjourn any directors meeting to another time and
place. Notice of the time and place of holding an adjourned meeting need not be
given to absent directors if the time and place be fixed at the meeting
adjourned, except as provided in the next sentence. If the meeting is adjourned
for more than 24 hours, notice of any adjournment to another time or place shall
be given prior to the time of the adjourned meeting to the directors who were
not present at the time of the adjournment.
Section 7. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members
of the Board may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear and speak to one another.
Section 8. WAIVER OF NOTICE. Notice of a meeting need not be given to
any director who signs a waiver of notice or a consent to holding the meeting or
an approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting. All such waivers, consents and approvals shall be filed
with the corporate records and made a part of the minutes of the meeting.
Section 9. ACTION WITHOUT MEETING. Any action required or permitted to
be taken by the Board may be taken without a meeting if all members of the Board
shall individually or collectively consent in writing to such action. Such
consent or consents shall have the same effect as a unanimous vote of the Board
and shall be filed with the minutes of the proceedings of the Board.
Section 10. QUORUM AND VOTING. A majority of the Board of Directors in
office shall constitute a quorum for the transaction of business, but at any
meeting of the Board at which there is less than a quorum present, a majority of
those present may adjourn such meeting from time to time, until a quorum shall
be present, and no notice of' such adjournment shall be required except as
provided by Section 6 of this Article II. The Board Director may prescribe rules
not in conflict with these By-Laws for the conduct of its business. Except as
otherwise expressly set forth in these Bylaws, the affirmative vote of a
majority of the Directors shall constitute an action validly taken by the Board
of Directors.
Notwithstanding the foregoing, the following acts and transactions
shall require the affirmative vote of not less than eighty percent (80%) of the
Directors:
(a) Issuance of any capital stock of the corporation (or rights to acquire
capital stock, through conversion, exchange, exercise of options or
otherwise); and\
(b) The election, removal or replacement of the President and CEO of the
corporation or of any Chairman of the Board;
(c) Any increase or decrease in the facility fees charged by the corporation;
and
(d) Appointments to, replacements of, or removals from, the Medical Advisory
Board established pursuant to the authority set forth in Section 13 of this
Article.
Section 11. PRESUMPTION OF ASSENT. A director of the corporation
present at a meeting of the directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken as reflected in the
minutes of the meeting, unless his abstention from voting or dissenting vote is
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the Secretary of the meeting
before the adjournment thereof. Such right to dissent shall not apply to any
director who voted in favor of such action.
Section 12. COMMITTEES. The Board of Directors shall not have authority
to designate its powers to an Executive Committee. The Board of Directors may,
by resolution passed by a majority of the whole Board, designate one or more
other committees of the Board (other than an Executive Committee) including,
without limitation, an Audit Committee and/or a Compensation Committee, which
committees, to the extent provided in the resolution or resolutions of the Board
or in the Bylaws of the corporation as then in effect, shall have and may
exercise the powers of the Board of Directors in the business and affairs of the
corporation, and may have the power to authorize the seal of the corporation to
be affixed to all papers on which the corporation desires to place its corporate
seal, if such a corporate seal shall exist. Any such committee or committees
must have such name or names as shall be stated in the Bylaws of the corporation
then in effect or as may be determined from time to time by resolution adopted
by the Board. Each such committee must include at least one (1) member of the
Board of Directors, and the Board of Directors by resolution may appoint natural
persons who are not Directors to serve as regular or alternate members on one or
more of such committees; provided, however, that any committee authorized to
administer stock option or stock plans of the corporation shall consist only of
persons who are members of the Board of Directors. Notwithstanding the
foregoing, the Board of Directors may not delegate any of its powers to a
committee or committees, the affect of which would allow such committee or
committees to authorize any of the acts or transactions which require the
affirmative of not less than eighty percent (80%) of the Directors as set for in
Section 10 of this Article, unless such committee or committees shall have been
established by resolution passed by the affirmative vote of not less than eight
percent (80%) of the Directors.
The Board shall have the power to prescribe the manner in which
proceedings of any such committee shall be conducted. In the absence of any such
prescription, such committee shall have the power to prescribe the manner in
which its proceedings shall be conducted. Unless the Board or such committee
shall otherwise provide, the regular and special meetings and other actions of
any such committee shall be governed by the provisions of this Article
applicable to meetings and actions of the Board. Minutes shall be kept of each
meeting of each committee.
The Board of Directors shall designate an Audit Committee, such Audit
Committee shall meet independently with the corporation's internal auditing
staff, with representatives of the corporation's independent accountants, and
with representatives of senior management, in each instance not less frequently
than once each fiscal year. The Audit Committee shall also. be responsible for
reviewing the general scope of the audit, the fee charged by independent
accountants, and matters relating to internal control systems and procedures.
If the Board of Directors shall designate a Compensation Committee, the
Compensation Committee shall be, responsible for reviewing and reporting to the
Board on the recommended annual compensation for all officers and for preparing
any reports on compensation policies required by rules and regulations of the
Securities and Exchange Commission to which the corporation is subject.
Section 13. MEDICAL ADVISORY BOARD. The Board of Directors shall
establish a Medical Advisory Board, the size and composition of which shall be
established by resolution passed by the affirmative vote of not less than eighty
percent (80%) of the Directors. Members of the Medical Advisory Board who need
not be members of the Board of Directors or officers of the corporation. The
Medical Advisory Board shall meet at such time or times as it may, by majority
vote of its members, elect and may adopt procedures for the conduct of its
meetings. The Medical Advisory Board's role shall be to provide advice to the
Board of Directors on decisions relating to equipment purchases, technological
obsolescence, quality assurance, credentialing and such other matters respecting
the medical aspects of the corporation's business as it shall determine or as
shall be requested by the Board of Directors. The Medical Advisory Board shall
have no authority to bind the corporation or the Board of Directors. Unless
otherwise established by a resolution adopted by at least a majority of the
members of the Medical Advisory Board, the majority of the members of the
Medical Advisory Board shall constitute a quorum of the transaction of its
business and the affirmative vote of the majority of the members of the Medical
Advisory Board shall constitute action validly taken by that body.
Section 14. EXPENSES AND COMPENSATION.
(a) The Directors shall be allowed and paid all reasonable and
necessary expenses incurred in attending any meeting of the Board. In
determining whether specific items of expense are reasonable in amount, the
Board may from time to time establish policies as the type of airline travel and
hotel accommodations for which reimbursement of expenses will be paid by the
corporation.
(b) The Board of Directors may fix the compensation of directors for
services to the corporation as directors, as members of a committee of the
Board, or in any other capacity. Provided, however, that Directors shall not
receive compensation for their services as Directors except as authorized and
approved at a meeting of the Board of Directors at which at least two-third
(2/3) of the then duly elected and acting Directors shall be in attendance, and
only with the affirmative vote and approval at such meeting of at least a
majority of the Directors then duly elected and acting.
Section 15. REPORT TO STOCKHOLDERS AND RATIFICATION BY STOCKHOLDERS.
(a) The Board of Directors, acting through a representative of the
Board or by the Chairman of the Board or the President, if such person shall be
a Director, shall make a report to the stockholders at annual meetings of the
stockholders of the condition of the corporation, and shall, on request, furnish
each of the stockholders with a true copy thereof. The requirement of furnishing
a copy of a statement of the condition of the corporation shall be satisfied if
annual report with financial statements for the last fiscal year of the
corporation is provided to stockholders of record at or prior to the annual
meeting.
(b) The Board of Directors, in its discretion, may submit any contract
or act for approval or ratification at any annual or special meeting of the
stockholders called for the purpose of considering any such contract or act,
which, if approved, or ratified by the vote of the holders of a majority of the
capital stock represented in person or by proxy at such meeting, provided that a
lawful quorum of stockholders be there represented in person or by proxy, shall
be valid and binding upon the corporation and upon all the stockholders thereof,
as if it had been approved or ratified by every stockholder of the corporation.
Section 16. RIGHTS OF INSPECTION. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records and
documents of every kind and to inspect the physical properties of the
corporation and also of its subsidiary corporations, domestic or foreign. Such
inspection by a director may be made in person or by agent or attorney and
includes the right to copy and obtain extracts.
ARTICLE III - OFFICERS AND THEIR DUTIES
Section 1. DESIGNATION AND ELECTION OF OFFICERS AND AGENTS. Subject to
the provisions of ARTICLE II, Section 10, the Board of Directors, at its first
meeting after the annual meeting of stockholders, shall elect a President, a
Secretary and a Treasurer, to hold office at the pleasure of the Board and,
unless removed without or without cause by the Board, for a period of
approximately one (1) year until the next annual meeting of the Board and until
their successors are elected and qualify. The Board of Directors may from time
to time, by resolution, appoint such additional officers, and agents, including
without limitation a Chairman of the Board, Vice Presidents, Assistant
Secretaries, Assistant Treasurers and transfer agents as it may deem advisable.
The Board shall have authority to prescribe the duties of all officers and to
fix their compensation, and all such appointed officers shall be subject to
removal at any time by the Board of Directors. All officers, agents and factors
shall be chosen and appointed in such manner, and shall hold their office for
such terms as the Board of Directors may by resolution prescribe.
No officer other than the Chairman of the Board, if such officer is
elected, shall be required to be a member of the Board of Directors. Any person
may hold more than two or more offices.
All officers shall serve at the pleasure of the Board of Directors and
any person may be removed from office by action of the Board of Directors at any
time, either with or without cause. Any vacancy in any of said offices may be
filled by the Board of Directors or, at the discretion of the Board, may be left
vacant except that the corporation shall at all times have a President, a
Secretary and a Treasurer.
Section 2. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer shall be designated and elected by the Board, shall act as chairman of
the Board and shall preside at all meetings of the Board of Directors and the
stockholders. The Chairman of the Board shall have authority to sign the
Certificates of Stock issued by the corporation, bills of exchange and
promissory notes of the corporation, and shall perform such other duties as
shall be prescribed by the Board of Directors. If so designated by resolution of
the Board of Directors, the Chairman of the Board shall also be the chief
executive officer of the corporation and shall have the supervision and, subject
to the control of the Board of Directors, the direction of the corporation's
affairs, with full power to execute all resolutions and orders of the Board of
Directors not especially entrusted to some other officer of the corporation.
Section 3. PRESIDENT. Unless such duties are assigned by resolution of
the Board to a Chairman of the Board, if there be such an officer, the President
shall be the chief executive officer of the corporation and shall have the
supervision and, subject to the control of the Board of Directors, the direction
of the corporation's affairs, with full power to execute all resolutions and
orders of the Board of Directors not especially entrusted to some other officer
of the corporation. If there shall not be a Chairman of the Board, the President
shall also preside at all meetings of the Board of Directors and stockholders.
If the Chairman of the Board shall also preside at all meetings of the Board of
Directors and stockholders. If the Chairman of the Board shall be appointed as
the corporation's chief executive officer, then the President shall be the chief
operating officer of the corporation and shall have the supervision and, subject
to the control of the Chairman of the Board and the Board of Directors, the
direction of the corporation's day-to-day business affairs, with full power to
execute all resolutions and orders of the Board of Directors not especially
entrusted to some other officer of the corporation. The President shall have
authority to sign the Certificates of Stock issued by the corporation, bills of
exchange and promissory notes of the corporation, and shall perform such other
duties as shall be prescribed by the Board of Directors.
Section 4. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board or,
if not so ranked, any such Vice President, shall perform all the duties of the
President and, when so acting shall have all the powers of, and be subject to
all the restrictions upon, the President. The Vice Presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board. The Board may designate specific
functions or areas of responsibility for any Vice President by resolution of the
Board and/or by specifying at the time of his or her election that such person's
Vice President title and office include a designation of such function or
general area of responsibility; the authority of any such person in said
designated functions and areas of responsibility shall be subject to the control
of the Board of Directors and to right of supervision conferred upon the
Chairman of the Board and the President of the corporation. In the absence or
inability to act of the Chairman of the Board and the President, any Vice
President shall have authority to sign the Certificates of Stock issued by the
corporation.
Section 5. TREASURER. The Treasurer shall have the responsibility for
depositing all moneys and other valuables in the name and to the credit of the
corporation with such depositaries as may be designated by the Board and
otherwise protecting the custody of all the funds and securities of the
corporation. The Treasurer shall have the care and custody of the stocks, bonds,
certificates, vouchers, evidence of debts, securities, and such other property
belonging to the corporation as the Board of Directors shall designate. When
necessary or proper, he or she shall endorse on behalf of the corporation for
collection checks, notes, and other obligations. The Treasurer shall disburse
the funds of the corporation as may be ordered by the Board. In the absence of
the Chairman of the Board and the President, the Treasurer shall sign on behalf
of the corporation all bills of exchange and promissory notes of the
corporation; he or she shall sign all papers required by law or by these By-Laws
or the Board of Directors to be signed by the Treasurer, and shall perform such
other duties as shall be prescribed by the Board of Directors.
Whenever required by the Board of Directors or the President, the
Treasurer shall render a statement of the corporation's cash account, an account
of all transactions as Treasurer, and of the financial condition of the
corporation. The Treasurer shall enter regularly in the books of the corporation
to be kept by him or her for the purpose, full and accurate accounts of all
monies received and paid by him or her on account of the corporation. The
Treasurer shall at all reasonable times exhibit the books of account to any
Director or the president of the corporation during business hours, and shall
perform all acts incident to the position of Treasurer subject to the control of
the Board of Directors.
The Treasurer shall, if required by the Board of Directors, give bond
to the corporation conditioned for the faithful performance of all his or her
duties as Treasurer in such sum, and with such security as shall be approved by
the Board of Directors, the expense of such bond to be borne by the corporation.
Section 6. ASSISTANT TREASURERS. The Board of Directors may appoint one
or more Assistant Treasurers who shall have such powers and perform such duties
as may be prescribed by the Treasurer of the corporation or by the Board of
Directors or the President of the corporation. Any Assistant Treasurer shall, if
required by the Board of Directors, give bond to the corporation conditioned for
the faithful performance of all his or her duties as Assistant Treasurer in such
sum, and with such security as shall be approved by the Board of Directors, the
expense of such bond to be borne by the corporation.
Section 7. SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors and the minutes of all meetings of the
stockholders in books provided for that purpose. The Secretary shall attend to
the giving and serving of all notices of the corporation; he or she may sign
with the Chairman of the Board, the President or any Vice President, in the name
of the corporation, all contracts authorized by the Board of Directors; he or
she shall have the custody of the corporate seal of the corporation, if there be
a corporate seal; he or she shall affix the such corporate seal, if there be
one, to all certificates of stock duly issued by the corporation; he or she
shall have charge of the stock certificate books, stock transfer books and stock
ledgers, and such other books and papers as the Board of Directors may direct,
all of which shall at all reasonable times be open to the examination of any
Director upon application at the office of the corporation during business
hours; and he or she shall, in general, perform all the duties incident to the
office of Secretary and such other duties as shall be prescribed by the Board of
Directors.
Section 8. ASSISTANT SECRETARIES. The Board of Directors may appoint
one or more Assistant Secretaries who shall have such powers and perform such
duties as may be prescribed by the Secretary or by the Board of Directors.
Section 9. REPRESENTATION OF THE CORPORATION. Unless otherwise ordered
by the Board of Directors, the Chairman of the Board or the President shall have
full power and authority in behalf of the corporation to attend and to act and
to vote at any meetings of the stockholders or holders of indebtedness of any
corporation in which the corporation may hold stock or evidences of
indebtedness, and at any such meetings, shall possess and may exercise any and
all rights and powers incident to the ownership of such stock or evidences of
indebtedness which the corporation might have possessed and exercised if
present. The Board of Directors, by resolution from time to time, may confer
like powers on any person or persons in place of the Chairman of the Board of
the President to represent the corporation for the purposes in this section
mentioned.
ARTICLE IV - CAPITAL STOCK
Section 1. AUTHORITY OF THE BOARD. The capital stock of the corporation
shall be issued in such manner and at such times and upon such conditions as
shall be prescribed by the Board of Directors; provided, however, that issuance
of any capital stock (or any rights to acquire capital stock) shall require the
affirmative vote of greater than or equal to eighty percent (80%) of the
directors then serving on the Board of Directors
Section 2. STOCK CERTIFICATES.
(a) Every holder of shares of the corporation shall be entitled to have
a certificate signed in the name of the corporation by the Chairman of the
Board, the President or a Vice-President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary, certifying the number of
shares and the class or series of shares owned by the stockholder. Any or all of
the signatures on the certificate may be facsimile if the stock certificate is
imprinted with the corporate seal. If any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were an officer, transfer agent or registrar at the date of
issue.
(b) Certificates for shares may be issued prior to full payment under
such restrictions and for such purposes as the Board may provide, provided,
however, that on any certificate issued to represent any partly paid shares, the
total amount of the consideration to be paid therefor and the amount paid
thereon shall be stated or incorporated by reference to a document setting forth
the same.
(c) Except as provided in this Section, no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered and
cancelled at the same time. The Board may, however, if any certificate for
shares is alleged to have been lost, stolen or destroyed, authorize the issuance
of a new certificate in lieu thereof, and the corporation may require that the
corporation be given a bond or other adequate security and an indemnification
agreement sufficient to indemnify it against any claim that may be made against
the corporation (including expense or liability) on account of the alleged loss,
theft or destruction of such certificate or the issuance of such new
certificate. The Board of Directors may, in its discretion, refuse to issue such
new or duplicate certificates save upon the order of a court of competent
jurisdiction in such matter, anything herein to the contrary notwithstanding.
(d) All certificates evidencing stock in this corporation of any class
or series shall be consecutively numbered; the name of the person owning the
shares represented thereby with the number of such shares and the date of issue
shall be entered on the corporation's books.
(e) the Board of Directors may appoint a transfer agent and a registrar
of transfers and may require all stock certificates to bear the signature of
each transfer agent and such registrar of transfer.
(f) The Board of Directors shall have power and authority to make all
such rules and regulations not inconsistent herewith as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
the capital stock of the corporation.
Section 3. CLOSING OF STOCK TRANSFER BOOKS FOR VOTING AND
DISTRIBUTIONS. The Stock Transfer Books shall be closed for all meetings of the
stockholders for a period specified by the Board of Directors or by any
authorized officer of the corporation acting pursuant to authority of the Board
of Directors or by any authorized officer of the corporation acting pursuant to
authority of the Board of Directors, for a period of not less than ten (10) and
not more than sixty (60) days prior to such meetings, and shall be closed for
the payment of dividends or other distributions by the corporation to its
stockholders during such periods as from time to time may be fixed by the Board
of Directors.
Section 4. NO PREEMPTIVE RIGHTS. No stockholder or subscriber to shares
of this corporation shall be entitled to any preemptive or preferential rights
to purchase and/or subscribe for any part of any shares which may be issued at
any time by this corporation.
ARTICLE V - OFFICES AND BOOKS
Section 1. RESIDENT AGENT, REGISTERED OFFICE IN NEVADA; OTHER OFFICES.
(a) The corporation shall appoint and maintain a resident agent for the
corporation in accordance with the provisions of Section 78.090 of the Nevada
General Corporation Law, who may be either a natural person or a corporation,
resident or located in the State of Nevada. The resident agent may be changed
from time to time by action of the Board of Directors. The street address of the
resident agent where such agent maintains an office for the service of process
upon this corporation shall be the registered office of this corporation in the
State of Nevada (the "registered office").
(b) The corporation may have a principal office and such other offices
in the State of Nevada or any other state or territory as the Board of Directors
may designate from time to time.
Section 2. BOOKS AND RECORDS.
(a) A copy of the Articles of Incorporation of the corporation,
certified by the secretary of state of Nevada, a copy of the Bylaws of the
corporation, certified by an officer of this corporation, and a statement
setting out the name of the custodian of the stock ledger or a duplicate stock
ledger of this corporation, and the present and complete post office address,
including street and number, where the stock ledger or duplicate stock ledger is
kept, shall be kept and maintained at the registered office of the corporation
in the State of Nevada. All such documents maintained at the registered office
of the corporation shall be subject to inspection by any of the stockholders of
the corporation upon reasonable notice during customary business hours for a
proper purpose.
(b) The stock ledger and stock transfer books of the corporation shall
be kept at its principal office, either within or without the State of Nevada,
or at the offices of a stock transfer agent duly authorized to act as such by
resolutions adopted by the Board of Directors. The stock ledger shall be
available for the inspection of all who are authorized or have the right to see
the same in accordance with the Nevada General Corporation Law, and for the
transfer of stock.
(c) Any person who has been a stockholder of record of the corporation
for at least six (6) months immediately preceding his or her demand, or any
person holding, thereunto authorized in writing by the holders of, at least five
percent (5%) of all of the corporation's outstanding shares entitled to vote,
upon at least five (5) days' written demand is entitled to inspect in person or
by agent or attorney, during usual business hours, the stock ledger or duplicate
stock ledger of the corporation, whether kept in the registered office of the
corporation in the State of Nevada or elsewhere in accordance with paragraph (a)
of this Section 2, and to make extracts therefrom. An inspection authorized by
this paragraph (c) may be denied to a stockholder or other person upon such
person's refusal to furnish to the corporation an affidavit that such inspection
is not desired for a purpose which is in the interest of a business or object
other than the business of the corporation and that such person has not at any
time sold or offered for sale any list of stockholders or any domestic or
foreign corporation or aided or abetted any person in procuring any such record
of stockholders for any such purpose. In every instance where an attorney or
other agent of a stockholder seeks the right of inspection, the demand must be
accompanied by a power of attorney as provided by Section 78.1059 of the Nevada
General Corporation Law.
(d) All other books and records of the corporation shall be kept at
such places as may be prescribed by the Board of Directors or by the President
of the Corporation acting pursuant to authority conferred by the Board of
Directors.
ARTICLE VI INDEMNIFICATION
Section 1. DEFINITIONS. For the purposes of this Article, "agent' means
any person who is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent or another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a director,
officer, employee or agent of a foreign or domestic corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes without limitation
attorneys' fees and any expenses of establishing a right to indemnification
under Sections 4 or 5(c) of this Article.
Section 2. INDEMNIFICATION IN ACTIONS BY THIRD PARTIES. The corporation
shall have power to indemnify any person who was or is a party or is threatened
to be made a party to any proceeding (other than an action by or in the right of
the corporation to procure a judgment in its favor) by reason of the fact that
such person is or was an agent of the corporation, against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such proceeding if such person acted in good faith and in a
manner such persons reasonably believed to be in the best interests of the
corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person reasonably
believed to be in the best interests of the corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
Section 3. INDEMNIFICATION BY ACTIONS BY OR IN THE RIGHT OF THE
CORPORATION. The corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that such person is or was an agent of the
corporation, against expenses actually and reasonably incurred by such person in
connection with the defense or settlement of such action if such person acted in
good faith, in a manner such person believed to be in the best interests of the
corporation and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances
Section 4. INDEMNIFICATION AGAINST EXPENSES. To the extent that an
agent of the corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article or in defense of any
claim, issue or matter therein, and as otherwise provided by authorization of
the Board of Directors or stockholders of this corporation, the agent shall be
indemnified against expenses actually and reasonably incurred by the agent in
connection therewith.
Section 5. REQUIRED DETERMINATIONS. Any indemnification under this
Article shall be made by the corporation only if authorized in the specific
case, upon a determination that indemnification of the agent is proper in the
circumstances because the agent has met the applicable standard of conduct set
forth in Sections 2 or 3 of this Article, by:
(a) A majority vote of a quorum consisting of directors who are not parties
to such proceeding; or
(b) Approval of the stockholders, with the shares owned by the person to be
indemnified not being entitled to vote thereon; or
(c) The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or other person
rendering services in connection with the defense, whether or not such
application by the agent, attorney or other person is opposed by the
corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the corporation prior to the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of the agent to
repay such amount unless it shall be determined ultimately that the agent is
entitled to be indemnified as authorized in this Article.
Section 7. OTHER INDEMNIFICATION. No provision made by the corporation
to indemnify it or its subsidiary's directors or officers for the defense of any
proceeding, whether contained in the Articles, Bylaws, a resolution of
stockholders or directors, an agreement or otherwise, shall be valid unless
consistent with this Article and approved by a majority of the Directors;
provided, however, that any such agreement approved by a majority of the shares
of capital stock voted at any meeting called to consider the same or by written
consent of a majority of the shares entitled to vote for the election of
directors shall supercede the provision of this Article to the extent of any
inconsistencies. Nothing contained in this Article shall affect any right to
indemnification to which persons other than such directors and officers may be
entitled by contract or otherwise.
Section 8. FORMS OF INDEMNIFICATION NOT PERMITTED. No indemnification
or advance shall be made under this Article, except as provided in Sections 4 or
5(c), in any circumstances where it appears:
(a) That it would be inconsistent with a provision of the Articles,
these Bylaws, a resolution of the stockholders or a written contractual
agreement which prohibits or otherwise limits indemnifications; or
(b) That it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
Section 9. INSURANCE. The corporation shall have power to purchase and
maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not the corporation would have the
power to indemnify the agent against such liability under the provisions of this
Article.
Section 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT PLANS.
This Article does not apply to any proceeding against any trustee, investment
manager or other fiduciary of an employee benefit plan in such person's capacity
as such, even though such person may also be an agent of the corporation as
defined in Section I of this Article. The corporation shall have power to
indemnify such trustee, investment manager or other fiduciary to the extent
permitted by applicable law
ARTICLE VII OTHER PROVISIONS
Section 1. AUTHORITY REQUIRED FOR COMMITMENTS IN EXCESS OF $250,000. No
agreement, contract, lease, note, bond, debenture or other obligation (other
than checks in payment of indebtedness incurred by authority of the Board of
Directors) involving the payment of money or the credit of the corporation for
more than Two Hundred Fifty Thousand Dollars ($250,000) shall be made without
the authority of the Board of Directors.
Section 2. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, option or warrants to purchase stock in this corporation, conveyance
or other instrument in writing and any assignment or endorsements thereof
executed or entered into between the corporation and any other person, when
signed by the Chairman of the Board, the President or any Vice President and the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the corporation shall be valid and binding on the corporation in the absence of
actual knowledge on the part of the other person that the signing officers had
no authority to execute the same. Any such instruments may be signed by any
other person or persons and in such manner as from time to time shall be
determined by the Board, and, unless so authorized by the Board, no other
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or amount.
Section 3. STOCK PURCHASE PLANS. Subject to the provisions of Article
I, Section 4 of these Bylaws, the corporation may adopt and carry out one or
more stock purchase plans or agreements or stock option plans or agreements
providing for the issue and sale of capital stock for such consideration as may
be fixed of its unissued shares, or of issued shares acquired or to be acquired,
to one or more of the employees, officer or directors of, or consultants to, the
corporation or of a subsidiary or to a trustee on their behalf, and for the
payment of such shares in installments or at one time, and may provide for
aiding any such persons in paying for such shares by compensation for services
rendered, promissory notes or otherwise
Any such stock purchase plan or agreement or stock option plan or other
stock agreement may include, among other features, the fixing of eligibility for
participation therein, the class and price of shares to be issued or sold under
the plan or agreement, the number of shares which may be subscribed for, the
method of payment therefor, the reservation of title until full payment
therefor, the effect of the termination of employment, an option or obligation
on the part of the corporation to repurchase the shares upon termination of
employment, restrictions upon transfer of the shares, the time limits of and
termination of the plan, and any other matters, not in violation of applicable
law, as may be included in the plain as approved or authorized, by the Board or
any committee of the Board.
Section 4. RESERVES AND DIV1DENDS. The Board of Directors shall have
power to reserve over and above the capital stock paid in, such amount, in its
discretion to fix as a reserve fund, and may, from time to time, declare
dividends in excess of the amounts so reserved subject to the provisions of the
Nevada General Corporation Law, and pay the same to the stockholders of the
corporation, and may also, if it deems the same advisable, declare stock
dividends of the unissued capital stock.
Section 5. DEPOSIT OF FUNDS. Except for funds, held in trust by third
parry fiduciaries, all monies of the corporation, shall be deposited when and as
received by the Treasurer or any other employee or agent of the corporation in
such bank or banks or other depositary as may from time to time be designated by
the Board of Directors, and such deposits shall be made in the name of the
corporation.
Section 6. BOARD APPROVAL REQUIRED FOR LOANS TO OFFICERS OR
STOCKHOLDERS. No loan or advance of money shall be made by the corporation to
any stockholder or officer of the corporation, unless the Board of Directors
shall otherwise authorize; the foregoing provision shall not apply to advances
for business expenses made in the ordinary course of business to employees or
agents of the corporation who coincidentally are stockholders or officers of the
corporation.
Section 7. BOARD APPROVAL REQUIRED FOR COMPENSATION TO EXECUTIVE
OFFICERS. No executive officer shall be entitled to any salary or compensation
for any services performed for the corporation, unless such salary or
compensation shall be fixed by resolution of the Board of Directors or by a
committee thereof or the Chairman of the Board or the President of the
Corporation under authority conferred by the Board. For the purposes hereof, an
executive officer shall be deemed to include the Chairman of the Board, the
President, any Vice President, the Secretary and the Treasurer of the
corporation
Section 8. POWER TO DEAL IN SECURITIES. The corporation may take,
acquire, hold, mortgage, sell, or otherwise deal in stocks or bonds or
securities of any other corporation, partnership, association or other business
entity, if and as often as the Board of Directors shall so elect.
Section 9. POWER TO CREATE SECURITY INTERESTS; STOCKHOLDER APPROVAL
REQUIRE TO DISPOSE OF ALL ASSETS. The Directors shall have power to authorize
and cause to be executed, mortgages and liens without limit as to amount upon
the property and franchise of this corporation, and pursuant to the affirmative
vote, either in person or by proxy, of the holders of not less than eighty
percent (80%) of the voting capital stock issued and outstanding;; the Directors
shall have authority to dispose in any manner of the whole property of this
corporation.
Section 10. CORPORATE SEAL. The corporation may have a corporate seal if so
authorized by resolution of the Board, the design thereof being established by
the Board.
Section 11. FISCAL YEAR. The fiscal year of the corporation shall end
on December 31 of each year, subject to the right of the Board to change the
fiscal year if determined by the Board to be appropriate.
ARTICLE VIII AMENDMENT OF BYLAWS
Section 1. Amendments and changes of these Bylaws may be made at any
regular or special meeting the Board of Directors at which a quorum is present
and acting, by a vote of not less than eighty percent (80%) of the entire Board
of Directors, or may be made by a vote of, or a consent in writing signed by,
the holders of not less than eighty percent (80%) of the issued and outstanding
capital stock of the corporation.
[Certification follows]
<PAGE>
CERTIFICATION OF BYLAWS:
The undersigned, being a duly elected and acting officer of the
corporation, DOES HEREBY CERTIFY that the foregoing is a true, correct and
complete copy of the Bylaws of the above corporation as adopted and approved by
the Board of Directors of said corporation on September 1, 1999, and that the
same have not been rescinded, modified or amended as of this date of this
certificate.
IN WITNESS WHEREOF, I have set my hand and the seal of the corporation
as of September 1, 1999.
Printed Name: Mark R. Mandel
Title: Secretary
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of September, 1999, by and between Prime Medical
Operating, Inc., a Delaware corporation (the "Secured Party") and Prime/BDR
Acquisition, L.L.C., a Delaware limited liability company (the "Debtor").
RECITALS:
A. Debtor and Secured Party have executed and delivered that certain
Contribution Agreement dated effective September 1, 1999, between and among
Debtor, Secured Party, Prime Medical Services, Inc., a Delaware corporation,
Prime/BDEC Acquisition, L.L.C., a Delaware limited liability company, Barnet
Dulaney Eye Center, P.L.L.C., an Arizona professional limited liability company,
LASIK Investors L.L.C., a Delaware limited liability company, David D. Dulaney,
M.D., Ronald W. Barnet, M.D., and Mark Rosenberg (the "Contribution Agreement"),
and that certain Loan Agreement, dated September 1, 1999 (the "Loan Agreement"),
pursuant to which Secured Party agrees to make certain loans to Debtor on the
terms and subject to the conditions provided therein.
B. Secured Party has requested that Debtor pledge the Collateral (as
defined below) to secure certain obligations and liabilities that Debtor may now
or hereafter have to Secured Party, including, without limitation, any
obligations arising under loans made pursuant to the Loan Agreement.
C. Debtor desires to enter into this Agreement as a material inducement to
Secured Party's extension of credit under the Loan Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
COLLATERAL AND SECURED OBLIGATIONS
1.1 Grant of Security Interest. Debtor hereby assigns, transfers, and
pledges to Secured Party, and Debtor hereby grants to Secured Party a security
interest in, the following described collateral (collectively, the
"Collateral"):
(a) Interest in Subsidiary. All ownership interests of Debtor in Horizon
Vision Center, Inc., a Nevada corporation ("Horizon"), whether now existing or
hereafter acquired and including, without limitation, that certain 60% interest
in Horizon (the "Interests").
<PAGE>
2
(b) Interest in Acquisition Agreements. All of Debtor's interest and rights
(but not any obligations) under those certain Stock Purchase Agreements by and
between Debtor and the Shareholders of Horizon;
(c) Accounts. All accounts and rights now or hereafter
attributable to any of the Collateral described in (a) and (b)above, and all
rights of Debtor now or hereafter arising under any agreement pertaining to the
Collateral described in (a) and (b) above, including without limitation all
distributions, proceeds, fees, dividends, preferences, payments or other
benefits of whatever nature which Debtor is now or may hereafter become entitled
to receive with respect to any Collateral described in (a) and (b) above;
(d) Additional Property. "Collateral" shall also include the
following property (collectively, the "Additional Property") which Debtor
becomes entitled to receive or shall receive in connection with any other
Collateral: (i) any stock or other ownership certificate, including without
limitation, any certificate representing a stock dividend or any certificate in
connection with any recapitalization, reclassification, merger, consolidation,
conversion, sale of assets, combination, stock split, reverse stock split, or
spin-off; (ii) any option, warrant, subscription or right, whether as an
addition to or in substitution of any other Collateral; (iii) any dividends or
distributions of any kind whatsoever, whether distributable in cash, stock or
other property; (iv) any interest, premium or principal payments; and (v) any
conversion or redemption proceeds; and
(e) Proceeds. All proceeds (cash and non-cash) arising out of
the sale, exchange, collection or other disposition of all or any portion of the
Collateral described in (a), (b), (c) or (d) above, including without limitation
proceeds in the form of stock, accounts, chattel paper, instruments, documents,
goods, inventory and equipment.
The security interest in the Collateral hereby granted by Debtor to Secured
Party may sometimes be referred to in this Agreement as the "Security Interest".
1.2 Obligations. This Agreement and the Security Interest shall secure
full and punctual payment and performance of the following indebtedness, duties
and obligations (collectively, the "Obligations"):
(a) All liabilities and obligations of Debtor to Secured Party
or any subsidiary of Secured Party (including, without limitation, any
principal, interest, fees and other amounts, and any other obligations) under
and pursuant to this Agreement and/or the Contribution Agreement, the Loan
Agreement, each promissory note issued pursuant to the Loan Agreement
(collectively, the "Note"), and/or any other contract or agreement between
Secured Party (or any of its subsidiaries) and Debtor or any affiliate of Debtor
(collectively, including the Contribution Agreement, the Loan Agreement and the
Note, the "Other Agreements"); and
(b) (i) all indebtedness, obligations and liabilities of
Debtor and/or any affiliate of Debtor to Secured Party or any subsidiary of
Secured Party of any kind or character, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, arising from, connected with,
or related to the Other Agreements, or any other document, agreement, or
instrument executed in connection therewith, (ii) all accrued but unpaid
interest on any of the indebtedness described in (i) above, (iii) all
obligations of Debtor and/or any affiliate of Debtor to Secured Party or any
subsidiary of Secured Party under any documents or agreements evidencing,
securing, governing and/or pertaining to all or any part of the indebtedness
described in (i) and (ii) above, (iv) all costs and expenses incurred by Secured
Party or its subsidiaries in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all attorneys' fees, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
(c) All sums now or hereafter loaned or advanced by Secured
Party or any subsidiary of Secured Party to Debtor or any affiliate of Debtor,
or expended by Secured Party or its subsidiaries for the account of Debtor or
its affiliates or otherwise owing by Debtor or its affiliates to Secured Party
or its subsidiaries, in respect of the Obligations, and all other sums expended
or advanced by Secured Party or its subsidiaries pursuant to any term or
provision of this Agreement or any Other Agreement (i) to collect and/or enforce
the Obligations or (ii) to maintain, protect and preserve the Collateral.
ARTICLE II
DEBTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO COLLATERAL
Debtor hereby represents and warrants to Secured Party as follows:
2.1 Ownership of Collateral. Debtor has good and marketable title to
the Collateral free and clear of any liens, security interests, shareholders
agreement, calls, charge, or encumbrance, except for this Security Interest. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except as may have
been filed in favor of Secured Party relating to this Agreement.
2.2 Power & Authority. Debtor has the lawful right, power, and
authority to grant the Security Interest in the Collateral. This Agreement,
together with all filings and other actions necessary or desirable to perfect
and protect such security interest, which have been duly taken, create a valid
and perfected first priority security interest in the Collateral securing the
payment and performance of the Obligations.
2.3 No Agreements. The Interests are not subject to any right of
redemption, or any call or put options, voting trust, proxy, shareholders
agreement, right of first refusal, or any other document or agreement which
would in any way impair or adversely affect this Security Interest or the rights
of Secured Party under this Agreement.
2.4 Securities. Any certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any party or of any agreement by which Debtor or the issuer thereof is
bound. No restrictions or conditions exist with respect to the transfer or
voting of any securities pledged as Collateral.
ARTICLE III
DEBTOR'S OTHER REPRESENTATIONS AND WARRANTIES
3.1 Solvency of Debtor. As of the date hereof, (i) Debtor is and will
be solvent; (ii) the fair saleable value of Debtor's assets exceeds and will
continue to exceed Debtor's liabilities (both fixed and contingent); (iii)
Debtor has and will have sufficient capital to satisfy all of Debtor's
obligations as they become due; (iv) no receiver, trustee, or custodian has been
appointed for, or taken possession of, all or substantially all of the assets of
Debtor, either in a proceeding brought by Debtor or in a proceeding brought
against Debtor; (v) Debtor is not the subject of a petition for relief under the
United States Bankruptcy Code or any similar federal or state insolvency law,
including without limitation a petition filed by Debtor or a petition filed by a
third party seeking relief against Debtor; and (vi) Debtor has no intention of
filing a petition for relief under the United States Bankruptcy Code or any
similar federal or state insolvency law, or of seeking any other form of
creditor relief, within the two-year period immediately following the date of
this Agreement.
3.2 Authority and Compliance. Debtor has full power and authority to
enter into this Agreement. Debtor has full power and authority to enter into and
perform its obligations under each Other Agreement. No further consent or
approval is required as a condition to the validity of this Agreement or any
Other Agreement. Debtor is in compliance with all applicable laws, ordinances,
statutes, orders, regulations, judgments, writs, or decrees of any governmental
entity to which it is subject.
3.3 Binding Agreement. This Agreement and each Other Agreement
constitute valid and legally binding obligations of Debtor, in accordance with
their terms, subject to the applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally.
3.4 Litigation. There are no proceedings pending or, to the knowledge
of Debtor, threatened before any court or administrative agency which will or
may have a material adverse effect on the financial condition of Debtor or upon
Debtor's ability to perform its obligations under this Agreement or any Other
Agreement.
3.5 No Conflicting Agreements. There are no provisions of any existing
agreement, mortgage, indenture or contract binding on Debtor or affecting its
property, which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement or any Other Agreement.
3.6 Ownership of Assets. Debtor has good and full title to the
Collateral, and the Collateral is owned free and clear of liens, charges,
claims, security interests, and other encumbrances.
3.7 Taxes. Debtor has filed all tax returns required to be filed by Debtor.
ARTICLE IV
DEBTOR'S COVENANTS WITH RESPECT TO COLLATERAL
Debtor covenants and agrees that from the date hereof and until the
payment and performance in full of the Obligations unless Secured Party
otherwise consents in writing:
4.1 Delivery of Instruments and/or Certificates. Contemporaneously
herewith, Debtor covenants and agrees to deliver to Secured Party any
certificates, documents, or instruments representing or evidencing the
Collateral, with Debtor's endorsement thereon and/or accompanied by property
instruments of transfer and assignment duly executed in blank with, if requested
by Secured Party, signatures guaranteed by a member or member organization in
good standing of an authorized Securities Transfer Agents Medallion Program, all
in form and substance satisfactory to Secured Party.
4.2 Further Assurances. Debtor will contemporaneously with the
execution hereof and from time to time thereafter at its expense promptly
execute and deliver all further instruments and documents and take all further
action necessary or appropriate or that Secured Party may request in order (i)
to perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing and filing any financing or
continuation statements, or any amendments thereto; (B) obtaining written
confirmation from the issuer of any securities pledged as Collateral of the
pledge of such securities, in form and substance satisfactory to Secured Party;
(C) cooperating with Secured Party in registering the pledge of any securities
pledged as Collateral with the issuer of such securities; (D) delivering notice
of Secured Party's security interest in any securities pledged as Collateral to
any securities or financial intermediary, clearing corporation or other party
required by Secured Party, in form and substance satisfactory to Secured Party;
and (E) obtaining written confirmation of the pledge of any securities
constituting Collateral from any securities or financial intermediary, clearing
corporation or other party required by Secured Party, in form and substance
satisfactory to Secured Party.
4.3 Additional Property. All Additional Property, as defined in Section
1.1(d) above, received by Debtor shall be received in trust for the benefit of
Secured Party. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Debtor, together with such instruments of transfer as
Secured Party may request, shall immediately be delivered to or deposited with
Secured Party and held by Secured Party as Collateral under the terms of this
Agreement. If the Additional Property received by Debtor and delivered to
Secured Party pursuant to this Section shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a member or member organization in good standing of an authorized Securities
Transfer Agents Medallion Program, all in form and substance satisfactory to
Secured Party. Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.
4.4 Sale, Transfer, Encumbrance. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, including without
limitation by purchase, lease, barter, trade, payment deferral, or the creation,
assumption or guarantee of indebtedness or other lending of credit. Secured
Party's written consent to any sale, mortgage, transfer, or encumbrance shall
not be construed to be a waiver of this provision in respect to any subsequent
proposed sale, mortgage, transfer, or encumbrance.
4.5 Liens. Neither Debtor nor any person acting on Debtor's behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed, upon the Collateral, any lien of any type or
nature whatsoever, other than the liens in favor of Secured Party.
4.6 Matters or Occurrences Affecting Collateral or this Agreement.
Debtor will promptly notify Secured Party of any and all matters or occurrences
that may have a material adverse effect on the status or value of the Collateral
or this Agreement, including without limitation the occurrence of an Event of
Default, or an event which, with giving of notice or lapse of time, or both,
would constitute an Event of Default.
4.7 Agreements Pertaining to Collateral. Debtor will not enter into any
type of contract or agreement pertaining to any of the Collateral or in any way
transfer any voting rights pertaining to the Collateral to any person or entity.
4.8 Dilution of Ownership. As to any securities pledged as Collateral,
Debtor will not consent to or approve of the issuance of (i) any additional
interests or shares of any class of securities of such issuer, (ii) any
instrument convertible voluntarily by the holder thereof or automatically upon
the occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or other
commitments entitling any third party to purchase or otherwise acquire any such
securities.
4.9 Restrictions on Securities. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any securities pledged as Collateral,
except as consented to in writing by Secured Party. As to any securities pledged
as collateral, Debtor will not consent to or approve of any stock split, reverse
stock split, stock dividend, reclassification, or other similar act or
transaction regarding the Interests unless consented to in writing by Secured
Party.
ARTICLE V
DEBTOR'S AFFIRMATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that it shall (i) promptly advise Secured Party in writing of any
litigation filed against Debtor and of any condition, event or act which comes
to its attention that would or might have a material adverse effect on Debtor's
financial condition or on Debtor's ability to perform the Obligations, (ii)
except as expressly contemplated in Section 4.3(e)(i) and (ii) of the
Contribution Agreement, pay all available funds toward repayment of the Note,
regardless of whether payment of such amounts exceeds the required payments
under the Note and (iii) if Borrower uses any proceeds from the Note, to
acquire, directly or indirectly, a one hundred percent (100%) interest in a
Target Center (as defined in the Contribution Agreement), Borrower shall cause
such Target Center to execute a security agreement, acceptable in form and
substance to Lender, granting to Lender or one of Lender's subsidiaries the
highest available priority security interest in all of the assets of such Target
Center.
ARTICLE VI
NEGATIVE COVENANTS
Until payment and performance of all Obligations, Debtor covenants and
agrees that Debtor will not, without the prior written consent of Secured Party:
6.1 Liens. Grant, suffer, or permit liens on, or security interests in, the
Collateral.
6.2 Violate Other Covenants. Violate or fail to comply with any
covenants or agreements regarding other debt which will or would with the
passage of time or upon demand cause the maturity of any other debt to be
accelerated.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. An Event of Default (herein so called) shall exist
if any one or more of the following events shall occur:
(a) The failure of Debtor to pay any amount required to be
paid under the Loan Agreement (including, without limitation, principal,
interest and fees due thereunder), or any other amount which Debtor may now or
hereafter owe to Secured Party under any Other Agreement or otherwise, within
ten (10) calendar days after such amount is due;
(b) The failure of Debtor to pay any Obligation after such
amount is due (and, if applicable under the terms of any contractual agreement
creating or governing such Obligation, after the expiration of any cure period
expressly required);
(c) Debtor's breach of a covenant in this Agreement or any other failure to
perform its obligations under this Agreement or any Other Agreement;
(d) Any representation or warranty made by Debtor in this
Agreement or any Other Agreement between Debtor and Secured Party shall be false
or materially misleading, as determined in the reasonable discretion of Secured
Party;
(e) Any event of default shall occur under the terms of the
Loan Agreement and shall not be cured within the time expressly provided for
with respect thereto in the Loan Agreement;
(f) If Debtor or any other party obligated to pay any portion
of the Obligations: (i) becomes insolvent, or makes a transfer in fraud of
creditors, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they become due; (ii) generally is not
paying its debts as such debts become due and Secured Party, in good faith,
determines that such event or condition could lead to a material impairment of
the Collateral, or any part thereof, or of any other payment security for any of
the Obligations; (iii) has a receiver, trustee or custodian appointed for, or
take possession of, all or substantially all of the assets of such party or any
of the Collateral, either in a proceeding brought by such party or in a
proceeding brought against such party and such appointment is not discharged or
such possession is not terminated within sixty (60) days after the effective
date thereof or such party consents to or acquiesces in such appointment or
possession; (iv) files a petition for relief under the United States Bankruptcy
Code or any other present or future federal or state insolvency, bankruptcy or
similar laws (all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or an involuntary petition for relief is filed against such
party under any Applicable Bankruptcy Law and such involuntary petition is not
dismissed within sixty (60) days after the filing thereof, or an order for
relief naming such party is entered under any Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization or other relief of debtors
now or hereafter existing is requested or consented to by such party; (v) fails
to have discharged within a period of sixty (60) days any attachment,
sequestration or similar writ levied upon, or any claim against or affecting,
any property of such party; or (vi) fails to pay within ninety (90) days any
final money judgment against such party; or
(g) The issuer of any securities constituting Collateral files
a petition for relief under any Applicable Bankruptcy Law, an involuntary
petition for relief is filed against any such issuer under any Applicable
Bankruptcy Law and such involuntary petition is not dismissed within thirty (30)
days after the filing thereof, or an order for relief naming any such issuer is
entered under any Applicable Bankruptcy Law.
7.2 Secured Party's Remedies. Upon the occurrence of an Event of Default:
(a) Secured Party may declare the Obligations in whole or part
immediately due and may enforce payment and performance of the same and exercise
any rights under the Texas UCC, rights and remedies of Secured Party under this
Agreement, or otherwise.
(b) Secured Party may, at Secured Party's option and at the
expense of Debtor, either in Secured Party's own right or in the name of Debtor
and in the same manner and to the same extent that Debtor might reasonably so
act if this Agreement had not been made: (i) do all things requisite,
convenient, or necessary to enforce the performance and observance of all
rights, remedies and privileges of Debtor arising from the Collateral, or any
part thereof, including without limitation compromising, waiving, excusing, or
in any manner releasing or discharging any obligation of any party to or arising
from the Collateral; (ii) take possession of the books, papers, chattel paper,
documents of title, and accounts of Debtor, wherever located, relating to the
Collateral; (iii) sue or otherwise collect and receive money attributable to the
Collateral; and (iv) exercise any other lawfully available powers or remedies,
and do all other things which Secured Party deems requisite, convenient or
necessary or which the Secured Party deems proper to protect the Security
Interest.
(c) Secured Party may foreclose this Agreement in the manner
now or hereafter provided or permitted by law and may upon such reasonable
notification prior thereto as may be required by applicable law (Debtor hereby
agreeing that ten days' notice is commercially reasonable), sell, assign,
transfer, or otherwise dispose of the Collateral at public or private sale, in
whole or in part, and Secured Party may, in its own name or as Debtor's
attorney-in-fact effectively assign and transfer the Collateral, or any part
thereof, absolutely, and execute and deliver all necessary assignments,
conveyances, bills of sale, and other instruments with power to substitute one
or more persons or corporations with like power. Any such foreclosure sale,
assignment, transfer, or other disposition shall, to the extent permitted by
law, be a perpetual bar, both at law and in equity, against Debtor and all
persons and corporations lawfully claiming by or through or under Debtor. Any
such foreclosure sale may be adjourned from time to time. Upon any sale, Secured
Party may bid for and purchase the Collateral, or any part thereof, and upon
compliance with the terms of sale may hold, retain, possess and dispose of the
Collateral, in its absolute right without further accountability. Secured Party
shall have the right to be credited on the amount of its bid a corresponding
amount of the Obligations as of the date of such sale.
(d) If, in the opinion of Secured Party, there is any question
that a public sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in any type of offering which complies with, or is exempt from the
registration requirements of, the Securities Act of 1933 and any applicable
state securities laws, and no sale so made in good faith by Secured Party shall
be deemed to be not "commercially reasonable" because so made.
(e) Not in limitation of any other provision of this
Agreement, Secured Party shall have all rights and remedies of a secured party
under the Texas UCC.
7.3 Application of Proceeds. Secured Party may apply the proceeds of
any foreclosure sale hereunder or from any other permitted disposition of the
Collateral or any part thereof as follows: (a) first, to the payment of all
reasonable costs and expenses of any foreclosure and collection hereunder and
all proceedings in connection therewith, including reasonable attorneys' fees;
(b) then, to the reimbursement of Secured Party for all disbursements made by
Secured Party for taxes, assessments or liens superior to the Security Interest
and which Secured Party shall deem expedient to pay; (c) then, to the
reimbursement of Secured Party of any other disbursements made by Secured Party
in accordance with the terms hereof or under the Contribution Agreement or any
Other Agreement; (d) then, to or among the amounts of fees, interest and
principal then owing and unpaid in respect of the Obligations, in such priority
as Secured Party may determine in its discretion; and (e) the remainder of such
proceeds, if any, shall be paid to Debtor. If such proceeds shall be
insufficient to discharge the entire Obligations, Secured Party shall have any
other available legal recourse against Debtor under, or for the performance of,
the Contribution Agreement and any Other Agreement between Debtor and Secured
Party, for the deficiency, together with interest thereon at the maximum rate
permitted under applicable law.
7.4 Enforcement of Obligations. Nothing in this Agreement or in any
other document or agreement shall affect or impair the unconditional and
absolute right of Secured Party to enforce the Obligations as and when the same
shall become due in accordance with the terms of any Other Agreement.
ARTICLE VIII
RIGHTS OF SECURED PARTY
8.1 Subrogation. Upon the occurrence of an Event of Default, Secured
Party, at its election, may subrogate to all of the interest, rights and
remedies of the Debtor, in respect to any of the Collateral or agreements
pertaining thereto.
8.2 Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
Secured Party as attorney-in-fact of Debtor, with full authority in the place
and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from
time to time on Secured Party's discretion and upon the occurrence of an Event
of Default, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation: (a) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral; (b) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) of this Section 8.2; (c) to file any claims or take
any action or institute any proceeding which Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party against any of the Collateral; and (d) to assign and
transfer the Collateral, or any part thereof, absolutely and to execute and
deliver endorsements, assignments, conveyances, bills of sale and other
instruments with power to substitute one or more persons or corporation with
like power.
8.3 Performance by Secured Party. If Debtor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause the
performance of, such agreement, and the reasonable expenses of Secured Party
incurred in connection therewith shall be payable by Debtor under Section 8.8.
In no event, however, shall Secured Party have any obligation or duties
whatsoever to perform any covenant or agreement of Debtor contained herein, and
any such performance by Secured Party shall be wholly discretionary with Secured
Party.
8.4 Duties of Secured Party. The powers conferred upon Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for money actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing Debtor with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether conversion,
redemption or otherwise) with respect to the Collateral; (c) collect any amounts
payable in respect of the Collateral; (d) sell all or any portion of the
Collateral, for any reason; or (e) hold the Collateral for or on behalf of any
party other than Debtor.
8.5 No Liability of Secured Party. Neither the acceptance of this
Agreement by Secured Party, nor the exercise of any rights hereunder by Secured
Party, shall be construed in any way as an assumption by Secured Party of any
obligations, responsibilities, or duties of Debtor arising in connection with
the Collateral assigned hereunder or otherwise bind Secured Party to the
performance of any obligations respecting the Collateral, it being expressly
understood that Secured Party shall not be obligated to perform, observe, or
discharge any obligation, responsibility, duty, or liability of Debtor in
respect of any of the Collateral, including without limitation appearing in or
defending any action, expending any money or incurring any expense in connection
therewith. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR SHALL AND
DOES AGREE TO INDEMNIFY, PROTECT, DEFEND AND HOLD HARMLESS SECURED PARTY AND ITS
SUBSIDIARIES, AND EACH OF THEIR OFFICERS, DIRECTORS, REPRESENTATIVES, AGENTS,
EMPLOYEES, LENDERS, SUCCESSORS AND ASSIGNS, FROM AND AGAINST ALL LIABILITIES,
CLAIMS, DAMAGES, LOSSES, FINES, PENALTIES, CAUSES OF ACTIONS, SUITS, JUDGMENTS
AND EXPENSES (INCLUDING COURT COSTS, ATTORNEY'S FEES AND COST OF INVESTIGATION)
OF ANY NATURE, KIND OR DESCRIPTION OF ANY PERSON OR ENTITY, DIRECTLY OR
INDIRECTLY, ARISING OUT OF, CAUSED BY OR RESULTING FROM (IN WHOLE OR IN PART),
ANY ACT OR OMISSION OF SECURED PARTY, OR ANYONE ACTING ON BEHALF OF SECURED
PARTY, IN CONNECTION WITH THE COLLATERAL, INCLUDING WITHOUT LIMITATION ANY
MARKET FLUCTUATIONS IN THE COLLATERAL AS A RESULT OF SECURED PARTY'S SALE OF, OR
FAILURE TO SELL, THE INTERESTS AT ANY PARTICULAR TIME WHEN IT HAS THE RIGHT TO
DO SO. THE FOREGOING INDEMNITY SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS AGREEMENT.
8.6 Right of Secured Party to Defend Action Affecting Security. Secured
Party may, at the expense of Debtor, appear in and defend any action or
proceeding at law or in equity purporting to affect Secured Party's Security
Interest under this Agreement.
8.7 Right of Secured Party to Prevent or Remedy Default. If Debtor
shall fail to perform any of the covenants, conditions and agreements required
to be performed and observed by Debtor under any Other Agreement, or in respect
of the Collateral (subject to any applicable default cure period), Secured Party
(a) may but shall not be obligated to take any action Secured Party deems
necessary or desirable to prevent or remedy any such default by Debtor or
otherwise to protect the Security Interest, and (b) shall have the absolute and
immediate right to take possession of the Collateral or any part thereof (to the
extent Secured Party has not previously taken possession) to such extent and as
often as the Secured Party, in its sole discretion, deems necessary or desirable
in order to prevent or to cure any such default by Debtor, or otherwise to
protect the security of this Agreement. Secured Party may advance or expend such
sums of money for the account of Debtor as Secured Party in its sole discretion
deems necessary for any such purpose.
8.8 Secured Party's Expenses. All reasonable advances, costs, expenses,
charges and attorneys' fees which Secured Party may make, pay or incur under any
provision of this Agreement for the protection of its security or for the
enforcement of any of its rights hereunder, including, without limitation, in
foreclosure proceedings commenced and subsequently abandoned or in any dispute
or litigation in which Secured Party or the holder of any of the Obligations may
become involved by reason of or arising out of any Other Agreement or the
Collateral, shall be a part of the Obligations and shall be paid by Debtor to
Secured Party, upon demand, and shall bear interest until paid at the maximum
rate of interest permitted by applicable law, from the date incurred by Secured
Party until repaid by Debtor.
8.9. Convertible Collateral. Secured Party may present for conversion
any Collateral which is convertible into any other instrument or investment
security or a combination thereof with cash, but Secured Party shall not have
any duty to present for conversion any Collateral unless it shall have received
from Debtor detailed written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
8.10 Secured Party's Right of Set-Off. Upon the happening of any event
entitling Secured Party to pursue any remedy provided herein, or if Secured
Party shall be served with garnishment process in which Debtor shall be named as
defendant, whether or not Debtor shall be in default hereunder at the time,
Secured Party may, but shall not be required to, set-off any indebtedness owing
by Secured Party to Debtor against any of the Obligations without first
resorting to the security hereunder and without prejudice to any other rights or
remedies of Secured Party or its Security Interest.
8.11 Remedies. No right or remedy herein reserved to Secured Party is
intended to be exclusive of any other right or remedy, but each and every such
remedy shall be cumulative, not in lieu of, but in addition to any other rights
or remedies given under this Agreement and all other security documents. Any and
all of Secured Party's rights and remedies may be exercised from time to time
and as often as such exercise as deemed necessary or desirable by Secured Party.
8.12 Debtor's Waivers. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Obligations; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
8.13 Other Parties and Other Collateral. No renewal or extension of or
any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in other manner
impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other document or agreement pertaining to the other
security for the Obligations, before foreclosing upon the Collateral for the
purpose of paying the Obligations. Debtor waives any right to the benefit of or
to require or control application of any other security or proceeds thereof, and
Debtor agrees that Secured Party shall have no duty or obligation to Debtor to
apply to the Obligations any such other security or proceeds thereof.
ARTICLE IX
MISCELLANEOUS
9.1 Terms Commercially Reasonable. The terms of this Agreement shall be
deemed commercially reasonable within the meaning of the Texas UCC.
9.2 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and personally
delivered or mailed (with all postage and charges prepaid), addressed to Secured
Party or to Debtor their respective addresses set forth below, or at such other
address as the above parties may from time to time designate by written notice
to the other given in accordance with this Section 9.2. Any such notice, if
personally delivered or transmitted by telex or telegram, shall be deemed to
have been given on the date so delivered or transmitted or, if mailed, be deemed
to have been given on the day after such notice is placed in the United States
mail in accordance with this Section 9.2.
Secured Party: 1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
with copy to: Timothy L. LaFrey, Esq.
Akin, Gump, Strauss, Hauer & Feld,L.L.P.
1900 Frost Bank Plaza
816 Congress Avenue
Austin, Texas 78701
Debtor: Prime/BDR Acquisition, L.L.C.
1301 Capital of Texas Hwy., Suite C-300
Austin, Travis County, Texas 78746
Attn: President
9.3 Parties Bound. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Obligations or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Obligations or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor.
9.4 Waiver. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
9.5 Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to those
contained in any Other Agreement.
9.6 Definitions. Unless the context indicated otherwise, definitions in
the Texas Business and Commerce Code ("Texas UCC") apply to words and phrases in
this Agreement; if Texas UCC definitions conflict, Chapter 9 definitions apply.
9.7 Miscellaneous. In this Agreement, whenever the context so requires,
the neuter gender includes the masculine and feminine, and the singular number
includes the plural and vice versa. The headings of paragraphs herein are
inserted only for convenience and shall in no way define, describe or limit the
scope of intent of any provisions of this Agreement. No change, amendment,
modification, cancellation, or discharge of any provision of this Agreement
shall be valid unless consented to in writing by Secured Party.
9.8 Assignment of Secured Party's Interest. Secured Party shall have
the right to assign all or any portion of its rights in this Agreement without
approval or consent. Debtor acknowledges that Lender intends to make a
collateral assignment of its rights under this Agreement for the benefit of one
or more of its lenders. Debtor may not assign this Agreement or any of its
rights or obligations hereunder without the express prior written consent of
Secured Party in each instance.
9.9 Applicable Laws. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE LOAN AGREEMENT, THE NOTE AND THE
CONTRIBUTION AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
ASSIGNMENT AND
SECURITY AGREEMENT
EXECUTED this 1 day of September, 1999.
DEBTOR: Prime/BDR Acquisition, L.L.C.
By: /s/ David Dulaney, M.D.
Printed Name: David Dulaney, M.D.
Title:Manager, Prime/BRD Acquisition, L.L.C.
SECURED PARTY: Prime Medical Operating, Inc.
By: /s/ Cheryl Williams
Printed Name: Cheryl Williams
Title: Vice President
EXHIBIT 12
PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, 1997, 1996 and 1995
<TABLE>
<S> <C> <C> <C> <C> <C>
Years Ended December 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
Income before income taxes
and after minority interests $24,471 $18,171 $20,651 $10,957 $ 8,090
Undistributed equity income (583) (102) (408) - (299)
Minority interest income of subsidiaries
with fixed charges 3,726 1,823 6,074 7,000 -
------------ ------------ ------------ ------------ ------------
Adjusted earnings 27,614 19,892 26,317 17,957 7,791
------------ ------------ ------------ ------------ ------------
Interest on debt 9,408 8,469 7,477 5,977 1,231
Debt issuance costs 566 4,978 360 2,735 -
------------ ------------ ------------ ------------ ------------
Total fixed charges 9,974 13,447 7,837 8,712 1,231
------------ ------------ ------------ ------------ ------------
Total available earnings
before fixed charges $37,588 $33,339 $34,154 $26,669 $ 9,022
============ ============ ============ ============ ============
Ratio 3.8 2.5 4.4 3.1 7.3
============ ============ ============ ============ ============
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF PRIME MEDICAL SERVICES, INC.
AS OF MARCH 27, 2000
Name of Subsidiary State of Incorporation
(doing business as) or Organization
- ------------------- ----------------------
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
(Reston Lithotripsy)
Prime Kidney Stone Treatment, Inc. New Jersey
(Indiana Lithotripsy, West
Virginia Lithotripsy)
Prime Diagnostic Corp. of Florida Delaware
Prime Lithotripter Operations, Inc. New York
(Tennessee Valley Lithotripter,
Alabama Lithotripsy)
Prime Practice Management, Inc. New York
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
Texas Litho, Inc. Delaware
Prime/BDR Acquisition, L.L.C. Delaware
Prime/BDEC Acquisition, L.L.C. Delaware
Horizon Vision Center, Inc. Nevada
California I Prostatherapy, LP California
North Carolina Prostatherapy, LP North Carolina
Texas 1 Prostatherapy, LP Texas
<PAGE>
Ohio Mobile Lithotripter, Ltd. Ohio
Ohio Mobile Lithotripter II, Ltd. Ohio
ARKLATX Mobile Lithotripter, LP Louisiana
(Kidney Stone Center of Louisiana)
TENN-GA Stone Group Two, LP Tennessee
Southern California Stone Center, L.L.C. California
AK Associates, L.L.C. Texas
Metro Atlanta Stonebusters, GP Georgia
Kidney Stone Center of South Florida, LC Florida
Mobile Kidney Stone Centers, Ltd. California
Mobile Kidney Stone Centers II, Ltd. California
Mobile Kidney Stone Centers III, Ltd. California
Northern California Lithotripsy Associates California
Northern California Kidney Stone Center, Ltd. California
Lithotripsy Institute of Northern California California
Fayetteville Lithotripters Limited Partnership -
Arizona I Arizona
Fayetteville Lithotripters Limited Partnership -
Arkansas I Arkansas
San Diego Lithotripters Limited Partnership California
California Lithotripters Limited Partnership - II, LP California
California Lithotripters Limited Partnership - III, LP California
California Lithotripters Limited Partnership - IV, LP California
California Lithotripsy Joint Venture California
Florida Lithotripsy Limited Partnership I Florida
Indiana Lithotripsy Limited Partnership I Indiana
Pacific Medical Limited Partnership Hawaii
Las Vegas Lithotripters Limited Partnership Nevada
Fayetteville Lithotripters Limited Partnership -
Louisiana I Louisiana
Louisiana Lithotripsy Investment Limited Partnership Louisiana
Montana Lithotripsy Limited Partnership I Montana
Mountain Lithotripsy Limited Partnership I Colorado
<PAGE>
Mountain Lithotripsy GP Colorado
Fayetteville Lithotripters Limited Partnership -
South Carolina I South Carolina
Fayetteville Lithotripters Limited Partnership -
South Carolina II South Carolina
Tennessee Lithotripters Limited Partnership I Tennessee
Texas Lithotripsy Limited Partnership I Texas
Texas Lithotripsy Limited Partnership III Texas
Texas Lithotripsy Limited Partnership V Texas
Texas Lithotripsy Limited Partnership VI Texas
Texas Lithotripsy Limited Partnership VII Texas
Texas Lithotripsy Joint Venture, L.L.C. Texas
Fayetteville Lithotripters Limited Partnership -
Utah I Utah
Fayetteville Lithotripters Limited Partnership -
Virginia I Virginia
Pacific Lithotripsy GP California
Great Lakes Lithotripsy Partnership, LP Wisconsin
Big Sky Urological Services, LP Montana
Wyoming Urological Services Ltd. Partnership Wyoming
Washington Urological Services, L.L.C. Washington
Kentucky I Lithotripsy, L.L.C. Kentucky
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
----------------------------------------------------
We consent to incorporation by reference in the registration statements
(No. 33-70478 and 333-62245) on Form S-8 and (No. 333-12893 and 333-47621) on
Form S-3 of Prime Medical Services, Inc. of our report dated March 6, 2000,
relating to the consolidated balance sheets of Prime Medical Services, Inc. and
subsidiaries as of December 31, 1999 and 1998, 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, 1999, which report appears in the
Annual Report on Form 10-K of Prime Medical Services, Inc. for the year ended
December 31, 1999.
/s/ KPMG LLP
- --------------------------
Austin, Texas
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1999 Form 10-K and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,064
<SECURITIES> 4,120
<RECEIVABLES> 23,273
<ALLOWANCES> 244
<INVENTORY> 3,676
<CURRENT-ASSETS> 58,012
<PP&E> 44,220
<DEPRECIATION> 25,567
<TOTAL-ASSETS> 246,826
<CURRENT-LIABILITIES> 20,493
<BONDS> 0
0
0
<COMMON> 194
<OTHER-SE> 87,655
<TOTAL-LIABILITY-AND-EQUITY> 246,826
<SALES> 0
<TOTAL-REVENUES> 112,174
<CGS> 0
<TOTAL-COSTS> 44,939
<OTHER-EXPENSES> 10,848
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,408
<INCOME-PRETAX> 24,471
<INCOME-TAX> 9,432
<INCOME-CONTINUING> 15,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,039
<EPS-BASIC> 0.89
<EPS-DILUTED> 0.88
</TABLE>
