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: May 1, 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 April 15, 1996, the Registrant's 56% owned subsidiary, Response Oncology,
Inc. (Response), acquired (the Transaction) from unaffiliated individual
sellers (the Sellers) 100% of the outstanding general partnership interests
(the Acquired Interests) of Knoxville Hematology Oncology Associates, a
Tennessee general partnership (the Acquired Business). The total
consideration (the Purchase Price) for the Acquired Interests was $9
million, approximately $8,190,000 of which was paid in cash, approximately
$150,000 was paid in the form of Response's unsecured interest-bearing
promissory note due April 12, 1997 (the Note) and the balance being paid
through assumption of approximately $660,000 of accounts payable and capital
leases. The Note may, at the election of the holder, be paid in shares of
common stock of Response (the Response Common Stock) based on a conversion
price of $11.75 per share of Response's common stock. In addition, 80,000
stock purchase warrants (the Warrants) exercisable at $11.75 were issued as
additional purchase price. The delivery of the Note, the warrants and the
Response Common Stock potentially issuable by Response in full or partial
satisfaction of the Note or upon exercise of the warrants have not been
registered under the Securities Act of 1933 in reliance upon an exemption
from such registration.
The Acquired Interests were purchased by Response directly from the Sellers,
who constituted all of the partners of the Acquired Business. At the time
of the Transaction, no Seller had a material relationship with Response.
Upon consummation of the Transaction, 99% of the interests in the profits,
losses and capital of the Acquired Business were owned by Response, with the
remaining 1% being owned by a wholly owned subsidiary of Response. The
assets of the Acquired Business include medical equipment, accounts
receivable, office furnishings and fixtures, rights under a certain lease
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 limited liability company wholly owned by the Sellers and
formed to continue the group medical practice theretofore conducted by the
Sellers (the New PLLC) entered into a long-term management services
agreement (the Service Agreement) with Response providing for the management
by Response of the non-medical aspects of the practice thereafter conducted
by the New PLLC. Pursuant to the Service Agreement, Response will manage
the non-medical aspects of the New PLLC's business and will permit the New
PLLC 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 the proceeds of a
$10 million loan from the Registrant to be used to finance acquisitions.
The loan has a maturity date of December 31, 1996, bears interest at the
rate of prime plus 1%, is unsecured and, after August 1, 1996, is
convertible at the option of the Registrant into shares of Response common
stock at a conversion price equal to the market price of the common stock at
the time of conversion.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements: none
(b) Pro Forma Financial Information: none
(c) Exhibits: Form of the following agreements filed with
Response's current report on Form 8-K:
99.1. Purchase and Sale Agreement by and among Response
Oncology, Inc., Knoxville Hematology Oncology Associates and Partners of
Knoxville Hematology Oncology Associates.
99.2. Service Agreement between Response Oncology, Inc.,
Knoxville Hematology Oncology Associates, P.L.L.C. and Members of Knoxville
Hematology Oncology Associates, P.L.L.C.
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: May 1, 1996 By: /s/ Steven K. Fitzwater
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Steven K. Fitzwater
Vice President, Chief Accounting
Officer and Secretary
EXHIBIT 99.1
PURCHASE AND SALE AGREEMENT
BY AND AMONG
RESPONSE ONCOLOGY, INC.,
KNOXVILLE HEMATOLOGY ONCOLOGY ASSOCIATES
AND
PARTNERS OF KNOXVILLE HEMATOLOGY ONCOLOGY ASSOCIATES
April 12, 1996
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated as of April 12, 1996, by and
among RESPONSE ONCOLOGY, INC, a Tennessee corporation (the "Purchaser"),
and the HOLDERS OF ALL GENERAL PARTNERSHIP INTERESTS OF KNOXVILLE
HEMATOLOGY ONCOLOGY ASSOCIATES, a Tennessee general partnership (the
"Partnership"), each of whom, together with his or her state of residence
and address is listed on Exhibit A hereto (collectively, the "Partners"
and, individually, a "Partner").
W I T N E S S E T H:
WHEREAS, the Partners own 100% of the interests as general partners
(the "Partnership Interests") in the Partnership which is engaged in the
practice of medicine in the specialty of general oncology and hematology;
and
WHEREAS, each of the Partners desires to sell and the Purchaser
desires to purchase 100% of the Partnership Interests of the Partnership
from the Partners 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.
"Affiliate" has the meaning set forth in Rule 12-2 of the regulations
promulgated under the Securities Exchange Act.
"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%).
"Assumed Liabilities" has the meaning set forth in Section 2(a)(ii)
below.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction 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.
"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 Multi-employer 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.
"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(c) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Intangible Assets" means all intangible assets of the Partnership
that are not Medical Practice Assets, including, without limitation, the
Seller's base of non-medical employees, management information systems,
business know-how as it relates to operation of the business aspects of an
oncology practice, accounting books and records and non-medical goodwill.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever
form or medium).
"Inventory" means the inventory of pharmaceuticals and medical
supplies owned by the Partnership as of the close of business on the day
prior to the Closing Date.
"Investments" means investment assets of the Partnership including
stocks, bonds, certificates of deposits, interests in non-medical
partnerships, joint ventures, corporations, limited liability companies and
other entities.
"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.
"Medical Practice Assets" means all assets and property owned by the
Partnership and used in its medical practice which cannot lawfully be
acquired and owned by the Purchaser, including, without limitation, all
patient charts and patient records that do not constitute business records,
licenses to practice medicine and goodwill related to Seller's patient base
and/or medical practice.
"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(c) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(c) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section
4(c) below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business of
an oncology practice similar in size to the Seller, consistent with the
Seller's past custom and practice.
"Party" means the Purchaser or the 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.
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Partnership Interests" has the meaning set forth in Section 2(a)(i)
below.
"Purchaser" has the meaning set forth in the preface above 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 accounts receivable of the Partnership 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 Note" means the promissory note of the Purchaser payable to
the order of the Partners in the form set forth as Exhibit 2(b)(i).
"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's Disclosure Letter" has the meaning set forth in Section 3(a)
below.
"Service Agreement" means the Service Agreement among the Purchaser,
the Partnership and the Partners to be executed and delivered by thereby,
and which will become effective, at the Closing.
"Tangible Assets" means furniture, medical and other equipment and
leasehold improvements of the Partnership listed on Exhibit 2(a)(i)(A)
hereto.
"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(c) below.
"Warrant" means the warrant to purchase 80,000 shares of Response
Stock at a price of $11.75 per share (subject to adjustment as described in
the Warrant), issuable by the Purchaser to the Partners pursuant to Section
2(b) below, which Warrant shall be issued and delivered to the Partners in
substantially the form set forth as Exhibit 2(b)(ii) below.
2. Purchase and Sale of Partnership Interests.
(a) Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Purchaser and Partners agree as follows:
(i) Partnership Interests. On the Closing Date, the Purchaser
shall purchase from each of the Partners, and each of the Partners shall
sell and deliver to the Purchaser, 100% of the Partnership Interests of the
Partnership (the "Partnership Interests").
(ii) Assumed Liabilities. In partial consideration for the sale
of the Partnership Interests by the Partners, on the Closing Date the
Purchaser shall assume and become primarily responsible for the payment or
other satisfaction of all past and future liabilities of the Partnership,
and the Partners shall be held harmless for all such liabilities, provided,
however, the Partners shall be and remain liable for:
(A) all tax liabilities incurred by the Partnership during
the period prior to the Closing Date; and
(B) any existing liability, contingent on otherwise, whether
known or unknown, of the Partnership not disclosed to the Purchaser on
Exhibit 2(a)(ii) hereto. As of the Closing Date, the parties shall jointly
prepare and agree upon a schedule of Assumed Liabilities, which shall be
attached hereto as Exhibit 2(a)(ii), and no Liability of the Partnership
which is excluded from such schedule shall be assumed by the Purchaser.
The Partners shall remain responsible for all Liabilities not assumed by
the Purchaser hereunder, and shall indemnify and hold the Purchaser
harmless from and against any and all claims, assessments, damages,
Liabilities and costs suffered by the Purchaser in respect of or arising
out of the assertion by any Person that the Purchaser is responsible for
any Liability of the Partnership that is not an Assumed Liability.
(b) Purchase Price; Payment of Purchase Price. The purchase price
for the Partnership Interests shall be Nine Million Dollars
($9,000,000.00). The Purchaser shall pay or satisfy the Purchase Price in
the following manner: (i) One Hundred Fifty Thousand Dollars ($150,000.00)
by issuance and delivery of the Response Note to Allan M. Grossman, M.D.;
(ii) $_____________________ by assumption of the Assumed Liabilities; and
(iii) the balance in readily available United States funds at Closing. As
additional consideration for the Partnership Interests, the Purchaser shall
issue the Warrant to the Partners at Closing.
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
Bernstein, Stair & McAdams, 530 South Gay Street, Suite 600, Knoxville,
Tennessee 38902 commencing at 9:00 a.m. local time on the second business
day following the satisfaction or waiver of all conditions precedent to the
obligations of the Parties to consummate the transactions contemplated
hereby or such other date as the Purchaser and the Partners may mutually
determine (the "Closing Date"); provided, however, that the Closing Date
shall be no later than June 30, 1996.
(d) Deliveries at the Closing. At the Closing, (i) the Purchaser
will deliver to the Partners the various certificates, instruments, and
documents referred to in Section 7(a) below, (ii) the Partners will deliver
to the Purchaser the various certificates, instruments, and documents
referred to in Section 7(b) below.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Partners. Each of the
Partners jointly and severally represents and warrants to the Purchaser
that the statements contained in this Section 3(a) are 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 3(a))
with respect to the Partnership, except as set forth in the disclosure
letter executed and delivered by the Partners contemporaneous with this
Agreement (the "Seller's Disclosure Letter""). The Seller's 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 of the Partners 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
Partner, enforceable in accordance with its terms and conditions. The
Partners need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Person, government or
governmental agency in order to deliver the Partnership Interests to the
Purchaser or otherwise to consummate the transactions contemplated by this
Agreement, or, if any such consent is required, each such consent has been
obtained. This Agreement constitutes the valid and legally binding
obligation of each of the Partners, 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 the Partnership
or a Partner 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 the Partnership or a Partner is a party or by which he
is bound or to which any of his assets is subject (or result in the
imposition of any Security Interest upon any of the Partnership's assets.)
The Partners are 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.
(iii) Brokers' Fees. The Partners have no Liability or
obligation to pay any fee or commission 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) Title. Each of the Partners has good and marketable title
to the Partnership Interests being conveyed to the Purchaser hereunder,
with the sole and absolute right to sell, assign, transfer and convey same
to the Purchaser free and clear of all liens, claims, options, pledges,
security interests or other encumbrances.
(v) Existence of the Partnership. The Partnership is a general
partnership validly existing under the laws of the State of Tennessee. The
Partnership has the power to own its property and to carry on its business
as now being conducted. The Partnership is duly qualified to do business
and is in good standing in any jurisdiction in which the character or
location of the properties owned or leased by the Partnership or the nature
of the business conducted by the Partnership makes such qualification
necessary.
(b) Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Partners that the statements contained in
this Section 3(b) are 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 3(b)), except as set forth in the
disclosure letter executed and delivered by the Purchaser contemporaneous
with this Agreement (the "Purchaser's Disclosure Letter"). The Purchaser's
Disclosure Letter shall be satisfactory to the Partners and their counsel.
(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 Person, government or governmental agency in order to
consummate the transactions contemplated by this Agreement, or, if any such
consent is required, each such consent has been obtained.
(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 Partners could become liable or obligated.
4. Representations and Warranties Concerning the Partners. Each of
the Partners, jointly and severally, represents and warrants 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 true, 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 Seller's Disclosure Letter.
Nothing in the Seller's Disclosure Letter shall be deemed adequate to
disclose an exception to a representation or warranty made herein, however,
unless the Seller's Disclosure Letter identifies the exception with
reasonable particularity and describes the relevant facts in reasonable
detail. The Seller's Disclosure Letter will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Section 4.
(a) Power, Authority, and Partnership Matters. The Partnership has
full 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 Seller's Disclosure Letter lists
the employees and partners of the Partnership. The Partners have delivered
to the Purchaser correct and complete copies of the general partnership
agreement of the Partnership (as amended to date).
(b) Title to Assets. The Partnership 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.
(c) Financial Statements. Attached as collective Paragraph 4(c) to
the Seller's Disclosure Letter are the following financial statements
(collectively the "Financial Statements"): (i) unaudited balance sheet and
statement of income, changes in partners' capital, and cash flow as of and
for the fiscal years ended December 31, 1995 (the "Most Recent Fiscal Year
End") for the Partnership; and (ii) unaudited balance sheet and statement
of income (the "Most Recent Financial Statements") as of and for the month
ended March 31, 1996 (the "Most Recent Fiscal Month End") for the
Partnership. 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 Partnership as of such dates
and the results of operations of the Partnership for such periods, are
correct and complete, and are consistent with the books and records of the
Partnership.
(d) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Partnership. Without limiting the generality of the
foregoing, since that date:
(i) the Partnership 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 Partnership 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 Partnership) 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 Partnership is a party or by
which the Partnership or its properties are bound;
(iv) the Partnership has not created, suffered or permitted to
attach or be imposed any Security Interest upon any of its assets, tangible
or intangible;
(v) the Partnership 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 Partnership 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 Partnership 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 Partnership has not delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) the Partnership 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 Partnership 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 general
partnership agreement of the Partnership;
(xii) none of the Partners has sold, or otherwise disposed of any
of the Partnership Interests, granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of the Partnership Interests;
(xiii) the Partnership has not declared, set aside, or paid any
distribution with respect to its Partnership Interests (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its
Partnership Interests;
(xiv) the Partnership has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its assets,
tangible or intangible;
(xv) the Partnership has not made any loan to, or entered into
any other transaction with, any of its Partners and employees outside the
Ordinary Course of Business;
(xvi) the Partnership 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 Partnership has not granted any increase in the base
compensation of any of its Partners and employees outside the Ordinary
Course of Business;
(xviii) the Partnership 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 Partners and
employees (or taken any such action with respect to any other Employee
Benefit Plan);
(xix) the Partnership has not made any other change in employment
terms for any of its Partners and employees outside the Ordinary Course of
Business;
(xx) the Partnership 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 Partnership; and
(xxii) the Partnership has not committed to any of the foregoing.
(e) Undisclosed Liabilities. To the best of the Partners' knowledge,
the Partnership 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 Partnership 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(e) of the Seller's Disclosure Letter (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).
(f) Legal Compliance. To the best of the Partners' knowledge, the
Partnership and its 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.
(g) Tax Matters.
(i) The Partnership has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by the Partnership (whether or not shown
on any Tax Return) have been paid or accrued in the Financial Statements.
The Partnership 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 Partnership 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 the Partnership that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Partnership 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, or other third party.
(h) Real Property. The Partnership 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(h) of the Seller's Disclosure
Letter lists and describes briefly all real property leased or subleased to
the Partnership. The Partnership has delivered to the Purchaser correct
and complete copies of the leases and subleases listed in Paragraph 4(h) of
the Seller's Disclosure Letter (as amended to date). With respect to each
lease and sublease listed in Paragraph 4(h) of the Seller's Disclosure
Letter, except as otherwise set forth in such Paragraph of the Seller's
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) no 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) no party to the lease or sublease has repudiated any
provision thereof;
(v) 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 Partnership 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 are
supplied with utilities and other services necessary for the operation of
said facilities; and
(i) Intellectual Property.
(i) The Partnership owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of its business as presently conducted. Each
item of Intellectual Property owned or used by the Partnership immediately
prior to the Closing hereunder will be owned or available for use by the
Partnership on identical terms and conditions immediately subsequent to the
Closing hereunder. The Partnership has taken all necessary action to
maintain and protect each item of Intellectual Property that it owns or
uses. The Partnership has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Partnership has not received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Partnership must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of each of the Partners, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of the
Partnership.
(j) Tangible Assets. The Partnership leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct
of its business as presently conducted. Each Tangible Asset is free from
patent defects, and, to the best of the Partners' knowledge, latent
defects, has been maintained in accordance with normal industry practice,
is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
(k) Inventory. Inventory consists of pharmaceuticals and medical
supplies, all of which is merchantable and fit for the purpose for which it
was procured or manufactured, and no material portion 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 Partnership.
(l) Contracts. Paragraph 4(l) of the Seller's Disclosure Letter
lists the following contracts and other agreements to which the Partnership
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 pharmaceuticals, 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 Partnership, or involve consideration in excess of $25,000.00;
(iii) any agreement concerning a partnership or joint venture
involving the Partnership other than the Partnership's general partnership
agreement;
(iv) any agreement (or group of related agreements) under which
the Partnership 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 any health maintenance organization,
preferred provider organization, insurance company or other third party
payor for medical services;
(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,
partners, 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 Partnership has advanced or
loaned any amount to any of its Partners 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
Partnership; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.00.
The Partners have delivered to the Purchaser a correct and complete copy of
each written agreement listed in Paragraph 4(l) of the Seller's 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(l) of the
Seller's 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 is assignable to the Purchaser pursuant hereto
and, following such assignment, 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.
(m) Notes and Accounts Receivable. All notes and accounts receivable
of the Partnership are reflected properly on the Partnership's 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 (A) contractual allowances
and adjustments to third party payors, and (B) the reserve for bad debts
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 Partnership.
(n) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Partnership or the Partners.
(o) Insurance. Paragraph 4(o) of the Seller's 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 Partnership and each of the Partners is a party,
a named insured, or otherwise the beneficiary of coverage:
(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 Partnership,
the Partner, 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 (C) no party to the
policy has repudiated any provision thereof. The Partnership and each of
the Partners 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(o) of the
Seller's Disclosure Letter describes any self-insurance arrangements
affecting the Partnership or the Partners.
(p) Litigation. Section 4(p) of the Seller's Disclosure Letter sets
forth each instance in which the Partnership or any Partner (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 Section 4(p) of the
Seller's Disclosure Letter could result in any material adverse change in
the business, financial condition, operations, results of operations, or
future prospects of the Partnership or the medical practice to be conducted
by the Partners following the Closing. Each of the Partners has no reason
to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Partnership or any
Partner.
(q) Employees. To the Knowledge of each of the Partners, no
executive, key employee, or group of employees has any plans to terminate
employment with the Partnership. The Partnership is not a party to or
bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Partnership has not committed any unfair labor
practice. Each of the Partners has no Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor
union with respect to employees of the Partnership. Except as described in
paragraph 4(q) of the Seller's Disclosure Letter, each of the Partners has
no knowledge of any disciplinary or other proceeding alleging professional
misconduct or misfeasance against any employee of the Partnership.
(r) Employee Benefits.
(i) Paragraph 4(r) of the Seller's Disclosure Letter lists each
Employee Benefit Plan that the Partnership maintains or to which the
Partnership 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 Partnership. 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 Partners 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
Partnership 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. Each of the Partners has no Knowledge
of any Basis for any such action, suit, proceeding, hearing, or
investigation.
(C) The Partnership has not incurred, and neither the
Partnership nor the Partners (and employees with responsibility for
employee benefits matters) of the Partnership has any reason to expect that
the Partnership 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 Partnership does not contribute to, has never
contributed to, or has not been required to contribute to any Multiemployer
Plan or has any Liability (including withdrawal Liability) under any
Multiemployer Plan.
(iv) The Partnership does not maintain or has never maintained or
contributes, ever has contributed, or 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 Section 4980B).
(s) Guaranties. The Partnership is not a guarantor or is not
otherwise liable for any Liability or obligation (including indebtedness)
of any other Person.
(t) Environment, Health, and Safety. To the best of the Partners'
knowledge:
(i) Each of the Partnership and its predecessors and 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 Partnership and its predecessors and 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 Partnership has no Liability (and none of the
Partnership and its predecessors and 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 Partnership 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
Partnership and its predecessors and Affiliates have been free of asbestos,
PCB's, methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
(u) Healthcare Compliance. Neither the Partnership nor any Partner
or other physician associated with or employed by the Partnership 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. e 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 Partnership (and/or each
Partner or other physician employed thereby) is participating in or is
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 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. The
Partnership is in full compliance with the requirements of all such third
party payor programs applicable thereto.
(v) Fraud and Abuse. The Partnership and persons and entities
providing professional services for the Partnership have not engaged in any
activities which are prohibited under 42 U.S.C. e 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.
(w) Facility Compliance. The Partnership is duly licensed, and the
Partnership and its clinics, offices and facilities are lawfully operated
in accordance with the requirements of all applicable law 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 the Partnership 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, none of the Partners has received notice of and has no
Knowledge of or reason to believe that such necessary authorizations may be
revoked or not renewed in the ordinary course.
(x) Rates and Reimbursement Policies. The Partnership has no rate
appeal currently pending before any governmental authority or any
administrator of any third party payor program.
(y) Disclosure. The representations and warranties contained in this
Section 4 and in the Seller's Disclosure Letter do not contain any untrue
statement of a fact or omit to state any fact necessary in order to make
the statements and information contained in this Section 4 or the Seller's
Disclosure Letter not misleading in any material respect.
5. 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 8 below). Each of the Partners acknowledges and agrees 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 Partnership. The Partners will
be afforded access to such documents, books, records, agreements and
financial data for inspection and copying during ordinary business hours.
(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 Partnership, 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 8 below).
(c) Transition. The Partners will not take any action that is
designed or intended to have the effect of discouraging any lessor,
licensor, supplier, or other business associate of the Partnership from
maintaining the same business relationships with the Purchaser after the
Closing as it maintained with the Partnership prior to the Closing. The
Partners will refer all inquiries relating to the businesses of the
Partnership to the Purchaser from and after the Closing.
(d) Employees. The Partnership shall continue to employ, at
substantially the same pay rates and benefit levels as paid or delivered by
the Partnership, the persons listed on Exhibit 5(d) attached hereto.
(e) Amendment of Partnership Agreement. The Partners will cause the
general partnership agreement to be amended removing the Partners and
adding the Purchaser as the new partner of the Partnership.
6. 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 Partners shall have performed and complied with all of
the covenants hereunder in all material respects through the Closing;
(iii) the Partners shall have given such notices to persons,
governments and governmental agencies and shall have procured from third
parties all consents to consummation of the transactions contemplated
hereby that may be required by law or the terms of any contract to which
the Partnership or any Partner may be subject or that the Purchaser may
reasonably request in connection with the transactions contemplated hereby.
(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 acquire Partnership
Interests and own and operate the Partnership and enter into the Service
Agreement, or (D) affect adversely the right of the Partnership to own its
assets and to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(v) each of the Partners shall have delivered to the Purchaser a
certificate to the effect that each of the conditions specified above in
Section 6(a)(i)-(iv) is satisfied in all respects;
(vi) the Purchaser shall have received from Bernstein, Stair &
McAdams, counsel to the Partners, 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;
(vii) the Partners and Knoxville Hematology-Oncology Associates,
P.L.L.C. (the "Continuing Practice") shall have executed and delivered to
the Purchaser the Service Agreement in substantially the form set forth as
Exhibit 6(a)(vii) hereof;
(viii) the Purchaser shall have received an opinion from
Tennessee counsel reasonably satisfactory to the Purchaser that the Service
Agreement is the legal, valid and binding obligation of the Partners and
the Continuing Practice, 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, the
Partners and the Continuing Practice will not violate any statute,
regulation, official interpretation, order, decree or other law of the
state of Tennessee;
(ix) each Partner shall have executed an employment contract
with the Continuing Practice in substantially the form set forth as Exhibit
6(a)(x) hereto; and
(x) all actions to be taken by each of the Partners and the
Partnership 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 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Partners. The obligation of the
Partners 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 Partners a
certificate to the effect that each of the conditions specified above in
Section 6(b)(i)-(iii) is satisfied in all respects;
(v) the Partners shall have received an opinion from Baker,
Donelson, Bearman & Caldwell that the performance of the Service Agreement
by the Purchaser, the Partners and the Continuing Practice will not violate
any statute, regulation, official interpretation, order, decree or other
law of the United States of America; and
(vi) 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 Partners.
The Partners may waive any condition specified in this Section 6(b) if they
execute a writing so stating at or prior to the Closing.
7. 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
Partners or other appropriate party:
(i) a certified or cashier's check or wire transfer equal to the
amount of cash deliverable by the Purchaser pursuant to Section 2(b);
(ii) the Response Note, payable to the order of Allan M.
Grossman, M.D.;
(iii) the Warrant;
(iv) the certificate described in Section 6(b)(iv) above;
(v) the opinion described in Section 6(b)(v) above; and
(vi) such other documents as the Partners may reasonably request
to affect the transactions contemplated by this Agreement.
(b) Documents to be Delivered by the Partners. At the Closing, the
Partners shall deliver the following instruments and documents to the
Purchaser:
(i) all consents necessary regarding the transaction
contemplated by this Agreement;
(ii) the opinion of counsel to the Partnership, in a form
reasonably satisfactory to the Purchaser's counsel, required by Section
6(a)(vi) above;
(iii) the opinion, in a form reasonably acceptable to the
Purchaser's counsel, required by Section 6(a)(viii) above;
(iv) the Certificate described in Section 6(a)(v) above;
(v) the Service Agreement, duly executed by the Partners and any
entity in which they shall conduct a medical practice after Closing; and
(vi) such other documents as may be required or as the Purchaser
may reasonably request to affect the transactions contemplated by this
Agreement.
8. 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 for a period of two (2)
years (subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of the Purchaser. In the
event any of the Partners breaches (or in the event any third party alleges
facts that, if true, would mean a Partner has breached) any of the
representations, warranties, and covenants contained herein and, provided
that the Purchaser makes a written claim for indemnification against the
Partners pursuant to Section 8(c)(i) below, then each of the Partners,
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, provided that the Purchaser shall have made a reasonable
claim for indemnification hereunder prior to the end of such 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 8, then the Purchaser shall promptly
notify the Partners thereof in writing; provided, however, that no delay on
the part of the Purchaser in notifying the Partners shall relieve the
indemnitor from any obligation hereunder unless (and then solely to the
extent) the indemnitor thereby is prejudiced.
(ii) The Partners will have the right to defend the Purchaser
against the Third Party Claim with counsel of their choice reasonably
satisfactory to the Purchaser so long as (A) the Partners indemnify the
Purchaser in accordance with this Section 8.
(iii) So long as the Partners are conducting the defense of the
Third Party Claim in accordance with Section 8(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
Partners (not to be withheld unreasonably), and (C) the Partners 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 8(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
Partners in connection therewith), (B) the Partners 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
Partners 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 8.
(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 8. All indemnification payments under this Section 8 shall be
deemed adjustments to the Purchase Price.
(e) Recoupment Under the Response Note. If and only to the extent
that the Partners shall not have satisfied any indemnification obligation
pursuant hereto within ninety (90) days after the Purchaser shall have made
written demand therefor, the Purchaser shall have the option of recouping
all or any part of any Adverse Consequences it shall have suffered by
notifying the Partners that the Purchaser is reducing the principal amount
outstanding under the Response Note held by the Partners. This shall
affect the timing and amount of payments required under the Response 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.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Purchaser and the Partners 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 Partners at any time prior to the Closing (A) in the event
any of the Partners has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Purchaser
has notified the Partners of the breach, and the breach has continued
without cure for a period of 10 days after the notice of breach or (B) if
the Closing shall not have occurred on or before June 30, 1996, by reason
of the failure of any condition precedent under Section 6(a) hereof (unless
the failure results primarily from the Purchaser itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(iii) the Partners may terminate this Agreement by giving written
notice to the Purchaser at any time prior to the Closing (A) in the event
the Purchaser has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Partners
have notified the Purchaser of the breach, and the breach has continued
without cure for a period of 10 days after the notice of breach or (B) if
the Closing shall not have occurred on or before June 30, 1996 by reason of
the failure of any condition precedent under Section 6(b) hereof (unless
the failure results primarily from any of the Partners themselves breaching
any representation, warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(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).
10. 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 Partners; 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) 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.
(c) 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.
(d) 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 Partners;
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).
(e) 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.
(f) 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.
(g) 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 Partners: Copy to:
Knoxville Hematology Oncology Associates James W. Parris,
Esq.
1114 Weisgarber Road, #E Bernstein, Stair & McAdams
Knoxville, Tennessee 37909-2648 530 South Gay Street,
Suite 600
Knoxville, Tennessee 38902
If to the Purchaser: Copy to:
Daryl P. Johnson John A. Good, Esq.
Response Oncology, Inc. Executive Vice President - General Counsel
1775 Moriah Woods Blvd. Response Oncology, Inc.
Memphis, Tennessee 38117 1775 Moriah Woods Blvd.
Memphis, TN 38117
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.
(h) 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.
(i) 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 Partners. 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.
(j) 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.
(k) 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.
(l) 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.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
(n) 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.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Knoxville, Knox
County, Tennessee in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court. 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. Nothing in this Section
11(p), however, shall affect the right of any Party to bring any action or
proceeding arising out of or relating to this Agreement in any other court
or to serve legal process in any other manner permitted by law or at
equity. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on
the judgment or in any other manner provided by law or at 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:
Knoxville Hematology Oncology Associates
By:
Title:
Partners:
Peter W. Carter, M.D.
Albert S.C. Ebenezer, M.D.
Jerry M. Foster, M.D.
Allan M. Grossman, M.D.
Exhibit 2(a)(ii)
Assumed Liabilities
Exhibit 2(b)(i)
to
Purchase and Sale Agreement
NON-NEGOTIABLE PROMISSORY NOTE
$150,000.00 Knoxville, Tennessee
April 12, 1996
FOR VALUE RECEIVED, the undersigned, RESPONSE ONCOLOGY, INC., a
Tennessee corporation (the "Maker"), promises to pay to the order of ALLAN
M. GROSSMAN, M.D., (the "Lender"), the principal sum of ONE HUNDRED FIFTY
THOUSAND DOLLARS ($150,000.00), together with interest from date until
maturity at the rate of five (5%) percent per annum from date until
Maturity (hereinafter defined). Interest shall be payable on the unpaid
principal balance hereof, in arrears, at Maturity. The principal amount of
this note shall be payable in full on April 12, 1997 ("Maturity").
This Note may be prepaid in whole or in part prior to Maturity upon
sixty (60) days advance written notice given by the Maker to 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 (including any prepayment) or interest on
this Note, such payment shall be paid in whole or in part in whole shares
of common stock of the Maker, $.01 par value per share (the "Shares"). For
purposes of this paragraph, the number of whole 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 $11.75, 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. No fractional Shares shall be issued by
the Maker, and the Lender shall be paid cash in lieu of such fractional
Shares in an amount equal to the fractional Share to which the Lender would
otherwise be entitled times the conversion price stated above.
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 Purchase and Sale Agreement by and between
Lender and Maker dated as of April 12, 1996.
Subject to the Lender's option to require any payment of principal and
interest to be made in the form of Shares as hereinabove provided, 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.
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
Purchase and Sale Agreement
Certificate No. W-____
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 April 12, 1996 by Response Oncology,
Inc., a Tennessee corporation (the "Issuer"), which certifies that, for
value received, the registered holder hereof, or its 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), 20,000
shares of common stock (the "Common Stock") of Response Oncology, Inc.
(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
"Purchase") by the Issuer of 100% of the Partnership Interests in Knoxville
Hematology Oncology Associates (the "Partnership") from the partners of the
Partnership (the "Partners") pursuant to that certain Purchase and Sale
Agreement dated as of April 12, 1996 among the Issuer and the Partners of
the Partnership.
VOID AFTER 5:00 P.M. MEMPHIS, TENNESSEE TIME, ON APRIL 11, 2001,
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 that is one (1) year after the date hereof and shall terminate on
(the "Termination Date") the earlier of (i) April 11, 2001, (ii) the
occurrence of any merger, voluntary dissolution or other event pursuant to
which the existence of the Issuer shall terminate, or (iii) upon the
termination of that certain Service Agreement (the "Service Agreement")
between the Issuer and Knoxville Hematology-Oncology Associates, P.L.L.C.
(the "Provider") in accordance with its terms after occurrence of a
Provider Event of Default (as defined in the Service Agreement).
2. Exercise Price. The Exercise Price shall be equal to $11.75 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, (i) in cash or by certified or cashier's check, payable to the
order of the Issuer, (ii) by wire transfer in accordance with instructions
provided by the Issuer, or (iii) by the Holder's delivery, in transferable
form, of certificates representing the number of shares of the Issuer's
Common Stock which, when valued at the last sale price on the Nasdaq Stock
Market's National Market on the dated date of the purchase form, would be
sufficient to satisfy the Exercise Price in full. 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
reasonably 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 Purchase and Sale Agreement 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, at any time or from time to time the Issuer shall elect
to file a registration statement ("Registration Statement") on Form S-1, 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 or such portion of 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(d), 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) prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep the Registration
Statement effective for the period of the distribution contemplated thereby
and to comply with the provisions of the Securities Act with respect to the
disposition of all Warrant Shares covered by the Registration Statement in
accordance with the selling Holders' intended method of disposition set
forth in the Registration Statement for such period;
(v) immediately notify each selling Holder under the
Registration Statement and each underwriter, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus contained in
the Registration Statement, as then in effect, includes any untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(vi) make available for inspection by each selling
Holder, any underwriter participating in any distribution pursuant to the
Registration Statement, and any attorney, accountant or other agent
retained by such Holder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney, accountant
or agent in connection with the Registration Statement;
(vii) use its best efforts to take actions necessary or
advisable to effect such registration in the manner contemplated by this
Agreement; and
(viii) 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; provided, however, that in the event the Issuer shall elect to
exercise such redemption right, the Holder shall have the right,
exercisable in writing for a period of three (3) days following delivery by
the Issuer of its notice of intent to redeem Shares, to withdraw Holder's
Demand, in which event the redemption notice shall, with no further action
on the part of the Issuer, be deemed revoked and the Holder shall retain
the Unregistered Shares that were the subject of the Demand.
14A. Expenses of Registration. All expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 13 or 14, including, without limitation, all registration, filing
and qualification fees (including blue sky fees and expenses), printing
expenses (including, without limitation, those associated with printing a
quantity of preliminary and final prospectuses for distribution),
accounting fees, escrow fees, the fees and disbursements of counsel for the
Company with respect to such registration, fees of any exchange or of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, out-of-pocket expenses of any underwriter
(to the extent required to be paid by the Issuer or Holders), costs of
insurance (if any) and expenses of any special audits incidental to or
required by such registration, shall be borne by the Company; provided,
however, that the following expenses shall be borne by the Holders, pro
rata, according to their securities so registered:
a. All fees and disbursements of counsel for the Holders; and
b. Underwriters' fees, discounts and commissions relating to
the Warrant Shares which are the subject of or included for sale in the
Registration Statement.
14B. Indemnification.
a. To the extent permitted by law, the Company shall
indemnify each Holder against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other documents (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or (ii) any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any
violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities law applicable to the Company and
relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each
such person, each of its officers and directors, and each person
controlling such person, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage or
liability or action arises out of or is based on any untrue statement or
any omission based upon written information furnished to the Company by an
instrument duly executed by any such person and stated to be specifically
for use therein.
b. To the extent permitted by law, each Holder shall, if
securities held by or issuable to such person are included in the
securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers
who sign such registration statement, each underwriter, if any, of the
Company's securities covered by such registration statement, each person
who controls the Company within the meaning of the Securities Act and each
other such Holder, each officer and director and each person controlling
each such underwriter, or other Holder against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on
(i) any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular
or other document, or (ii) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company, and
such other Holders, such directors, officers, persons or underwriters for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder and stated to be specifically for use therein.
c. Each party entitle to indemnification under this Section
14B (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
within a reasonable amount of time, if such failure is prejudicial to the
Indemnifying Party's ability to defend such action, shall relieve the
Indemnifying Party of its obligations under this Section 14B, but not of
any obligation arising aprt from this Section 14B. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to such claim or litigation.
If any such Indemnified Party shall have reasonably concluded that there
may be one or more legal defenses available to such Indemnified party which
are different from or additional to those available to the Indemnifying
Party, or that such claim or litigation involves or could have an effect
upon matters beyond the scope of the indemnity agreement provided in this
Section 14B, the Indemnifying Party shall not have the right to assume the
defense of such action on behalf of such Indemnified Party and such
Indemnifying Party shall reimburse such indemnified Party and any person
controlling such Indemnified Party for that portion of the fees and
expenses of any counsel retained by the Indemnified Party which are
reasonably related to the matters covered by the indemnity agreement
provided in this Section 14B.
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: April 11, 1996 By:
Daryl Johnson, Chief Financial Officer
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 6(a)(x)
to
Purchase and Sale Agreement
EMPLOYMENT AGREEMENT FOR
PROFESSIONAL EMPLOYEES OF
KNOXVILLE HEMATOLOGY-ONCOLOGY ASSOCIATES, P.L.L.C.
THIS AGREEMENT is entered into as of October 1, 1996 (the "Effective
Date"), by and between KNOXVILLE HEMATOLOGY-ONCOLOGY ASSOCIATES, P.L.L.C.,
a Tennessee professional limited liability company ("Employer") and
________________________, an individual residing in the State of Tennessee,
("Employee").
WITNESSETH:
WHEREAS, Employer is a professional group practice engaged in the
practice of medicine in the State of Tennessee;
WHEREAS, Employee is an individual duly licensed to practice as a
physician in the State of Tennessee;
WHEREAS, Employer wishes to employ Employee on a full-time basis to
provide professional services on behalf of Employer; and
WHEREAS, Employee wishes to be so employed;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual promises and covenants hereinafter set forth, the parties agree as
follows:
1. Scope of Employment. Employee agrees to devote substantially his
full time and energy to the practice of medicine, in the specialty of
oncology-hematology on behalf of Employer, and to practice medicine solely
as an employee of Employer, except as may be otherwise agreed to by
Employer in writing. Employee shall represent himself professionally only
under such business or clinic name as shall be approved or designated by
Employer, and shall practice at the office location designated by Employer.
Employee understands that the governing body of Employer has final
authority and responsibility for determining the fee schedule for
professional services rendered by employees of Employer.
2. Compensation for Services. Employer shall compensate Employee for
all services rendered by Employee under this Agreement in accordance with
Schedule A hereto. Employee understands and agrees that any and all monies
due to or received by Employee on account of the rendering of patient care
services or otherwise in the professional practice of his or her profession
from and after the effective date of this Agreement, regardless of
the time and place such services are delivered, shall be the exclusive
property of Employer. The compensation paid to Employee under this
Agreement shall constitute full compensation to Employee for services
rendered under this Agreement, and Employee shall not seek additional
compensation from any source for services rendered under this Agreement.
3. Billing. (a) Except as otherwise provided by law, only Employer
shall be entitled to bill for or otherwise receive payment from the patient
or any third party for services provided by Employee under this Agreement.
Employee shall have no right to receive, nor shall Employee attempt to bill
for or collect, payment from the patient or any third party for services
provided by Employee under this Agreement, except in the name of and for
the sole benefit of Employer.
(b) Employee shall cooperate with and assist Employer in the
preparation and documentation of claims for services rendered by Employee
under this Agreement. Employee agrees to cooperate and comply with the
terms of applicable utilization management and similar cost management
protocols, and to do all things necessary and appropriate to maximize
reimbursement to Employer for services rendered by Employee under this
Agreement, to the extent consistent with law and with the best clinical
interests of the patient.
4. Working Facilities. Employer shall assure that Employee has
appropriate office space, support staff, supplies, equipment, and such
other facilities and services as Employer deems necessary and appropriate
to his or her position and for the performance of Employee's duties.
5. Professional Relationships. Employer and Employee each
acknowledges and agrees that the business relationship between Employer and
Employee as established by this Agreement does not, and shall not be
construed to, alter or in any way affect the legal, ethical, and
professional relationship between Employee and patients cared for by
Employee, nor shall anything contained in this Agreement abrogate any
right, privilege, or obligation arising out of or applicable to the
physician-patient relationship.
6. Clinical Records. Employee shall assure that appropriate clinical
records are prepared with regard to all professional services provided by
Employee under this Agreement. All such records shall be prepared and
maintained according to prudent record keeping procedures and as required
by law. All clinical records prepared and maintained with regard to
services rendered under this Agreement shall be and remain the property of
Employer, notwithstanding any termination of this Agreement.
7. Professional Liability Insurance. Employer shall, at all times
during the initial and any renewal term of this Agreement, provide at its
sole cost and expense professional and general liability insurance coverage
for Employee in such amounts and with such carrier or carriers as Employer
shall deem necessary and appropriate.
8. Expenses. Ordinary and necessary business expenses incurred by
Employee in performing his or her duties under this Agreement, including
but not limited to professional dues, subscriptions, licenses, and
continuing education expenses, shall be borne by Employer.
9. Employee Benefits. Employee shall be entitled to receive or
participate in all employee benefits generally available to employees of
Employer in accordance with the terms of the Employer's employee benefit
plans in effect from time to time. The governing body of Employer may
increase, decrease, or discontinue any benefit plan at any time without
notice to or the consent of Employee.
10. Term. The initial term of this Agreement shall begin on the
Effective Date stated on page 1 hereof, and shall terminate on the next
ensuing December 31. This Agreement shall thereafter automatically renew
for successive terms of one (l) year each unless and until terminated as
hereinafter provided.
11. Voluntary Termination. Either party may terminate this Agreement
at any time, with or without cause, by giving written notice thereof to the
other party at least ninety (90) days prior to the effective date of
termination.
12. Termination For Cause. Employer may terminate this Agreement
immediately upon written notice to Employee on the occurrence any of the
following events:
(a) The failure of Employee to correct any material breach of
this Agreement to the reasonable satisfaction of Employer within thirty
(30) days following written notice from Employer specifying such breach;
(b) The revocation, termination, restriction, or suspension of
Employee's license to practice his or her profession in the State of
Tennessee, Employee's DEA permit (if applicable), or the exclusion of
Employee from participation in Medicare, Medicaid, or CHAMPUS; or
(c) Any unprofessional or illegal conduct by Employee which
makes the performance of this Agreement impractical, including, but not
limited to, the conviction of a felony.
13. Covenant Not to Compete. (a) Employee agrees and covenants that,
during the term of this Agreement and for a period of five (5) years after
termination of this Agreement, Employee shall not, either directly as a
partner, employer, agent, independent contractor, employee or indirectly
through a corporation, partnership, affiliate, subsidiary or otherwise:
(i) Establish, operate or provide professional medical services
substantially similar to those provided for Employer pursuant to his
employment relationship with Employer ("Prohibited Services") at any
medical office, clinic or other health care facility at any location within
Knox County, Tennessee (the "Restricted Territory");
(ii) Publicly announce or offer (by any method) to provide
Prohibited Services within the Restricted Territory;
(iii) Solicit, induce or attempt to induce patients of any
physician (including Employee) associated or affiliated with Employer to
leave the care of physicians associated or affiliated with Employer; or
(iv) Solicit, induce or attempt to induce any employee,
consultant or other persons associated or affiliated with Response
Oncology, Inc. ("Response") or any Affiliate of Response, or any medical
practice (including Employer) to leave the employment of, or to discontinue
their association with, Response or such Affiliate of Response.
Employer acknowledges and agrees that nothing in the foregoing will be
construed to restrict the Employee from (i) delivering physician services
that are unrelated to the fields of hematology or oncology, including the
practice of internal medicine, (ii) teaching hematology or oncology, or
(iii) assuming directorships of hospices following termination of this
Agreement. Moreover, the employee acknowledges and agrees that Response,
by reason of its long-term management relationship with Employer, is an
intended third-party beneficiary of the provisions of this Section 13.
(b) If Employee violates the covenants set forth in this Section 13,
then the duration of the restrictions contained herein shall be extended an
additional month for each month during which such violation occurred but
was not discovered by Employer or Response, beginning upon the date that
Employer or Response learns of the violation and so notifies Employee in
writing.
(c) Employee acknowledges and agrees that the covenants contained in
this Section 13 are necessary to protect the business and goodwill of
Employer and Response and that a breach of these covenants will result in
irreparable harm and continuing damage to Employer and Response. As a
result, Employee agrees that if Employee breaches or threatens to breach
these covenants, Employer and/or Response, acting either in its own behalf
or as agent for Employer pursuant to that certain Service Agreement between
Employer and Response, shall be entitled to specific performance and/or
injunctive or other equitable relief in order to prevent the continuation
of such harm, as well as money damages. Employee waives any requirement
for the securing or posting of any bond in connection with the obtaining of
any such equitable relief.
(d) Employee acknowledges and agrees that if Employee breaches the
covenants contained in this Section 13 and Employer and/or Response are
unable for any reason to obtain a restraining order from a court of
competent jurisdiction within thirty (30) days after application to enjoin
the breach by Employee, it will be difficult to calculate the precise
amount of damages suffered by Employer and Response. As a result, the
parties have determined that, in the event of such a breach, Employer shall
be entitled to liquidated damages equal to three hundred percent (300%) of
the total amount of professional service revenues attributable to Employee
during the twelve (12) months prior to the termination of this Agreement.
(e) The parties have attempted to limit the provisions of this
Section 13 only to the extent necessary to protect each party's interests.
However, the parties hereby agree that, in the event that any provision,
section or subsection of this Section 13 is adjudged by any court of
competent jurisdiction to be void or unenforceable, in whole or part, such
court shall modify and enforce any such provision, section or subsection to
the extent that it believes to be reasonable under the circumstances.
14. Notices. Any notice required or permitted under the terms of
this Agreement shall be in writing and shall delivered by any reasonable
means, which may include but is not limited to hand delivery or United
States Mail. Any notice given by United States Mail shall be effective on
the mailing date. Notice given by any other reasonable means, including
hand delivery, shall be effective on receipt.
15. Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter addressed herein. Any
prior or contemporaneous agreement, promise, or representation, whether
oral or written, relating to the subject matter of this Agreement and not
expressly set forth or referenced in this Agreement or a proper amendment
hereto shall be of no force or effect.
16. Amendment. This Agreement may be amended only by the mutual
written consent of the parties, and no oral modification or amendment shall
be permitted.
17. Assignment. This Agreement and Employee's rights and obligations
hereunder may not be assigned or transferred by Employee. Employer may
assign this Agreement, and its rights and obligations hereunder, to any
person that controls, is controlled by, or is under common control with
Employer, or which is merged with or into Employer, or that purchases all
or substantially all of the assets of Employer.
18. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the respective parties hereto and their successors
and permitted assigns.
19. Waiver. Any of the terms or conditions of this Agreement which
may be waived may be waived in writing at any time by any party hereto
which is entitled to the benefit thereof. Waiver of breach of any
provision of this Agreement shall not be deemed a waiver of any other
breach of the same or a different provision.
20. Remedies. Nothing in this Agreement shall be construed to limit
the lawful remedies available to either party in the event of breach of any
provision of this Agreement. The provisions of this Agreement and the
performance of each party hereunder may be enforced by any right or remedy
available at law or in equity.
21. Severability. In the event that any provision of this Agreement
is rendered invalid or unenforceable, such provision shall be severed from
this Agreement and the remaining provisions of this Agreement shall
continue in full force and effect, provided, however, that if the effect of
the severance of such unenforceable provision is to substantially deprive
Employer of the benefit of the services of Employee or the revenues derived
therefrom, or to substantially deprive Employee of the benefit of
compensation for services rendered, this Agreement may be terminated by the
party so deprived immediately upon written notice to the other party.
22. Headings or Captions. The headings or captions provided
throughout this Agreement are for reference purposes only, shall not be
considered in construing the terms and conditions of this Agreement, and
shall not in any way affect the meaning or interpretation of this
Agreement.
23. Schedules and Exhibits. The schedules and exhibits referenced in
this Agreement are an essential part of the agreement of the parties, and
shall be considered for all purposes a part of this Agreement. Any and all
counterparts, photocopies, or other reproductions of this Agreement shall
include all of its schedules and exhibits, attached to and made a part of
the Agreement.
24. Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of Tennessee.
25. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
KNOXVILLE HEMATOLOGY-ONCOLOGY ASSOCIATES, P.L.L.C.
("Employer")
By:_______________________________________
Allan M. Grossman, M.D.
_____________________, M.D.
("Employee")
__________________________________________
,M.D.
SCHEDULE A
COMPENSATION OF EMPLOYEE
Employee shall be entitled to receive, throughout the term of this
Agreement, a base salary of $________ per year, payable in arrears in equal
monthly installments. In addition, Employee shall be entitled to a
discretionary bonus in such amount as shall be determined by Employer,
based on Employee's production and value to Employer. Any bonus amounts
payable under this Agreement shall be determined and paid not more
frequently than quarterly and not less frequently than yearly, at the
discretion of Employer. All salary and bonus amounts shall be paid as
salary, pursuant to this employment agreement, subject to applicable taxes
and other usual payroll deductions.
THIS SCHEDULE IS AN ESSENTIAL PART OF THE AGREEMENT OF THE PARTIES
AND MUST BE INCLUDED WITH ANY AND ALL COPIES OF THE AGREEMENT
(Initial) Employer: ________
Employee: ________
EXHIBIT 99.2
SERVICE AGREEMENT
BY AND AMONG
RESPONSE ONCOLOGY, INC.
KNOXVILLE HEMATOLOGY-ONCOLOGY ASSOCIATES, P.L.L.C.
AND
MEMBERS OF KNOXVILLE HEMATOLOGY-ONCOLOGY ASSOCIATES, P.L.L.C.
April 12, 1996
SERVICE AGREEMENT
THIS SERVICE AGREEMENT dated as of April 12, 1996 by and among
RESPONSE ONCOLOGY, INC., a Tennessee corporation ("Response"), KNOXVILLE
HEMATOLOGY-ONCOLOGY ASSOCIATES, P.L.L.C., a Tennessee professional limited
liability company (the "Provider") and THE MEMBERS OF KNOXVILLE HEMATOLOGY-
ONCOLOGY ASSOCIATES, P.L.L.C. (the "Members").
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 April 12, 1996, Response and the Members will
execute a definitive agreement (the "Purchase Agreement") pursuant to which
Response will contract to acquire from the Members all of their rights,
title and interests in and to the medical partnership operating as
Knoxville Hematology-Oncology Associates (the "Group");
WHEREAS, the Members have formed the Provider for the purpose of
continuing their medical practice following consummation of the transaction
contemplated by the Purchase Agreement;
WHEREAS, the Provider and the Members desire to retain Response to
perform the practice management functions described herein in order to
permit the Provider and the Members 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 April 12, 1996, the
Provider, the Members and Response agree to the terms and conditions
provided in this Agreement.
ARTICLE 1.
RELATIONSHIP OF THE PARTIES
1.1.Independent Relationship. The Provider 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 the Provider agree that the Provider 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 the Provider with offices and facilities,
equipment, supplies, support personnel, and management and financial
advisory services. As more specifically set forth herein, the Provider
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.Provider's Matters. Matters involving the internal agreements and
finances of the Provider, including the distribution of professional fee
income among the individual Physician Members (as hereinafter defined), tax
planning, and pension and investment planning (and expenses relating solely
to these internal business matters), hiring, firing and licensing of Non-
physician Employees (hereinafter defined) shall remain the sole
responsibility of the Provider and the individual Physician Members.
1.4.Patient Referrals. The parties agree that the benefits to the
Provider 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 the
Provider'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 the Provider, the Provider's
Employees, and the Provider'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 the Provider and the Provider'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 the
Provider, 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 the Provider, including, but not limited to, accounts
receivable, proceeds of any letters of credit naming the Provider 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 Base Service Fee (hereinafter defined),
Practice Retainage (hereinafter defined) and Non-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.
(g)"Base Fee" shall mean an amount payable monthly to Response by
the Provider equal to the Base Draw set forth on Schedule A.
(h)"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 the Provider for its medical
performance under any managed care arrangement.
(i)"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 of any
Executive Director employed pursuant to Section 5.6 below and all personnel
employed by Response at a Clinic, including Non-physician Employee
Compensation;
(B) obligations of Response under leases or subleases of
facilities and personal property utilized by the Provider, including,
without limitation, Clinics and medical offices, medical, laboratory and
other equipment utilized by the Provider;
(C) personal property and intangible taxes assessed against
properties and assets utilized by the Provider 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 Member or his/her assigns arising out of the Purchase Agreement)
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 the
Provider; provided, however, that in the case of Non-physician Employee
Compensation, such expenses shall be Clinic Expenses notwithstanding the
obligation of the Provider to pay same.
(j)"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 the
Provider and any Third Party Payor, and any professional courtesy or other
reasonable and customary discount that results in fee revenue not being
collected.
(k)"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.
(l)"Governmental Receivables" shall mean an Account Receivable of
the Provider which (i) arises in the ordinary course of business of the
Provider, (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 the Provider 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.
(m)"Non-Physician Revenue" shall mean all amounts recorded as
fees (net of Fee Adjustments and Bad Debt Allowance) by or on behalf of
either the Provider 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 the Provider or Response that
are unrelated to the provision of medical services or products.
(n)"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.
(o)"Non-physician Employee Compensation" shall mean all amounts
recorded as salaries, wages (including overtime), benefits, payroll taxes
and other compensation expense by the Provider in respect of Physician
Extender Personnel (hereinafter defined) and Technical Employees
(hereinafter defined) who are Non-physician Employees (hereinafter
defined), to the extent such amounts are required to be paid by the
Provider under Applicable Law or the reimbursement policies of any Third
Party Payor.
(p)"Physician Expense" shall mean the sum of (i) salaries,
bonuses and other compensatory payments to Physicians (hereinafter defined)
employed by or otherwise performing services for the Provider, including
Physician Members; (ii) perquisites and benefits provided to such persons;
(iii) travel and entertainment expense, continuing education expense,
professional liability expense and other expenses and payments that
primarily benefit such persons; provided, however, that any such expense
incurred at the direction of Response shall not be a Physician Expense and
shall instead be a Clinic Expense; and (iv) payroll taxes in respect of any
of the foregoing.
(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 the Provider as a result of professional medical services
furnished to patients by Non-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 the Provider as Physician Services Revenue, Non-Physician Revenue,
Capitation Revenue and other revenue attributable to the conduct of the
Provider's medical practice, but shall specifically exclude profits from
any investment of the Provider in any partnership, joint venture,
corporation, limited liability company and any other revenue not derived
from the providing of services by employees of the Provider 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), the Provider 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)"CHAMPUS" shall mean the Civilian Health and Medical Program
of the Uniformed Services.
(x)"Clinic" shall mean the practice facility currently utilized
by the Provider, and any facility, related business and all medical group
business operations which the Provider and Response may, in the future,
mutually agree to characterize as a Clinic.
(y)"Employment Agreement" shall mean an employment agreement
between each physician now or hereinafter employed by the Provider and the
Provider pursuant to which the physician shall be employed by the Provider
to provide medical services on behalf of the Provider, which Employment
Agreement shall be substantially in the form set forth as Exhibit 2.1(y)
hereto.
(z)"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.
(aa)"Group" shall mean Knoxville Hematology & Oncology
Associates, a Tennessee general partnership of which the Members were the
sole general partners and which, prior to consummation of the Purchase
Agreement, conducted the medical practice of the Members.
(ab)"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.
(ac)"Liquidated Damages Amount" shall mean an amount equal to the
Liquidated Damages Amount set forth on Schedule A hereto.
(ad)"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.
(ae)"Medicare" shall mean any medical program established under
Title VIII of the Social Security Act and administered by the Health Care
Financing Administration.
(af)"Member" shall mean each Member of the Provider as of the
date hereof.
(ag)"Necessary Authorization" shall mean with respect to the
Provider 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 the
Provider's business.
(ah)"Oversight Committee" shall mean a seven (7) 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.
(ai)"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.
(aj) "Physician" shall mean all medical doctors employed by the
Provider or with whom the Provider has entered into independent contractor
or other non-employee relationships, and
(ak)"Non-physician Employees" shall mean all persons other than
Physicians who deliver billable medical or health care services under the
direction of the Provider and its Physicians or are otherwise under
contract with the Provider to provide professional services to Clinic
patients and, in each case, who are duly licensed to provide professional
medical services in the State of Tennessee and all Technical Employees.
Such definition 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 the
Provider.
(al)"Physician Extender Personnel" shall mean employees of
Response who deliver services to the Provider, 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 Non-physician Employees.
(am)"Physician Members" shall mean those Physicians who are from
time to time hereafter members of the Provider.
(an)"Practice Assets" shall have the meaning ascribed to that
term in Section 11.5 of this Agreement.
(ao) "Provider" shall mean Knoxville Hematology-Oncology
Associates, P.L.L.C., a Tennessee professional limited liability company
operating a group medical practice in the general oncology specialty.
(ap)"Provider Event of Default" shall have the meaning ascribed
to such term in Section 11.4 hereof.
(aq)"Purchase Agreement" shall mean that certain Purchase and
Sale Agreement dated as of April 12, 1996 by and among Response and the
Members.
(ar)"Remaining Physician Member" shall mean any Physician Member
who shall have been a Member at the effective time of this Agreement and
who, at any time within one (1) year prior to the occurrence of a Provider
Event of Default shall have been a Physician Member; provided, however,
that such term shall not include any Member who shall have, within such one
year period, ceased to be a Physician Member by reason of such Physician
Member's withdrawal as a Physician Member of the Provider under
circumstances which, in the reasonable judgment of Response, did not have
as a primary purpose the avoidance of the provisions of Section 11.6
hereof, or by reason of such Physician Member's death, disability or
retirement at normal retirement age.
(as)"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.
(at)"Response Event of Default" shall have the meaning ascribed
to such term in Section11.3 of this Agreement.
(au)"Technical Employees" shall mean technicians who provide
services in the diagnostic areas of the Provider's practice, such as
employees of any Clinic laboratory, radiology technicians and cardiology
technicians. All Technical Employees shall be Non-physician Employees.
(av)"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.
(aw)"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 the Provider 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. The Provider shall
comply with all terms and provisions of any lease or other agreement with
respect to such facility. Response shall maintain such facility and
equipment used by the Provider in updated, fully operational condition,
ordinary wear and tear excepted. Response shall consult with the Provider
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 as
directed and/or approved by a majority of the Oversight Committee.
Response shall follow all reasonable directions of the Oversight Committee
in respect of improvements to the offices, facilities and equipment to be
used by the Provider. The Provider shall not amend, modify or terminate
any sub-lease agreements without the prior written consent of Response.
3.2 Use of Facilities. The Provider 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 seven (7)
members. Response shall designate, and shall have the right to remove and
replace, in its sole discretion, three (3) members of the Oversight
Committee. The Provider shall designate, and shall have the right to
remove and replace, in its sole discretion, four (4) 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 and does not propose a
commensurate reduction in other budget items reasonably acceptable to
Response, then such modification shall be approved by a vote of five-
sevenths (5/7) 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 five-sevenths (5/7)
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 the Provider and Response, to the
extent allowed by Applicable Law, the Oversight Committee shall review and
advise the Provider as to an appropriate fee schedule for all physician and
ancillary services rendered by the Provider, which fee schedule shall
ultimately be determined by the Provider 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
the Provider.
(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 of any
Executive Director pursuant to Section 5.6 and the salary and cash fringe
benefits of each Executive Director shall be pursuant to the direction and
control of the Oversight Committee. If the Provider is dissatisfied with
the services provided by any Executive Director, the Provider shall refer
the matter to the Oversight Committee. The Oversight Committee shall, 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.
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. The Provider 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 the Provider'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 pursuant to Section 3.1, and Response agrees to
provide funds to allow the Clinic to provide such new services and to
utilize such new technologies. Such budgets shall be presented to the
Oversight Committee at least sixty (60) days prior to the end of the
preceding calendar year. The Oversight Committee shall us its best efforts
to agree upon a budget 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 the Provider 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 the
Provider desires an audit of any financial statement, the Provider 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 the
Provider 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 the Provider to provide quality services in the day-to-day operations of
its medical practice.
5.5.Management Services and Administration.
(a) The Provider hereby appoints Response as its sole and
exclusive manager and administrator of all day-to-day business functions
connected with its group medical practice. The Provider agrees that the
purpose and intent of this Service Agreement is to relieve the Provider,
the Physicians and Non-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 the Provider, and only the Provider, 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 the Provider 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 the Provider 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
the Provider 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 the Provider. The Provider
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 the Provider or
Non-physician Employees.
(b) Response shall, on behalf of the Provider and under the
Provider's provider number, bill patients and Third Party Payors, and shall
collect the professional fees for medical services rendered by the Provider
in each Clinic, for services performed outside a Clinic for the Provider'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.
The Provider 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 the Provider's name and on its behalf; (ii) to collect
Accounts Receivable resulting from such billing in the Provider'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 the Provider
(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 the Provider or any Physician
to collect any accounts and monies owed to the Provider, Clinic or any
Physician, to enforce the rights of the Provider or any Physician 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 the Provider and shall be located at Clinic facilities so that
they are readily accessible for patient care. The Physicians 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. Response shall indemnify and hold
the Provider harmless from and against any monetary loss suffered by the
Provider on account of Response's breach of the foregoing confidentiality
provisions.
(d) Response shall supply to the Provider 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 public relations programs on
behalf of the Provider, with appropriate emphasis on public awareness of
the availability of services at the Provider's Clinics. Any public
relations program shall be conducted in compliance with applicable laws and
regulations governing advertising by medical professionals and applicable
canons or principles of professional ethics governing the Provider and its
physicians.
(f) Response shall provide the data necessary for the Provider
to prepare its annual income tax returns and financial statements, and
shall provide payroll and related services for Physicians and Non-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 the Provider or any
physician employed thereby.
(g) Response shall assist the Provider in recruiting additional
Physicians and Non- physician Employees, carrying out such administrative
functions as may be appropriate such as advertising for and identifying
potential candidates, checking credentials, and arranging interviews;
provided, however, the Provider shall interview and make the ultimate
decision as to the suitability of any Physician or Non-physician Employee
to become associated with a Clinic. All Physicians recruited by Response
and accepted by the Provider shall be the sole employees of the Provider,
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 or Non-physician Employees, 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 the
Provider.
(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 the Provider, 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 Non-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
the Provider. If the Provider is dissatisfied with the services of any
person, the Provider 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 the optimal quality of medical care consistent with the efficient
operation of the Clinic. Employee assignments shall be made to assure
consistent and continued rendering of the optimal quality medical support
services consistent with the efficient operation of the Clinic 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 the Provider with regard to the assignment of its employees.
5.8.Events Excusing Performance. Response shall not be liable to the
Provider 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 the Provider in
fulfilling its obligations to its patients to maintain the optimal quality
of medical and professional services consistent with the efficient
operation of the Clinic.
5.11. Provider Operating Account. The Provider agrees to establish
and maintain a bank account, which shall be referred to as the Provider
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) all expenses which are solely the obligation of the
Provider, including, without limitation, Physician Expense, up to the
amount of Practice Retainage, (ii) Clinic Expenses payable directly by the
Provider (including, without limitation, Non-physician Employee
Compensation, (iii) the Clinic Expense Portion of the Base Service Fee owed
pursuant to Section 8.1 of this Agreement, (iv) the Fixed Portion of the
Base Service Fee owed pursuant to Section 8.1 of this Agreement, and (v)
other distributions to the Provider, and the distributions shall be made in
that order of payment. To the extent Practice Revenue of the Provider is
insufficient to pay all amounts set forth above, then any shortage shall be
applied in reverse order to the order provided above, with the Practice
Retainage being the last item to be reduced by such shortage. The Provider
hereby designates, constitutes and appoints the Chief Financial Officer and
Treasurer of Response as a signatory on the Provider Operating Account,
with full power and authority to sign checks and cause drafts and other
debits to be made on the Provider Operating Account in the name of the
Provider and to otherwise manage the cash resources and flow of the
Provider. After the payment of all items described in clauses (b)(i)
through (iv) above, the Provider may withdraw amounts for distributions to
Physician Members.
5.12. Credit Line. So long as the Provider is not in default
hereunder, Response shall from time to time during the term of this
Agreement advance to the Provider, in readily available United State funds,
by wire transfer, intrabank transfer or other electronic means, to be
deposited into the Provider Operating Account, up to an amount (the
"Receivables Line") determined from time to time equal to 100% of Accounts
Receivable, net of any Bad Debt Allowance and all Fee Adjustments with
respect thereto, for the purpose of paying the amounts required pursuant to
Section 5.11(b)(i) through (v). 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 the Provider 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 15.7 below.
5.13. Ancillary Services. Response shall operate such ancillary
services as approved by the Oversight Committee.
ARTICLE 6.
OBLIGATIONS OF THE PROVIDER
6.1.Professional Services. The Provider 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 the Provider prior to
effectiveness of this Agreement. The Provider shall also make all reports
and inquiries to the National Practitioners Data Bank and/or any state
medical licensing board required by Applicable Law. The Provider shall use
its best efforts to ensure that each Non-physician Employee and Technical
Employee associated with the Provider to provide medical care to patients
of the Provider is licensed by the State of Tennessee to the extent
required. The Provider shall promptly notify Response in writing, citing
the underlying circumstances, in the event the Provider or any Physician or
Non-physician Employee associated therewith (i) shall be or become the
subject of any investigation into or proceeding with respect to allegations
of professional misconduct or incompetence; (ii) shall be or become the
subject of any investigation by any Federal or state regulatory agency with
respect to any possible violation of any Federal or state law regulating
the providing of health care services; (iii) shall be a named party to any
proceeding alleging violation of any law relating to such person's
professional activities or seeking to revoke such person's professional
license or privileges to practice in any hospital or medical center; (iv)
shall suffer revocation of such person's Medicare provider number,
professional license or privileges to practice in any hospital or medical
center. In the event that any disciplinary action or medical malpractice
action is initiated against any Physician or other person assisting in the
providing of medical services, the Provider shall immediately inform the
Executive Director of such action and the underlying facts and
circumstances. The Provider shall develop a program to monitor the quality
of medical care practiced at each Clinic. In that regard, the Provider
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. The Provider 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 the Provider, and no other physician or medical practitioner shall be
permitted to use or occupy a Clinic without the prior written consent of
Response and the Provider.
6.3.Employment of Physicians and Non-physician Employees. The
Provider shall have complete control of and responsibility for the hiring,
compensation, supervision, evaluation and termination of its Physicians and
Non-physician Employees, although at the request of the Provider, Response
shall consult with the Provider respecting such matters. The Provider
shall be responsible for the payment of all Physician Expense and Non-
physician Employee Compensation now or hereafter applicable to Physicians
and Non-physician Employees; provided, however, that Response shall provide
the payroll service for computing, accounting for and disbursing or paying
all salaries and benefits of the Provider employees, all of whom may be
paid out of the Provider Operating Account. With respect to Physicians,
the Provider shall only employ and contract with licensed Physicians
meeting applicable credentialling guidelines established by the Provider.
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 Non-physician
Employees, notwithstanding their employment by the Provider. The cost of
such items shall be Clinic Expense. Response shall not provide any benefit
to such persons to the extent the Provider 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), the Provider and Physicians shall be solely
responsible for payment of the cost of professional licenses and dues for
membership in professional associations and continuing professional
education costs. The Provider shall ensure that each of its Physicians and
Non-physician Employees participates in such continuing medical education
as is necessary for such person to maintain current practical and academic
knowledge of the field of medicine and health care in which the Provider is
engaged.
6.5.Professional Insurance Eligibility. The Provider shall be
primarily responsible, with assistance from Response, if requested, for
obtaining and retaining of professional liability insurance by assuring
that its Physicians are insurable, and participating in an on-going risk
management program. Professional liability insurance shall be paid for by
the Provider or its Physicians and shall not be Clinic Expense.
6.6.Events Excusing Performance. The Provider 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 the Provider has no control for so long
as such events continue, and for a reasonable period of time thereafter.
6.7.Fees for Professional Services. The Provider shall be solely
responsible for legal, accounting and other professional service fees
incurred by the Provider, except as set forth in Section 5.5(i) herein.
6.8. Peer Review. The Provider agrees to cooperate with Response in
establishing a system of peer review as necessary to obtain provider
contracts. In connection therewith, the Provider 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. The Provider 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, the Provider 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 the Provider 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.
6.9Provider Employee Benefit Plans.
(a)Effective as of the date of the closing under the Acquisition
Agreement, the Provider shall amend the tax-qualified retirement plan(s)
described on Exhibit6.9(a) (the "Provider Plan") to provide that employees
of Response who are classified as "leased employees" (as defined in Code
Section414(n)) of the Provider shall be treated as the Provider's employees
for purposes described in Code Section 414(n)(3). Not less often than
annually, the Provider and Response shall agree upon and identify in
writing those individuals to be classified as leased employees of the
Provider (the "Designated Leased Employees"). The Provider and Response
shall establish mutually agreeable procedures with respect to the
participation of Designated Leased Employees in the Provider Plan. Such
procedures shall be designed to avoid the tax disqualification of the
Provider Plan, similar plans of practices similarly situated,
(collectively, the "Plans").
(b)If the Oversight Committee determines that the relationship
between Response and the Provider (and other practices similarly situated)
constitutes an "affiliated service group" (as defined in Code
Section414(m)), Response and the Provider shall take such actions as may be
necessary to avoid the tax disqualification of the Plans. Such actions may
include the amendment, freeze, termination or merger of the Provider Plan.
(c)The Plans described on Exhibit6.9(a) attached hereto are
approved by Response. The Provider shall not enter into any new "employee
benefit plan" (as defined in Section3(3) of the Employment Retirement
Income Security Act of 1974, as amended ("ERISA") without the consent of
Response (which will not be unreasonably withheld). In addition, the
Provider shall not offer any retirement benefits or make any material
retirement payments other than under the Provider Plan to any Member of the
Provider without the express written consent of Response (which will not be
unreasonably withheld). Except as otherwise required by law, the Provider
shall not materially amend, freeze, terminate or merge the Provider Plan
without the express written consent of Response (which will not be
unreasonably withheld). In the event of either of the foregoing,
Response's consent shall not be withheld if such action would not
jeopardize the qualification of any of the Plans. The Provider agrees to
make such changes to the Provider Plan, including the amendment freeze,
termination or merger of the Provider Plan, as may be approved by the
Oversight Committee and Response but only if such changes are necessary to
prevent the disqualification of any of the Plans and do not have a material
adverse impact on Provider.
(d)Expenses incurred in connection with the Provider Plan or
other Provider employee benefit plans, including, without limitation, the
compensation of counsel, accountants, corporate trustees, and other agents
shall be included in Clinic Expenses.
(e)The contribution and administration expenses for the
Designated Leased Employees shall be included in the Provider's operating
budget. The Provider and Response shall not make employee benefit plan
contributions or payments to the Provider for their respective employees in
excess of such budgeted amounts unless required by law or the terms of the
Provider Plan. Response shall make contributions or payments with respect
to the Provider Plan or other Provider employee benefit plans, as a Clinic
Expense, on behalf of eligible Designated Leased Employees, and other
eligible Provider employees. In the event a Provider Plan or other
Provider employee benefit plan is terminated, Response shall be
responsible, as a Clinic Expense, for any funding liabilities related to
eligible Designated Leased Employees; provided, however, Response shall
only be responsible for the funding of any liability accruing after the
date of the Acquisition Agreement.
(f)Response shall have the sole and exclusive authority to adopt,
amend or terminate any employee benefit plan for the benefit of its
employees, regardless of whether such employees are Designated Leased
Employees, unless such actions would require the amendment, freeze or
termination of the Provider Plan to avoid disqualification of the Provider
Plan, in which case any such action would be subject to the express prior
written consent of the Oversight Committee. Response shall have the sole
and exclusive authority to appoint the trustee, custodian and administrator
of any such plan.
(g)In the event that any "employee welfare benefit plan" (as
defined in ERISA Section3(l)) maintained or sponsored by the Provider must
be amended, terminated, modified or changed as a result of the Provider or
Response being deemed to be a part of an affiliated service group, the
Oversight Committee will replace such plan or plans with a plan or plans
that provides those benefits approved by the Oversight Committee. It shall
be the goal of the Oversight Committee in such event to provide
substantially similar or comparable benefits if the same can be provided at
a substantially similar cost to the replaced plan.
ARTICLE 7.
EMPLOYMENT AGREEMENTS, RESTRICTIVE COVENANTS AND REMEDIES
The parties recognize that the services to be provided by
Response shall be feasible only if the Provider operates an active medical
practice to which the Physicians associated with the Provider devote their
full time and attention. To that end:
7.1. Employment Agreements with Physicians. As a condition to
Response's continuing obligations hereunder, the Provider 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 6(a)(x) of the Purchase Agreement.
7.2.Restrictive Covenants by Physicians. The Provider 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 engage in the practice of oncology or hematology, including providing or
supervising the provision of chemotherapy, radiation treatment or other
cancer therapies, within Knox County in Tennessee (the "Practice
Territory") during the term of the Employment Agreement and for a period of
five (5) years after any termination of employment with the Provider.
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 the Provider.
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 the
Provider, 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 the Provider 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. Subject to the terms of Section5.11, 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 procedure
set forth in Section 8.2 below. Notwithstanding the foregoing or any other
provision in this Service Agreement, in the event the sum of the Base
Service Fee, Non-physician Employee Compensation and Practice Retainage
shall exceed the aggregate Practice Revenue of the Provider, then (i)first,
the Fixed Portion of Base Service Fee shall be reduced by the amount of
such excess, and (ii)to the extent such excess is greater than the Fixed
Portion, such remaining excess will be reimbursed by Response to the
Provider no later than the last day of the month immediately succeeding the
month such excess arose.
8.2. Base Fee. The Clinic Expense Portion of the Base Service Fee
shall be payable by the Provider to Response out of the Provider Operating
Account as Clinic Expenses are incurred by Response, subject to ordinary,
reasonable and customary payment terms on invoices for goods and services,
and subject to Section 5.11 and the adjustments as set forth in Section 8.1
above. The Fixed Portion of the Base Service Fee shall be payable by the
Provider to Response out of the Provider Operating Account on a monthly
basis, subject to Section 5.11 and reduction as set forth in Section 8.1
above. The Performance Fee will be computed as of the end of each calendar
year based on amounts recorded during the calendar year.
ARTICLE 9.
RECORDS
9.1.Patient Records. Upon termination of this Agreement, the Provider
shall retain all patient medical records maintained by the Provider or
Response in the name of the Provider. Response shall, at its option, and
if allowed under Applicable Law be entitled to have reasonable access
during normal business hours to the Provider's patient medical records
applicable to the period of Response's performance under this Agreement.
Moreover, the Provider shall, at its option, be entitled to retain copies
of financial and accounting records relating to all services performed by
the Provider 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 the Provider 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, the Provider or its designee shall have reasonable access
during normal business hours in Knoxville, Tennessee to the Provider's and
Response's financial and accounting records, including, but not limited to,
records of collections, expenses and disbursements, as kept by Response in
performing Response's obligations under this Agreement, and the Provider
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 the Provider. Throughout the term
of this Agreement, the Provider 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 the Provider. The Provider 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 Tennessee. Response shall reimburse the Provider for any unearned
professional liability insurance premiums paid by the Provider to the
extent not reimbursed or reimbursable by the Provider's insurance carrier
if the Provider'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 provide and/or maintain comprehensive
professional liability insurance for all Non-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. The Provider 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. The Provider
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 ("Adverse Consequences"), 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 the Provider, by any Physician
Member or other person acting under the supervision and control thereof,
or, in the case of Response, by any employee, agent, officer, director or
shareholder thereof who is not acting under the supervision and control of
a Physician Member of the Provider.
(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 reasonably
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
in accordance with this Article10, (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 (not to be unreasonably withheld).
(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 Purchase Agreement and shall expire on April 30,
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 the Provider 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 sixty (60) days thereafter.
(b) any material default by Response in the performance of any
of its duties or obligations under this Agreement or breach of its
representations and warranties as set forth in Article 14, and such default
or breach 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 the Provider.
(c) in the event Response shall, intentionally or in bad faith,
misapply funds or assets of the Provider or commit a similar act which
cause material harm to the Provider.
(d) in the event Response shall default in the payment of any
promissory note payable by Response to the Provider.
11.4.Provider Event of Default. The occurrence of any of the
following events shall constitute a default by the Provider (an "Provider
Event of Default") under this Agreement, giving Response the right to the
remedies set forth in Section 11.6 below:
(a) the filing by the Provider of a petition in voluntary
bankruptcy or an assignment by the Provider 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 the Provider, except
for the filing of a petition in involuntary bankruptcy against the Provider
which is dismissed within sixty (60) days thereafter; provided, however,
that no Provider Event of Default shall be deemed to exist if, within sixty
(60) days following the occurrence of the enumerated event, the Provider
and/or the Physicians who are then Physician Members of the Provider
lawfully reorganize the Provider or lawfully transfer the practice
theretofore conducted by the Provider to a new entity which assumes, with
the reasonable consent of Response, all of the obligations of the Provider
hereunder (together with a written reaffirmation by the persons who would
be Remaining Physician Members of the Provider at that time of their
personal liability under Section 11.6), and the successor practice (or
reorganized Provider, as the case may be) then continues the practice
theretofore conducted by the Provider in substantially the same manner as
it had theretofore been conducted under this Agreement.
(b) any material default by the Provider in the performance of
any of its duties or obligations under this Agreement or breach of its
representations and warranties as set forth in Article 13, and such default
or breach shall continue for a period of sixty (60) days after written
notice thereof has been given to the Provider by Response.
(c) the final determination of termination or suspension of the
Provider's Medicare or Medicaid Provider Number primarily for reasons not
arising out of any action or inaction by Response in performing its
obligations under this Agreement, and such termination or suspension shall
continue for sixty (60) days.
11.5.Remedies upon Response Event of Default. Upon the occurrence of
a Response Event of Default, the Provider 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. In such
event the Provider shall have the option to purchase from Response, and
upon proper exercise of such option by the Provider in the manner
hereinbelow provided, Response shall sell to the Provider, 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 the Provider in its medical practice ("Practice
Assets") for a price, payable in cash, equal to the fair market value of
the Practice Assets. The Provider 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 the Provider shall negotiate in good faith the fair market value as of
the date of the Response Event of Default of the assets to be acquired. In
the event that, after at least fifteen (15) days of good faith negotiation,
Response and the Provider 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 the Provider 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 the Provider shall
purchase the Practice Assets for such value.
11.6. Remedies upon Provider Event of Default. Upon the occurrence
of a Provider Event of Default, Response shall have the right to terminate
this Agreement by written notice to the Provider, and the Provider shall
have no further obligation to Response for Service Fees after the date such
notice is received. In such event, the Provider 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 the Provider in cash within sixty (60) days
after occurrence of the Provider Event of Default. Each Member hereby
severally, and not jointly, guarantees the foregoing obligation of the
Provider 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
Member for purposes of this Agreement, with the pro rata share being equal
to the portion of the Liquidated Damages Amount not paid by the Provider
divided by the number of Remaining Physician Members as of the date of
occurrence of a Provider Event of Default. Moreover, in such event the
Provider shall have the option to purchase from Response, and upon proper
exercise of such option by the Provider in the manner hereinbelow provided,
Response shall sell to the Provider, all Practice Assets for a price,
payable in cash, equal to the fair market value of the Practice Assets as
of the date of the Provider Event of Default. The Provider 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 the Provider 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 the
Provider 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 the Provider 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 the Provider shall
purchase the Practice Assets for such value.
11.7.Closing of Repurchase by the Provider and Effective Date of
Termination. The Provider 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 the Provider 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 the Provider in connection with the
repurchase described herein. The closing date for the repurchase shall be
determined by the Provider, 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 the
Provider such assignments to leases and other contracts and such bills of
sale and other transfer or closing documents necessary to effect such
transaction. The Provider shall execute and deliver to Response such
officers' certificates, assumption agreements and other closing documents
necessary to close such transaction. Between the date of termination and
the earlier to occur of closing the repurchase as hereinabove described or
the termination (without exercise) of any repurchase option, the Provider
shall be entitled to use all Practice Assets, and Response hereby grants
the Provider a license to use the Practice Assets in such event. In
consideration of the foregoing license, the Provider will pay to Response
an amount equal to any rental payments by Response to any third party
vendor in respect of all Practice Assets.
ARTICLE12
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 the Provider, 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.
ARTICLE13
REPRESENTATIONS AND WARRANTIES OF THE PROVIDER
The Provider represents, warrants, covenants and agrees with Response
that:
13.1. Validity. The Provider is a professional association duly
organized, validly existing and in good standing under the laws of the
State of Tennessee. The Provider 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. Except as disclosed in writing to Response prior
to the effective date hereof, there is no suit, action, proceeding at law
or in equity, arbitration, administrative proceeding or other proceeding
pending, or threatened against, or affecting the Provider or the Group, or
any of the assets to be acquired from the Group pursuant to the Purchase
Agreement, or to the best of the Provider's knowledge, any hematology or
oncology provider or other health care professional associated with or
employed by the Provider as pertains to any claim involving the providing
of health care related services, and to the best of the Provider's
knowledge there is no basis for any of the foregoing.
13.3. Permits. The Provider and all physicians and other health care
professionals associated with or employed by the Provider 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 the Provider'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 the Provider, enforceable in accordance with its
terms. The Provider 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 the Provider 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 of the Group to be acquired pursuant to the Purchase Agreement,
the Provider'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 the Provider is a
party, or by which either the Provider 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 the Provider or any of the assets to be
conveyed hereunder.
13.5. Compliance with Applicable Laws. To the best of the Provider's
knowledge and belief, the Provider has operated in compliance with all
federal, state, county and municipal laws, ordinances and regulations
applicable thereto and neither the Provider nor any physician or other
Person associated with or employed by the Provider 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. The Provider and each Physician
associated therewith 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. The Provider and
each Physician associated therewith is in full compliance with the
requirements of all such Third Party Payor Programs applicable thereto.
13.7. Fraud and Abuse. The Provider and persons and entities
providing professional services for the Provider, have not, to the
knowledge of the Provider, 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 the Provider'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. Provider Compliance. The Provider 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 the Provider 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 Provider 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. Except as previously
disclosed in writing to Response, the Provider does not have any rate
appeal currently pending before any Governmental Authority or any
administrator of any Third Party Payor Program.
13.10. Full Disclosure. When considered in the context of all
information contained herein, no representation or warranty made by the
Provider in this Agreement contains or will contain any untrue statement of
a material fact.
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 the Provider as though recited in this Article
13.
ARTICLE14
REPRESENTATIONSANDWARRANTIESOFRESPONSE
Response represents, warrants, covenants and agrees with the Provider
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. 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
Response enforceable in accordance with its terms. 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.Litigation. There is no suit, action, proceeding at law or in
equity, arbitration, administrative proceeding or other proceeding pending
or, to the best of Response's knowledge, threatened against Response that,
if successful, would have a material adverse effect on Response, and, to
the best of Response's knowledge, there is no basis for the foregoing.
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.
14.7.Full Disclosure. When considered in the context of all
information contained herein, no representation or warranty made by the
Response in this Agreement contains or will contain any untrue statement of
a material fact.
ARTICLE 15
COVENANTS OF THE PROVIDER
15.1. Merger, Consolidation and Other Arrangements. The Provider
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 the Provider'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; provided, however, that no such consent shall be
required in respect of any incorporation, merger, consolidation,
partnership, joint venture or acquisition transaction that (i)results in
the continued, unimpaired operation of the Clinics; and (ii)results in the
Physician Members maintaining at least a fifty percent (50%) voting and
equity interest in the Clinics. The Provider acknowledges and agrees that
such consent may be withheld if Response and the Provider cannot mutually
agree upon the terms and conditions of a new Service Agreement with the
Provider.
15.2. Necessary Authorizations/Assignment of Licenses and Permits.
The Provider 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 the Provider assign,
transfer, or remove or permit any other individual or entity to assign,
transfer or remove any records of the Provider, 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. The Provider 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 the Provider as would be
obtainable by the Provider at the time in a comparable arms-length
transaction with a person not an Affiliate of Response.
15.4. Compliance with All Laws. The Provider shall comply with all
laws and regulations relating to the Provider's practice and the operation
of any cancer 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, the Provider shall not violate any Applicable
Laws.
15.5. Third Party Payor Programs. The Provider shall maintain the
Provider's compliance with the requirements of all Third Party Payor
Programs in which the Provider is currently participating or authorized to
participate.
15.6. Change in Business or Credit and Collection Policy. The
Provider shall not make any change in the character of the Provider'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. The Provider shall, effective as of the
date hereof, be deemed to have granted (and the Provider does hereby grant)
to Response a first priority security interest in and to any and all of the
Accounts Receivable (except Governmental Receivables) and the proceeds
thereof (including the proceeds from the collection of Governmental
Receivables after such proceeds shall have been deposited into the Provider
Operating Account) to secure the repayment of all amounts advanced to the
Provider under the Receivables Line and all accrued interest thereon, and
this Agreement shall be deemed to be a security agreement. Upon a default
by the Provider in the payment of amounts due under the Receivables Line,
Response may at its option exercise from time to time any and all rights
and remedies available to it under the UCC or otherwise. The Provider
represents and warrants that the location of the Provider's principal place
of business, and all locations where the Provider maintains records with
respect to its Accounts Receivables are set forth under its name in Section
16.5 hereof. The Provider agrees to notify Response in writing thirty (30)
days prior to any change in any such location. The exact name of the
Provider is as set forth at the beginning of this Agreement. The Provider
is a new limited liability company, and the medical practice conducted by
the Provider was formerly conducted under the name "Knoxville Hematology &
Oncology Associates," a Tennessee general partnership. The Provider shall
notify Response in writing thirty (30) days prior to any change in any such
name.
15.8. Representations and Warranties. The Provider agrees to notify
Response in the event that any representation or warranty contained in
Article 13 of this Agreement becomes untrue in any material respect.
15.9. Additional Physician Members. The Provider shall, as a
condition to permitting any physician from becoming a Physician Member
after the date hereof, obtain the signature of each such physician to a
counterpart amendment hereto, and, upon the obtaining of such signature,
this Agreement shall be deemed amended by adding as a party hereto the
Physician Member who shall sign such counterpart.
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 the Provider 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 Tennessee Uniform Arbitration Act, with any
such arbitration proceeding being conducted in Knoxville, Tennessee 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.
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: John A. Good, Esq.
Executive Vice President & General Counsel
Response Oncology, Inc.
1775 Moriah Woods Blvd.
Memphis, Tennessee 38117
To Provider: Knoxville Hematology Oncology Associates,
P.C.
1114 Weisgarber Road, #E
Knoxville, Tennessee 37909-2648
With copies to: James W. Parris, Esq.
Bernstein, Stair & McAdams
530 South Gay Street, Suite 600
Knoxville, Tennessee 38902
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 Tennessee. 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, the Provider 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
the Provider 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 the Provider under this Agreement shall in any way or
in any manner be deemed to create any obligation of Response or of the
Provider to, or any rights, in, any person or entity not a party to this
Agreement.
16.17.Communications. The Provider 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
the Provider's practice at a Clinic.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
KNOXVILLE HEMATOLOGYONCOLOGY ASSOCIATES, P.L.L.C.
By:
Title:
RESPONSE ONCOLOGY, INC.
By:
Title:
PHYSICIANS:
Peter W. Carter, M.D.
Albert S.C. Ebenezer, M.D.
Jerry M. Foster, M.D.
Allan M. Grossman, M.D.
RESPONSE ONCOLOGY, INC.SERVICE AGREEMENT
SCHEDULE A
Base Service Fee
The Base Service Fee shall be equal to the sum of (i) amounts recorded
as Clinic Expenses (the "Clinic Expense Portion") plus (ii) ***% of
Practice Revenue (the "Fixed Portion").
Base Fee
The Base Fee shall be equal to the sum of (A) ***% of Practice Revenue
up to $***, (B) ***% of Practice Revenue between $*** and $***, and (C)
***% of Practice Revenue between $*** and $***.
Performance Fee
During the entire term of the Service Agreement, including any
extended term, unless reduced in the upon the occurrence of the event
described below, a Performance Fee in an amount equal to any Annual Surplus
shall be paid to Response. Response shall, in turn, remit, in exchange for
delegated practice management services delivered thereby, fifty percent
(50%) of such Performance Fee to Physicians' Medical Enterprises, LLC.
("PME"). In the event PME shall, at any time during the term hereof,
discontinue rendering management services to the Provider, then the
Performance Fee payable to Response shall be equal to 50% of Annual
Surplus.
Performance Fees shall be computed on the basis of Annual Surplus
computed for each calendar year. For any period during the term of the
Service Agreement that does not encompass an entire calendar year, the
Performance Fees for such partial period shall be computed as follows:
a) For any partial period that commences with the execution and
delivery of the Service Agreement, Clinic Expenses, Physician Expense
and Non-physician Employee Compensation from such commencement date until
the end of the calendar year of commencement shall be determined. The sum
of Clinic Expenses, Physician Expense, Non-physician Employee Compensation
and ***% of Practice Revenue will be subtracted from Practice Revenue, with
the difference then being divided by the number of days in such period, and
the quotient multiplied by 365. The computation formula set forth above
will be applied to the annualized Annual Surplus to compute an annualized
Performance Fee, which shall then be divided by 365 and multiplied by the
number of days in the partial period to yield the Performance Fee payable
with respect to such short period.
b) For any partial period that commences on the first day of a
calendar year and ends prior to the last day thereof, Annual Surplus for
the full year will be computed based on the definition thereof, which
result shall then be divided by 365 and multiplied by the number of days
during the partial period to yield the Performance Fees payable with
respect to such short period.
The foregoing calculations shall be adjusted by 50% if the Performance
Fee is reduced by reason of the PME agreement being terminated.
Liquidated Damages Amount
For purposes of this Agreement, the Liquidated Damages Amount shall be
the difference obtained pursuant to the following formula: [****]; wherein
(i) *** equals *** (ii) *** equals the number of Remaining Physician
Members at the time of occurrence of a Provider Event of Default; (ii) ***
equals *** x ***/***; and (iii) *** equals ***.
Practice Retainage
For purposes of this Agreement, the Practice Retainage shall equal the
sum of ***% of Practice Revenue of $*** or less, ***% of Practice Revenue
between $*** and $***, ***% of Practice Revenue between $*** and $***, ***%
of Practice Revenue between $*** and $*** and ***% of Practice Revenue in
excess of $***.
*** MATERIAL REDACTED PURSUANT TO CLAIM FOR CONFIDENTIAL TREATMENT
