SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: January 17, 1996
Seafield Capital Corporation
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(Exact name of registrant as specified in its charter)
Missouri 0-16946 43-1039532
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(State of other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
2600 Grand Ave. Suite 500
P. O. Box 410949
Kansas City, MO 64141
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(Address of principal executive offices) (Zip code)
(816) 842-7000
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(Registrant's telephone number, including area code)
Item 5. Other Events
On January 2, 1996, the Registrant's 59% owned subsidiary, Response Oncology,
Inc. ("Response") acquired (the "Transaction") from eight (8) unaffiliated
individual sellers (the "Sellers") 100% of the issued and outstanding common
stock (the "Acquired Stock") of Oncology Hematology Group of South Florida,
Inc., a Florida corporation (the "Acquired Business"). The total consideration
(the "Purchase Price") for the Acquired Stock was approximately $12.1 million,
approximately $5.3 million of which was paid in cash, approximately $5.0
million paid in the form of Response's long-term unsecured interest-bearing
amortizing promissory note (the "Long-Term Note") and the balance being paid
over 16 calendar quarters at the rate of $50,000 per quarter. The quarterly
payments of interest and principal under the Long-Term Note may, at the
election of the Sellers, acting through a duly-appointed attorney-in-fact, be
paid in shares of common stock of Response (the "Common Stock") based on a
conversion price in excess of the current market price of Response's common
stock. The delivery of the Long-Term Note and Response's Common Stock
potentially issuable by Response in full or partial satisfaction of the Long-
Term Note have not been registered under the Securities Act of 1933 in reliance
upon an exemption from such registration.
The Acquired Stock was purchased by Response directly from the Sellers, who
constituted all of the stockholders of the Acquired Business. Upon
consummation of the Transaction, the Acquired Business became a wholly owned
subsidiary of Response, the assets of which include medical equipment, accounts
receivable, office furnishings and fixtures, rights under a certain sublease
for certain office space, employee base and expertise, know-how in respect of
management of a medical practice in the oncology and hematology specialty,
computer systems, accounting books and records and other intangible assets.
Such assets were historically used in the conduct by the Acquired Business of a
group medical practice in the oncology and hematology specialty.
Simultaneous with the consummation of the Transaction, a newly-formed
professional association wholly owned by the Sellers and formed to continue the
group medical practice theretofore conducted by the Sellers (the "New PC")
entered into a long-term management services agreement (the "Service
Agreement") with the New PC providing for the management by Response of the
non-medical aspects of the practice thereafter conducted by the New PC.
Pursuant to the Service Agreement, Response will manage the non-medical aspects
of the New PC's business and will permit the New PC to use office space,
equipment and other assets owned or leased by Response in exchange for an
agreed-upon management fee.
The cash portion of the Purchase Price was provided from working capital of
Response.
Response announced on January 2, 1996 the appointment of Leonard A. Kalman,
M.D. to Response's Board of Directors. Dr. Kalman, a co-medical director of
the Baptist Hospital of Miami Regional Cancer Center, is a practicing
oncologist with the Oncology Hematology Group of South Florida. Dr. Kalman
is a graduate of Wesleyan University, and the Duke University School of
Medicine. Among his other appointments, Dr. Kalman was a fellow in medical
oncology at the Memorial Sloan Kettering Cancer Center in New York. He has
been in private practice in Miami, Florida since 1982.
Additionally, Response announced that Joseph T. Clark has been named as Chief
Executive Officer of Response in addition to his duties as President. This
will allow Response's Chairman, William H. West, M.D., to concentrate on
medical and scientific affairs of Response, particularly in connection with
refining disease management capabilities to support managed care marketing.
Mr. Clark has served as President of Response since 1993.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements: none
(b) Pro Forma Financial Information: none
(c) Exhibits: Form of agreement filed with Response's current
report on Form 8K of:
(1) Stock Purchase Agreement by and among Response Oncology,
Inc., Stockholders of Oncology Hematology Group of South Florida, P.A. and
South Florida Oncology Hematology Associates, P.A. dated December 28, 1995.
(2) Service Agreement between Response Oncology, Inc. and
Oncology Hematology Group of South Florida, P.A. dated January 2, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized officer.
Seafield Capital Corporation
Date: January 17, 1996 By: /s/ Steven K. Fitzwater
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Steven K. Fitzwater
Vice President, Chief Accounting
Officer and Secretary
EXHIBIT 1
STOCK PURCHASE AGREEMENT
BY AND AMONG
RESPONSE ONCOLOGY, INC.,
STOCKHOLDERS OF ONCOLOGY HEMATOLOGY GROUP OF SOUTH FLORIDA, P.A.
AND
SOUTH FLORIDA ONCOLOGY HEMATOLOGY ASSOCIATES, P.A.
December 20, 1995
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of December 20, 1995, by and among
RESPONSE ONCOLOGY, INC, a Tennessee corporation (the "Purchaser"), the
STOCKHOLDERS OF ONCOLOGY HEMATOLOGY GROUP OF SOUTH FLORIDA, P.A., each of whom,
together with his or her state of residence and address, is listed on Exhibit A
hereto (collectively, the "Sellers" and, individually, a "Seller") and SOUTH
FLORIDA ONCOLOGY HEMATOLOGY ASSOCIATES, P.A., a Florida professional
association (the "Group").
W I T N E S S E T H:
WHEREAS, the Sellers own in the aggregate eighty (80) shares (the
"Shares") of the common stock, par value $1.00 per share, of Oncology
Hematology Group of South Florida, P.A., a Florida professional association
engaged in the practice of medicine (the "Association"), with each Seller
owning ten (10) Shares; and
WHEREAS, the Sellers desire to sell and Purchaser desires to purchase the
Shares on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and promises herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses which, in the
aggregate, would have a material adverse effect on the financial condition or
results of operations of the Purchaser.
"Affiliate" has the meaning set forth in Rule 12-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law.
"Agreement among Sellers" means an agreement, effective as of a time prior
to the execution and delivery of this Agreement, pursuant to which the Sellers
appoint an attorney-in-fact to execute and deliver this Agreement, collect the
cash portion of the Purchase Price, take delivery of the Long-term Note and the
Warrants, receive payments under the Long-Term Note, exercise Warrants and
otherwise act on behalf of the Sellers for all purposes connected with the
performance of this Agreement.
"Applicable Rate" means the corporate base rate of interest announced from
time to time by First Tennessee Bank National Association, Memphis, Tennessee
plus two percent (2%).
"Association" has the meaning set forth in the first recital above.
"Base Purchase Price" has the meaning set forth in Section 2(a) below.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction of which any Seller has Knowledge that forms or
could form the basis for any specified consequence.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
"Deferred Intercompany Transaction" has the meaning set forth in Treasury
Regulation 1.1502-13.
"Deferred Purchase Price" has the meaning set forth in Section 2(b) below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Occupational Safety and Health Act
of 1970, the Medical Waste Tracking Act of 1988, the U. S. Public Vessel
Medical Waste Anti-Dumping Act of 1988, the Marine Protection, Research and
Sanctuaries Act and Human Services, National Institute for Occupational Safety
and Health, Infections Waste Disposal Guidelines, Publication No. 88-119, each
as amended, together with all other laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof) concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of medical wastes,
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Treasury Regulation
1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statement" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Group" has the meaning set forth in the initial paragraph of this Stock
Purchase Agreement.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.
"Long-Term Note" means the promissory note of the Purchaser payable to the
order of the Sellers in the form set forth as Exhibit 2(b)(i).
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4(f) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 4(f)
below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(f)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Party" means the Purchaser or any Seller.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Pro Rata" means, with respect to the Sellers, their proportionate
ownership interests in the Association.
"Purchaser" has the meaning set forth in the initial paragraph of this
Stock Purchase Agreement and, after Closing (and as relates to Section 9(b)
regarding indemnification), shall mean Response Oncology, Inc. and any
subsidiary or affiliate thereof.
"Purchaser's Disclosure Letter" has the meaning set forth in Section 3(b)
below.
"Receivables" means the face amount, in dollars, of the Association's
accounts receivable as of the close of business on the day prior to the Closing
Date.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Response Stock" means the common stock of the Purchaser, $.01 par value
per share.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Sellers' Disclosure Letter" has the meaning set forth in Section 3(a)
below.
"Service Agreement" means the Service Agreement between the Purchaser and
the Group to be executed and delivered by the Purchaser and the Group, and
which will become effective, at the time of Closing.
"Shares" means all of the issued and outstanding shares of the Common
Stock, par value $1.00 per share, of the Association.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 9(d) below.
"Warrants" means warrants to purchase 160,000 shares of Response Stock at
$12.50 per share, issuable to the Sellers at Closing in the form set forth as
Exhibit 2(b)(ii).
2. PURCHASE AND SALE OF SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase from the Sellers, and the
Sellers agree to sell to the Purchaser, all of the Shares for the sum of (i)
the aggregate base price (the "Base Purchase Price") equal to the sum of Ten
Million Three Hundred Three Thousand Seven Hundred Twenty-Two Dollars
($10,303,722.00), plus the Net Realizable Value of Receivables, and (ii) the
deferred price (the "Deferred Purchase Price") equal to Fifty Thousand Dollars
($50,000.00) per calendar quarter for each quarter, or portion thereof, that
the Service Agreement remains if effect, up to a maximum of Eight Hundred
Thousand Dollars ($800,000). In the event of termination of the Service
Agreement on any day which is not the last day of a calendar quarter, then the
Deferred Purchase Price shall be pro rated through the last day of the calendar
month of termination as if such termination occurred on that day. In addition
to the foregoing, the Purchaser shall issue to each Seller, at such Seller's
election, either (i) a Warrant to purchase 20,000 shares Response Stock, (ii)
options to purchase 20,000 shares of Response Stock at a price of $12.50 per
share, which options shall be issued pursuant to the Purchaser's Non-Qualified
Stock Option Plan, or (iii) any combination of Warrants and options. At the
time of such issuance, any options issued to any Seller pursuant to said plan
shall be immediately vested and exercisable.
(b) PAYMENT OF PURCHASE PRICE. The Purchaser shall pay or satisfy the
Base Purchase Price in the following manner: (i) Five Million Two Hundred
Thousand ($5,343,750) Dollars in cash to the Sellers, pro rata according to
their ownership of Shares, at Closing (hereinafter defined), (ii) Five Million
Nine Hundred Fifty-Nine Thousand Nine Hundred Seventy-Two ($5,959,972) Dollars
by issuance and delivery of the Long-Term Note to the Sellers; and (iii)
issuance and delivery of the Warrants and/or option to the Sellers in
accordance with Section 2(a) above. The Deferred Purchase Price shall be paid
to the Sellers, pro rata according to their ownership of Shares, by the
Purchaser Fifty Thousand Dollars (or such portion thereof as may be computed in
accordance with Section 2(a) in the event of termination of the Service
Agreement) in arrears on the last day of each calendar quarter, commencing
March 31, 1996 (which date is subject to change in the event the Closing occurs
later than January 2, 1996), with the last such payment being due and payable
on the earlier of the last day of the quarter during which the Service
Agreement is terminated or December 31, 1999. In addition to the foregoing,
the Purchaser shall pay to the Sellers, pro rata according to their ownership
of Shares, as additional Purchase Price, on a monthly basis during the period
after Closing, the amount of Receivables collected by Response in excess of
$1,200,000.00. Such obligation shall terminate on the first anniversary of the
Closing. In that regard, during such one year period, the Purchaser shall make
monthly accountings to the Sellers with respect to the collection of
Receivables, and the Sellers may, at their option and sole expense, assist in
the collection of any Receivable.
(c) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Baker, Donelson,
Bearman & Caldwell, 165 Madison Avenue, 21st Floor, Memphis, Tennessee 38103
commencing at 9:00 a.m. local time on January 2, 1996, or such other date as
the Purchaser and the Sellers may mutually determine (the "Closing Date").
(d) DELIVERIES AT THE CLOSING. At the Closing, (i) the Purchaser will
deliver to the Sellers the various certificates, instruments, and documents
referred to in Section 8(a) below, (ii) the Sellers will deliver to the
Purchaser the various certificates, instruments, and documents referred to in
Section 8(b) below.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers jointly
and severally represent and warrant to the Purchaser that the statements
contained in this Section 3(a) are correct and complete as of the date of this
Agreement with respect to the Sellers, except as set forth in the disclosure
letter executed and delivered by the Sellers and the Group contemporaneous with
this Agreement (the "Sellers' Disclosure Letter""). The Sellers' Disclosure
Letter shall be satisfactory to the Purchaser and its counsel and will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3(a) and Section 4.
(i) AUTHORIZATION OF TRANSACTION. Each Seller has the requisite
legal capacity and has full power and authority to execute and deliver this
Agreement and to perform his obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of each Seller, enforceable in
accordance with its terms and conditions. Each Seller need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the transactions
contemplated by this Agreement. This Agreement constitutes the valid and
legally binding obligation of each Seller, enforceable in accordance with its
terms, subject to applicable bankruptcy, moratorium, insolvency and other laws
affecting the rights of creditors and general equity principles.
(ii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any Seller is subject or (B)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any Seller is a party or by
which he is bound or to which any of his assets is subject.
(iii) BROKERS' FEES. The Sellers have no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Purchaser could
become liable or obligated.
(iv) SHARES. Each Seller holds of record and owns beneficially all
of the Shares free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. No Seller is a party to any option, warrant,
purchase right, or other contract or commitment that could require the Seller
to sell, transfer, or otherwise dispose of any capital stock of the Association
(other than this Agreement). No Seller is a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any Shares.
(v) AGREEMENT AMONG SELLERS. The Agreement among Sellers has been
duly executed by each Seller and constitutes the valid and legally binding
obligation of each Seller, enforceable according to its terms.
(b) REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to each Seller that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement except
as set forth in the disclosure letter executed and delivered by the Purchaser
contemporaneous with this Agreement (the "Purchaser's Disclosure Letter").
(i) ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Tennessee.
(ii) AUTHORIZATION OF TRANSACTION. The Purchaser has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Purchaser,
enforceable in accordance with its terms, subject to applicable bankruptcy,
moratorium, insolvency and other laws affecting the rights of creditors and
general equity principles. The Purchaser need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Purchaser is subject or
any provision of its charter or bylaws or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Purchaser is a party or by which it is bound or to
which any of its assets is subject.
(iv) BROKERS' FEES. The Purchaser has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
(v) INVESTMENT. The Purchaser is not acquiring the Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE ASSOCIATION. The
Sellers and the Group, jointly and severally, represent and warrant to the
Purchaser that the statements contained in this Section 4 are true, correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except
as set forth in the Sellers' Disclosure Letter. Nothing in the Sellers'
Disclosure Letter shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Sellers' Disclosure Letter
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. The Sellers' Disclosure Letter will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Association is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Florida. The Association is duly authorized to conduct
business and are in good standing under the laws of each jurisdiction where
such qualification is required. The Association has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the business in which it is engaged and to own and use its properties.
Paragraph 4(a) of the Sellers' Disclosure Letter lists the directors and
officers of the Association. The Sellers have delivered to the Purchaser
correct and complete copies of the charter and bylaws of the Association (as
amended to date). The minute book (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate book, and the stock record book of the
Association are correct and complete. The Association is not in default under
or in violation of any provision of its charter or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock of the
Association consists of 5,000 Shares, of which 80 Shares are issued and
outstanding. All of the issued and outstanding Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the Sellers. There are no outstanding or authorized options,
warrants, purchase rights, preemptive rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Association to issue, sell, or otherwise cause to become outstanding any of
its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Association. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Association.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Association is subject or any
provision of the charter or bylaws of the Association or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Association is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). The Association
is not required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) BROKERS' FEES. The Association has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(e) TITLE TO ASSETS. The Association has good and marketable title to,
or a valid leasehold interest in, all of its properties and assets, free and
clear of all Security Interests, and has not sold, transferred, exchanged or
conveyed any of its properties and assets since the date of the Most Recent
Balance Sheet except for properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet.
(f) FINANCIAL STATEMENTS. Attached as collective Paragraph 4(f) to the
Sellers' Disclosure Letter are the following financial statements (collectively
the "Financial Statements"): (i) unaudited balance sheet and statement of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
years ended December 31, 1994 (the "Most Recent Fiscal Year End") for the
Association; and (ii) unaudited balance sheet and statement of income, changes
in stockholders' equity, and cash flow (the "Most Recent Financial Statements")
as of and for the six (6) months ended June 30, 1995 (the "Most Recent Fiscal
Month End") for the Association. The Financial Statements (including the notes
thereto) have been prepared on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Association as
of such dates and the results of operations of the Association and its
subsidiaries for such periods on a cash basis method of accounting, are correct
and complete, and are consistent with the books and records of the Association.
(g) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Association. Without limiting the generality of the foregoing,
since that date:
(i) the Association has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(ii) the Association has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $25,000.00 or outside the Ordinary Course
of Business;
(iii) no party (including the Association) has accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) involving
more than $25,000.00 to which the Association is a party or by which the
Association or its properties are bound;
(iv) the Association has not created, suffered or permitted to attach
or be imposed any Security Interest upon any of its assets, tangible or
intangible;
(v) the Association has not made any capital expenditure (or series
of related capital expenditures) either involving more than $25,000.00 or
outside the Ordinary Course of Business;
(vi) the Association has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $25,000.00 or outside the Ordinary Course of Business;
(vii) the Association has not issued any note, bond, or other debt
instrument or security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
(viii) the Association has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
(ix) the Association has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than $25,000.00 or outside the Ordinary Course of Business;
(x) the Association has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of the Association;
(xii) the Association has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
(xiii) the Association has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xiv) the Association has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xv) the Association has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xvi) the Association has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xvii) the Association has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii) the Association has not adopted, amended, modified, or
terminated any bonus, profit sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(xix) the Association has not made any other change in employment
terms for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xx) the Association has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(xxi) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of Business
involving the Association; and
(xxii) the Association has not committed to any of the foregoing.
(h) UNDISCLOSED LIABILITIES. The Association has no Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Association that
may result in any Liability), except for (i) Liabilities set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto); (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business and (iii) Liabilities described with particularity
in Paragraph 4(h) of the Sellers' Disclosure Letter (and, with respect to each
Liability described in items (i) through (iii) immediately above, none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, malpractice, infringement, or
violation of law).
(i) LEGAL COMPLIANCE. The Association and its respective predecessors
and Affiliates have complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
(j) TAX MATTERS.
(i) The Association has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Association (whether or not shown on any Tax Return) have
been paid or accrued in the Financial Statements. The Association is not the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where the
Association does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Security Interests on any of the assets of
either the Association that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) The Association has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(iii) Neither the Sellers nor any director or officer (or employee
responsible for Tax matters) of the Association expects any authority to assess
any additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax Liability of the Association
either (A) claimed or raised by any authority in writing or (B) as to which the
Sellers or the directors and officers (and employees responsible for Tax
matters) of the Association have Knowledge. Paragraph 4(j) of the Sellers'
Disclosure Letter lists all federal, state, local, and foreign income Tax
Returns filed with respect to the Association for taxable periods ended on or
after December 31, 1992, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit. The
Sellers have delivered to the Purchaser correct and complete copies of all
examination reports and statements of deficiencies assessed against or agreed
to by the Association since December 31, 1991.
(iv) The Association has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Association has not filed a consent under Code Section 341(f)
concerning collapsible corporations. The Association has not made any payment,
is not obligated to make any payment, or is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will
not be deductible under Code Section 280G. The Association has not been a
United States real property holding corporation within the meaning of Code Sec.
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Association has not disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Association is not a party to any Tax allocation or sharing agreement. The
Association (A) has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return or (B) has no Liability for the Taxes of
any Person (other than of the Association under Treasury Regulation 1.1502 6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) Paragraph 4(j) of the Sellers' Disclosure Letter sets forth the
following information with respect to the Association as of the most recent
practicable date: (A) the basis of the Association in its assets; and (B) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution.
(k) REAL PROPERTY. The Association does not own any real property and
has not executed and delivered or otherwise entered into any contract to
purchase any real property. Paragraph 4(k) of the Sellers' Disclosure Letter
lists and describes briefly all real property leased or subleased to the
Association. The Sellers have delivered to the Purchaser correct and complete
copies of the leases and subleases listed in Paragraph 4(k) of the Sellers'
Disclosure Letter (as amended to date). With respect to each lease and
sublease listed in Paragraph 4(k) of the Sellers' Disclosure Letter, except as
otherwise set forth in such Paragraph 4(k) of the Sellers' Disclosure Letter:
(i) the lease or sublease is legal, valid, binding, enforceable, and
in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby;
(iii) the Association, and, to the best of Sellers' Knowledge, no
other party to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder;
(iv) the Association, and, to the best of Sellers' Knowledge, no
party to the lease or sublease has repudiated any provision thereof;
(v) to the best of Sellers' Knowledge, there are no disputes, oral
agreements, or forbearance programs in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and correct
with respect to the underlying lease;
(vii) the Association has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations;
(ix) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities;
and
(x) to the best of Sellers' Knowledge, the owner of the facility
leased or subleased has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special easements not yet delinquent
and recorded easements, covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the marketability of title, of the
property subject thereto.
(l) TANGIBLE ASSETS. The Association owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
its business as presently conducted.
(m) INVENTORY. The inventory of the Association consists of medical
supplies, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Association.
(n) CONTRACTS. Paragraph 4(n) of the Sellers' Disclosure Letter lists
the following contracts and other agreements to which the Association is a
party:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $25,000.00 per annum;
(ii) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of
which will extend over a period of more than one year, result in a loss to the
Association, or involve consideration in excess of $25,000.00;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which the
Association has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $25,000.00 or
under which it has imposed a Security Interest on any of its assets, tangible
or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with either the Sellers or their Affiliates (other
than the Association);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement
for the benefit of its current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a full-
time, part-time, consulting, or other basis providing annual compensation in
excess of $25,000.00 or providing severance benefits;
(x) any agreement under which the Association has advanced or loaned
any amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial condition,
operations, results of operations, or future prospects of the Association; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.00.
The Sellers has delivered to the Purchaser a correct and complete copy of each
written agreement listed in Paragraph 4(n) of the Sellers' Disclosure Letter
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Paragraph 4(n) of the Sellers'
Disclosure Letter. With respect to each such agreement: (1) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (2) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (3) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (4) no party has repudiated any provision of the agreement.
(o) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of
the Association are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Association.
(p) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Association.
(q) INSURANCE. Paragraph 4(q) of the Sellers' Disclosure Letter sets
forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, medical
malpractice, and workers' compensation coverage and bond and surety
arrangements) to which the Association has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past five (5)
years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Association nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. The Association has been covered during
the past five (5) years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Paragraph 4(q) of the Sellers' Disclosure Letter describes any self-
insurance arrangements affecting the Association.
(r) LITIGATION. Paragraph 4(r) of the Sellers' Disclosure Letter sets
forth each instance in which either the Association (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Paragraph 4(r) of the Sellers' Disclosure Letter
could result in any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of either the
Association or the Group. Neither the Sellers nor the directors and officers
(and employees with responsibility for litigation matters) of the Association
and the Group has any reason to believe that any such action, suit, proceeding,
hearing, or investigation may be brought or threatened against the Association
or the Group.
(s) EMPLOYEES. To the best of the Sellers' Knowledge, no physician,
executive, key employee, or group of employees has any plans to terminate
employment with the Association or, after the Closing, with the Group. The
Association is not a party to or bound by any collective bargaining agreement,
nor has it experienced any strikes, grievances filed pursuant to any work rules
of any organized labor organization, claims of unfair labor practices, or other
collective bargaining disputes. To the best of the Sellers' Knowledge, the
Association has not committed any unfair labor practice. To the best of the
Sellers' Knowledge, no organizational effort is presently being made or
threatened by or on behalf of any labor union with respect to employees of the
Association.
(t) EMPLOYEE BENEFITS.
(i) Paragraph 4(t) of the Sellers' Disclosure Letter lists each
Employee Benefit Plan that the Association maintains or to which the
Association contributes.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all respects
with the applicable requirements of ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to each
such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title
I of ERISA and of Code Sec. 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which are not
yet due have been paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Association. All premiums
or other payments for all periods ending on or before the Closing Date have
been paid with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code Sec.
401(a) and has received, within the last two years, a favorable determination
letter from the Internal Revenue Service.
(E) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan (other than any Multiemployer
Plan) equals or exceeds the present value of all vested and nonvested
Liabilities thereunder determined in accordance with PBGC methods, factors, and
assumptions applicable to an Employee Pension Benefit Plan terminating on the
date for determination.
(F) The Sellers have delivered to the Purchaser correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the
most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the Association
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is in Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely or
partially terminated or been the subject of a Reportable Event as to which
notices would be required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or threatened.
(B) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan.
No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit
Plan (other than routine claims for benefits) is pending or threatened.
Neither the Sellers nor the directors and officers (and employees with
responsibility for employee benefits matters) of the Association has any
Knowledge of any Basis for any such action, suit, proceeding, hearing, or
investigation.
(C) The Association has not incurred, and neither the Sellers
nor the directors and officers (and employees with responsibility for employee
benefits matters) of the Association has any reason to expect that the
Association will incur, any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any such Employee Benefit Plan
which is an Employee Pension Benefit Plan.
(iii) The Association does not contribute to, has never contributed
to, and has not been required to contribute to any Multiemployer Plan or has
any Liability (including withdrawal Liability) under any Multiemployer Plan.
(iv) The Association does not maintain, has never maintained, has
never contributed, and has not been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with Code Sec.
4980B).
(u) GUARANTIES. The Association is not a guarantor or is not otherwise
liable for any Liability or obligation (including indebtedness) of any other
Person.
(v) ENVIRONMENT, HEALTH, AND SAFETY.
(i) Each of the Sellers, the Association and their respective
Affiliates has complied with all Environmental, Health, and Safety Laws, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply. Without limiting the generality of the preceding
sentence, each of the Sellers, the Association and their respective Affiliates
has obtained and been in compliance with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
(ii) The Association has no Liability (and none of the Sellers, the
Association and their respective Affiliates has handled or disposed of any
substance, arranged for the disposal of any substance, exposed any employee or
other individual to any substance or condition, or owned or operated any
property or facility in any manner that could form the Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Association giving rise to any Liability) for
damage to any site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual, or for any
reason under any Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of the
Sellers, the Association and their respective Affiliates have been free of
asbestos, PCB's, methylene chloride, trichloroethylene, 1,2-trans-
dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous Substances.
(w) HEALTHCARE COMPLIANCE. Neither the Association nor any physician
associated with or employed by the Association has received payment or any
remuneration whatsoever to induce or encourage the referral of patients or the
purchase of goods and/or services as prohibited under 42 U.S.C. 1320a 7b(b),
or otherwise perpetrated any Medicare or Medicaid fraud or abuse nor has any
fraud or abuse been alleged within the last five (5) years by any government
agency. The Association and/or each physician employed thereby is
participating in or otherwise authorized to receive reimbursement from or is a
party to Medicare, Medicaid, and other third party payor programs, and, after
the execution and delivery hereof and of the Service Agreement, the foregoing
representation shall be true with respect to the Group and all physicians
employed thereby. All necessary certifications and contracts required for
participation in such programs are in full force and effect and have not been
amended or otherwise modified, rescinded, revoked or assigned and, to the best
of the Sellers' Knowledge, no condition exists or event has occurred which in
itself or with the giving of notice or the lapse of time or both would result
in the suspension, revocation, impairment, forfeiture or non-renewal of any
such third party payor program. The Association is and, after the execution
and delivery hereof and of the Service Agreement, the Group will be, in full
compliance with the requirements of all such third party payor programs
applicable thereto.
(x) FRAUD AND ABUSE. The Association and persons and entities providing
professional services for the Association have not engaged in any activities
which are prohibited under 42 U.S.C. 1320a 7b, or the regulations promulgated
thereunder pursuant to such statutes, or related state or local statutes or
regulations, or which are prohibited by rules of professional conduct,
including but not limited to the following:
(i) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(ii) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
(iii) failing to disclose knowledge by a claimant of the occurrence
of any event affecting the initial or continued right to any benefit or payment
on its own behalf or on behalf of another, with intent to fraudulently secure
such benefit or payment; and
(iv) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe, or rebate), directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay or receive such remuneration
(A) in return for referring an individual to a person for the furnishing or
arranging for the furnishing or any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (B) in return for
purchasing, leasing, or ordering or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item for which payment may
be made in whole or in part by Medicare or Medicaid.
(y) FACILITY COMPLIANCE. The Association is duly licensed, and the
Association and its clinics, offices and facilities are lawfully operated in
accordance with the requirements of all applicable law and has all necessary
authorizations for their use and operation, all of which are in full force and
effect. There are no outstanding notices of deficiencies relating to the
Association or any physician employed thereby issued by any governmental
authority or third party payor requiring conformity or compliance with any
applicable law or condition for participation of such governmental authority or
third party payor, and after reasonable and independent inquiry and due
diligence and investigation, the Association has no Knowledge or reason to
believe that such necessary authorizations may be revoked or not renewed in the
ordinary course.
(z) RATES AND REIMBURSEMENT POLICIES. The jurisdiction in which the
Association is located does not currently impose any restrictions or
limitations on rates which may be charged to private pay patients receiving
services provided by the Association. The Association has no rate appeal
currently pending before any governmental authority or any administrator of any
third party payor program. The Association has no Knowledge of any applicable
law, which has been enacted, promulgated or issued within the eighteen (18)
months preceding the date of this Agreement or any such legal requirement
proposed or currently pending in the jurisdiction in which the Association is
located which could have a material adverse effect on the Association or may
result in the imposition of additional Medicaid, Medicare, charity, free care,
welfare, or other discounted or government assisted patients at the Association
or require the Association to obtain any necessary authorization which the
Association does not currently possess.
(aa) DISCLOSURE. The representations and warranties contained in this
Section 4 and in the Sellers' Disclosure Letter do not contain any untrue or
misleading statement of a fact.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use his or its best efforts to
take all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction of the closing conditions set forth in Section 7 below).
(b) NOTICES AND CONSENTS. The Sellers will cause the Association to give
any notices to third parties, and will cause the Association to use its best
efforts to obtain any third-party consents, that may be required by law or the
terms of any contract to which the Sellers may be subject or that the Purchaser
may request in connection with the transaction contemplated by this Agreement.
Each of the Parties will (and the Sellers will cause the Association to) give
any notices to, make any filings with, and use its best efforts to obtain any
authorizations, consents, and approvals of governments and governmental
agencies required to consummate the transaction contemplated by this Agreement.
(c) OPERATION OF BUSINESS. The Sellers will not cause or permit the
Association or the Group to engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without limiting
the generality of the foregoing, the Sellers will not cause or permit the
Association to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock or (ii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 4(g) above.
(d) PRESERVATION OF BUSINESS. The Sellers will cause the Association to
keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, patients, and employees.
(e) FULL ACCESS. The Sellers will permit, and the Sellers will cause the
Association to permit, representatives of the Purchaser to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Association, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Association.
(f) NOTICE OF DEVELOPMENTS. The Sellers will give prompt written notice
to the Purchaser of any material adverse development of which any of them
learns which would constitute or otherwise cause a breach of any of the
representations and warranties in Section 4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in Section 3
above. No disclosure by any Party pursuant to this Section 5(f), however,
shall be deemed to amend or supplement the Sellers' Disclosure Letter or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g) EXCLUSIVITY. For so long as this Stock Purchase Agreement shall
remain in effect, the Sellers will not (and the Sellers will not cause or
permit the Association to) (i) solicit, initiate, or encourage the submission
of any proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets of, the Association (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Sellers will not vote their
Shares in favor of any such acquisition structured as a merger, consolidation,
or share exchange. The Sellers will notify the Purchaser immediately if any
Person makes any proposal, offer, inquiry, or contact with respect to any of
the foregoing.
(h) RELEASE FROM PERSONAL GUARANTIES. The Purchaser shall use its best
efforts to obtain the release of each Seller from any personal guarantee of any
obligation of the Association. Failure of the Purchaser to obtain any such
release shall not be a breach of this Agreement or otherwise, without the
existence of a separate breach hereof, excuse any Seller from performance
hereunder. In that regard, the Purchaser hereby agrees to indemnify and hold
each Seller harmless from and against any claim made by such Seller in respect
of any such personal guarantee.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all at
the sole cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefor under Section 9 below). The Sellers
acknowledge and agree that from and after the Closing the Purchaser will be
entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the
Association.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Association or any Seller, each of the other
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Section 9 below).
(c) TRANSITION. The Sellers will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Association from maintaining the
same business relationships with the Association or the Group after the Closing
as it maintained with the Association prior to the Closing. The Sellers will
refer all inquiries relating to the businesses of the Association to the
Purchaser from and after the Closing.
(d) NAME CHANGE. At the time of Closing, the Purchaser shall cause the
name of the Association to be changed to something distinguishable, within the
meaning of the corporation statutes of the state of Florida, from the name of
the Association and shall execute, deliver and/or cause to be filed such
documents or instruments that may be necessary to permit the Group to change
its name to and to do business under the name "Oncology Hematology Group of
South Florida, P.A."
(e) MEDICAL DIRECTOR ARRANGEMENT. From and after Closing, the Parties
will continue to negotiate in good faith and establish consistent with past
practice all fees related to the performance by some or all of the Sellers of
services as medical directors of the Purchaser's IMPACT Center in Miami,
Florida.
7. CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(a) and
Section 4 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Sellers shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) the Sellers shall have caused the Association to procure all of
the third party consents specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (C) affect adversely the right of the
Purchaser to own the Shares and to control the Association, or (D) affect
adversely the right of the Association to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(v) the Sellers and the Group shall have delivered to the Purchaser a
certificate to the effect that each of the conditions specified above in
Section 7(a)(i) (iv) is satisfied in all respects;
(vi) the Purchaser shall have received the resignations, effective as
of the Closing, of each director and officer of the Association other than
those whom the Purchaser shall have specified in writing at least five business
days prior to the Closing;
(vii) the Purchaser shall have received from Cohen, Chase, Hoffman &
Trautman, P.A., counsel to the Sellers and the Association, an opinion as to
matters customarily addressed in opinions of counsel in transactions such as
that described herein, which opinion shall be in form and substance reasonably
acceptable to the Purchaser and its counsel;
(viii) the Group shall have executed and delivered the Service
Agreement to the Purchaser;
(ix) the President of the Association shall have executed and
delivered to Baker, Donelson, Bearman & Caldwell, a professional corporation,
and any state healthcare counsel engaged to render the opinion described in
subparagraph (x) below, the Certificate of Fact in substantially the form set
forth as Exhibit 7(a)(ix) hereto
(x) the Purchaser shall have received an opinion from Florida
counsel reasonably satisfactory to the Purchaser that the Service Agreement is
the legal, valid and binding obligation of the Group, enforceable according to
its terms (subject to standard bankruptcy, insolvency and principles of equity
exceptions) and that the performance of the Service Agreement by the Purchaser
and the Group will not violate any statute, regulation, official
interpretation, order, decree or other law of the state of Florida;
(xi) the Purchaser shall have received an opinion from Baker,
Donelson, Bearman & Caldwell that the performance of the Service Agreement by
the Purchaser and the Group will not violate any statute, regulation, official
interpretation, order, decree or other law of the United States of America;
(xii) each Seller shall have executed an employment contract with
the Group in substantially the form required by the Service Agreement; and
(xiii) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinion, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to the
Purchaser.
The Purchaser may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Purchaser shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(iv) the Purchaser shall have delivered to the Sellers a certificate
to the effect that each of the conditions specified above in Section 7(b)(i)-
(iii) is satisfied in all respects;
(v) all actions to be taken by the Purchaser in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
the Sellers.
(vi) the Sellers shall have received an opinion from Baker,
Donelson, Bearman & Caldwell, in form and substance satisfactory to the Sellers
and their counsel with respect to the enforceability of the Long-Term Note and
the legality of the rate of interest thereupon.
(vii) the Sellers shall have received an opinion from Florida
counsel reasonably satisfactory to the Sellers that the Service Agreement is
the legal, valid and binding obligation of the Purchaser, enforceable according
to its terms (subject to standard bankruptcy, insolvency and principles of
equity exceptions) and that the performance of the Service Agreement by the
Purchaser and the Group will not violate any statute, regulation, official
interpretation, order, decree or other law of the state of Florida.
(viii) the Sellers shall have received an opinion from Baker,
Donelson, Bearman & Caldwell that the performance of the Service Agreement by
the Purchaser and the Group will not violate any statute, regulation, official
interpretation, order, decree or other law of the United States of America;
The Sellers may waive any condition specified in this Section 7(b) if they
execute a writing so stating at or prior to the Closing.
8. DELIVERIES AT CLOSING.
(a) DOCUMENTS TO BE DELIVERED BY THE PURCHASER. At the Closing, the
Purchaser shall deliver the following instruments and documents to the Sellers
or other appropriate party:
(i) the amount described in Section 2(b)(i) above;
(ii) the Long-Term Note, payable to the order of the Sellers;
(iii) the Warrants;
(iv) the certificate described in Section 7(b)(iv) above;
(v) the opinions of counsel, in a form reasonably satisfactory to
the Sellers' counsel, required pursuant to Sections 7(b)(vi) through (viii)
above; and
(vi) such other documents as the Sellers may reasonably request to
affect the transactions contemplated by this Agreement.
(b) DOCUMENTS TO BE DELIVERED BY THE SELLER. At the Closing, the Sellers
shall deliver the following instruments and documents to the Purchaser:
(i) stock certificates representing all of the Shares, endorsed in
blank or accompanied by duly executed assignment documents;
(ii) a certificate of existence from the Florida Secretary of State
evidencing the existence and good standing of the Association, dated not more
than five (5) days prior to the Closing Date;
(iii) all consents necessary regarding the transaction contemplated
by this Agreement;
(iv) the opinion of counsel to the Sellers, in a form reasonably
satisfactory to the Purchaser's counsel, required by Section 7(a)(vii) above;
(v) the opinion, in a form reasonably acceptable to the Purchaser's
counsel, required by Section 7(a)(ix) above;
(vi) the Certificate described in Section 7(a)(v) above;
(vii) the Service Agreement, duly executed by the Group; and
(viii) such other documents as the Purchaser may reasonably request
to affect the transactions contemplated by this Agreement.
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect forever thereafter (subject to any applicable
statutes of limitations).
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PURCHASER . In the
event any of the Sellers breaches (or in the event any third party alleges
facts that, if true, would mean the Seller has breached), in a manner which has
a material adverse effect on the Purchaser, any of such Seller's
representations, warranties, and covenants contained herein and, provided that
the Purchaser makes a written claim for indemnification against the Seller
pursuant to Section 9(c)(i) below, then the Sellers and the Group, jointly and
severally, agree to indemnify the Purchaser from and against the entirety of
any Adverse Consequences the Purchaser may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences the Purchaser
may suffer after the end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or the
alleged breach). or otherwise.
(c) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify the Purchaser with respect to any
matter (a "Third Party Claim") which may give rise to a claim for
indemnification under this Section 9, then the Purchaser shall promptly notify
the Sellers thereof in writing; provided, however, that no delay on the part of
the Purchaser in notifying the Sellers shall relieve the indemnitor from any
obligation hereunder unless (and then solely to the extent) the indemnitor
thereby are prejudiced.
(ii) The Sellers and the Group will have the right to defend the
Purchaser against the Third Party Claim with counsel of its choice satisfactory
to the Purchaser so long as (A) they notify the Purchaser in writing within 15
days after the Purchaser has given notice of the Third Party Claim that the
Sellers will indemnify the Purchaser from and against the entirety of any
Adverse Consequences the Purchaser may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (B) the
Sellers and the Group provides the Purchaser with evidence acceptable to the
Purchaser that the Sellers and the Group will have the financial resources to
defend against the Third Party Claim and fulfill his indemnification
obligations hereunder, (C) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (D) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not, in the
good faith judgment of the Purchaser, likely to establish a precedential custom
or practice adverse to the continuing business interests of the Purchaser, and
(E) the Sellers and the Group conduct the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Sellers and the Group are conducting the defense
of the Third Party Claim in accordance with Section 9(c)(ii) above, (A) the
Purchaser may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the Purchaser will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the Sellers and
the Group (not to be withheld unreasonably), and (C) the Sellers and the Group
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Purchaser.
(iv) In the event any of the conditions in Section 9(c)(ii) above is
or becomes unsatisfied, however, (A) the Purchaser may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it may deem appropriate (and the
Purchaser need not consult with, or obtain any consent from, the Seller in
connection therewith), (B) the Sellers and the Group will reimburse the
Purchaser promptly and periodically for the costs of defending against the
Third Party Claim (including attorneys' fees and expenses), and (C) the Sellers
and the Group will remain responsible for any Adverse Consequences the
Purchaser may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim to the fullest extent provided in this
Section 9.
(d) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this Section 9. All
indemnification payments under this Section 9 shall be deemed adjustments to
the Purchase Price.
(e) RECOUPMENT UNDER THE LONG-TERM NOTE. In the event that the Purchaser
shall suffer Adverse Consequences for which indemnification pursuant to the
foregoing provisions shall be payable by the Sellers and the Sellers shall not
make any such indemnification payment within sixty (60) days after such
indemnity amount shall become payable, the Purchaser shall have the option of
recouping all or any part of any Adverse Consequences it may suffer by
notifying the Sellers that the Purchaser is offsetting the amount of such
Adverse Consequences against the principal amount outstanding under the Long-
Term Note. An offset pursuant to this subsection shall affect the timing and
amount of payments required under the Long-Term Note in the same manner as if
the Purchaser had made a permitted prepayment (without premium or penalty)
thereunder.
(f) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. The Sellers hereby agree that they will
not make any claim for indemnification against the Association by reason of the
fact that they were directors, officers, employees, or agents of the
Association or were serving at the request thereof as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought by the Purchaser
against the Sellers (whether such action, suit, proceeding, complaint, claim,
or demand is pursuant to this Agreement, applicable law, or otherwise).
10. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Purchaser and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Purchaser may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event any of the
Sellers has breached or failed to satisfy in any material respect any
representation, warranty, covenant or condition contained in this Agreement,
the Purchaser has notified the Seller of the breach or failure, and the breach
or failure has continued without cure for a period of 10 days after the notice
of breach or failure;
(iii) the Sellers may terminate this Agreement by giving written
notice to the Purchaser at any time prior to the Closing in the event the
Purchaser has breached or failed to satisfy in any material respect any
representation, warranty, covenant or condition contained in this Agreement,
any of the Sellers has notified the Purchaser of the breach or failure, and the
breach or failure has continued without cure for a period of 10 days after the
notice of breach or failure; and
(iv) if the Closing shall not have occurred on or before February
29, 1996 (unless the failure to close is primarily attributable to the breach
of or failure to satisfy any representation, warranty, covenant or condition
contained in this Agreement by the Party seeking to terminate this Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach).
11. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Purchaser and the
Seller; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Parties prior to
making the disclosure).
(b) ARBITRATION OF DISPUTES; LEGAL FEES. Any dispute arising under this
Stock Purchase Agreement shall be submitted by the parties to binding
arbitration pursuant to the Tennessee Uniform Arbitration Act, with any such
arbitration proceeding being conducted in accordance with the rules of the
American Arbitration Association. Any arbitration panel presiding over any
arbitration proceeding hereunder is hereby empowered to render a decision in
respect of such dispute, to award costs and expenses (including reasonable
attorney fees) as it shall deem equitable and to enter its award in any court
of competent jurisdiction. Each of the Parties submits to the jurisdiction of
any state or federal court sitting in Memphis, Shelby County, Tennessee for
purposes of enforcement of any arbitration award hereunder. Each Party also
agrees not to bring any action or proceeding arising out of or relating to this
Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety, or other security that might be required of any
other Party with respect thereto.
(c) LIQUIDATED DAMAGES. In the event that the Sellers shall be willing,
ready and able to close on the Closing Date and the Purchaser shall fail to
close on such date, the Purchaser shall pay to the Sellers, as liquidated
damages and in complete satisfaction of all claims that Sellers may have
against the Purchaser on account of said failure, the amount of $250,000.00,
which shall be payable within ten (10) business days after such failure shall
occur, and such reasonable attorneys' fees as shall have been incurred by the
Sellers or the Group in connection with this Agreement.
(d) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(e) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements, or representations by or among the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(f) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Purchaser and the Seller; provided, however, that the
Purchaser may (i) assign any or all of its rights and interests hereunder to
one or more of its Affiliates and (ii) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which cases the
Purchaser nonetheless shall remain responsible for the performance of all of
its obligations hereunder).
(g) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(h) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Seller: Copy to:
Leonard Kalman, M.D. Alan R. Chase, Esq.
Oncology Hematology Group Cohen, Chase, Hoffman & Trautman, P.A.
of South Florida, P.A. Suite 600, 9400 South Dadeland Blvd
8940 N. Kendall Dr., Miami, Florida 33156
Suite 300-E East Tower
Miami, Florida 33176
If to the Purchaser: Copy to:
Daryl P. Johnson John A. Good, Esq.
Response Oncology, Inc. Baker, Donelson, Bearman & Caldwell
1775 Moriah Woods Blvd. 200 First Tennessee Building
Memphis, Tennessee 38117 Memphis, Tennessee 38103
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
(j) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Tennessee without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Tennessee or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Tennessee.
(k) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Purchaser and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(l) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(m) EXPENSES. Each of the Parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Sellers agree that
neither the Association has not borne or will not bear any of the Sellers'
costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(n) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(o) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(p) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy
to which they may be entitled, at law or in equity.
* * * * *
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on [as
of] the date first above written.
PURCHASER:
Response Oncology, Inc.
By:__________________________________
Title:_______________________________
GROUP:
South Florida Oncology Hematology Associates, P.A.
By:__________________________________
Title:_______________________________
SELLERS:
_____________________________________
Dr. Leonard Kalman, individually and as
duly-authorized attorney-in-fact
Exhibit 2(b)(i)
to
Stock Purchase Agreement
NON-NEGOTIABLE PROMISSORY NOTE
$5,959,972.00 Miami, Florida
January 2, 1996
FOR VALUE RECEIVED, the undersigned, RESPONSE ONCOLOGY, INC., a Tennessee
corporation (the "Maker"), promises to pay to the order of DR. LEONARD KALMAN,
a resident of the State of Florida, individually and acting as attorney-in-fact
for all Selling Shareholders pursuant to that certain Agreement among Selling
Shareholders of even date herewith (the "Lender"), the principal sum of FIVE
MILLION NINE HUNDRED FIFTY-NINE THOUSAND NINE HUNDRED SEVENTY-TWO DOLLARS
($5,959,972.00), together with interest from date until maturity at the rate of
nine (9%) percent per annum from date until Maturity (hereinafter defined),
said principal and interest being payable in fifty nine (59) consecutive,
equal, quarterly amortized installments of ONE HUNDRED EIGHTY-TWO THOUSAND
SEVEN HUNDRED THIRTEEN AND FIFTY-FOUR ONE HUNDREDTHS DOLLARS ($182,713.54),
commencing April 1, 1996, and on the first day of each calendar quarter
thereafter. The entire remaining unpaid balance of principal, and any accrued
interest thereon, shall be due and payable on January 1, 2011.
This Note may be prepaid in whole or in part prior to Maturity only with
the advance written consent of the Lender. Any partial prepayment of principal
shall, however, not have the effect of suspending or deferring the payments
provided for herein, but the same shall continue to be due and payable on each
due date subsequent to any such partial prepayment of the principal and shall
operate to effect full payment of the principal at an earlier date.
At the option of the Lender, exercisable not later than ten (10) days
prior to any payment of principal or interest on this Note, such payment shall
be paid in whole or in part in shares of common stock of the Maker, $.01 par
value per share (the "Shares"). For purposes of this paragraph, the number of
Shares to which the Lender shall be entitled upon exercise of the option
provided hereunder shall be determined by dividing the amount of principal and
interest to be paid in Shares by the Maker by $17.50, which price shall be
adjusted for stock splits, stock dividends, reverse stock splits,
recapitalizations, reorganizations and other changes in the capital structure
of the Maker affecting the value of the Shares.
Any amounts not paid when due hereunder (whether by acceleration or
otherwise) shall bear interest after maturity at the lesser of (a) eighteen
percent (18%) per annum or (b) the maximum effective contract rate which may be
charged by the Lender under applicable law from time to time in effect.
In the event that the foregoing provisions should be construed by a court
of competent jurisdiction not to constitute a valid, enforceable designation of
a rate of interest or method of determining same, the indebtedness hereby
evidenced shall bear interest at the maximum effective contract rate which may
be charged by the Lender under applicable law from time to time in effect.
This Note is non negotiable.
Notwithstanding anything to the contrary, the payments required pursuant
to this Note are subject to a right of offset, setoff, and recoupment as a
result of any indemnification required pursuant to the provisions of that
certain Stock Purchase Agreement by and between Lender and Maker dated as of
December ___, 1995.
All installments of interest, and the principal hereof, are payable by
Maker's corporate check at ______________________________ or at such other
place as the holder may designate in writing, in lawful money of the United
States of America, which shall be legal tender in payment of all debts and
dues, public and private, at the time of payment.
If the Maker shall fail to make payment of any installment of principal
and interest, as above provided, and such failure shall continue unremedied for
a period of thirty (30) days following written notice thereof, or upon the
dissolution of the Maker or any endorser, and (if there is a cure period
applicable thereto) such default is not cured within such applicable cure
period, then and in any such event, the entire unpaid principal balance of the
indebtedness evidenced hereby, together with all interest then accrued, shall,
at the absolute option of the holder hereof, at once become due and payable,
without demand or notice, the same being hereby expressly waived.
If this Note is placed in the hands of an attorney for collection, by suit
or otherwise, the Maker shall pay on demand all costs of collection and
litigation (including court costs), together with a reasonable attorney's fee
if Lender is successful in the litigation.
It is the intention of the Lender and the Maker to comply strictly with
applicable usury laws; and, accordingly, in no event and upon no contingency
shall the holder hereof ever be entitled to receive, collect, or apply as
interest any interest, fees, charges or other payments equivalent to interest,
in excess of the maximum effective contract rate which the Lender may lawfully
charge under applicable statutes and laws from time to time in effect; and in
the event that the holder hereof ever receives, collects, or applies as
interest any such excess, such amount which, but for this provision, would be
excessive interest, shall be applied to the reduction of the principal amount
of the indebtedness hereby evidenced; and if the principal amount of the
indebtedness evidenced hereby, all lawful interest thereon and all lawful fees
and charges in connection therewith, are paid in full, any remaining excess
shall forthwith be paid to the Maker, or other party lawfully entitled thereto.
All interest paid or agreed to be paid by the Maker shall, to the maximum
extent permitted under applicable law, be amortized, prorated, allocated and
spread throughout the full period until payment in full of the principal so
that the interest hereon for such full period shall not exceed the maximum
amount permitted by applicable law. Any provision hereof, or of any other
agreement between the holder hereof and the Maker, that operates to bind,
obligate, or compel the Maker to pay interest in excess of such maximum
effective contract rate shall be construed to require the payment of the
maximum rate only. The provisions of this paragraph shall be given precedence
over any other provision contained herein or in any other agreement between the
holder hereof and the Maker that is in conflict with the provisions of this
paragraph.
Neither Lender, nor any subsequent holder of this Note, shall have any
right to commute, sell, assign, transfer or otherwise convey the right to
receive any payments hereunder (except to the Maker, or to ONCOLOGY HEMATOLOGY
GROUP OF SOUTH FLORIDA, P.A. [the "P.A."]), which payments and the rights
thereto are hereby expressly declared: (i) to be nonassignable and non-
transferrable (except to the Maker or to the P.A.), and (ii) not liable for or
subject to the debts, liabilities, or obligations or the Lender or the P.A.
(except for those debts, obligations and liabilities of the P.A. to Maker which
are secured by the security interest in this Note granted to Maker pursuant to
a security agreement of even date herewith; and, in the event of any attempted
assignment or transfer (except to the Maker or to the P.A.), the Maker shall
have no further liability under this Note.
This Note shall be governed and construed according to the statutes and
laws of the State of Tennessee from time to time in effect.
RESPONSE ONCOLOGY, INC.
By:_____________________________________
Title:__________________________________
Exhibit 2(b)(ii)
to
Stock Purchase Agreement
COMMON STOCK PURCHASE WARRANT
Certificate No. SF-Specimen
This Warrant has not been registered under the Securities Act of 1933 or any
state securities law, has been acquired for investment only and may not be
sold, transferred, assigned, pledged, hypothecated or otherwise disposed of
unless it has been registered under the Securities Act of 1933 and any
applicable state securities law, or the proposed transfer is exempt from the
registration requirements of the Securities Act of 1933 and any applicable
state securities law.
____________________________________________________________________________
WARRANT TO PURCHASE COMMON STOCK
OF
RESPONSE ONCOLOGY, INC.
____________________________________________________________________________
This Warrant is granted as of January 2, 1996 by Response Oncology, Inc.,
a Tennessee corporation (the "Issuer"), which certifies that, for value
received, the registered holder hereof, or his registered assigns (the
registered holder or assigns are referred to herein as the "Holder"), is
entitled to purchase from the Issuer, at any time and from time to time during
the Exercise Period (as hereinafter defined) at the Exercise Price (as
hereinafter defined) per share (as adjusted as herein provided), 160,000 shares
of common stock (the "Common Stock") of Response Oncology, Inc. (the "Company")
(such number of shares of Common Stock purchasable upon the exercise of this
Warrant to Purchase Common Stock, as adjusted from time to time pursuant to the
provisions hereinafter set forth, are referred to in this Warrant as the
"Warrant Shares"). This Warrant has been issued in connection with and as
partial consideration for the acquisition (the "Stock Purchase") by the Issuer
of all of the outstanding shares of capital stock of Oncology Hematology Group
of South Florida, P.A. (the "Association") pursuant to that certain Stock
Purchase Agreement dated as of December 20, 1995 among the Issuer and the
stockholders of the Association.
VOID AFTER 5:00 P.M. MEMPHIS, TENNESSEE TIME, ON DECEMBER 31, 2000,
SUBJECT TO EARLIER TERMINATION AS HEREINAFTER SET FORTH
This Warrant is subject to the following terms and conditions:
1. EXERCISE PERIOD. The period in which the Holder shall have the right
to exercise this Warrant (the "Exercise Period") shall commence on the date
hereof and shall terminate on (the "Termination Date") the earlier of (i)
December 31, 2000, (ii) the occurrence of any merger, voluntary dissolution or
other event pursuant to which the existence of the Issuer shall terminate, or
(iii) thirty (30) days following the occurrence of any Oncology Event of
Default as defined in that certain Service Agreement between the Issuer and
Oncology Hematology Group of South Florida, P.A. dated as of January 2, 1996
(taking into account, for purposes of determining the date of occurrence of
such Oncology Event of Default, any curative period).
2. EXERCISE PRICE. The Exercise Price shall be equal to $12.50 per
share. The Exercise Price is subject to adjustment as provided in Section 5
below.
3. TERMINATION OF WARRANTS. The Warrants shall terminate on the
Termination Date and shall not be exercisable thereafter.
4. EXERCISE OF WARRANTS. (a) The Warrants may be exercised in whole or in
part, at any time and from time to time, during the Exercise Period by
surrendering this Warrant, with the purchase form provided for herein duly
executed by the Holder or by the Holder's duly authorized attorney-in-fact, at
the principal office of the Issuer or at such other office in the United States
as the Issuer may designate by notice in writing to the Holder (the "Issuer's
Office") accompanied by payment of the Exercise Price in full, in cash or by
certified or cashier's check, payable to the order of the Issuer, or, at the
option of the Holder, by wire transfer in accordance with instructions provided
by the Issuer. If fewer than all of the Warrants are exercised, the Issuer
shall, upon each exercise prior to the expiration of the Exercise Period,
execute and deliver to the Holder an amendment to this Warrant (dated the date
hereof) evidencing the balance of the Warrants that remain exercisable.
(b) On the date of exercise of the Warrant, the Holder exercising the
same shall be deemed to have become the holder of record for all purposes of
the Warrant Shares to which the exercise relates.
(c) As soon as practicable, but not later than ten (10) days after the
exercise of all or part of the Warrants, the Issuer shall, at the Issuer's
expense (including the payment of any applicable issue taxes and the cost of
any opinion of counsel required by the Issuer or its transfer agent), cause to
be issued in the name of and delivered to the Holder a certificate or
certificates evidencing the number of fully paid and nonassessable Warrant
Shares to which the Holder shall be entitled upon such exercise.
(d) The Warrant Shares issued upon exercise of this Warrant will not be
registered under the Securities Act of 1933, as amended (the "Act") or the
securities laws of any state in reliance on exemptions from the registration
requirements of the Act and such laws. Accordingly, the Warrant Shares may be
sold or otherwise transferred only upon (i) registration under the Act and
qualification under applicable state securities laws, (ii) compliance with Rule
144 under the Act, or (iii) the Issuer's receipt of an opinion, at the Holder's
expense, from counsel reasonable acceptable to the Issuer to the effect that
any such sale or transfer will not violate the Act or any state law. The
Issuer will cause an appropriate legend to be placed on certificates
representing the Warrant Shares to the foregoing effect.
5. ADJUSTMENTS OF EXERCISE PRICE, NUMBER AND CHARACTER OF WARRANT SHARES,
AND NUMBER OF WARRANTS. The Exercise Price, the number and kind of securities
purchasable upon the exercise of each Warrant, and the number of Warrants
outstanding shall be subject to adjustment from time to time upon the happening
of the events enumerated in this Section 5.
(a) In case the Issuer shall at any time on or after the date hereof (i)
pay a dividend in shares of Common Stock or other securities of the Issuer or
make a distribution in shares of Common Stock or such other securities to
holders of all its outstanding shares of Common Stock, (ii) subdivide or
reclassify the outstanding shares of Common Stock into a greater number of
shares, (iii) combine the outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue by reclassification of its
shares of Common Stock other securities of the Issuer (including any such
reclassification in connection with a consolidation or merger in which the
Issuer is the continuing corporation), then the number and kind of Warrant
Shares purchasable upon exercise of each Warrant outstanding immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of shares of Common Stock or other securities of the Issuer
which the Holder would have owned or have been entitled to receive after the
happening of any of the events described above had such Warrant been exercised
in full immediately prior to the earlier of the happening of such event or any
record date in respect thereof. In the event of any adjustment of the total
number of shares of Common Stock purchasable upon the exercise of the then
outstanding Warrants pursuant to this Section 5(a), the Exercise Price shall be
adjusted to be the amount resulting from dividing the number of shares of
Common Stock (including fractional shares of Common Stock) covered by such
Warrant immediately after such adjustment into the total amount payable upon
exercise of such Warrant in full immediately prior to such adjustment. An
adjustment made pursuant to this Section 5(a) shall become effective
immediately after the effective date of such event retroactive to the record
date for any such event. Such adjustment shall be made successively whenever
any event listed above shall occur.
(b) In case the Issuer shall at any time after the date hereof fix a
record date for the issuance of rights, options, or warrants to all holders of
its outstanding shares of Common Stock, entitling them (for a period expiring
within forty-five (45) days after such record date) to subscribe for or
purchase shares of Common Stock (or securities exchangeable for or convertible
into shares of Common Stock) at a price per common share (or having an exchange
or conversion price per common share, with respect to a security exchangeable
for or convertible into shares of Common Stock) which is lower than the
Exercise Price per common share on such record date, then the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect immediately prior
to such record date by a fraction, of which the numerator shall be the number
of shares of Common Stock outstanding on such record date plus the number of
shares of Common Stock which the aggregate offering price of the total number
of shares of Common Stock so to be offered (or the aggregate initial exchange
or conversion price of the exchangeable or convertible securities so to be
offered) would purchase at such current Exercise Price and of which the
denominator shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock to be offered
for subscription or purchase (or into which the exchangeable or convertible
securities so to be offered are initially exchangeable or convertible). Such
adjustment shall become effective at the close of business on such record date;
however, to the extent that shares of Common Stock (or securities exchangeable
for or convertible into shares of Common Stock) are not delivered after the
expiration of such rights, options, or warrants, the Exercise Price shall be
readjusted (but only with respect to Warrants exercised after such expiration)
to the Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights, options, or warrants been made upon the basis
of delivery of only the number of shares of Common Stock (or securities
exchangeable for or convertible into shares of Common Stock) actually issued.
In case any subscription price may be paid in a consideration part or all of
which shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors of the Issuer and
shall be described in a statement mailed to the Holder. Shares of Common Stock
owned by or held for the account of the Issuer shall not be deemed outstanding
for the purpose of any such computation.
(c) In case the Issuer shall at any time after the date hereof distribute
to all holders of its shares of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Issuer is the
surviving corporation) evidences of its indebtedness or assets (excluding cash
dividends and distributions payable out of consolidated net income or earned
surplus in accordance with applicable law and dividends or distributions
payable in shares of stock described in Section 5(a) above) or rights, options,
or warrants or exchangeable or convertible securities containing the right to
subscribe for or purchase shares of Common Stock (or securities exchangeable
for or convertible into shares of Common Stock) (excluding those expiring
within forty-five (45) days after the record date referred to in Section 5(b)
above), then the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the record date for such distribution by a
fraction, of which the numerator shall be the fair market value of the shares
of Common Stock on such day, as determined in good faith by the Board of
Directors of the Issuer whose determination shall be conclusive, and described
in a notice to the Holder of the portion of the evidences of indebtedness or
assets so to be distributed or of such rights, options or warrants applicable
to one common share and of which the denominator shall be such fair market
value per common share. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for such transaction.
(d) For the purpose of this Warrant, the fair market value per share of
Common Stock shall be determined by reference to the latest independent bid for
the Common Stock as set forth in the National Market of The Nasdaq Stock Market
or, if the Common Stock shall be traded on any national or regional securities
exchange, the latest bid price for the Common Stock, or, if none of the
foregoing apply, as determined in good faith by the Board of Directors of the
Issuer.
(e) No adjustment in the Exercise Price or the number of Warrant Shares
purchasable shall be required unless such adjustment would require an increase
or decrease of at least ten percent (10%) in the Exercise Price or the number
of Warrant Shares purchasable; provided, however, that any adjustments which by
reason of this Section 5(e) are not required to be made (i) shall be carried
forward and taken into account in any subsequent adjustment or (ii) if no
subsequent adjustment occurs, shall be made immediately prior to exercise of
this Warrant. All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
(f) Unless the Issuer shall have exercised its election as provided in
Section 5(g), upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 5(b) or (c), each Warrant outstanding prior to
the making of the adjustment in the Exercise Price shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of shares of
Common Stock (calculated to the nearest hundredth) obtained by (i) multiplying
the number of shares of Common Stock purchasable upon exercise of a Warrant
prior to adjustment of the number of shares of Common Stock by the Exercise
Price in effect prior to adjustment of the Exercise Price and (ii) dividing the
product so obtained by the Exercise Price in effect after such adjustment of
the Exercise Price.
(g) The Issuer may elect on or after the date of any adjustment of the
Exercise Price to adjust the number of Warrants, in substitution for any
adjustment in the number of Warrant Shares purchasable upon the exercise of
Warrants as provided in Sections 5(a) and (f). Each of the Warrants
outstanding after such adjustment of the number of Warrants shall be
exercisable for one share of Common Stock. Each Warrant held of record prior
to such adjustment of the number of Warrants shall become that number of
Warrants (calculated to the nearest hundredth) obtained by dividing the
Exercise Price in effect prior to adjustment of the Exercise Price by the
Exercise Price in effect after adjustment of the Exercise Price. The Issuer
shall send to each Holder a notice of its election to adjust the number of
Warrants, indicating the record date for the adjustment, and if known at the
time, the amount of the adjustment to be made. This record date may be the
date on which the Exercise Price is adjusted or any day thereafter, but shall
be at least ten (10) days after the date such announcement is sent to the
Holders. Upon each adjustment of the number of Warrants pursuant to this
Section 5(g) the Issuer shall, as promptly as practicable, cause to be
distributed to holders of record of Warrants on such record date new
certificate(s) evidencing the additional Warrants to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Issuer,
shall cause to be distributed to such holders of record in substitution and
replacement for the certificates held by such holders prior to the date of
adjustments, and upon surrender thereof if required by the Issuer, new
certificates evidencing all the Warrants to which such holders shall be
entitled after such adjustment.
(h) In case of any capital reorganization of the Issuer, or of any
reclassification of the shares of Common Stock [other than a reclassification,
subdivision or combination of shares of Common Stock referred to in Section
5(a)], or in case of the consolidation of the Issuer with, or the merger of the
Issuer with, or merger of the Issuer into, any other corporation, limited
partnership, limited liability company or other business entity (other than a
reclassification of the shares of Common Stock referred to in Section 5(a) or a
consolidation or merger which does not result in any reclassification or change
of the outstanding shares of Common Stock) or of the sale of the properties and
assets of the Issuer as, or substantially as, an entirety to any other
corporation or entity, each Warrant shall after such capital reorganization,
reclassification of shares of Common Stock, consolidation, merger, or sale be
exercisable, upon the terms and conditions specified in this Warrant, for the
kind, amount and number of shares or other securities, assets, or cash to which
a holder of the number of shares of Common Stock purchasable (at the time of
such capital reorganization, reclassification of shares of Common Stock,
consolidation, merger or sale) upon exercise of such Warrant would have been
entitled to receive upon such capital reorganization, reclassification of
shares of Common Stock, consolidation, merger, or sale; and in any such case,
if necessary, the provisions set forth in this Section 5 with respect to the
rights and interests thereafter of the holders of the Warrants shall be
appropriately adjusted so as to be applicable, as nearly equivalent as
possible, to any shares or other securities, assets, or cash thereafter
deliverable on the exercise of the Warrants. The subdivision or combination of
shares of Common Stock at any time outstanding into a greater or lesser number
of shares shall not be deemed to be a reclassification of the shares of Common
Stock for purposes of this Section 5(h).
(i) In the event that at any time, as a result of an adjustment made
pursuant to this Section 5, the holders of an Warrant or Warrants shall become
entitled to purchase any shares or securities of the Issuer other than the
shares of Common Stock, thereafter the number of such other shares or
securities so purchasable upon exercise of each Warrant and the exercise price
for such shares or securities shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as possible to the provisions
with respect to the shares of Common Stock contained in Sections 5(a) through
(h), inclusive.
(j) In any case in which this Section 5 shall require that an adjustment
in the Exercise Price be made effective as of a record date for a specified
event, the Issuer may elect to defer until the occurrence of such event issuing
to the holder of any Warrant exercised after such record date the shares of
Common Stock, if any, issuable upon such exercise over and above the Warrant
Shares, if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment; provided, however, that the Issuer shall
deliver as soon as practicable to such holder a due bill or other appropriate
instrument provided by the Issuer evidencing such holder's right to receive
such additional shares of Common Stock upon the occurrence of the event
requiring such adjustment.
(k) Notwithstanding anything herein to the contrary, no adjustment shall
be required under this Section 5 in the event the Issuer (i) issues options to
purchase Common Stock or other securities to officers, directors, employees or
agents pursuant to an incentive or non-qualified stock option plan, or (ii)
issues shares of Common Stock or other securities pursuant to an offering for
cash or other consideration (including the assets or capital stock or
securities of any other corporation or other business entity), or pursuant to a
plan of merger whereby the Issuer is the surviving participant in the merger,
other than an issuance of rights, options or warrants exercisable for shares of
Common Stock (or securities exchangeable for or convertible into shares of
Common Stock) to all holders of its outstanding shares of Common Stock.
6. DEFINITION OF SHARES OF COMMON STOCK. The shares of Common Stock
issuable upon exercise of the Warrants shall be the shares of Common Stock as
constituted on the date hereof except as otherwise provided in Section 5.
7. NOTICE OF NUMBER OF WARRANT SHARES, ADJUSTMENT OR TERMINATION. Within
thirty (30) days of the occurrence of an event which results in an adjustment
in the number of Warrants, the number of Warrant Shares purchasable upon the
exercise of Warrants and/or the Exercise Price or the termination of the
Warrants shall have occurred as provided herein, the Issuer shall forthwith:
(a) prepare and hold for inspection at the Issuer's principal place of
business, 1775 Moriah Woods Blvd., Memphis, Tennessee 38117, or such subsequent
principal place of business (the "Issuer's Office"), a statement, signed by the
Chief Financial Officer of the Issuer, stating either (i) the number of
Warrants or Warrant Shares, (ii) the adjusted number of Warrants or Warrant
Shares purchasable upon the exercise of Warrants and/or Exercise Price
determined as herein provided, such statement to show in detail the facts
requiring such adjustment or (iii) the termination of the Warrants, and
(b) give notice embodying such statement to each Holder as provided in
Section 13. Where appropriate, such notice may be given in advance and may be
included as part of a notice required to be mailed pursuant to Section 8.
8. NOTICES OF RECORD DATE, ETC. In the event the Issuer shall propose to
take any action of the type requiring an adjustment of the Exercise Price or
the number or character of the Warrant Shares or Warrants pursuant to Section 5
or a dissolution, liquidation or winding up of the Issuer (other than in
connection with a consolidation, merger, or sale of all or substantially all of
its property, assets, and business as an entirety) shall be proposed, the
Issuer shall give notice to each Holder as provided in Section 13, which notice
shall specify the record date, if any, with respect to any such action and the
date on which such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary to indicate
the effect of such action (to the extent such effect may be known at the date
of such notice) on the Exercise Price and the number, kind or class of shares
or other securities or property which shall be deliverable or purchasable upon
the occurrence of such action or deliverable upon the exercise of the Warrants.
In the case of any action which will require the fixing of a record date,
unless otherwise provided in this Warrant, such notice shall be given at least
twenty (20) days prior to the date so fixed, and in case of all other action,
such notice shall be given at least thirty (30) days prior to the taking of
such proposed action.
9. REPLACEMENT OF SECURITIES. If this Warrant shall be lost, stolen,
mutilated or destroyed, the Issuer shall, on such terms as to indemnity or
otherwise as the Issuer may in its discretion reasonably impose, issue a new
certificate of like tenor or date representing in the aggregate the right to
subscribe for and purchase the number of shares of Common Stock which may be
subscribed for and purchased hereunder. Any such new certificate shall
constitute an original contractual obligation of the Issuer, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time
enforceable by anyone.
10. RECORDKEEPING. This Warrant, as well as all other warrant
certificates representing Warrants of like tenor issued in connection with the
Stock Purchase shall be numbered beginning with the alphabetic prefix "SF" and
shall be registered in a register (the "Warrant Register") maintained at the
Issuer's Office as they are issued. The Warrant Register shall list the name,
address and Social Security or other Federal Identification Number, if any, of
all Holders. Upon notice duly given by the Holder, the Issuer shall be
entitled to recognize the Holder as set forth in the Warrant Register as the
nominee for the beneficial owners of the Warrants as set forth in such notice
or subsequent notices with respect to such beneficial ownership recognize for
all purposes and shall not be bound to recognize any equitable or other claim
to or interest in such Warrant on the part of any other person, and shall not
be liable for any registration of transfer of Warrants that are registered or
to be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with the actual knowledge that a fiduciary or nominee is committing
a breach of trust in requesting such registration of transfer, or with such
knowledge of such facts that its participation therein amounts to bad faith.
11. TRANSFER. This Warrant shall not be transferable and may not be the
subject of a sale, assignment, pledge or other conveyance without the Issuer's
advance consent, which the Issuer may withhold in its absolute discretion. The
Warrant shall be transferable only on the Warrant Register upon delivery of
such Warrants, with the assignment form provided for herein duly executed by
the Holder or by the Holder's duly authorized attorney-in-fact. Upon any
registration of transfer, the Issuer shall execute and deliver a new Warrant
certificate to the person entitled thereto.
The Warrants have not been registered under the Securities Act of 1933 or
any state securities law, and, accordingly, may not be sold, transferred,
assigned, pledged, hypothecated or otherwise disposed of unless they have been
registered under the Securities Act of 1933 and any applicable state securities
law or, in the opinion of counsel reasonably satisfactory to the Issuer, whose
fees and expenses in connection with such opinion will be borne by the Holder,
the proposed transfer is exempt from the registration requirements of the
Securities Act of 1933 and any applicable state securities law.
12. EXCHANGE OF WARRANT CERTIFICATES. This Warrant may be exchanged for
another certificate or certificates entitling the Holder thereof to purchase a
like aggregate number of Warrant Shares as this Warrant entitles such Holder to
purchase. A Holder desiring to so exchange this Warrant shall make such
request in writing delivered to the Issuer, and shall surrender this Warrant
therewith. Thereupon, the Issuer shall execute and deliver to the person
entitled thereto a new certificate or certificates, as the case may be, as so
requested.
13. PIGGYBACK REGISTRATION.
(a) NOTICE OF PIGGYBACK REGISTRATION AND INCLUSION OF WARRANT
SHARES.
If, after the Holder's exercise of the Warrants pursuant to Section 4
hereof, the Issuer shall elect to file a registration statement ("Registration
Statement") on Form S-2 or S-3 (or any successor form thereto) under the Act
with respect to any of its securities, either for its own account or the
account of a security holder or holders, other than a registration of a public
offering of Common Stock commenced within one (1) year of the date hereof or a
registration relating solely to employee benefit plans (excluding the foregoing
events, a "Registration"), the Issuer will: (i) promptly give each Holder
written notice thereof (which shall include a list of the jurisdictions in
which the Issuer intends to attempt to qualify such securities under the
applicable Blue Sky or other state securities laws) and (ii) include in such
Registration (and any related registration and/or qualification under Blue Sky
laws or other compliance), and in any underwriting involved therein, all the
Warrant Shares specified in a written request delivered to the Issuer by any
Holder within 30 days after delivery of such written notice from the Issuer.
(b) UNDERWRITING IN PIGGYBACK REGISTRATION.
(i) NOTICE OF UNDERWRITING IN PIGGYBACK REGISTRATION.
If the Registration of which the Issuer gives notice is for a
Registered public offering involving an underwriting, the Issuer shall so
advise the Holders as a part of the written notice given pursuant to Section
13(a). In such event, the right of any Holder to Registration shall be
conditioned upon such underwriting and the inclusion of such Holder's Warrant
Shares in such underwriting to the extent provided in this Section 13. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Issuer and any other holders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the Underwriter ("Underwriter's
Representative") for such offering. The Holders shall have no right to
participate in the selection of underwriters for an offering pursuant to this
Section.
(ii) MARKETING LIMITATION IN PIGGYBACK REGISTRATION.
In the event the Underwriter's Representative advises the
Holders seeking Registration of Warrant Shares pursuant to Section 13 in
writing that market factors (including, without limitation, the aggregate
number of shares of Common Stock requested to be included in such Registration,
the general condition of the market, and the status of the persons proposing to
sell securities pursuant to the Registration) require a limitation of the
number of shares to be underwritten, the Underwriter's Representative (subject
to the allocation priority set forth in Section 13(a)(iii) may limit (or reduce
to zero) the number of Warrant Shares to be included in such Registration and
underwriting; provided however, that any Warrant Shares so excluded shall
retain any and all Registration rights set forth in Section 13 hereof.
(iii) ALLOCATION OF WARRANT SHARES IN PIGGYBACK
REGISTRATION.
In the event that the Underwriter's Representative limits the
number of shares to be included in a Registration pursuant to Section
13(a)(ii), the number of shares to be included in such Registration shall be
allocated in the following manner: Common Stock held by persons who are not
contractually entitled to include shares in such Registration shall be excluded
from such Registration and underwriting to the extent required by such
limitation. If a limitation of the number of shares is still required after
such exclusion, the number of shares of Common Stock that may be included in
the Registration and underwriting by all selling shareholders (including the
Holders and all other persons contractually entitled to such registration)
shall be allocated among Holders and other holders of securities other than
Warrant Shares requesting and contractually entitled to include shares in such
Registration, in proportion, as nearly as practicable, to the respective
amounts of securities (including Warrant Shares) which such Holders and such
other holders would otherwise be entitled to include in such Registration. No
Warrant Shares or other securities excluded from the underwriting by reason of
this Section 13(a)(iii) shall be included in the Registration Statement.
(iv) WITHDRAWAL IN PIGGYBACK REGISTRATION.
If any Holder disapproves of the terms of any such underwriting,
he may elect to withdraw therefrom by written notice to the Issuer and the
underwriter delivered at least seven days prior to the effective date of the
Registration Statement. Any Warrant Shares or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such Registration.
(c) BLUE SKY IN PIGGYBACK REGISTRATION.
In the event of any Registration of Warrant Shares pursuant to
Section 13, the Issuer will use its best efforts to register and/or qualify the
securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of such securities; provided, however, that notwithstanding
anything in this Agreement to the contrary, in the event any jurisdiction in
which the securities shall be qualified imposes a non-waivable requirement that
expenses incurred in connection with the qualification of the securities be
borne by selling shareholders, the Holders shall pay their pro rata share of
such expenses.
14. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION.
Subject to exceptions as hereinafter provided, after the first
anniversary of the Closing Date, the Holders which have exercised Warrants
pursuant to Section 4 hereof (the "Unregistered Shares"), may annually make a
single request (a "Demand") in writing within 30 days of the anniversary date
that the Issuer file and effect a registration statement with the Commission in
respect of all, but not less than all, shares of Unregistered Shares held by
the Holders. Upon receipt of a Demand, the Issuer shall as soon as practicable
cause a Registration Statement to be filed with the Commission, which
Registration Statement shall, if not an Underwritten Offering pursuant to
Section 13 above, contain all appropriate undertakings necessary to comply with
Rule 415 under the 1933 Act pertaining to "shelf registration", and the Issuer
shall use its best efforts to effect such Registration (including the execution
of an undertaking to file post effective amendments and any related
registration or qualification under Blue Sky Laws or other compliance with the
Securities Act) as may be so requested and as would permit or facilitate the
sale and distribution of the Unregistered Shares.
(b) REGISTRATION OF OTHER SECURITIES IN DEMAND REGISTRATION.
Any Registration Statement filed pursuant to the request of the
Holders under this Section 14 may, subject to the provisions of Section 14(c),
include securities of the Issuer other than the Unregistered shares.
(c) BLUE SKY IN DEMAND REGISTRATION.
In the event of any Registration of Warrant Shares pursuant to
Section 14, the Issuer will use its best efforts to register and/or qualify the
securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of such securities; provided, however, that notwithstanding
anything in this Agreement to the contrary, in the event any jurisdiction in
which the securities shall be qualified imposes a non-waivable requirement that
expenses incurred in connection with the qualification of the securities be
borne by selling shareholders, the Holders shall pay their pro rata share of
such expenses.
(d) UNDERWRITTEN DEMAND REGISTRATION.
The Holders making a Demand shall be entitled to engage an
underwriter reasonably acceptable to the Issuer to offer and sell in a public
offering the Unregistered Shares included in any Registration Statement filed
pursuant to Section 14(a) above. In such event, the Issuer and each
participating Holder shall enter into an underwriting agreement in customary
form with the representative of the underwriter ("Underwriter's
Representative") for such offering. Whether or not an underwriting agreement
is entered into, the Issuer shall:
(i) make such representation and warranties to the Holders
participating in such registration and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
comparable underwritten offerings;
(ii) obtain opinions of counsel to the Issuer and updates
thereof (which counsel and opinions (if form, scope and substance) shall be
reasonably satisfactory to the Underwriter's Representative, if any, and the
Holders of a majority in number of the Unregistered Shares being sold)
addressed to such Holders and underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Holders and the
underwriters, if any;
(iii) obtain comfort letters and updates thereof from the
Issuer's independent certified public accountants addressed to the selling
Holders and the underwriters, if any, such letters to be in customary form and
covering matters of the type (including the "circling" of numbers in the
prospectus included in the Registration Statement, with appropriate legends
explaining the procedures performed with respect to "circled" numbers)
customarily covered in comfort letters by independent certified public
accountants in connection with underwritten offerings, on such date or dates as
may be reasonably requested by the Underwriters' Representative and the Holders
of a majority of the Unregistered Shares being sold; and
(iv) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority of the Unregistered Shares
being sold and the Underwriters' Representative, if any, to evidence compliance
with any customary conditions contained in the underwriting agreement.
In connection with such Underwritten Offering, the Issuer shall (i) make
provide to a single counsel for the Holders whose Unregistered Shares are
included in such Underwritten Offering, for such counsel's review and comment,
drafts of the Registration Statement; (ii) provide such counsel with a
reasonable number of executed copies of the Registration Statement and all
amendments thereto, as filed, as well as a reasonable number of preliminary
prospectuses used by the underwriters in such Underwritten Offering; (iii) give
prompt notice to such counsel of the effectiveness of such registration
statement and of any stop order issued by the Commission or proceeding, or
threat of such a proceeding, by the Commission for the purpose of issuing a
stop order or otherwise suspending the effectiveness of any Registration
Statement; (iv) provide to the Holders a reasonable number of final
prospectuses delivered to purchasers under the Securities Act; and (v) for such
period for which prospectuses are required to be delivered by dealers, provide
such dealers with an adequate number of final prospectuses in order to permit
the dealers to comply with their obligations under the Securities Act. In all
other regards, the Issuer agrees to comply with the requirements of the
Securities Act in connection with any Underwritten Offering.
(e) RIGHT OF REDEMPTION. The Issuer shall have the right to
redeem the Unregistered Shares at a price equal to the average of the price as
quoted for the Common Stock as set forth in the National Market of The Nasdaq
Stock Market or, if the Common Stock shall be traded on any national or
regional securities exchange, the latest bid price for the Common Stock, for
the prior ten (10) trading days prior to the date the Demand is received.
15. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered in person, against written
receipt therefor, or two days after being sent, by registered or certified
mail, postage prepaid, return receipt requested, and, if to the Holder, at such
address as is shown on the Warrant Register or as may otherwise may have been
furnished to the Issuer in writing by the Holder and, if to the Issuer, at the
Issuer's Office.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This certificate is deemed to have been delivered in
the State of Tennessee and shall be construed and enforced in accordance with
and governed by the laws of such State. The headings in this Warrant to
Purchase Common Stock Certificate are for purposes of reference only, and shall
not limit or otherwise affect any of the terms hereof.
17. EXPIRATION. Unless as hereinafter provided, the right to exercise
these Warrants shall terminate upon the expiration of the Exercise Period.
IN WITNESS WHEREOF
Response Oncology, Inc.
DATED: January 2, 1996 By:_______________________________
Joseph T. Clark, President
PURCHASE FORM
TO: RESPONSE ONCOLOGY, INC.
Dated:_________________, 19__
The undersigned hereby irrevocably elects to exercise the within Warrants,
to the extent of purchasing __________ shares of Common Stock, and hereby makes
payment of $______________ in payment of the actual Exercise Price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:________________________________________________________________________
(Please typewrite or print in block letters)
Address:_____________________________________________________________________
Signature:___________________________________________________________________
(Signature must conform in all respects to the name of the Holder as
set forth on the face of this Warrant.)
ASSIGNMENT FORM
FOR VALUE RECEIVED, __________________________________ hereby sells,
assigns and transfers unto
Name:_______________________________________________________________________
(Please typewrite or print in block letters)
Address:____________________________________________________________________
the right to purchase shares of Common Stock represented by this Warrant to the
extent of ___________________________________________ shares as to which such
right is exercisable and does hereby irrevocably constitute and appoint
_______________________________
Attorney-in-Fact, to transfer the same on the books of the Issuer with full
power of substitution in the premises.
Dated:________________, 19__
Signature___________________________________________________________________
(Signature must conform in all respects to the name of the Holder as
set forth on the face of this Warrant.)
Exhibit 7(a)(x)
to
Stock Purchase Agreement
CERTIFICATE OF FACTS
This Certificate is provided in connection with the transactions
contemplated by the Stock Purchase Agreement dated as of December 20, 1995, by
and among the Stockholders (the "Sellers") of Oncology Hematology Group of
South Florida, P.A., a Florida professional association (the "Association"),
South Florida Oncology Hematology Associates, P.A., a Florida professional
association (the "New PA") and Response Oncology, Inc., a Tennessee corporation
("Response"), pursuant to which Response is to acquire from the Sellers all of
the outstanding capital stock of the Association and the new PA and Response
are to enter into a Service Agreement (the "Transaction").
The Association and Sellers acknowledge that the law firms of Baker,
Donelson, Bearman & Caldwell, a professional corporation, and Zack, Sparber,
Zosnitzky, Truxton, Spratt & Brooks, P.A. may rely on the certification of
facts contained herein in connection with such firms' rendering their opinions
concerning the Transaction to Response and to such lender, underwriter or other
party as directed by Response.
The undersigned person, in his own behalf and on behalf of all Sellers,
and as President of the Association, does hereby certify the following:
1. The locations at which the Sellers and the Association conduct
their practice and a description of the nature of such practice at each
location is described on Exhibit "A" to this Certificate. The Sellers and the
Association do not conduct a practice or business at any locations other than
those identified on Exhibit "A."
2. A list of all employment agreements and non-competition agreements
and a description of the compensation arrangement with each employee whose
services are billable is provided on Exhibit "B" to this Certificate.
3. The Sellers and any professional associated with or employed by the
Association do not have any oral or written agreement or understanding with any
organization or individual that provides health services or supplies other than
those identified on Exhibit "C."
4. The Sellers and any professional associated with or employed by the
Association do not have any endorsement arrangement with any manufacturer of
drugs, biologicals or medical devices, including, but not limited to, surgical
instruments or intraocular lenses other than those identified on Exhibit "D."
5. The Sellers and any professional associated with or employed by the
Association do not have any oral or written agreements with professionals, or
legal entities with which such professionals have an investment or compensation
interest as defined by the Medicare and Medicaid Anti-Kickback Law (42 U.S.C.
1320a-7(b)(b)), the Stark Self-Referral Law (42 U.S.C. 1395nn) or regulations
promulgated thereunder and applicable state law, who may refer to or receive
referrals from the Sellers or to professionals employed by the Association,
other than those identified on Exhibit "E."
6. The Sellers and professionals associated with or employed by the
Association are not members of a group referral service other than those
identified on Exhibit "F."
7. The Sellers and professionals associated with or employed by the
Association do not belong to a group purchasing organization other than those
identified on Exhibit "G."
8. The Sellers and professionals associated with or employed by the
Association are not parties to any recruitment or retention agreement with any
hospital or health care provider for which the terms are ongoing other than
those identified on Exhibit "H."
9. The Sellers and professionals associated with or employed by the
Association do not allow waiver of Medicare/Medicaid or insurance co-payments
and deductibles or their policy for waiver of Medicare/Medicaid or insurance
co-payments and deductibles is stated on Exhibit "I."
10. The Sellers and professionals associated with or employed by the
Association do not have any oral or written financial or cross-referral
arrangements with any other provider of health care services not employed by
the Association other than as identified on Exhibit "K."
11. The Sellers and professionals employed by the Association do not
have an ownership or an investment interest in or any kind of compensation
arrangement with any business that provides any of the following services other
than as identified on Exhibit "L:"
(a) An ambulatory surgery center;
(b) Any agency, institution, facility or place which provides the
following health care services: burn unit, neonatal, intensive care unit, open
heart surgery, cardiac catheterization, linear accelerator, positron emission
tomography, psychiatric, obstetrical, maternity;
(c) A diagnostic laboratory;
(d) Any major medical equipment with value exceeding $1,000,000;
(e) Home health services (services to patients on an outpatient
basis in either their regular or temporary place of residence);
(f) Hospital (in-patient or out-patient);
(g) Recuperation center;
(h) Nursing home;
(i) Convalescent home;
(j) Mental health hospital;
(k) Mental retardation institutional habilitation facility,
including, but not limited to, intermediate care facilities for mental
retardation and state-run institutions;
(l) Rehabilitation facility;
(m) Residential hospice;
(n) Mental health residential treatment facility;
(o) Home for the aged;
(p) Home health care agency;
(q) Alcohol and drug prevention treatment facility;
(r) Outpatient diagnostic center;
(s) Blood bank;
(t) Trauma center;
(u) X-ray equipment;
(v) Computerized axial topographers;
(w) Extracorporeal shock wave lithotripter;
(x) Magnetic resonance imagers;
(y) Physical therapy;
(z) Occupational therapy services;
(aa) Radiology or other diagnostic services;
(bb) Radiation therapy services;
(cc) Durable medical equipment;
(dd) Parenteral and enteral nutrients, equipment and supplies;
(ee) Prosthetics, orthotics and prosthetic devices.
12. The Sellers and professionals associated with or employed by the
Association are in compliance with all health care laws and licensing laws of
the states in which the Sellers and such professionals conduct their business
and have not received or made payment or any remuneration whatsoever to induce
or encourage the referrals of patients or the purchase of goods and/or services
as prohibited under 42 U.S.C. 1320a-7b(b) or the regulations promulgated
thereunder, or have not otherwise perpetrated any Medicare or Medicaid fraud or
abuse or false claims nor have any fraud or abuse or false claims been alleged
within the last five (5) years by any government agency.
13. The Sellers and all professionals associated with or employed by
the Association have all permits and licenses required by all applicable laws;
have made all regulatory filings necessary for the conduct of the Association's
business; and are not in violation of said permitting or licensing
requirements.
14. The Sellers and professionals associated with or employed by the
Association have not in the past referred patients to Response or any physician
or practitioner on Exhibit "M" or received referrals of patients from Response
or any physician or practitioner on Exhibit "M", except as identified on
Exhibit "M."
15. All agreements whereby Sellers or professionals associated with or
employed by the Association provide or obtain professional services, management
services, or use of space or equipment are identified on Exhibit "N" and each
such agreement is in writing, for a term of at least one year and provide
compensation or fees at fair market for such goods or services, except as
identified on Exhibit "N."
16. The Sellers and professionals associated with or employed by the
Association have not knowingly and willfully made or caused to be made any
false statement or representation of a material fact in any application for any
benefit or payment under the Medicare or Medicaid programs.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of January 2, 1996.
ONCOLOGY HEMATOLOGY GROUP OF
SOUTH FLORIDA, P.A.
By: _________________________________
Title: _______________________________
____________________________________
Leonard E. Kalman, M.D.
Exhibit A
Office Locations
Exhibit B
List of Employment Agreements
Exhibit C
Agreements with Health Services or Supplies Providers
Exhibit D
Endorsement Arrangements
Exhibit E
Agreements with Professionals
Exhibit F
Group Referral Services
Exhibit G
Group Purchasing Organizations
Exhibit H
Recruitment Agreements
Exhibit I
Waiver Policy for Co-Payments and Deductibles
Exhibit K
Financial Arrangements with Health Care Professionals Not Employed
Exhibit L
Investment Interests
Exhibit M
List of Referrals
Exhibit N
Material Agreements
EXHIBIT 2
SERVICE AGREEMENT
BY AND BETWEEN
RESPONSE ONCOLOGY, INC.
AND
ONCOLOGY HEMATOLOGY GROUP OF SOUTH FLORIDA, P.A.
January 2, 1996
SERVICE AGREEMENT
THIS SERVICE AGREEMENT dated as of January 2, 1996 by and between RESPONSE
ONCOLOGY, INC., a Tennessee corporation (together with the Acquired Corporation
(hereinafter defined), "Response") and ONCOLOGY HEMATOLOGY GROUP OF SOUTH
FLORIDA, P.A., a Florida professional association ("Oncology").
RECITALS:
WHEREAS, Response is in the business of owning certain assets of and
managing and operating medical clinics, and providing support services to and
furnishing medical practices with the necessary facilities, equipment,
personnel, supplies and support staff to operate a medical practice;
WHEREAS, effective January 2, 1996, Response will acquire (the "Stock
Purchase") from the stockholders of the Acquired Corporation (the
"Stockholders") all of the outstanding common stock of Response Oncology of
South Florida, Inc. (the "Acquired Corporation"), which has heretofore and
contemporaneous with the formation of Oncology, converted to a Florida business
corporation form of organization in contemplation of the Stock Purchase and
changed its name from Oncology Hematology Group of South Florida, P.A. to its
current name;
WHEREAS, the Stockholders have heretofore discontinued practicing medicine
in the name of the Acquired Corporation and have begun conducting their
respective medical practices as members of Oncology, which is a group medical
practice in Florida providing comprehensive oncology and hematology medical
care to the general public; and
WHEREAS, Oncology desires to retain Response to perform the practice
management functions described herein in order to permit Oncology and its
Stockholders to devote substantially full time and efforts on a concentrated
and continuous basis to the rendering of medical services to patients;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, effective January 2, 1996, Oncology and
Response agree to the terms and conditions provided in this Agreement.
ARTICLE 1.
RELATIONSHIP OF THE PARTIES
1.1. INDEPENDENT RELATIONSHIP. Oncology and Response intend to act and
perform as independent contractors, and the provisions hereof are not intended
to create any partnership, joint venture, agency or employment relationship
between the parties. Notwithstanding the authority granted to Response herein,
Response and Oncology agree that Oncology shall retain the authority to direct
the medical, professional, and ethical aspects of its medical practice. Each
party shall be solely responsible for and shall comply with all state and
federal laws pertaining to employment taxes, income withholding, unemployment
compensation contributions and other employment related statutes applicable to
that party.
1.2. RESPONSIBILITIES OF THE PARTIES. As more specifically set forth
herein, Response shall provide Oncology with offices and facilities, equipment,
supplies, support personnel, and management and financial advisory services.
As more specifically set forth herein, Oncology shall be responsible for the
recruitment and hiring of physicians and all issues related to medical practice
patterns and documentation thereof. Notwithstanding anything herein to the
contrary, no "designated health service" as defined in 42 U.S.C. 1395nn,
including any amendments or successors thereto, shall be provided by Response
under this Agreement.
1.3. ONCOLOGY'S MATTERS. Matters involving the internal agreements and
finances of Oncology, including the distribution of professional fee income
among the individual Physician Stockholders (as hereinafter defined), tax
planning, and pension and investment planning (and expenses relating solely to
these internal business matters), hiring, firing and licensing of Physician
Employees (hereinafter defined) shall remain the sole responsibility of
Oncology and the individual Physician Stockholders.
1.4. PATIENT REFERRALS. The parties agree that the benefits to Oncology
hereunder do not require, are not payment for, and are not in any way
contingent upon the admission, referral or any other arrangement for the
provision of any item or service offered by Response to any of Oncology's
patients in any facility or laboratory controlled, managed or operated by
Response.
1.5. PROFESSIONAL JUDGMENT. Each of the parties acknowledges and agrees
that the terms and conditions of this agreement pertain to and control the
business and financial relationship between and among the parties but do not
pertain to and do not control the professional and clinical relationship
between and among Oncology, Oncology's Employees, and Oncology's patients.
Nothing in this Agreement shall be construed to alter or in any way affect the
legal, ethical and professional relationship between and among Oncology and
oncology's patients, nor shall anything contained in this Agreement abrogate
any right, privilege, or obligation arising out of or applicable to the
physician-patient relationship.
ARTICLE 2.
DEFINITIONS
2.1. DEFINITIONS. For the purposes of this Agreement, the following
definitions shall apply:
Financial and Accounting Definitions:
(a) "Account Debtor" shall mean an account debtor or any other
Person obligated in respect of an Account Receivable.
(b) "Accounts Receivable" shall mean, with respect to Oncology, all
accounts and any and all rights to payment of money or other forms of
consideration of any kind now owned or hereafter acquired (whether classified
under the Uniform Commercial Code as accounts, chattel paper, general
intangibles, or otherwise) for goods sold or leased or for services rendered by
Oncology, including, but not limited to, accounts receivable, proceeds of any
letters of credit naming Oncology as beneficiary, chattel paper, insurance
proceeds, contract rights, notes, drafts, instruments, documents, acceptances,
and all other debts, obligations and liabilities in whatever form from any
other Person, provided that cash, checks and credit card purchases are not
included in the definition of Accounts Receivable.
(c) References to "amounts recorded" shall mean all amounts recorded
or recordable in accordance with GAAP (hereinafter defined), including, without
limitation, all billed Physician Services Revenue hereinafter defined and Non-
Physician Revenue hereinafter defined, earned Capitation Revenue hereinafter
defined and all expenses that are subject to accrual under GAAP.
(d) "Annual Surplus" shall mean Practice Revenue (hereinafter
defined) less the sum of the Clinic Expense Portion of the Base Service Fee
(hereinafter defined), Practice Retainage (hereinafter defined) and Physician
Employee Compensation (hereinafter defined).
(e) "Bad Debt Allowance" shall mean, with respect to Accounts
Receivable, an allowance for uncollectible Accounts Receivable determined based
on a methodology approved by the Oversight Committee.
(f) "Base Service Fee" shall mean the base fee set forth on Schedule
A hereto. The Base Service Fee will consist of the Clinic Expense Portion and
the Fixed Portion, both defined on Schedule A.
(g) "Base Draw" shall mean an amount payable monthly to Response by
Oncology equal to the Fixed Portion of the Base Service Fee set forth on
Schedule A .
(h) "Base Draw Excess" shall mean the excess (if any) of the
aggregate Base Draw over the Service Fees for a calendar year, which shall be
recorded as an advance payable by Response to Oncology pursuant to Section 8.2
below.
(i) "Capitation Revenue" shall mean amounts recorded consisting of
revenue from managed care organizations, where payment is made periodically on
a per member basis, administration payments, co-payments and all other payments
by managed care organizations, including, without limitation, managed care
variable expense bonuses, hospital expense bonuses or any other bonus or
payment which rewards Oncology for its medical performance under any managed
care arrangement.
(j) "Clinic Expenses" shall mean all amounts recorded comprising the
expenses incurred in the operation of any Clinic, including, without
limitation:
(A) salaries, benefits and other direct costs (except Physician
Employee Compensation) of any Executive Director employed pursuant to Section
5.6 below and all personnel employed by Response at a Clinic;
(B) obligations of Response under leases or subleases of
facilities and personal property utilized by Oncology, including, without
limitation, Clinics and medical offices, medical, laboratory and other
equipment utilized by Oncology;
(C) personal property and intangible taxes assessed against
properties and assets utilized by Oncology or otherwise deployed in any Clinic
commencing on the date of this Agreement; and
(D) other ordinary, necessary and reasonable expenses incurred
by Response in carrying out its obligations under this Agreement, including,
without limitation, depreciation on equipment utilized in the Clinics, interest
on secured loans (other than notes payable by Response to any Stockholder or
his/her assigns arising out of the Stock Purchase) incurred to purchase Clinic
equipment, insurance (except professional liability of physicians, which will
remain a physician expense), laundry, supplies, cost of goods sold from
inventory, utilities, telephone service, printing, stationery, advertising,
postage, medical transcribing and waste deposal.
All Clinic Expenses shall be computed in accordance with GAAP. To
the extent expenses incurred benefit multiple clinics, such Clinic Expenses
shall be allocated among such Clinics benefitting from such expenditure as
Response shall reasonably determine with the approval of the Oversight
Committee. Clinic Expenses shall not include (i) any corporate overhead
charges of Response, (ii) the cost of any capital expenditures incurred by
Response pursuant hereto, except to the extent of depreciation, amortization
(except amortization of the Service Agreement Intangible (hereinafter defined)
which shall not be a Clinic Expense), interest and other period charges under
GAAP in respect of such capital expenditures, (iii) any federal or state income
taxes, (iv) base rental payments under any sub-lease arrangement and (v) any
expenses which are expressly designated herein as expenses or responsibilities
of and are paid by Oncology.
(k) "Fee Adjustment" shall mean any adjustment for any discount,
non-allowed contractual or other adjustment under Medicare, Medicaid, any
preferred provider plan, workers' compensation plan, employee/dependent health
care benefit program or other contractual arrangement between Oncology and any
Third Party Payor, and any professional courtesy or other reasonable and
customary discount that results in fee revenue not being collected.
(l) "GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession or prescribed by
the Securities and Exchange Commission, which are applicable to the
circumstances as of the date of determination. For purposes of this Agreement,
GAAP shall be applied in a manner consistent with the historic practices used
by Response.
(m) "Governmental Receivables" shall mean an Account Receivable of
Oncology which (i) arises in the ordinary course of business of Oncology, (ii)
has as its Third Party Payor the United States of America or any state or any
agency or instrumentality of the United States of America or any state which
makes any payments with respect to Medicare or Medicaid or with respect to any
other program (including CHAMPUS) established by federal or state law, and
(iii) is required by federal or state law to be paid or to be made to Oncology
as a health care provider. Governmental Receivables shall not, however, refer
to amounts payable by private insurers under contract to provide benefits under
the Federal Employee Health Benefit Program.
(n) "Non-Physician Revenue" shall mean all amounts recorded as fees
(net of Fee Adjustments and Bad Debt Allowance) by or on behalf of either
Oncology or Response which are not Physician Services Revenue or Capitation
Revenue, but excluding any interest, investment, rental or similar payments or
income made or payable to Oncology or Response that are unrelated to the
provision of medical services or products.
(o) "Performance Fee" shall mean an amount payable to Response on a
calendar year basis as computed pursuant to the formula set forth in Schedule A
hereto.
(p) "Physician Employee Compensation" shall mean all amounts
recorded as salaries, wages (including overtime), benefits, payroll taxes and
other compensation expense by Oncology in respect of Physician Extender
Personnel (hereinafter defined) and Technical Employees (hereinafter defined)
who are Physician Employees (hereinafter defined), to the extent such amounts
are required to be paid by Oncology under Applicable Law or the reimbursement
policies of any Third Party Payor.
(q) "Physician Services Revenue" shall mean (a) all amounts recorded
as fees (net of Fee Adjustments and Bad Debt Allowance) by or on behalf of
Oncology as a result of professional medical services furnished to patients by
Physician Employees and Physician Extender Personnel, whether rendered in an
inpatient or outpatient setting plus (b) Capitation Revenue, and excluding any
items approved pursuant to Section 4.2(c) below.
(r) "Practice Retainage" shall mean an amount equal to the
percentage] of Practice Revenue set forth on Schedule A hereto.
(s) "Practice Revenue" shall mean the sum of all amounts recorded by
Oncology as Physician Services Revenue, Non-Physician Revenue, Capitation
Revenue and other revenue attributable to the conduct of Oncology's medical
practice, but shall specifically exclude profits from any investment of
Oncology in any partnership, joint venture, corporation, limited liability
company and any other revenue not derived from the providing of services by
employees of Oncology or Response.
(t) "Service Fees" shall mean the sum of the Base Service Fee and
the Performance Fee (if any).
Other Definitions:
(u) An "Affiliate" of a corporation shall mean (a) any person or
entity directly or indirectly controlled by such corporation, (b) any person or
entity directly or indirectly controlling such corporation, (c) any subsidiary
of such corporation if the corporation has a fifty percent (50%) or greater
ownership interest in the subsidiary, or (d) such corporation's parent
corporation if the parent has a fifty percent (50%) or greater ownership
interest in the corporation. For purposes of this Section 2.1(u), Oncology is
not an affiliate of Response.
(v) "Applicable Law" shall mean all applicable provisions of
constitutions, statutes, rules, regulations, ordinances and orders of all
Governmental Authorities and all orders and decrees of all courts, tribunals
and arbitrators, and shall include, without limitation, Health Care Law.
(w) "Acquired Corporation" shall mean Response Oncology of South
Florida, Inc., a Florida corporation which, prior hereto, was a Florida
professional association named Oncology Hematology Group of South Florida, P.A.
through which the Stockholders conducted their medical practice prior to
forming Oncology.
(x) "Acquisition Agreement" shall mean that certain Stock Purchase
Agreement dated as of December 20, 1995; by and among Response, the Acquired
Corporation and the Stockholders.
(y) "CHAMPUS" shall mean the Civilian Health and Medical Program of
the Uniformed Services.
(z) "Clinic" shall mean the practice facility currently utilized by
Oncology, and any facility, related business and all medical group business
operations which Oncology and Response may, in the future, mutually agree to
characterize as a Clinic.
(aa) "Employment Agreement" shall mean an employment agreement
between each physician now or hereinafter employed by Oncology and Oncology
pursuant to which the physician shall be employed by Oncology to provide
medical services on behalf of Oncology, which Employment Agreement shall be
substantially in the form set forth as Exhibit 2.1(aa) hereto.
(ab) "Governmental Authority" shall mean any national, state or
local government (whether domestic or foreign), any political subdivision
thereof or any other governmental, quasi-governmental, judicial, public or
statutory instrumentality, authority, board, body, agency, bureau or entity or
any arbitrator with authority to bind a party at law.
(ac) "Health Care Law" shall mean any Applicable Law regulating the
acquisition, construction, operation, maintenance or management of a health
care practice, facility, provider or payor, including without limitation 42
U.S.C. Section 1395 nn and 42 U.S.C. Section 1320a-7b.
(ad) "Liquidated Damages Amount" shall mean the difference obtained
pursuant to the following formula: [(4,000,000 x A/8) - ((B/180) x C)];
wherein (i) A equals the number of Remaining Physician Stockholders at the time
of occurrence of an Oncology Event of Default; (ii) B equals 4,000,000 x A/8;
and (iii) C equals the number of full calendar months between the effective
date of this Agreement and the date of the occurrence of the Oncology Event of
Default.
(ae) "Medicaid" shall mean any state program pursuant to which
health care providers are paid or reimbursed for care given or goods afforded
to indigent persons and administered pursuant to a plan approved by the Health
Care Financing Administration under Title XIX of the Social Security Act.
(af) "Medicare" shall mean any medical program established under
Title VIII of the Social Security Act and administered by the Health Care
Financing Administration.
(ag) "Necessary Authorization" shall mean with respect to Oncology
all certificates of need, authorization, certifications, consents, approvals,
permits, licenses, notices, accreditations and exemptions, filings and
registrations, and reports required by Applicable Law, including, without
limitation, Health Care Law, which are required, necessary or reasonably useful
to the lawful ownership and operation of Oncology's business.
(ah) "Oncology" shall mean Oncology Hematology Group of South
Florida, P.A., a Florida professional association recently formed by the
Stockholders to continue the operation of their group medical practice.
(ai) "Oncology Event of Default" shall have the meaning ascribed to
such term in Section 11.4 hereof.
(aj) "Oversight Committee" shall mean a five (5) member committee
established pursuant to Section 4.1. Except as otherwise provided, the act of
a majority of the members of the Oversight Committee shall be the act of the
Oversight Committee.
(ak) "Person" shall mean an individual, corporation, partnership,
joint venture, trust, association, or unincorporated organization, or a
government or any agency or political subdivision thereof including, without
limitation, a Third Party Payor.
(al) "Physician Employees" shall mean all physicians employed by
Oncology or with whom Oncology has entered into a practice management
agreement, and all other persons who deliver billable medical or health care
services under the direction of Oncology and its physicians or are otherwise
under contract with Oncology to provide professional services to Clinic
patients and, in each case, who are duly licensed to provide professional
medical services in the State of Florida and all Technical Employees. Such
definition shall include both Physician Stockholders and other physicians
employed by Oncology, including Junior Physician Employees, and may include
Physician Extender Personnel to the extent such Physician Extender Personnel
are required by Applicable Law or reimbursement policies of any Third Party
Payor to be employed by Oncology.
(am) "Physician Extender Personnel" shall mean employees of Response
who deliver services to Oncology, including without limitation nurse
anesthetists, physician assistants, registered and licensed practical nurses,
nurse practitioners, psychologists, and other such persons, other than
physicians, who are not Physician Employees.
(an) "Physician Stockholders" shall mean those physicians who are
stockholders of Oncology.
(ao) "Practice Assets" shall have the meaning ascribed to that term
in Section 11.5 of this Agreement.
(ap) "Remaining Physician Stockholder" shall mean any Physician
Stockholder who shall have been a Stockholder at the effective time of this
Agreement and who, at any time within one (1) year prior to the occurrence of
an Oncology Event of Default shall have been a Physician Stockholder; provided,
however, that such term shall not include any Stockholder who shall have,
within such one year period, ceased to be a Physician Stockholder by reason of
death, disability or retirement at normal retirement age.
(aq) "Response" shall mean Response Oncology, Inc., a Tennessee
corporation incorporated on June 26, 1984 under the name Biotherapeutics
Incorporated, whose name was changed to Response Technologies, Inc. by Charter
amendment on October 30, 1989, and subsequently to Response Oncology, Inc. by
Charter amendment on November 1, 1995, and its wholly owned subsidiaries,
including the Group.
(ar) "Response Event of Default" shall have the meaning ascribed to
such term in Section 11.3 of this Agreement.
(as) "Stockholder" shall mean the Stockholders of the Acquired
Corporation.
(at) "Technical Employees" shall mean technicians who provide
services in the diagnostic areas of Oncology's practice, such as employees of
any Clinic laboratory, radiology technicians and cardiology technicians. All
Technical Employees shall be Physician Employees.
(au) "Third Party Payor" shall mean each Person which makes payment
under a Third Party Payor Program, and each Person which administers a Third
Party Payor Program.
(av) "Third Party Payor Program" shall mean Medicare, Medicaid,
CHAMPUS, insurance provided by Blue Cross and/or Blue Shield, managed care
plans, and any other private health care insurance programs and employee
assistance programs as well as any future similar programs.
ARTICLE 3.
FACILITIES TO BE PROVIDED BY RESPONSE
3.1. FACILITIES. Response shall provide to Oncology for its use in its
group medical practice the offices and facilities more fully described in
Exhibit 3.1 hereto, the furnishings, fixtures and equipment located thereupon,
and shall pay all costs (all of which shall be Clinic Expense) of repairs,
maintenance and improvements, utility (telephone, electric, gas, water)
expenses, normal janitorial services, refuse disposal and all other costs and
expenses reasonably incurred in conducting the operations contemplated by this
Agreement in each Clinic during the term of this Agreement, including, without
limitation, related real or personal property lease cost payments and expenses,
taxes and insurance. Oncology shall comply with all terms and provisions of
any lease or other agreement with respect to such facility. Response shall
consult with Oncology regarding the condition, use and needs for the offices,
facilities and improvements, and any purchase, lease or improvement of any
offices, facilities or improvements, or change in any of the foregoing, shall
be approved by a majority of the Oversight Committee. Oncology shall not
amend, modify or terminate any sub-lease agreements without the prior written
consent of Response.
3.2. USE OF FACILITIES. Oncology shall not use or occupy any facility
owned or leased by Response for any purpose which is prohibited by any
Applicable Law, this Agreement, or the terms of any lease or other arrangement
with respect to the use or occupancy of such facility, or which may be
dangerous to life, limb, or property (except medical services provided in the
ordinary course of business), or which would increase the fire or extended
coverage insurance rate on such facility.
ARTICLE 4.
DUTIES OF THE OVERSIGHT COMMITTEE
4.1. FORMATION AND OPERATION OF THE OVERSIGHT COMMITTEE. The parties
shall establish an Oversight Committee which shall be responsible for
developing management and administrative policies for the overall operation of
each Clinic. The Oversight Committee shall consist of five (5) members.
Response shall designate, and shall have the right to remove and replace, in
its sole discretion, two (2) members of the Oversight Committee. Oncology
shall designate, and shall have the right to remove and replace, in its sole
discretion, three (3) members of the Oversight Committee. The Oversight
Committee shall have the authority to adopt bylaws (which shall include the
fixing of a quorum for the conduct of business by the Oversight Committee),
establish regular meeting times and places, call special meetings for any
purpose and elect a chairman and a secretary who shall preside over and record,
respectively, the proceedings at any meeting of the Oversight Committee.
Except as otherwise provided herein, the affirmative vote of a majority of the
members of the Oversight Committee shall be required for approval of any action
taken thereby.
4.2. DUTIES AND RESPONSIBILITIES OF THE OVERSIGHT COMMITTEE. The
Oversight Committee shall have the following duties and obligations:
(a) CAPITAL IMPROVEMENTS AND EXPANSION. Any renovation and
expansion plans and capital equipment expenditures with respect to any Clinic
shall be reviewed and approved by the Oversight Committee and shall be based
upon economic feasibility, physician support, productivity and then current
market conditions.
(b) ANNUAL BUDGETS. All annual capital and operating budgets
prepared by Response, as set forth in Section 5.2, shall be subject to the
review and approval of the Oversight Committee, which shall have the authority
to reject individual items in the budget and to fix such amounts so rejected;
provided, however, that in the event the Oversight Committee exercises such
authority and increases any budget amount by more than ten (10%) percent of the
amount proposed by Response, then such modification shall be approved by a vote
of four-fifths (4/5) of the Oversight Committee.
(c) EXCEPTIONS TO INCLUSION IN THE PHYSICIAN SERVICES CALCULATION.
The exclusion of any revenue from Practice Revenue, whether now or in the
future, shall be subject to the approval by a vote of four-fifths (4/5) of the
Oversight Committee. Current approved exceptions are listed in the attached
Exhibit 4.2(c).
(d) ADVERTISING. All advertising and other marketing of the
services performed at any Clinic shall be subject to the prior review and
approval of the Oversight Committee.
(e) PATIENT FEES; COLLECTION POLICIES. As a part of the annual
operating budget, in consultation with Oncology and Response, to the extent
allowed by Applicable Law, the Oversight Committee shall review and advise
Oncology as to an appropriate fee schedule for all physician and ancillary
services rendered by Oncology, which fee schedule shall ultimately be
determined by Oncology in its sole discretion. In addition, the Oversight
Committee shall approve the credit collection policies of any Clinic.
(f) NON-PHYSICIAN SERVICES. The Oversight Committee shall establish
Clinic-provided non physician services based upon the pricing, access to and
quality of such services.
(g) PROVIDER AND PAYOR RELATIONSHIPS. Decisions regarding the
establishment or maintenance of relationships with managed care organizations,
institutional health care providers and Third Party Payors shall be made by the
Oversight Committee in consultation with Response and Oncology.
(h) STRATEGIC PLANNING. The Oversight Committee shall develop long-
term strategic planning objectives.
(i) CAPITAL EXPENDITURES. The Oversight Committee shall determine
the priority of major capital expenditures benefitting the Clinics.
(j) PHYSICIAN HIRING. The Oversight Committee shall determine the
number and type of physicians required for the efficient operation of each
Clinic. The approval of the Oversight Committee shall be required for any
variations to the restrictive covenants in any physician employment contract.
(k) EXECUTIVE DIRECTOR. The selection and retention by Response of
any Executive Director pursuant to Section 5.6 and the salary and cash fringe
benefits of each Executive Director shall be subject to the reasonable approval
of the Oversight Committee. If Oncology is dissatisfied with the services
provided by any Executive Director, Oncology shall refer the matter to the
Oversight Committee. Response and the Oversight Committee shall each in good
faith determine whether the performance of such Executive Director could be
brought to acceptable levels through counsel and assistance, or whether the
Executive Director's employment should be terminated.
(l) GRIEVANCE REFERRALS. The Oversight Committee shall consider and
make final decisions regarding grievances pertaining to matters not
specifically addressed in this Agreement as referred to it by Oncology's Board
of Directors.
ARTICLE 5.
ADMINISTRATIVE SERVICES TO BE PROVIDED BY RESPONSE
5.1. PERFORMANCE OF MANAGEMENT FUNCTIONS. Response shall provide or
arrange for the services set forth in this Article 5, the cost of all of which
shall be paid by Response and included in Clinic Expenses. Response is hereby
expressly authorized to perform its services hereunder in whatever manner it
deems reasonably appropriate to meet the day-to-day requirements of Clinic
operations in accordance with the general standards approved by the Oversight
Committee, including, without limitation, performance of some of the business
office functions at locations other than a Clinic. Oncology will not act in a
manner which would prevent Response from efficiently managing the day-to-day
operations of each Clinic in a business-like manner.
5.2. FINANCIAL PLANNING AND GOALS. Response shall prepare annual capital
and operating budgets reflecting in reasonable detail anticipated revenue and
expenses, sources and uses of capital for growth in Oncology's practice and
medical services rendered at each Clinic. Response shall determine the amount
and form of capital to be invested annually in each Clinic and shall specify
the targeted profit margin for each Clinic which shall be reflected in the
overall budget. Response realizes that a Clinic may realize opportunities to
provide new services and utilize new technologies that will require capital
expenditures and anticipates that such opportunities may include ambulatory
surgery centers, renovations to Clinic facilities, the addition of satellite
locations and new and replacement equipment as may be economically justified.
Such budgets shall be presented to the Oversight Committee at least sixty (60)
days prior to the end of the preceding calendar year. The budget shall be
agreed upon by the Oversight Committee at least thirty (30) days prior to the
end of such preceding Calendar year as provided in Section 4.2(b), and, once
approved in such manner, shall be binding upon Response and Oncology unless
modified or revised in like manner by the Oversight Committee.
5.3. FINANCIAL STATEMENTS. Response shall prepare annual financial
statements on a cash basis for the separate operations of each Clinic and shall
prepare an annual pro-forma, accrual basis combined income statement for all
Clinics for purposes of determining the Annual Surplus. If Oncology desires an
audit of any financial statement, Oncology may obtain such an audit at its own
expense. Response shall prepare monthly unaudited financial statements
containing a combined balance sheet and statements of operations for the
Clinics, which shall be delivered to Oncology within thirty (30) days after the
close of each calendar month. Notwithstanding the foregoing, Response shall be
under no obligation to keep multiple sets of books for cash basis and accrual
basis methods of accounting, but shall be entitled to keep one set of books
maintained on an accrual basis method of accounting, which shall be converted
by workpaper-only entries to the cash basis method of accounting for purposes
of preparing the cash basis financial statements described above.
5.4. INVENTORY AND SUPPLIES. Response shall order and purchase
reasonable and requested medical and office inventory and supplies required by
Oncology to provide quality services in the day-to-day operations of its
medical practice.
5.5. MANAGEMENT SERVICES AND ADMINISTRATION.
(a) Oncology hereby appoints Response as its sole and exclusive
manager and administrator of all day-to-day business functions connected with
its group medical practice. Oncology agrees that the purpose and intent of
this Service Agreement is to relieve Oncology, the Physician Stockholders and
Physician Employees to the maximum extent possible of the administrative,
accounting, payroll, accounts payable, personnel and business aspects of its
practice, with Response assuming responsibility for and being given all
necessary authority to perform these functions. Response agrees that Oncology,
and only Oncology, will perform the medical functions of its practice.
Response will have no authority, directly or indirectly, to perform, and will
not perform, any medical function. Response may, however, advise Oncology as
to the relationship between its performance of medical functions and the
overall administrative and business functioning of its practice. To the extent
that they assist Oncology in performing medical functions, all clinical
personnel performing patient care services obtained and provided by Response
shall be subject to the professional direction and supervision of Oncology and,
in the performance of such medical functions, shall not be subject to any
direction or control by, or liability to, Response, except as may be
specifically authorized by Oncology. Oncology hereby indemnifies and holds
Response, its officers, directors, shareholders, agents and affiliates, their
successors and assigns ("Indemnified Persons") harmless, and shall reimburse
the Indemnified Persons for, from and against each claim, loss, liability, cost
and expense (including, without limitation, interest, penalties, costs of
preparation and investigation, and the reasonable fees and disbursement
expenses of attorneys and other professional advisors) directly or indirectly
relating to, resulting from or arising out of any medical function performed,
or which should have been performed, under the supervision of Oncology or
Physician Employees.
(b) Response shall, on behalf of Oncology, bill patients and Third
Party Payors, and shall collect the professional fees for medical services
rendered by Oncology in each Clinic, for services performed outside a Clinic
for Oncology's hospitalized patients, and for all other professional and Clinic
services. Response's billing and collection practice shall be consistent with
those of comparable, nationally recognized, well managed group medical
practices. Oncology hereby appoints Response for the term hereof to be its
true and lawful attorney-in-fact, for the following purposes: (i) to bill
patients in Oncology's name and on its behalf; (ii) to collect Accounts
Receivable resulting from such billing in Oncology's name and on its behalf;
(iii) to receive payments from insurance companies, prepayments from health
care plans, and payments from all other Third Party Payors; (iv) to take
possession of and endorse in the name of Oncology (and/or in the name of an
individual physician, such payment intended for purpose of payment of a
physician's bill) any notes, checks, money orders, insurance payments and other
instruments received in payment of Accounts Receivable; and (v) with the
advance consent of the Oversight Committee, to initiate legal proceedings in
the name of Oncology or any Physician Employee to collect any accounts and
monies owed to Oncology, Clinic or any Physician Employee, to enforce the
rights of Oncology or any Physician Employee as a creditor under any contract
or in connection with the rendering of any service, and to contest adjustments
and denials by any Governmental Authority (or its fiscal intermediaries) as
Third Party Payors. All adjustments made for uncollectible accounts,
professional courtesies and other activities that do not generate a collectible
fee shall be done in a reasonable and consistent manner.
(c) Response shall design, supervise and maintain custody of all
files and records relating to the operation of each Clinic, including but not
limited to accounting, billing, patient medical records, and collection
records. Patient medical records shall at all times be and remain the property
of Oncology and shall be located at Clinic facilities so that they are readily
accessible for patient care. The Physician Employees shall have the obligation
to oversee the preparation and maintenance of patient medical records, and to
provide such medical information as shall be necessary and appropriate to the
clinical function of such records, and to maintain such records so as to ensure
the availability of Third-party Payor reimbursement for services rendered. The
management of all files and records shall comply with applicable state and
federal statutes. Response shall use its best efforts to preserve the
confidentiality of patient medical records and use information contained in
such records only for the limited purpose necessary to perform the services set
forth herein; provided, however, in no event shall a breach of said
confidentiality be deemed a default under this Agreement.
(d) Response shall supply to Oncology necessary clerical,
accounting, payroll, bookkeeping and computer services, laundry, linen,
uniforms, printing, stationary, advertising, postage and duplication services,
medical transcribing services and any other ordinary, necessary or appropriate
item or service for the operation of a Clinic, the cost of all of which shall
be Clinic Expense.
(e) Subject to the provisions of Section 4.2(d), Response shall
design and implement adequate and appropriate marketing and public relations
programs on behalf of Oncology, with appropriate emphasis on public awareness
of the availability of services at Oncology's Clinics. Any marketing or public
relations program shall be conducted in compliance with applicable laws and
regulations governing advertising by medical professionals.
(f) Response shall provide the data necessary for Oncology to
prepare its annual income tax returns and financial statements, and shall
provide payroll and related services for Physician Employees. Response shall
have no responsibility for the filing of such tax returns, the payment of such
income taxes or the cost of preparation of income tax returns or financial
statements on behalf of Oncology or any physician employed thereby.
(g) Response shall assist Oncology in recruiting additional
physicians, carrying out such administrative functions as may be appropriate
such as advertising for and identifying potential candidates, checking
credentials, and arranging interviews; provided, however, Oncology shall
interview and make the ultimate decision as to the suitability of any physician
to become associated with a Clinic. All physicians recruited by Response and
accepted by Oncology shall be the sole employees of Oncology, to the extent
such physicians are hired as employees. Subject to the provisions of Section
6.4, any expenses incurred in the recruitment of physicians, including, but not
limited to, employment agency fees, relocation and interviewing expenses shall
be Clinic Expenses.
(h) Subject to the provisions of Section 4.2(g), Response shall
negotiate and administer all managed care contracts on behalf of Oncology.
(i) Subject to the provisions of Sections 5.3 and 5.5(f), Response
shall arrange for legal and accounting services related to Clinic operations
incurred traditionally in the ordinary course of business, including the cost
of enforcing any physician contract containing restrictive covenants, provided
such services shall be approved in advance by the Executive Director.
(j) Response shall provide for the proper cleanliness of the
physical premises occupied and/or utilized by Oncology, and maintenance and
cleanliness of the equipment, furniture and furnishings located upon such
premises.
5.6. EXECUTIVE DIRECTOR. Subject to the provisions of Section 4.2(k),
Response shall recruit, hire and appoint an Executive Director to manage and
administer all of the day-to-day business functions of each Clinic (it being
understood and agreed that, if reasonable, a single Executive Director may have
responsibility for multiple Clinics). Subject to Oversight Committee approval,
Response shall determine the salary, bonuses (if any) and fringe benefits of
each Executive Director, which salary, bonuses (which may be payable in
Response common stock or by issuance of options on Response common stock) and
benefits shall, to the extent the same are current expenses under GAAP, be
Clinic Expenses. At the direction, supervision and control of Response, the
Executive Director, subject to the terms of this Agreement, shall implement the
policies established by the Oversight Committee and shall generally perform the
duties and have the responsibilities of an administrator. The Executive
Director shall be responsible for organizing the agenda for the meetings of the
Oversight Committee referred to in Article 4.
5.7. PERSONNEL. Response shall provide Physician Extender Personnel and
other non-physician professional support (other than Technical Employees and
other persons who are required to be Physician Employees) and administrative
personnel, clerical, secretarial, bookkeeping and collection personnel
reasonably necessary for the conduct of operations at each clinic. Response
shall determine and cause to be paid the salaries and fringe benefits of all
such personnel, which shall be Clinic Expenses. Such personnel shall be under
the direction, supervision and control of Response, with those personnel
performing billable patient care services remaining employees of and being
subject to the professional supervision of Oncology. If Oncology is
dissatisfied with the services of any person, Oncology shall consult with
Response. Response shall in good faith determine whether the performance of
that employee could be brought to acceptable levels through counsel and
assistance, or whether such employee's employment should be terminated. All of
Response's obligations regarding staff shall be governed by the overriding
principle and goal of providing high quality medical care. Employee
assignments shall be made to assure consistent and continued rendering of high
quality medical support services and to ensure prompt availability and
accessibility of individual medical support personnel to physicians in order to
develop constant, familiar and routine working relationships between individual
physicians and individual members of the medical support personnel. Response
shall maintain established working relationships wherever possible and Response
shall make every effort consistent with sound business practices to honor the
specific requests of Oncology with regard to the assignment of its employees.
In addition to the foregoing, Response shall advance to Oncology from time to
time the amount of any operating deficiency with respect to any new physician
who is an employee but not a shareholder of Oncology ("Junior Physician").
Operating deficiency with respect to a Junior Physician is hereby defined as
the excess of the amount payable to such Junior Physician pursuant to any
salary guarantee over the amount of salary payable to such Junior Physician
under Oncology's normal and customary compensation system, as the same may be
modified from time to time by Oncology. Upon the earliest to occur of (i) the
Junior Physician becoming a shareholder of Oncology, or (ii) the Junior
Physician recognizing billings in excess of his cost (as determined by the
Oversight Committee, a "Surplus"), Oncology shall begin repaying the amounts
theretofore advanced in respect of such Junior Physician. Such advanced
amounts shall be repaid in full within thirty (30) days after the occurrence of
the event enumerated (i) above, and, in the event item (ii) above shall occur,
shall be repaid as Surplus is recognized, in quarterly amounts equal to such
surplus for each quarter, within sixty (60) days after the end of each such
quarter; provided, however, that all such advances shall be payable in full by
Oncology no later than the third anniversary of the employment date of such
Junior Physician.
5.8. EVENTS EXCUSING PERFORMANCE. Response shall not be liable to
Oncology for failure to perform any of the services required herein in the
event of strikes, lock-outs, calamities, acts of God, unavailability of
supplies or other events over which Response has no control for so long as such
events continue, and for a reasonable period of time thereafter.
5.9. COMPLIANCE WITH APPLICABLE LAWS. Response shall comply with all
Applicable Law, in the conduct of its obligations under this Agreement.
5.10. QUALITY ASSURANCE. Response shall assist Oncology in fulfilling
its obligations to its patients to maintain a high quality of medical and
professional services.
5.11. ONCOLOGY OPERATING ACCOUNT. Oncology agrees to establish and
maintain a bank account, which shall be referred to as the Oncology Operating
Account, for the purpose of (a) depositing Practice Revenue and advances from
the Receivables Line (defined below) pursuant to Section 5.12 and (b) paying
(i) the Clinic Expense Portion of Service Fees owed pursuant to Section 8.1 of
this Agreement, (ii) expenses which are solely the obligation of Oncology,
including, without limitation, Physician Employee Compensation, (iii) the Fixed
Portion of Service Fees owed pursuant to Section 8.1 of this Agreement, and
(iv) distributions to Oncology, and the distributions shall be made in that
order of payment. Oncology hereby designates, constitutes and appoints the
Chief Financial Officer and Treasurer of Response as a signatory on the
Oncology Operating Account, with full power and authority to sign checks and
cause drafts and other debits to be made on the Oncology Operating Account in
the name of Oncology and to otherwise manage the cash resources and flow of
Oncology. After the payment of all Service Fees and expenses hereinabove
described, Oncology may withdraw amounts for distributions to Physician
Stockholders; provided, however, that Oncology agrees to maintain an adequate
balance in the Oncology Operating Account to pay the Clinic Expense Portion of
Service Fees as projected in the budget formulated pursuant to this Agreement.
5.12. CREDIT LINE. Response shall from time to time during the term of
this Agreement advance to Oncology, in readily available United State funds, by
wire transfer, intrabank transfer or other electronic means, to be deposited
into the Oncology Operating Account, an amount (the "Receivables Line") equal
to 100% of Accounts Receivable, net of any Bad Debt Allowance and all Fee
Adjustments with respect thereto. Amounts advanced by Response under the
Receivables Line will bear interest at a rate equal to the prime or base
lending rate quoted from time to time by First Tennessee Bank National
Association, plus one-half percent (.5%). Amounts advanced by Response
pursuant to this Section 5.12 shall be payable by Oncology upon demand, and if
no demand be made, upon termination of this Agreement. Response shall have the
authority from time to time pursuant to Section 5.11 above to make principal
payments on the Receivables Line. Interest on the outstanding Receivables Line
will be computed on a daily basis based on the total unpaid and outstanding
advances on the Receivables Line. Interest shall be payable to Response no
later than the fifth day of each month, in arrears. Advances on the
Receivables Line will be secured by a security interest in and to Accounts
Receivable granted pursuant to Section 15.8 below.
So long as an Oncology Event of Default has not occurred, advances on
the Receivables Line shall be made by Response as required to provide funds in
the Oncology Operating Account sufficient to pay, in the following order (i)
the Clinic Expense Portion of the Base Service Fee, (ii) Physician Employee
Compensation, (iii) other practice expenses which are not Clinic Expenses up to
an amount equal to the Physician Retainage, less the Base Draw, and (iv) the
Base Draw.
5.13. ANCILLARY SERVICES. Response shall operate such ancillary services
as approved by the Oversight Committee.
ARTICLE 6.
OBLIGATIONS OF ONCOLOGY
6.1. PROFESSIONAL SERVICES. Oncology shall provide professional services
to patients in compliance at all times with ethical standards, laws and
regulations applying to the medical profession, in a manner and to an extent
consistent with that established by Oncology prior to effectiveness of this
Agreement. Oncology shall also make all reports and inquiries to the National
Practitioners Data Bank and/or any state data bank required by Applicable Law.
Oncology shall ensure that each Physician Employee and Technical Employee
associated with Oncology to provide medical care to patients of Oncology is
licensed by the State of Florida to the extent required. In the event that any
disciplinary action or medical malpractice actions is initiated against any
physician or other person assisting in the providing of medical services,
Oncology shall immediately inform the Executive Director of such action and the
underlying facts and circumstances. Oncology shall develop a program to monitor
the quality of medical care practiced at each Clinic. In that regard, Oncology
shall at all times supervise and assume primary professional responsibility for
the delivery of all medical or other services to patients by Physician Extender
Personnel and any other employee of Response.
6.2. MEDICAL PRACTICE. Oncology shall use and occupy each Clinic
exclusively for the practice of medicine, and shall comply with all Applicable
Law and all standards of medical care. It is expressly acknowledged by the
parties that the medical practice or practices conducted at a Clinic shall be
conducted solely by physicians associated with Oncology, and no other physician
or medical practitioner shall be permitted to use or occupy a Clinic without
the prior written consent of Response and Oncology.
6.3. EMPLOYMENT OF PHYSICIAN EMPLOYEES. Oncology shall have complete
control of and responsibility for the hiring, compensation, supervision,
evaluation and termination of its Physician Employees, although at the request
of Oncology, Response shall consult with Oncology respecting such matters.
Oncology shall be responsible for the payment of all Physician Employee
Compensation now or hereafter applicable to Physician Employees; provided,
however, that Response shall provide the payroll service for computing,
accounting for and disbursing or paying all salaries and benefits of Oncology
employees, all of whom may be paid out of the Oncology Operating Account. With
respect to physicians, Oncology shall only employ and contract with licensed
physicians meeting applicable credentialling guidelines established by
Oncology.
To the extent permissible under the Employee Retirement and Income
Security Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986,
as amended (the "Code"), and applicable Health Care Law and to the extent such
practice does not violate Applicable Law or jeopardize reimbursement for
medical related services provided by any person associated with a Clinic,
Response shall pay any overtime or other non-salary compensation of and shall
provide employee benefits to Physician Employees, notwithstanding their
employment by Oncology. The cost of such items shall be Clinic Expense.
Response shall not provide any benefit to such persons to the extent Oncology
is required to provide same under ERISA, the Code or any other statute or
regulation.
6.4. LICENSING FEES, PROFESSIONAL DUES AND EDUCATION EXPENSES. Except as
provided in Section 5.5(g), Oncology and its Physician Employees shall be
solely responsible for payment of the cost of professional licenses and dues
for membership in professional associations and continuing professional
education costs. Oncology shall ensure that each of its Physician Employees
participates in such continuing medical education as is necessary for such
physician to remain current.
6.5. PROFESSIONAL INSURANCE ELIGIBILITY. Oncology shall be primarily
responsible, with assistance from Response, if requested, for obtaining and
retaining of professional liability insurance by assuring that its Physician
Employees are insurable, and participating in an on-going risk management
program. Professional liability insurance shall be paid for by Oncology or its
Physician Employees and shall not be Clinic Expense.
6.6. EVENTS EXCUSING PERFORMANCE. Oncology shall not be liable to
Response for failure to perform any of the services required herein in the
event of strikes, lock-outs calamities, acts of God, unavailability of supplies
or other events over which Oncology has no control for so long as such events
continue, and for a reasonable period of time thereafter.
6.7. FEES FOR PROFESSIONAL SERVICES. Oncology shall be solely
responsible for legal, accounting and other professional service fees incurred
by Oncology, except as set forth in Section 5.5(i) herein.
6.8. PEER REVIEW. Oncology agrees to cooperate with Response in
establishing a system of peer review as necessary to obtain provider contracts.
In connection therewith, Oncology agrees to assist in the formulation of
oncology and cancer care provider guidelines for each treatment or surgical
modality, and agrees to abide by said guidelines, and further agrees to submit
to periodic reviews by a third party to monitor compliance with said
guidelines. Oncology acknowledges that the establishment of provider
guidelines may be necessary to obtain PPO, HMO, IPA and other similar provider
contracts, both private and government funded. To the extent that said
provider guidelines must be filed or registered with any Third Party Payor,
Oncology agrees to cooperate with Response in making such filings or
registrations. it is agreed and acknowledged that all such peer review
guidelines shall be established and monitored by medical personnel on the staff
of Oncology and other practices that are part of the peer review process, and
shall not be promulgated, established or enforced independently by Response.
To the extent possible, all information obtained through the peer review
process shall remain confidential and the parties shall take all steps
reasonably necessary to assure that all privileges and immunities provided by
Applicable Law remain intact.
ARTICLE 7.
EMPLOYMENT AGREEMENTS, RESTRICTIVE COVENANTS AND REMEDIES
The parties recognize that the services to be provided by Response
shall be feasible only if Oncology operates an active medical practice to which
the physicians associated with Oncology devote their full time and attention.
To that end:
7.1. EMPLOYMENT AGREEMENTS WITH PHYSICIANS. As a condition to Response's
continuing obligations hereunder, Oncology and each physician now or
hereinafter employed thereby shall execute and deliver to each other an
employment contract substantially in the form set forth as Exhibit 2.1(aa)
hereto ("Employment Agreement").
7.2. RESTRICTIVE COVENANTS BY PHYSICIANS. Oncology shall obtain in each
Employment Agreement and use its best efforts to enforce (subject to Response's
obligations under Section 5.5 of this Agreement) formal agreements from each
physician pursuant to which the physician agrees not to establish, operate or
provide physician services at any medical office, clinic or outpatient and/or
ambulatory treatment or diagnostic facility providing services substantially
similar to those provided by Oncology pursuant to this Agreement within Dade
and Monroe Counties in Florida (the "Practice Territory") during the term of
the Employment Agreement and for a period of five (5) years after any
termination of employment with Oncology. Notwithstanding the foregoing, any
such restrictive covenant shall not restrict such physician from (i) delivering
physician services that are unrelated to the fields of hematology or oncology,
including the practice of internal medicine, (ii) teaching hematology and/or
oncology or (iii) assuming directorships of hospices following termination of
any such employment relationship with Oncology.
7.3. RESTRICTIVE COVENANTS OF RESPONSE. During the term of this
Agreement, neither Response nor any Affiliate, officer, director or employee of
Response or any Affiliate shall, without the consent of Oncology, purchase or
otherwise acquire any oncology or hematology practice within the Practice
Territory or establish, operate or enter into a service agreement with, or
provide service similar to those provided under this Agreement to, any medical
group or physician engaged in the practice of oncology or hematology within the
Practice Territory.
7.4. ENFORCEMENT. Response and Oncology acknowledge and agree that since
a remedy at law for any breach or attempted breach of the provisions of this
Article 7 shall be inadequate, either party shall be entitled to specific
performance and injunctive or other equitable relief in case of any such breach
or attempted breach, in addition to whatever other remedies may exist by law.
All parties hereto also waive any requirement for the securing or posting of
any bond in connection with the obtaining of any such injunctive or other
equitable relief. If any provision of Article 7 relating to the restrictive
period, scope of activity restricted and/or the territory described therein
shall be declared by a court of competent jurisdiction to exceed the maximum
time period, scope of activity restricted or geographical area such court deems
reasonable and enforceable under applicable law, the time period, scope of
activity restricted and/or area of restriction held reasonable and enforceable
by the court shall thereafter be the restrictive period, scope of activity
restricted and/or the territory applicable to the restrictive covenant
provisions in this Article 7. The invalidity or non-enforceability of this
Article 7 in any respect shall not affect the validity or enforceability of the
remainder of this Article 7 or of any other provisions of this Agreement.
ARTICLE 8.
FINANCIAL ARRANGEMENTS
8.1. SERVICE FEES. In consideration for its services hereunder, Response
shall receive the Base Service Fee and Performance Fee, computed pursuant to
Schedule A hereto, as compensation for its services hereunder, payable by means
of the Base Draw procedure set forth in Section 8.2 below.
8.2. BASE DRAW. The Clinic Expense Portion of the Base Service Fee shall
be payable by Oncology to Response out of the Oncology Operating Account as
Clinic Expenses are incurred by Response, subject to ordinary, reasonable and
customary payment terms on invoices for goods and services. The Base Draw
shall be payable by Oncology to Response out of the Oncology Operating Account
on a monthly basis for the purpose of paying the Fixed Portion of the Base
Service Fee and providing Response with an advance on its annual Performance
Fee (if any). The Base Fee and the Performance Fee will be computed as of the
end of each calendar year based on amounts recorded as Practice Revenue and
during the calendar year. In the event that it shall be finally determined
that the sum of the Base Service Fee and the Performance Fee are less than the
Base Draw paid by Oncology for such year, then such excess shall be deemed an
advance by Oncology, shall be recorded and reflected as a current account
payable by Response and an Excess Base Draw receivable by Oncology and shall be
settled by cash payment from Response to Oncology no later than the 15th day of
March of the next succeeding calendar year, or by such other settlement method
as may be mutually agreed upon.
ARTICLE 9.
RECORDS
9.1. PATIENT RECORDS. Upon termination of this Agreement, Oncology shall
retain all patient medical records maintained by Oncology or Response in the
name of Oncology. Response shall, at its option, and if allowed under
Applicable Law be entitled to have reasonable access during normal business
hours to Oncology's patient medical records applicable to the period of
Response's performance under this Agreement. Moreover, Oncology shall, at its
option, be entitled to retain copies of financial and accounting records
relating to all services performed by Oncology or Response under this
Agreement. All parties agree to maintain the confidentiality of patient
identifying information and not to disclose such information except as may be
required or permitted by Applicable Law.
9.2. RECORDS OWNED BY RESPONSE. All records relating in any way to the
operation of a Clinic which are not the property of Oncology under the
provisions of Section 9.1 above, shall at all times be the property of
Response.
9.3. ACCESS TO RECORDS. During the term of this Agreement, and
thereafter, Oncology or its designee shall have reasonable access during normal
business hours to Oncology's and Response's financial records, including, but
not limited to, records of collections, expenses and disbursements as key by
Response in performing Response's obligations under this Agreement, and
Oncology may copy any and or all such records.
9.4. GOVERNMENT ACCESS TO RECORDS. To the extent required by Section
1861(v)(1)(I) of the Social Security Act, each party shall, upon proper
request, allow the United States Department of Health and Human Services, the
Comptroller General of the United States, and their duly authorized
representatives access to this Agreement and to all books, documents, and
records necessary to verify the nature and extent of the costs of services
provided by either party under this Agreement, at any time during the term of
this Agreement and for an additional period of four (4) years following the
last date services are furnished under this Agreement. If either party carries
out any of its duties under this Agreement through an agreement between it and
an individual or organization related to it or through a subcontract with an
unrelated party, that party to this Agreement shall require that a clause be
included in such agreement (the value of which is in excess of $10,000.00) to
the effect that until the expiration of four (4) years after the furnishing of
services pursuant to such agreement, the related organization shall make
available, upon request by the United States Department of Health and Human
Services, the Comptroller General of the United States, or any of their duly
authorized representatives, all agreements, books, documents, and records of
such related organization that are necessary to verify the nature and extent of
the costs of services provided under that agreement.
ARTICLE 10.
INSURANCE AND INDEMNITY
10.1. INSURANCE TO BE MAINTAINED BY ONCOLOGY. Throughout the term of
this Agreement, Oncology shall maintain comprehensive professional liability
insurance with limits of not less than $500,000 per claim and with aggregate
policy limits of not less than $1,000,000 per physician and a separate limit
for Oncology. Oncology shall be responsible for all liabilities in excess of
the limits of such policies. Response shall have the option, with Oversight
Committee approval, of providing such professional liability insurance through
an alternative program, provided such program meets the requirements of the
Insurance Commissioner of the State of Florida. Response shall reimburse
Oncology for any unearned professional liability insurance premiums paid by
Oncology to the extent not reimbursed or reimbursable by Oncology's insurance
carrier if Oncology's existing professional liability insurance program is
cancelled and replaced by a comparable professional liability insurance program
initiated by Response.
10.2. INSURANCE TO BE MAINTAINED BY RESPONSE. Throughout the term of
this Agreement, Response shall make available, provide and/or maintain
comprehensive professional liability insurance for all Physician Employees who
are not physicians and all professional employees of Response, the cost of
which shall be a Clinic Expense, with limits as determined reasonable by
Response in its national program, and comprehensive general liability and
property insurance covering each Clinic premises and operations.
10.3. ADDITIONAL INSUREDS. Oncology and Response each agrees to use its
best efforts to have the other named as an additional insured on the their
respective professional liability insurance programs.
10.4. INDEMNIFICATION MATTERS INVOLVING THIRD PARTIES. Oncology and
Response ("Indemnitor") shall indemnify, hold harmless and defend the other
("Indemnitee") from and against any and all liability, loss, damage, claim,
causes of action, and expenses (including reasonable attorneys' fees, except to
the extent limited below), whether or not covered by insurance, caused or
asserted to have been caused, directly or indirectly, by or as a result of the
acts (intentional or negligent) or omissions by, in the case of Oncology, by
any Physician Stockholder or other person acting under the supervision and
control thereof, or, in the case of Response, by any employee thereof who is
not acting under the supervision and control of a Physician Stockholder of
Oncology.
(a) If any third party shall notify an Indemnitee with respect to any
matter (a "Third Party Claim") which may give rise to a claim for
indemnification under this Section 10.4, then the Indemnitee shall promptly
notify the Indemnitor in writing; provided, however, that no delay on the part
of the Indemnitee in notifying the Indemnitor shall relieve the Indemnitor from
any obligation hereunder unless (and then solely to the extent) the Indemnitor
is prejudiced by such delay.
(b) The Indemnitor will have the right to defend the Indemnitee
against the Third Party Claim with counsel of its choice satisfactory to the
Indemnitee so long as (A) the Indemnitor notifies the Indemnitee in writing
within 15 days after the Indemnitee has given notice of the Third Party Claim
that the Indemnitor will indemnify the Indemnitee from and against the entirety
of any Adverse Consequences (hereinbelow defined) the Indemnitee may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim, (B) the Indemnitor provides the Indemnitee with evidence
acceptable to the Indemnitee that the Indemnitor will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnitee, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnitee, and (E) the Indemnitor conducts the defense of the Third Party
Claim actively and diligently.
(c) So long as the Indemnitor is conducting the defense of the Third
Party Claim in accordance with Section 10.4(b) above, (A) the Indemnitee may
retain separate co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (B) the Indemnitee will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnitor (not to be
withheld unreasonably), and (C) the Indemnitor will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnitee.
(d) In the event any of the conditions in Section 10.4(b) above is or
becomes unsatisfied, however, (A) the Indemnitee may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it may deem appropriate (and the
Indemnitee need not consult with, or obtain any consent from, the Indemnitor in
connection therewith), (B) the Indemnitor will reimburse the Indemnitee
promptly and periodically for the costs of defending against the Third Party
Claim (including attorneys' fees and expenses), and (C) the Indemnitor will
remain responsible for any Adverse Consequences the Indemnitee may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 10.4.
10.5. Determination of Adverse Consequences. The parties hereto shall
take into account the time cost of money (using the Applicable Rate as the
discount rate) in determining Adverse Consequences for purposes of this Section
10.
10.6. Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any party may have for breach of
representation, warranty, or covenant.
ARTICLE 11.
TERM AND TERMINATION
11.1. TERM OF AGREEMENT. This Service Agreement shall be effective as of
the closing of the Stock Purchase and shall expire on December 31, 2035 unless
earlier terminated pursuant to the terms hereof.
11.2. EXTENDED TERM. Unless earlier terminated as provided for in this
Agreement, the term of this Agreement shall be automatically extended for
additional terms of five (5) years each, unless either party delivers to the
other party, not less than one hundred eighty (180) days prior to the
expiration of the preceding term, written notice of such party's intention not
to extend the term of this Agreement.
11.3. RESPONSE EVENT OF DEFAULT. The occurrence of any of the following
events shall constitute a default by Response (a "Response Event of Default")
under this Agreement, giving Oncology the right to the remedies set forth in
Section 11.5 below:
(a) the filing by Response of a petition in voluntary bankruptcy or
an assignment by Response for the benefit of creditors, or upon other action
taken or suffered, voluntarily or involuntarily, under any federal or state law
for the benefit of debtors by Response, except for the filing of a petition in
involuntary bankruptcy against Response which is dismissed within thirty (30)
days thereafter.
(b) any material default by Response in the performance of any of
its duties or obligations under this Agreement and such default shall continue
for a period of sixty (60) days (fifteen (15) days in the case of Response's
failure to provide required advances under the Receivables Line) after written
notice thereof has been given to Response by Oncology.
(c) in the event Response shall, intentionally or in bad faith,
misapply funds or assets of Oncology or commit a similar act which cause
material harm to Oncology.
11.4. ONCOLOGY EVENT OF DEFAULT. The occurrence of any of the following
events shall constitute a default by Oncology (an "Oncology Event of Default")
under this Agreement, giving Response the right to the remedies set forth in
Section 11.6 below:
(a) the filing by Oncology of a petition in voluntary bankruptcy or
an assignment by Oncology for the benefit of creditors, or upon other action
taken or suffered, voluntarily or involuntarily, under any federal or state law
for the benefit of debtors by Oncology, except for the filing of a petition in
involuntary bankruptcy against Oncology which is dismissed within thirty (30)
days thereafter.
(b) any material default by Oncology in the performance of any of
its duties or obligations under this Agreement and such default shall continue
for a period of ninety (90) days after written notice thereof has been given to
Oncology by Response.
(c) the termination or suspension of Oncology's Medicare or Medicaid
Provider Number as a result of the action or inaction of physicians, and such
termination or suspension shall continue for ninety (90) days, unless Oncology
shall at that time be acting in good faith (and shall provide reasonable
evidence of the action being taken) to reverse such termination or suspension.
Notwithstanding any good faith effort on the part of Oncology to reverse such
termination or suspension, if such termination or suspension shall not be
reversed within ninety (90) days after occurrence, an event of default shall be
deemed to have occurred.
(d) the termination or suspension of the Medicare or Medicaid
Provider Numbers of a majority of the physicians employed by Oncology, and such
termination or suspension shall continue for sixty (60) days, unless such
physicians shall be acting in good faith (and shall provide reasonable evidence
of the action being taken) to reverse such termination or suspension.
Notwithstanding any good faith effort on the part of any physicians to reverse
such termination or suspension, if such termination or suspension with respect
to that number of physicians required to cause a majority of such physicians to
retain their Medicare or Medicaid Provider Numbers shall not be reversed within
one hundred fifty (150) days after occurrence, an event of default shall be
deemed to have occurred.
11.5. REMEDIES UPON RESPONSE EVENT OF DEFAULT. Upon the occurrence of a
Response Event of Default, Oncology shall have the right to terminate this
Agreement by written notice to Response without any further obligation to
Response for Service Fees after the giving of such notice. Upon termination of
this Agreement by Oncology, Response's obligations under that certain long-term
promissory note given by Response to the Stockholders in connection with the
Stock Purchase will terminate. In addition to the foregoing, in such event
Oncology shall have the option to purchase from Response, and upon proper
exercise of such option by Oncology in the manner hereinbelow provided,
Response shall sell to Oncology, all assets and properties, tangible and
intangible (except that intangible assets shall not include any intangible
asset related to this Service Agreement), owned by Response and used by
Oncology in its medical practice ("Practice Assets") for a price, payable in
cash, equal to the fair market value of the Practice Assets. Oncology shall
exercise such option by giving written notice to Response within sixty (60)
days after the occurrence of the Response Event of Default. Upon delivery of
such exercise, Response and Oncology shall negotiate in good faith the fair
market value of the assets to be acquired. In the event that, after at least
fifteen (15) days of good faith negotiation, Response and Oncology shall not
have agreed upon the fair market value of the Practice Assets, each party shall
select an appraiser who shall provide an evaluation report with respect to the
fair market value of the Practice Assets. If the valuations of the appraisers
are within $25,000.00 of each other, then the lowest appraisal shall be deemed
the fair market value of the Practice Assets, and Oncology shall purchase the
Practice Assets for such value. If the valuation of the appraisers are more
than $25,000.00 different, then the two appraisers shall agree upon a third
appraiser, and the average value set forth in the three appraisals shall be
deemed the fair market value of the Practice Assets, and Oncology shall
purchase the Practice Assets for such value.
11.6. REMEDIES UPON ONCOLOGY EVENT OF DEFAULT. Upon the occurrence of an
Oncology Event of Default, Response shall have the right to terminate this
Agreement by written notice to Oncology, and Oncology shall have no further
obligation to Response for Service Fees after the date such notice is received.
In such event, Response's obligations under that certain long-term promissory
note given by Response to the Stockholders in connection with the Stock
Purchase shall terminate. In addition, in such event, Oncology shall be
obligated to pay to Response the Liquidated Damages Amount in complete
satisfaction of any and all damages suffered by Response hereunder. Such
Liquidated Damages Amount shall be payable by Oncology in cash within sixty
(60) days after occurrence of the Oncology Event of Default. Each Stockholder
hereby severally, and not jointly, guarantees the foregoing obligation of
Oncology and agrees to pay to Response his pro rata share of the Liquidated
Damages Amount provided that and to the extent he is a Remaining Physician
Stockholder for purposes of this Agreement, with the pro rata share being equal
to the portion of the Liquidated Damages Amount not paid by Oncology divided by
the number of Remaining Physician Stockholders as of the date of occurrence of
an Oncology Event of Default. Moreover, in such event Oncology shall have the
option to purchase from Response, and upon proper exercise of such option by
Oncology in the manner hereinbelow provided, Response shall sell to Oncology,
all Practice Assets for a price, payable in cash, equal to the fair market
value of the Practice Assets. Oncology shall exercise such option by giving
written notice to Response within sixty (60) days after the occurrence of the
Response Event of Default. Upon delivery of such exercise, Response and
Oncology shall negotiate in good faith the fair market value of the assets to
be acquired. In the event that, after at least fifteen (15) days of good faith
negotiation, Response and Oncology shall not have agreed upon the fair market
value of the Practice Assets, each party shall select an appraiser who shall
provide an evaluation report with respect to the fair market value of the
Practice Assets. If the valuations of the appraisers are within $25,000.00 of
each other, then the lowest appraisal shall be deemed the fair market value of
the Practice Assets, and Oncology shall purchase the Practice Assets for such
value. If the valuation of the appraisers are more than $25,000.00 different,
then the two appraisers shall agree upon a third appraiser, and the average
value set forth in the three appraisals shall be deemed the fair market value
of the Practice Assets, and Oncology shall purchase the Practice Assets for
such value.
11.7. CLOSING OF REPURCHASE BY ONCOLOGY AND EFFECTIVE DATE OF
TERMINATION. Oncology shall pay cash for Practice Assets repurchased
hereunder. The amount of the purchase price shall be reduced by the amount of
debt and liabilities of Response assumed by Oncology and shall also be reduced
by any payment Response has failed to make under this Agreement, provided that
such payments or obligations are not otherwise accounted for in the liabilities
assumed by Oncology in connection with the repurchase described herein. The
closing date for the repurchase shall be determined by Oncology, but shall in
no event occur later than 180 days from the date of the notice of termination.
In the event of exercise of such option, each party shall use its best efforts
to obtain such consents and authorizations to such transaction as may be
required by Applicable Law or otherwise. In such event, Response shall execute
and deliver to Oncology such assignments to leases and other contracts and such
bills of sale and other transfer or closing documents necessary to effect such
transaction. Oncology shall execute and deliver to Response such officers'
certificates, assumption agreements and other closing documents necessary to
close such transaction.
ARTICLE 12
DAMAGE AND LOSS; CONDEMNATION
12.1. USE OF INSURANCE PROCEEDS. All insurance or condemnation proceeds
payable by reason of any physical loss of any of the improvements comprising
the facilities or the furniture, fixtures and equipment used by the Clinics,
shall be available for the reconstruction, repair or replacement, as the case
may be, of any damage, destruction or loss. The Oversight Committee, in
consultation with Oncology, shall review and approve such reconstruction,
repair or replacement.
12.2. TEMPORARY SPACE. In the event of substantial damage to or the
condemnation of a significant portion of the facilities, Response shall use its
best efforts to provide temporary facilities until such time as the facilities
can be restored or replaced.
ARTICLE 13
REPRESENTATIONS AND WARRANTIES OF ONCOLOGY
Oncology represents, warrants, covenants and agrees with Response that:
13.1. VALIDITY. Oncology is a professional association duly organized,
validly existing and in good standing under the laws of the State of Florida.
Oncology has the full power and authority to own its property, to carry on its
business as presently being conducted, to enter into this Agreement, and to
consummate the transactions contemplated hereby.
13.2. LITIGATION. There is no suit, action, proceeding at law or in
equity, arbitration, administrative proceeding or other proceeding pending, or
threatened against, or affecting Oncology, or any of the assets to be conveyed
hereunder, or to the best of Oncology's knowledge, any hematology or oncology
provider or other health care professional associated with or employed by
Oncology as pertains to any claim involving the providing of health care
related services, and to the best of Oncology's knowledge there is no basis for
any of the foregoing.
13.3. PERMITS. Oncology and all physicians and other health care
professionals associated with or employed by Oncology have all permits and
licenses and other Necessary Authorizations required by all Applicable Laws,
except where failure to secure such licenses, permits and other Necessary
Authorizations does not have a material adverse effect; have made all
regulatory filings necessary for the conduct of Oncology's business; and are
not in violation of any of said permitting or licensing requirements.
13.4. AUTHORITY. The execution of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action, and this Agreement is a valid and binding Agreement of Oncology,
enforceable in accordance with its terms. Oncology has obtained all third
party consents necessary to enter into and consummate the transaction
contemplated by this Agreement. Neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, nor
compliance by Oncology with any of the provisions hereof, will:
(a) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of, any lien,
security interest, charge or encumbrance upon any of the assets to be conveyed
hereunder, Oncology's charter or bylaws or any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
agreement or other instrument or obligation to which Oncology is a party, or by
which either Oncology or any of the assets to be conveyed hereunder is bound;
or
(b) violate any order, writ, injunction, decree, statute, rule or
regulation applicable either to Oncology or any of the assets to be conveyed
hereunder.
13.5. COMPLIANCE WITH APPLICABLE LAWS. To the best of Oncology's
knowledge and belief, Oncology has operated in compliance with all federal,
state, county and municipal laws, ordinances and regulations applicable thereto
and neither Oncology nor any physician or other Person associated with or
employed by Oncology has received payment or any remuneration whatsoever to
induce or encourage the referral of patients or the purchase of goods and/or
services as prohibited under 42 U.S.C. 1320a 7b(b), or otherwise perpetrated
any Medicare or Medicaid fraud or abuse, nor has any fraud or abuse been
alleged within the last five (5) years by any Governmental Authority, a carrier
or a Third Party Payor.
13.6. HEALTH CARE COMPLIANCE. Oncology is presently participating in or
otherwise authorized to receive reimbursement from or is a party to Medicare,
Medicaid, and other Third Party Payor Programs. All necessary certifications
and contracts required for participation in such programs are in full force and
effect and have not been amended or otherwise modified, rescinded, revoked or
assigned as of the date hereof, and no condition exists or event has occurred
which in itself or with the giving of notice or the lapse of time or both would
result in the suspension, revocation, impairment, forfeiture or non-renewal of
any such Third Party Payor Program. Oncology is in full compliance with the
requirements of all such Third Party Payor Programs applicable thereto.
13.7. FRAUD AND ABUSE. Oncology and persons and entities providing
professional services for Oncology, have not, to the knowledge of Oncology,
after due inquiry, engaged in any activities which are prohibited by or are in
violation of the rules, regulations, policies, contracts or laws pertaining to
any Third Party Payor Program, or which are prohibited by rules of professional
conduct ("Governmental Rules and Regulations"), including but not limited to
the following: (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failing to disclose knowledge by a
claimant of the occurrence of any event affecting the initial or continued
right to any benefit or payment on Oncology's own behalf or on behalf of
another, with intent to fraudulently secure such benefit or payment; or (d)
knowingly and willfully soliciting or receiving any remuneration (including any
kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in
cash or in kind or offering to pay or receive such remuneration (i) in return
for referring an individual to a person for the furnishing or arranging for the
furnishing or any item or service for which payment may be made in whole or in
part by Medicare or Medicaid, or (ii) in return for purchasing, leasing, or
ordering or arranging for or recommending purchasing, leasing, or ordering any
good, facility, service or item for which payment may be made in whole or in
part by Medicare or Medicaid.
13.8. ONCOLOGY COMPLIANCE. Oncology has all licenses necessary to
operate the Clinic in accordance with the requirements of all Applicable Laws
and has all Necessary Authorizations for the use and operation, all of which
are in full force and effect. There are no outstanding notices of deficiencies
relating to Oncology issued by any Governmental Authority or Third Party Payor
requiring conformity or compliance with any Applicable Law or condition for
participation of such Governmental Authority or Third Party Payor, and after
reasonable and independent inquiry and due diligence and investigation,
Oncology has neither received notice nor has any knowledge or reason to believe
that such Necessary Authorizations may be revoked or not renewed in the
ordinary course.
13.9. RATES AND REIMBURSEMENT POLICIES. The jurisdiction in which
Oncology is located does not currently impose any restrictions or limitations
on rates which may be charged to private pay patients receiving services
provided by Oncology. Oncology does not have any rate appeal currently pending
before any Governmental Authority or any administrator of any Third Party Payor
Program. Oncology has no knowledge of any Applicable Law which has been
enacted, promulgated or issued within the eighteen (18) months preceding the
date of this Agreement or any such legal requirement proposed or currently
pending in the jurisdiction in which Oncology is located which could have a
material adverse effect on Oncology or may result in the imposition of
additional Medicaid, Medicare, charity, free care, welfare, or other discounted
or government assisted patients at Oncology or require Oncology to obtain any
necessary authorization which Oncology does not currently possess.
13.10. FULL DISCLOSURE. When considered in the context of all
information contained herein, no representation or warranty made by Oncology in
this Agreement contains or will contain any untrue statement of a material
fact. All representatives and warranties contained in this Agreement are true
and correct as of the date of their Agreement and shall remain true and correct
throughout the term of this Agreement.
13.11. EXHIBITS. All the facts recited in Exhibits annexed hereby (as
updated as of the effective date hereof) shall be deemed to be representations
of fact by Oncology as though recited in this Article 13.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES OF RESPONSE
Response represents, warrants, covenants and agrees with Oncology as
follows:
14.1. ORGANIZATION. Response is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee.
Response has the full power to own its property, to carry on its business as
presently conducted, to enter into this Agreement and to consummate the
transactions contemplated hereby.
14.2. AUTHORITY. Response has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, as well as the
consummation of the transactions contemplated hereby. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, violate any provisions of the charter or the
bylaws of Response or any indenture, mortgage, deed of trust, lien, lease,
agreement, arrangement, contract, instrument, license, order, judgment or
decree or result in the acceleration of any obligation thereunder to which
Response is a party or by which it is bound.
14.3. ABSENCE OF LITIGATION. No action or proceeding by or before any
court or other Governmental Authority has been instituted or is, to the best of
Response's knowledge, threatened with respect to the transactions contemplated
by this Agreement.
14.4. PERMITS. Response has all permits and licenses and other Necessary
Authorizations required by all Applicable Laws, except where failure to secure
such licenses, permits and other Necessary Authorizations does not have a
material adverse effect; have made all regulatory filings necessary for the
conduct of Response's business; and are not in violation of any of said
permitting or licensing requirements.
14.5. COMPLIANCE WITH APPLICABLE LAWS. To the best of Response's
knowledge and belief, Response has operated in compliance with all federal,
state, county and municipal laws, ordinances and regulations applicable thereto
and neither Response nor any other Person associated with or employed by
Response has received payment or any remuneration whatsoever to induce or
encourage the referral of patients or the purchase of goods and/or services as
prohibited under 42 U.S.C. 1320a 7b(b), or otherwise perpetrated any Medicare
or Medicaid fraud or abuse, nor has any fraud or abuse been alleged within the
last five (5) years by any Governmental Authority, a carrier or a Third Party
Payor.
14.6. FRAUD AND ABUSE. Response and persons and entities providing
professional services for Response, have not, to the knowledge of Response,
after due inquiry, engaged in any activities which are prohibited by or are in
violation of the rules, regulations, policies, contracts or laws pertaining to
any Third Party Payor Program, or which are prohibited by rules of professional
conduct ("Governmental Rules and Regulations"), including but not limited to
the following: (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failing to disclose knowledge by a
claimant of the occurrence of any event affecting the initial or continued
right to any benefit or payment on Response's own behalf or on behalf of
another, with intent to fraudulently secure such benefit or payment; or (d)
knowingly and willfully soliciting or receiving any remuneration (including any
kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in
cash or in kind or offering to pay or receive such remuneration (i) in return
for referring an individual to a person for the furnishing or arranging for the
furnishing or any item or service for which payment may be made in whole or in
part by Medicare or Medicaid, or (ii) in return for purchasing, leasing, or
ordering or arranging for or recommending purchasing, leasing, or ordering any
good, facility, service or item for which payment may be made in whole or in
part by Medicare or Medicaid.
ARTICLE 15
COVENANTS OF ONCOLOGY
15.1. MERGER, CONSOLIDATION AND OTHER ARRANGEMENTS. Oncology shall not
incorporate, merge or consolidate with any other entity or individual or
liquidate or practice at any location other than the Clinics or dissolve or
wind-up Oncology's affairs or enter into any partnerships, joint ventures or
sale-leaseback transactions or purchase or otherwise acquire (in one or a
series of related transactions) any part of the property or assets (other than
purchases or other acquisitions of inventory, materials and equipment in the
ordinary course of business) of any other person or entity without first
obtaining the prior written consent of Response. Oncology acknowledges and
agrees that such consent may be withheld if Response and Oncology cannot
mutually agree upon the terms and conditions of a new Service Agreement with
Oncology.
15.2. NECESSARY AUTHORIZATIONS/ASSIGNMENT OF LICENSES AND PERMITS.
Oncology shall maintain all licenses, permits, certifications, or other
Necessary Authorizations and shall not assign or transfer any interest in any
license, permit, certificate or other Necessary Authorization granted to it by
any Governmental Authority, nor shall Oncology assign, transfer, or remove or
permit any other individual or entity to assign, transfer or remove any records
of Oncology, including without limitation, patient records, medical and
clinical records (except for removal of such patient records as directed in
writing by the patients owning such records or as otherwise required under any
Applicable Law).
15.3. TRANSACTION WITH AFFILIATES. Oncology shall not enter into any
transaction or series of transactions, whether or not related or in the
ordinary course of business, with any Affiliate of Response, other than on
terms and conditions substantially as favorable to Oncology as would be
obtainable by Oncology at the time in a comparable arms-length transaction with
a person not an Affiliate of Response.
15.4. COMPLIANCE WITH ALL LAWS. Oncology shall comply with all laws and
regulations relating to Oncology's practice and the operation of any eye care
facility, including, but not limited to, all state, federal and local laws
relating to the acquisition or operation of a health care practice.
Furthermore, Oncology shall not violate any Applicable Laws.
15.5. THIRD PARTY PAYOR PROGRAMS. Oncology shall maintain Oncology's
compliance with the requirements of all Third Party Payor Programs in which
Oncology is currently participating or authorized to participate.
15.6. CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Oncology shall
not make any change in the character of Oncology's business or in the credit
and collection policy, which change would, in either case, impair the
collectibility of any Accounts Receivable or otherwise modify, amend or extend
the terms of any such account other than in the ordinary course of business.
15.7. SECURITY INTEREST.
(a) Oncology shall, effective as of the date hereof, be deemed to
have granted (and Oncology does hereby grant) to Response a first priority
security interest in and to any and all of the Accounts Receivable and the
proceeds thereof to secure the repayment of all amounts advanced to Oncology
hereunder with accrued interest thereon, and this Agreement shall be deemed to
be a security agreement. With respect to such grant of a security interest,
Response may at its option exercise from time to time any and all rights and
remedies available to it under the UCC or otherwise. Oncology agrees that five
(5) days shall be reasonable prior notice of the date of any public or private
sale or other disposition of all or part of the purchased Accounts Receivable.
Oncology represents and warrants that the location of Oncology's principal
place of business, and all locations where Oncology maintains records with
respect to its Accounts Receivables are set forth under its name in Section
16.5 hereof. Oncology agrees to notify Response in writing thirty (30) days
prior to any change in any such location. The exact name of Oncology is as set
forth at the beginning of this Agreement, and except as set forth on the
signature page hereof, Oncology has not changed its name in the last five (5)
years, and during such period Oncology did not use, nor does Oncology now use,
any fictitious or trade name. Oncology shall notify Response in writing thirty
(30) days prior to any change in any such name.
(b) Oncology shall, effective as of the date hereof, be deemed to
have granted (and Oncology does hereby grant) to Response a first priority
security interest in and to that certain promissory note of even date herewith,
and to the proceeds thereof, to secure the payment of the Fixed Portion of the
Base Service Fee; and this Agreement shall be deemed to be a security
agreement.
15.8. REPRESENTATIONS AND WARRANTIES. Oncology agrees to notify Response
in the event that any representation or warranty contained in Article 13 of
this Agreement becomes untrue.
ARTICLE 16.
GENERAL PROVISIONS
16.1. ASSIGNMENT. Response shall have the right to assign its rights
hereunder to any person, firm or corporation under common control with Response
and to any lending institution, for security purposes or as collateral, from
which Response obtains financing. Except as set forth above, neither Response
nor Oncology shall have the right to assign their respective rights and
obligations hereunder without the written consent of the other party.
16.2. NO PRACTICE OF MEDICINE. The parties acknowledge that Response is
not authorized or qualified to engage in any activity which may be construed or
deemed to constitute the practice of medicine. To the extent any act or
service required of Response in this Agreement should be construed or deemed by
any Governmental Authority or court to constitute the practice of medicine, the
performance of said act or service by Response shall be deemed waived and
forever unenforceable.
16.3. WHOLE AGREEMENT; MODIFICATION. This Agreement supersedes all prior
agreements between the parties, and there are no other agreements or
understandings, written or oral, between the parties regarding this Agreement,
the Exhibits and the Schedules, other than as set forth herein. This Agreement
shall not be modified or amended except by a written document executed by both
parties to this Agreement, and such written modification(s) shall be attached
hereto.
16.4. ARBITRATION OF DISPUTES; LEGAL FEES. Any dispute arising under
this Service Agreement shall be submitted by the parties to binding arbitration
pursuant to the Florida Uniform Arbitration Act, with any such arbitration
proceeding being conducted in accordance with the rules of the American
Arbitration Association. Any arbitration panel presiding over any arbitration
proceeding hereunder is hereby empowered to render a decision in respect of
such dispute, to award costs and expenses (including reasonable attorney fees)
as it shall deem equitable and to enter its award in any court of competent
jurisdiction. Each of the parties submits to the jurisdiction of any state or
federal court sitting in Miami, Dade County, Florida for purposes of
enforcement of any arbitration award hereunder. Each party also agrees not to
bring any action or proceeding arising out of or relating to this Service
Agreement in any other court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety, or other security that might be required of any
other Party with respect thereto.
16.5. NOTICES. All notices required or permitted by this Agreement shall
be in writing and shall be addressed as follows:
To Response: Response Oncology, Inc.
1775 Moriah Woods Blvd.
Memphis, Tennessee 38117
Attn: Daryl P. Johnson, CFO
With copies to: Baker, Donelson, Bearman & Caldwell
165 Madison Ave., Suite 2000
Memphis, Tennessee 38103
Attn: John A. Good
To Oncology: Oncology Hematology Group of South
Florida, P.A.
8940 N. Kendall Drive
Suite 300-E, East Tower
Miami, Florida 33176
Attn: Leonard Kalman
With copies to: Alan R. Chase, Esq.
Cohen, Chase, Hoffman & Trautman, P.A.
Suite 600, 9400 South Dadeland Blvd.
Miami, Florida 33156
or to such other addresses as either party shall notify the other.
16.6. BINDING ON SUCCESSORS. Subject to Section 16.1, this Agreement
shall be binding upon the parties hereto, and their successors, assigns, heirs
and beneficiaries.
16.7. WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing, and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a
waiver of any other terms and conditions hereof.
16.8. GOVERNING LAW. The validity, interpretation and performance of
this Agreement shall be governed by and construed in accordance with the laws
of the State of Florida. The parties acknowledge that Response is not
authorized or qualified to engage in any activity which may be construed or
deemed to constitute the practice of medicine. To the extent any act or
service required of Response in this Agreement should be construed or deemed,
by any governmental authority, agency or court to constitute the practice of
medicine, the performance of said act or service by Response shall be deemed
waived and forever unenforceable.
16.9. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and if any portion shall be held invalid, illegal or unenforceable
for any reason, the remainder of this Agreement shall be effective and binding
upon the parties.
16.10. ADDITIONAL DOCUMENTS. Each of the parties hereto agrees to
execute any document or documents that may be requested from time to time by
the other party to implement or complete such party's obligations pursuant to
this Agreement.
16.11. TIME IS OF THE ESSENCE. Time is hereby expressly declared to be
of the essence in this Agreement.
16.12. CONFIDENTIALITY. Except for disclosure to its bankers,
underwriters or lenders, or as necessary or desirable for conduct of business,
including negotiations with other acquisition candidates, neither party hereto
shall disseminate or release to any third party any information regarding any
provisions of this Agreement, or any financial information regarding the other
(past, present or future) that was obtained by the other in the course of the
negotiations of this Agreement or in the course of the performance of this
Agreement, without the other party's written approval; provided, however, the
foregoing shall not apply to information which (i) is generally available to
the public other than as a result of a breach of confidentiality provisions;
(ii) becomes available on a non-confidential basis from a source other than the
other party or its affiliates or agents, which source was not itself bound by a
confidentiality agreement, or (iii) which is required to be disclosed by law or
pursuant to court order.
16.13. CONTRACT MODIFICATIONS FOR PROSPECTIVE LEGAL EVENTS. In the event
any state or federal laws or regulations, now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decisions, a regulatory agency or legal counsel in such a manner as to
indicate that the structure of this Agreement may be in violation of such laws
or regulations, Oncology and Response shall amend this Agreement as necessary.
To the maximum extent possible, any such amendment shall preserve the
underlying economic and financial arrangements between Oncology and Response.
16.14. REMEDIES CUMULATIVE. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party shall be considered exclusive
of any other remedy available to any party, but the same shall be distinct,
separate and cumulative and may be exercised from time to time as often as
occasion may arise or as may be deemed expedient.
16.15. LANGUAGE CONSTRUCTION. The language in all parts of this
Agreement shall be construed, in all cases, according to its fair meaning, and
not for or against either party hereto. The parties acknowledge that each
party and its counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
16.16. NO OBLIGATION TO THIRD PARTIES. None of the obligations and
duties of Response or Oncology under this Agreement shall in any way or in any
manner be deemed to create any obligation of Response or of Oncology to, or any
rights, in, any person or entity not a party to this Agreement.
16.17. COMMUNICATIONS. Oncology and Response agree that good
communication between the parties is essential to the successful performance of
this Agreement, and each pledges to communicate fully and clearly with the
other on mattes relating to the successful operation of Oncology's practice at
a Clinic.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
ONCOLOGY HEMATOLOGY GROUP OF
SOUTH FLORIDA, P.A.
By:______________________________________
Title:___________________________________
RESPONSE ONCOLOGY, INC.
By:______________________________________
Title:___________________________________
PHYSICIANS:
_________________________________________
RESPONSE ONCOLOGY, INC.
SERVICE AGREEMENT
SCHEDULE A
The information contained in this Schedule has been omitted from this
Schedule and filed separately with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
