<PAGE> 1
UNITED STATES
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 (Date of earliest event reported): July 8, 1996
SEAFIELD CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
MISSOURI
(State or other jurisdiction of incorporation)
0-16946 43-1039532
(Commission File Number) (I.R.S. Employer Identification No.)
2600 Grand Blvd., Suite 500, P.O. Box 410949, Kansas City, MO 64141
(Address of principal executive offices, including Zip Code)
(816) 842-7000
(Registrant's telephone number, including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS
On July 3, 1996, the Registrant's 54% owned subsidiary, Response
Oncology, Inc. ("Response"), acquired (the "Transaction") from the
stockholders of Rymer, Zaravinos & Faig, M.D., P.A. (the "Sellers") 100% of the
outstanding common stock (the "Acquired Stock") of Rymer, Zaravinos & Faig,
M.D., P.A. (the "Acquired Business"). The total consideration (the "Purchase
Price") paid for the Acquired Stock was approximately $5.9 million in cash,
with the balance being paid by delivery of 117,600 restricted shares of common
stock of Response ("Response Common Stock"), valued at approximately
$1.2 million. The delivery of Response Common Stock as partial
consideration for the Acquired Stock has not been registered under the
Securities Act of 1933 in reliance upon an exemption from such registration.
The Acquired Stock was purchased by Response directly from the
Sellers. At the time of the Transaction, the Sellers had no material
relationship with 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 association wholly owned by the Sellers and formed to continue the
group medical practice theretofore conducted by the Seller (the "New PA")
entered into a long-term management services agreement (the "Service
Agreement") with the Acquired Business providing for the management by the
Acquired Business of the non-medical aspects of the practice thereafter
conducted by the New PA. Pursuant to the Service Agreement, the Acquired
Business will manage the non-medical aspects of the New PA's business and will
permit the New PA to use office space, equipment and other assets owned or
leased by the Acquired Business in exchange for an agreed-upon management fee.
The cash portion of the Purchase Price was provided from the proceeds
of a draw on Response's unsecured acquisition credit facility provided
through a syndicate of commercial banks led by NationsBank of Tennessee, N.A.
Borrowings under such facility bear interest at a rate equal to LIBOR plus
2 5/8%, and are payable on or before May 31, 1998.
Pro Forma financial information and audited financial statements are as
follows:
1. Pro Forma Balance Sheet and Statement of Operations for Response
and Acquired Business as of March 31, 1996 and for the year
ended December 31, 1995 and the three months ended March 31, 1996.
2. Audited Balance Sheet, Statement of Income, Statement of
Shareholders' Equity, and the Statement of Cash Flows, including
footnotes as of and for the year ended December 31, 1995 for Rymer,
Zaravinos and Faig, M.D., P.A.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits: Form of the following agreements filed with
Response's current report on Form 8-K:
99.1 Stock Puchase Agreement by and among Response
Oncology, Inc. and Stockholders of Rymer, Zaravinos &
Faig, M.D., P.A. dated July 1, 1996.
99.2 Service Agreement between Response Oncology of Fort
Lauderdale, Inc., Southeast Florida Hematology
Oncology Group, P.A. and Stockholders of Southeast
Florida Hematology Oncology Group, P.A. dated July 1,
1996.
<PAGE> 3
RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
The accompanying pro forma consolidated balance sheet as of March 31, 1996 and
the related pro forma consolidated statements of operations for the year ended
December 31, 1995 and the three months ended March 31, 1996 give effect to the
acquisitions of Southeast Florida Hematology Oncology Group, P.A. ("the Fort
Lauderdale Practice") Jeffrey L. Paonessa, M.D., P.A. ("Paonessa"), Knoxville
Hematology Oncology Associates ("KHOA") and Oncology Hematology Group of South
Florida, P.A. ("OHG"), (collectively referred to as the "Groups") as if the
acquisitions of the Groups had occurred on January 1, 1995. The pro forma
information is based on the historical audited financial statements of Response
Oncology, Inc. and subsidiaries (the "Company") and the Groups, giving effect
to the acquisitions under the purchase method of accounting, and the
assumptions and adjustments in the accompanying notes to the pro forma
consolidated financial information.
The pro forma statements have been prepared by the Company's management based
on the audited financial statements of the acquired entities. These pro forma
statements may not be indicative of the results that would have occurred if the
acquisitions had been in effect on the dates indicated or which may be obtained
in the future. The pro forma statements do not reflect the effect of expense
reductions and other operational changes, which, in the opinion of the Company,
is likely to result in profitable operations for the Groups. The pro forma
financial statements should be read in conjunction with the consolidated
financial statements and notes of Response Oncology, Inc. and subsidiaries.
<PAGE> 4
Response Oncology, Inc. and Subsidiaries
Pro Forma Consolidated Balance Sheet
March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Previous
Acquisition
Historical Subsequent to Pro Forma Pro Forma
Company March 31, 1996 Adjustments Results
--------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $ 483,191 $ 176,360 $(7,900,565) $(7,241,014)
Short-term investments 361,718 361,718
Accounts receivable, net 15,100,543 2,177,305 (198,657) 17,079,191
Supplies 1,090,643 248,981 (139,631) 1,199,993
Prepaids 525,882 3,875 (3,875) 525,882
Advances to affiliated physician groups 3,112,552 3,112,552
Other current assets 2,089,590 277,313 113,685 2,480,588
--------------------------------------------------------
Total current assets 22,764,119 2,883,834 (8,129,043) 17,518,910
Property and equipment, net 3,695,637 1,945,971 (395,971) 5,245,637
Deferred charges, net 325,733 325,733
Intangible assets 11,656,558 11,656,558
Management Service Agreement 22,413,662 22,413,662
Other assets 176,805 176,805
--------------------------------------------------------
Total assets $38,618,852 $ 4,829,805 $13,888,648 $57,337,305
Accounts payable $ 5,696,496 $ 559,759 $ 318,294 $ 6,574,549
Accrued expenses 1,891,482 1,891,482
Notes payable 3,607,711 5,100,000 8,707,711
Capital lease obligations 57,622 46,947 (46,947) 57,622
Current portion of long term note 396,997 1,713,757 (1,713,757) 396,997
--------------------------------------------------------
Total current liabilities 11,650,308 2,320,463 3,657,590 17,628,361
Capital lease obligations 0 48,865 (48,865) 0
Notes Payable 6,265,369 23,131 10,126,869 16,415,369
Deferred tax liability, noncurrent
Minority Interest 261,425 261,425
Stockholders' equity 0
Preferred stock 27,833 27,833
Common stock 73,782 1,000 962 75,744
Paid-in capital 60,137,024 2,588,438 62,725,462
Retained earnings (accumulated deficit) (39,796,889) 2,436,346 (2,436,346) (39,796,889)
--------------------------------------------------------
Total liabities and stockholders equity $38,618,852 $ 4,829,805 $13,888,648 $57,337,305
========================================================
<CAPTION>
Fort Lauderdale Pro Forma Total
Practice Adjustments Pro Forma Proforma
-------------------------------------------- ------------
<S> <C> <C> <C> <C>
Cash $111,737 $(6,270,425) $(6,158,688) $(13,399,702)
Short-term investments 0 361,718
Accounts receivable, net 664,966 664,966 17,744,157
Supplies 128,836 (128,836) 0 1,199,993
Prepaids 37,390 (37,390) 0 525,882
Advances to affiliated physician groups 0 3,112,552
Other current assets 166,226 166,226 2,646,814
---------------------------------------- ------------
Total current assets 942,929 (6,270,425) (5,327,496) 12,191,414
Property and equipment, net 21,217 21,217 5,266,854
Deferred charges, net 0 325,733
Intangible assets 0 11,656,558
Management Service Agreement 11,147,704 11,147,704 33,561,366
Other assets 0 176,805
---------------------------------------- ------------
Total assets $964,146 $ 4,877,279 $ 5,841,425 $ 63,178,730
Accounts payable $394,008 ($7,730) $ 386,278 $ 6,960,827
Accrued expenses 0 1,891,482
Notes payable 250,000 (250,000) 0 8,707,711
Capital lease obligations 0 57,622
Current portion of long term note 0 396,997
Deferred income taxes 69,386 69,386 69,386
---------------------------------------- ------------
Total current liabilities 713,394 (257,730) 455,664 18,084,025
Capital lease obligations 0 0
Notes Payable 0 16,415,369
Deferred tax liability, noncurrent 4,209,761 4,209,761 4,209,761
Minority Interest 0 261,425
Stockholders' equity 0 0
Preferred stock 0 27,833
Common stock 501 675 1,176 76,920
Paid-in capital 1,174,824 1,174,824 63,900,286
Retained earnings (accumulated deficit) 250,251 (250,251) 0 (39,796,889)
--------------------------------------- ------------
Total liabities and stockholders equity $964,146 $ 4,877,279 $ 5,841,425 $ 63,178,730
======================================= ============
</TABLE>
See accompanying notes to pro forma consolidated financial information.
<PAGE> 5
Response Oncology, Inc. and Subsididaries
Pro Forma Consolidated Statement of Operations
Period Ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Previous
Acquisitions
Historical Subsequent to Pro Forma Pro Forma
Company March 31, 1996 Adjustments Results
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Net revenue $13,340,885 $ 2,830,230 (b) $16,171,115
Other Income 16,729 $ 80,255 (80,255) 16,729
Net patient service revenue 4,037,206 (4,037,206)(a) 0
-------------------------------------------------------------
Total Revenue 13,357,614 4,117,461 (1,287,231) 16,187,844
Expenses:
Operating expenses 10,344,781 2,070,214 (296,990)(a) 12,118,005
General and administrative 1,266,840 150,868 95,766 1,513,474
Depreciation and amortization 570,965 72,889 95,319 (d) 739,173
Interest 192,281 23,328 216,047 (c) 431,656
Provision for doubtful accounts 372,100 0 372,100
-------------------------------------------------------------
Total Expenses 12,746,967 2,317,299 110,142 15,174,408
Earnings before minority interest 610,647 1,800,162 (1,397,373) 1,013,436
Minority interest 94,369 94,369
-------------------------------------------------------------
Net Earnings to common stockholders $ 516,278 $1,800,162 $(1,397,373) $ 919,067
=============================================================
<CAPTION>
Fort Lauderdale Pro Forma Total
Practice Adjustments Pro Forma Pro Forma
----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Net revenue $ 768,667 $768,667 $16,939,782
Other Income 16,729
Net patient service revenue $1,184,387 (1,184,387)
----------------------------------------------------------
Total Revenue 1,184,387 (415,720) 768,667 16,956,511
Expenses:
Operating expenses 1,147,885 (445,995) 701,890 12,819,895
General and administrative 1,513,474
Depreciation and amortization 3,516 69,239 72,755 811,928
Interest 0 431,656
Provision for doubtful accounts 0 372,100
----------------------------------------------------------
Total Expenses 1,151,401 (376,756) 774,645 15,949,053
Earnings before minority interest 32,986 (38,964) (5,978) 1,007,458
Minority interest 5,575 (5,575) 0 94,369
----------------------------------------------------------
Net Earnings to common stockholders $ 27,411 $ (33,389) $(5,978) $ 913,089
==========================================================
</TABLE>
See accompanying notes to pro forma consolidated financial information.
<PAGE> 6
Response Oncology, Inc. and Subsididaries
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Previous
Acquisition
Historical Subsequent to Pro Forma Pro Forma
Company December 31, 1995 Adjustments Results
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Net revenue $44,297,798 $ 15,174,143 (b) $59,471,941
Other Income 282,011 $ 352,353 (352,353) 282,011
Net patient service revenue 22,619,206 (22,619,206)(a) 0
--------------------------------------------------------------
Total Revenue 44,579,809 22,971,559 (7,797,416) 59,753,952
Expenses:
Operating expenses 32,892,728 16,253,432 (3,946,018)(a) 45,200,142
General and administrative 5,512,306 5,512,306
Depreciation and amortization 1,736,055 382,515 835,502 (d) 2,954,072
Interest 16,860 269,114 1,507,268 (c) 1,793,242
Provision for doubtful accounts 2,105,696 77,066 2,182,762
--------------------------------------------------------------
Total Expenses 42,263,645 16,982,127 (1,603,248) 57,642,524
Earnings before minority interest 2,316,164 5,989,432 (6,194,168) 2,111,428
Minority interest 1,806 1,806
--------------------------------------------------------------
Earnings before income taxes 2,314,358 5,989,432 (6,194,168) 2,109,622
Income tax expense 210,000 (210,000)(e) 0
--------------------------------------------------------------
Net earnings 2,314,358 5,779,432 (5,984,168) 2,109,622
Common stock dividend to
preferred stockholders 3,825 3,825
--------------------------------------------------------------
Net earnings to common stockholders $ 2,310,533 $ 5,779,432 $ (5,984,168) $ 2,105,797
==============================================================
<CAPTION>
Fort Lauderdale Pro Forma Total
Practice Adjustments Pro Forma Pro Forma
------------------------------------------------ -----------
<S> <C> <C> <C> <C>
Revenue:
Net revenue $ 3,074,667 (b) $ 3,074,667 $62,546,608
Other Income 0 0 282,011
Net patient service revenue 4,737,546 (4,737,546)(a) 0 0
------------------------------------------------ -----------
Total Revenue 4,737,546 (1,662,879) 3,074,667 62,828,619
Expenses:
Operating expenses 4,591,540 (1,783,981)(a) 2,807,559 48,007,701
General and administrative 0 5,512,306
Depreciation and amortization 14,065 276,958 (d) 291,023 3,245,095
Interest 0 1,793,242
Provision for doubtful accounts 0 2,182,762
------------------------------------------------ -----------
Total Expenses 4,605,605 (1,507,023) 3,098,582 60,741,106
Earnings before minority interest 131,941 (155,856) (23,915) 2,087,513
Minority interest 0 1,806
------------------------------------------------ -----------
Earnings before income taxes 131,941 (155,856) (23,915) 2,085,707
Income tax expense 22,298 (22,298) 0 0
------------------------------------------------ -----------
Net earnings 109,643 (133,558) (23,915) 2,085,707
Common stock dividend to
preferred stockholders 0 3,825
------------------------------------------------ -----------
Net earnings to common stockholders $ 109,643 $ (133,558) $ (23,915) $ 2,081,882
================================================ ===========
See accompanying notes to pro forma consolidated financial information.
</TABLE>
<PAGE> 7
RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The accompanying pro forma consolidated financial information presents the pro
forma financial condition of Response Oncology, Inc. and subsidiaries (the
"Company") as of March 31, 1996 and the results of their operations for the
year ended December 31, 1995 and the three months ended March 31, 1996.
On July 3, 1996, the Company acquired from unaffiliated individual sellers
100% of the issued and outstanding general partnership interest ("the Acquired
Interests") of Southeast Florida Hematology Oncology Group, P.A. ("the Fort
Lauderdale Practice")
The accompanying pro forma consolidated balance sheet includes the acquired
assets, assumed liabilities and effects of financing, as if the Fort Lauderdale
Practice had been acquired on March 31, 1996. The accompanying pro forma
consolidated statements of operations reflect the pro forma results of
operations, as adjusted, as if all acqusition practices held by the Company had
been acquired on January 1, 1995.
PRO FORMA CONSOLIDATED BALANCE SHEET
The adjustments reflected in the pro forma consolidated balance sheet are to
reflect the values of assets acquired and liabilities assumed in connection
with the acquisition of the Fort Lauderdale Practice to reflect the issuance of
long-term debt and cash payment to complete the acquisition; and to reflect the
recording of management service agreements acquired.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
The adjustments reflected in the pro forma consolidated statements of operations
are as follows:
(a) To eliminate certain revenues and expenses of Paonessa that would not
constitute revenue to the Company or be the responsibility of the
Company pursuant to the Service Agreement.
(b) To accrue net revenue resulting from service agreements related to the
acquisition of the Group. Amounts were calculated based upon actual
operating results for the period, as adjusted, under the terms of the
related service agreement.
(c) To reflect interest on the long-term debt issued. Interest was
calculated at the annual rates ranging from 5% to 9.5%.
(d) To record amortization of the intangible asset related to the service
agreements. The assets are amortized over the service agreement
period, or 40 years.
<PAGE> 8
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Rymer, Zaravinos and Faig, M.D., P.A.:
(d/b/a Southeast Florida Hematology -- Oncology Group)
We have audited the accompanying balance sheet of Rymer, Zaravinos and
Faig, M.D., P.A. (d/b/a Southeast Florida Hematology Oncology Group) as of
January 31, 1996, and the related statements of operating, stockholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Rymer, Zaravinos and Faig,
M.D., P.A. (d/b/a Southeast Florida Hematology Oncology Group) as of January
31, 1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
June 14, 1996
<PAGE> 9
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................. $ 111,737 $ 138,658
Accounts receivable, net of allowance for contractual adjustments and
uncollectible amounts of $932,000 at January 31, 1996, and
$913,000 (unaudited) at April 30, 1996............................ 664,966 770,345
Supplies............................................................. 128,836 60,817
Prepaid expenses..................................................... 19,960 26,557
Deposits............................................................. 17,430 17,430
----------- -----------
Total current assets......................................... 942,929 1,013,807
----------- -----------
Furniture and equipment:
Furniture and fixtures............................................... 154,724 156,414
Medical equipment.................................................... 96,026 96,026
Transportation equipment............................................. 38,546 38,546
----------- -----------
289,296 290,986
Less accumulated depreciation........................................ 268,079 270,588
----------- -----------
Net furniture and equipment.................................. 21,217 20,398
----------- -----------
$ 964,146 $ 1,034,205
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................................ $ 326,089 $ 474,646
Accrued employee compensation........................................ 60,189 4,362
Notes payable........................................................ 250,000 184,065
Due to officers...................................................... 7,730 499
Income taxes payable................................................. 58,574
Deferred income taxes................................................ 69,386 30,117
----------- -----------
Total current liabilities.................................... 713,394 752,263
----------- -----------
Stockholders' equity:
Common stock, $1 par value per share; Class A, 1 share authorized
and issued........................................................ 1 1
Common stock, $1 par value per share; Class B, 500 shares authorized
and issued........................................................ 500 500
Retained earnings.................................................... 250,251 281,441
----------- -----------
Total stockholders' equity................................... 250,752 281,942
Commitments and contingencies
----------- -----------
$ 964,146 $ 1,034,205
======== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 10
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE-
YEAR ENDED MONTH PERIOD
JANUARY 31, ENDED APRIL
1996 30, 1996
----------- --------------
(UNAUDITED)
<S> <C> <C>
Net patient revenue.................................................. $ 4,737,546 $1,122,266
Expenses:
Supplies........................................................... 1,327,112 406,517
Operating.......................................................... 613,355 215,826
Physicians' compensation........................................... 1,783,981 302,969
Salaries and benefits.............................................. 867,092 143,950
Depreciation....................................................... 14,065 2,509
----------- --------------
4,605,605 1,071,771
----------- --------------
Income before income taxes................................. 131,941 50,495
Provision for income taxes........................................... 52,237 19,305
----------- --------------
Net income................................................. $ 79,704 $ 31,190
========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 11
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
------ -------- -------------
<S> <C> <C> <C>
Balances, January 31, 1995..................................... $501 $170,547 $ 171,048
Net income........................................... -- 79,704 79,704
------ -------- -------------
Balances, January 31, 1996..................................... 501 250,251 250,752
Net income (unaudited)............................... -- 31,190 31,190
------ -------- -------------
Balances, April 30, 1996 (unaudited)........................... $501 $281,441 $ 281,942
====== ======== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 12
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE-
YEAR ENDED MONTH PERIOD
JANUARY 31, ENDED APRIL
1996 30, 1996
----------- --------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................... $ 79,704 $ 31,190
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation..................................................... 14,065 2,509
Changes in operating assets and liabilities:
Accounts receivables, net...................................... 136,587 (105,379)
Supplies....................................................... 13,234 68,019
Deferred income taxes.......................................... 29,939 (39,269)
Prepaid expenses............................................... 1,056 (6,597)
Accounts payable and accrued expenses.......................... (361,065) 148,557
Income taxes payable........................................... -- 58,574
Accrued employee compensation.................................. (48,830) (55,827)
----------- --------------
Net cash used in operating activities....................... (135,310) 101,777
----------- --------------
Cash flows from investing activity:
Expenditures for furniture and equipment............................ (1,063) (1,690)
----------- --------------
Net cash used in investing activity......................... (1,063) (1,690)
----------- --------------
Cash flows from financing activities:
Repayment of notes payable.......................................... (60,000) (65,935)
Proceeds from notes payable......................................... 250,000 --
Repayment of debt -- officers....................................... (19,837) (7,231)
----------- --------------
Net cash provided by financing activities................... 170,163 (73,166)
----------- --------------
Net increase in cash........................................ 33,790 26,921
Cash, beginning....................................................... 77,947 111,737
----------- --------------
Cash, end............................................................. $ 111,737 $ 138,658
========= ==========
Supplemental disclosure of cash flow information:
Cash payments for interest.......................................... $ 2,550 $ 4,430
========= ==========
Cash payments for taxes............................................. $ 22,298 $ --
========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 13
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED INTERIM FINANCIAL INFORMATION
The balance sheet as of April 30, 1996 and the related statements of
operations, shareholders' equity and cash flows for the three-month period ended
April 30, 1996 (1996 interim financial information) have been prepared by Rymer,
Zaravinos and Faig, M.D., P.A. (d/b/a Southeast Florida Hematology -- Oncology
Group) (the "Company") and are unaudited. In the opinion of the Company, the
1996 interim financial information includes all adjustments, consisting of only
normal recurring adjustments, necessary for a fair statement of the results of
the 1996 interim period.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the 1996 interim financial information. The
1996 interim financial information should be read in conjunction with the
Company's January 31, 1996 audited financial statements appearing herein. The
results for the three months ended April 30, 1996 may not be indicative of
operating results for the full year.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(a) Description of Business
The Company was incorporated on May 21, 1979 in the state of Florida. The
Company is a medical group practice whose physicians specialize in providing
services to patients with cancer.
(b) Net Revenue
Net revenue primarily consists of charges for patient services rendered by
the physicians based on established billing rates less allowance and discounts
for patients covered by contractual programs. Payments received under these
programs, which are generally based on predetermined rates, are generally less
than the established billing rates, and the differences are recorded as
contractual allowance or policy discounts. Net patient service revenue is net of
contractual adjustments and policy discounts of approximately $2,000,000 for the
year ended January 31, 1996 and $632,000 for the three-month period ended April
30, 1996 (unaudited).
(c) Accounts Receivable
Accounts receivable consists primarily of receivables from patients and
third-party payors. In the normal course of providing healthcare services, the
Company grants credit to patients, substantially all of whom are resident in the
south Florida area. The Company does not generally require collateral or other
security in extending credit to patients; however, it routinely obtains
assignments of (or is otherwise entitled to receive) patients' benefits payable
under their health insurance programs, plans or policies (for example, Medicare,
Medicaid, health maintenance organizations, preferred provider organizations and
commercial insurance policies).
The majority of the Company's net revenue and receivables is from
third-party payment programs. At January 31, 1995, approximately 97 percent of
total revenue and receivables consists of amounts from Medicare (26 percent),
various commercial plans (37 percent) and private pay patients (34 percent).
(d) Supplies
Supplies consists of pharmaceuticals and medications which are stated at
the lower of cost or market on a first-in, first-out basis.
<PAGE> 14
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation for equipment is
calculated using the straight-line method over the estimated useful lives of the
assets, as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
------------
<S> <C>
Furniture and fixtures........................................ 7 years
Medical equipment............................................. 5-7 years
Transportation equipment...................................... 5 years
</TABLE>
(f) Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("Statement 109"). Statement 109 requires the
asset and liability method of accounting for income taxes. Under the asset and
liability method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying accounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of patients' accounts receivable, investments,
accounts payable, notes payable, accrued expenses and accrued employee
compensation approximate fair value because of the short maturity of these
instruments.
(3) EMPLOYEE BENEFIT PLANS
The Company has a Qualified Defined Contribution Pension and A Profit
Sharing Plan, which covers substantially all employees. Employees become
eligible to participate in the plans after one year of full service and have
attained the age of 21 years. Under the Defined Contribution Plan, the Company,
for each plan year, contributes an amount equal to 8 percent of each
participants annual compensation, and 5.7 percent of the participants excess
compensation as defined by the plan agreement. Total company contributions for
year ended January 31, 1996 and the three-month period ended April 30, 1996
(unaudited) were $88,000 and $-0-, respectively.
The contributions to the Profit Sharing Plan are discretionary, which are
established by the board of directors. For the year ended January 31, 1996 and
the three-month period ended April 30, 1996 (unaudited) the Company did not make
any contributions to the Plan.
<PAGE> 15
RYMER, ZARAVINOS AND FAIG, M.D., P.A.
(D/B/A SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) NOTE PAYABLE
The note payable to bank bears interest at a rate of prime plus 1.650
percent and becomes due in January of 1997. The note is secured by the Company's
deposits and bank accounts serviced by the lender.
(5) INCOME TAXES
Income tax expense for the year ended January 31, 1996 and the three-month
period ended April 30, 1996 is summarized as follows:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Current:
Federal...................................................... $19,585 $ 50,472
State........................................................ 2,713 8,102
----------- -----------
22,298 58,574
----------- -----------
Deferred:
Federal...................................................... 25,577 (35,634)
State........................................................ 4,362 3,635
----------- -----------
29,939 (39,269)
----------- -----------
$52,237 $ 19,305
======== =========
</TABLE>
A reconciliation of the effective income tax rate for the year ended
January 31, 1996 and the three-month period ended April 30, 1996 is as follows:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Computed "expected" tax expense (benefit)...................... 35.00 35.00
State income tax, net of federal benefit....................... 3.44 3.23
Change in valuation allowance.................................. -- --
----------- -----------
Total................................................ 38.44 38.23
======== =========
</TABLE>
The tax effects of temporary differences that give rise to a significant
portion of the deferred tax assets and deferred tax liabilities for the year
ended January 31, 1996 and the three-month period ended April 30, 1996 are as
follows:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1996 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax liabilities:
Revenue and expenses recognized for financial reporting
purposes in a different period than for income tax
purposes.................................................. $69,386 $30,117
----------- -----------
Net deferred tax liabilities......................... $69,386 $30,117
======== =========
</TABLE>
Revenue and expenses recognized for financial reporting purposes in a
different period than for income tax purposes.
<PAGE> 16
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.
SEAFIELD CAPITAL CORPORATION
Dated: July 19, 1996 By: /s/ Steven K. Fitzwater
-----------------------------------------
Steven K. Fitzwater
Vice President, Chief
Accounting Officer
and Secretary
<PAGE> 1
Exhibit 99.1
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
RESPONSE ONCOLOGY, INC.,
AND
STOCKHOLDERS OF RYMER, ZARAVINOS & FAIG, M.D., P.A.
JULY 1, 1996
================================================================================
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of July 1, 1996, by and among
RESPONSE ONCOLOGY, INC., a Tennessee corporation (the "Purchaser"), and THE
STOCKHOLDERS OF RYMER, ZARAVINOS AND FAIG, M.D., P.A., each of whom, together
with his or her state of residence and address, is listed on Exhibit A hereto
(collectively, the "Sellers" and, individually, a "Seller").
W I T N E S S E T H:
WHEREAS, the Sellers own in the aggregate 100% of the issued and
outstanding shares (the "Shares") of the common stock of Rymer, Zaravinos &
Faig, M.D., P.A., a Florida professional association (the "Corporation"); and
WHEREAS, the Sellers desire to sell and Purchaser desires to purchase the
Shares on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and promises herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. DEFINITIONS. The following terms, as used herein, have the following
meanings:
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses which, in the
aggregate, would have a material adverse effect on the financial condition or
results of operations of the Corporation or the Purchaser.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local or foreign law.
"Applicable Rate" means the corporate base rate of interest announced from
time to time by NationsBank of Tennessee, N.A., Nashville, Tennessee plus two
percent (2%).
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction of which any Seller has Knowledge that forms or
could form the basis for any specified consequence.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
"Corporation" has the meaning set forth in the first recital above.
1
<PAGE> 3
"Deferred Intercompany Transaction" has the meaning set forth in Treasury
Regulation Section 1.1502-13.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Occupational Safety and Health Act
of 1970, the Medical Waste Tracking Act of 1988, the U. S. Public Vessel
Medical Waste Anti-Dumping Act of 1988, the Marine Protection, Research and
Sanctuaries Act and Human Services, National Institute for Occupational Safety
and Health, Infections Waste Disposal Guidelines, Publication No. 88-119, each
as amended, together with all other laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof) concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of medical wastes,
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Treasury Regulation
Section 1.1502-19.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statements" has the meaning set forth in Section 4(f) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Group" means Southeast Florida Hematology Oncology Associates, P.A., a
Florida professional association wholly owned by the Sellers.
"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.
2
<PAGE> 4
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4(f) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 4(f)
below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(f)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Party" means the Purchaser or any Seller.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Pro Rata" means one-third (1/3).
"Purchase Price" has the meaning set forth in Section 2(a) below.
"Purchaser" has the meaning set forth in the initial paragraph of this
Stock Purchase Agreement and, after Closing (and as relates to Section 9(b)
regarding indemnification), shall mean Response Oncology, Inc. and any
subsidiary or affiliate thereof.
"Purchaser's Disclosure Letter" has the meaning set forth in Section 3(b)
below.
"Receivables" means the amount, in dollars, of the Corporation's accounts
receivable as of the close of business on the day prior to the Closing Date,
net of contractual adjustments, courtesy discounts and other historical
adjustments.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Response Stock" means the common stock of the Purchaser, $.01 par value
per share.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
3
<PAGE> 5
"Seller" has the meaning set forth in the preface above.
"Sellers' Disclosure Letter" has the meaning set forth in Section 3(a)
below.
"Shares" means all of the issued and outstanding shares of all classes of
the Common Stock of the Corporation.
"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.
2. PURCHASE AND SALE OF SHARES.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase from the Sellers, and the
Sellers agree to sell to the Purchaser, all of the Shares for an aggregate
price (the "Purchase Price") of Seven Million Three Hundred Fifty Thousand
Dollars ($7,350,000.00), plus Receivables and minus Liabilities of the
Corporation as of the Closing Date.
(b) Payment of Purchase Price. The Purchaser shall pay or satisfy the
Purchase Price in the following manner: (i) Five Million Eight Hundred Eighty
Thousand Dollars ($5,880,000.00), plus Receivables minus Liabilities in cash to
the Sellers at Closing (hereinafter defined), (ii) issuance and delivery of
117,600 shares of Response Stock to the Sellers, with all of the foregoing to
be distributed Pro Rata to the Sellers. For purposes of this subsection (b),
the Receivables balance as of the Closing Date shall be $760,000. In the event
that the Purchaser shall collect more than said Receivables balance after
Closing, then the Purchaser shall remit such excess to the Sellers, Pro Rata,
upon receipt as additional Purchase Price. In the event that the Purchaser
shall collect less than said Receivables balance after Closing, then the amount
of Receivables for purposes of this Agreement shall be deemed $760,000.
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Geiger, Kasdin,
Heller, Kuperstein, et. al., 1428 Brickell, 6th Floor, Miami, Florida
commencing at 9:00 a.m. local time on July 3, 1996, or such other date as the
Purchaser and the Sellers may mutually determine (the "Closing Date");
provided, however, that the Closing Date shall be no later than September 1,
1996.
(d) Deliveries at the Closing. At the Closing, (i) the Purchaser will
deliver to the Sellers the various certificates, instruments, and documents
referred to in Section 8(a) below, (ii) the Sellers will deliver to the
Purchaser the various certificates, instruments, and documents referred to in
Section 8(b) below.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
4
<PAGE> 6
(a) Representations and Warranties of the Sellers. The Sellers jointly
and severally represent and warrant to the Purchaser that the statements
contained in this Section 3(a) are correct and complete as of the date of this
Agreement with respect to the Sellers, except as set forth in the disclosure
letter executed and delivered by the Sellers contemporaneous with this
Agreement (the "Sellers' Disclosure Letter""). The Sellers' Disclosure Letter
shall be satisfactory to the Purchaser and its counsel and will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3(a) and Section 4.
(i) Authorization of Transaction. Each Seller has the requisite
legal capacity and has full power and authority to execute and deliver
this Agreement and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of each Seller,
enforceable in accordance with its terms and conditions. No Seller is
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Person in order to consummate
the transactions contemplated by this Agreement , or, if any such filing,
authorization, consent or approval is required, the same has been or, as
of the Closing Date, shall have been made or obtained. This Agreement
constitutes the valid and legally binding obligation of each Seller,
enforceable in accordance with its terms, subject to applicable
bankruptcy, moratorium, insolvency and other laws affecting the rights of
creditors and general equity principles.
(ii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any Seller is
subject or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which any Seller is a party or by which he is bound or to which any of
his assets is subject.
(iii) Brokers' Fees. The Sellers have no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the
Purchaser could become liable or obligated.
(iv) Shares. Each Seller holds of record and owns beneficially all
of the Shares free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws),
Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. No Seller is a party to any
option, warrant, purchase right, or other contract or commitment that
could require the Seller to sell, transfer, or otherwise dispose of any
capital stock of the Corporation (other than this Agreement). No Seller
is a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any Shares.
(b) Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to each Seller that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement except
as set forth in the disclosure letter executed and delivered by the Purchaser
contemporaneous with this Agreement (the "Purchaser's Disclosure Letter").
(i) Organization of the Purchaser. The Purchaser is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of Tennessee.
(ii) Authorization of Transaction. The Purchaser has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, subject to
applicable bankruptcy, moratorium, insolvency and other laws affecting
the rights of creditors and general equity principles. The Purchaser
need not give any
5
<PAGE> 7
notice to, make any filing with, or obtain any authorization, consent,
or approval of any Person in order to consummate the transactions
contemplated by this Agreement, or, if any such filing, authorization,
consent or approval is required, the same has been or, as of the Closing
Date, shall have been made or 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
Seller could become liable or obligated.
(v) Investment. The Purchaser is not acquiring the Shares with a
view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE CORPORATION. The
Sellers , jointly and severally, represent and warrant to the Purchaser that
the statements contained in this Section 4 are true, correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Section 4), except as set forth in
the Sellers' Disclosure Letter. Nothing in the Sellers' Disclosure Letter
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the Sellers' Disclosure Letter identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. The Sellers' Disclosure Letter will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
(a) Organization, Qualification, and Corporate Power. The Corporation is
a business corporation duly organized, validly existing, and in good standing
under the laws of the State of Florida. The Corporation is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. The Corporation has full corporate power
and authority and all licenses, permits, and authorizations necessary to carry
on the business in which it is engaged and to own and use its properties.
Paragraph 4(a) of the Sellers' Disclosure Letter lists the directors and
officers of the Corporation. The Sellers have delivered to the Purchaser
correct and complete copies of the charter and bylaws of the Corporation (as
amended to date). The minute book (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate book, and the stock record book of the
Corporation are correct and complete. The Corporation is not in default under
or in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the
Corporation consists of one (1) share of Class A common stock, $1.00 par value
per share, which is issued and outstanding, and five hundred shares of Class B
common stock, $1.00 par value per share, all of which is issued and
outstanding. All of the issued and outstanding Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the Sellers. There are no outstanding or authorized options,
warrants, purchase rights, preemptive rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Corporation to issue, sell, or otherwise cause to become outstanding any of
its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Corporation. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Corporation.
6
<PAGE> 8
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Corporation is subject or any
provision of the charter or bylaws of the Corporation or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Corporation is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). The Corporation
is not required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Person in order for the Parties to
consummate the transactions contemplated by this Agreement, or, if any such
filing, authorization, consent or approval is required, the same has been or,
as of the Closing Date, shall have been made or obtained.
(d) Brokers' Fees. The Corporation has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(e) Title to Assets. The Corporation has good and marketable title to,
or a valid leasehold interest in, all of its properties and assets, free and
clear of all Security Interests, and has not sold, transferred, exchanged or
conveyed any of its properties and assets since the date of the Most Recent
Balance Sheet except for properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet.
(f) Financial Statements. Attached as collective Paragraph 4(f) to the
Sellers' Disclosure Letter are the following financial statements (collectively
the "Financial Statements"): as of and for the fiscal year ended January 31,
1996 (the "Most Recent Fiscal Year End") for the Corporation; and (the "Most
Recent Financial Statements") as of and for the three (3) months ended April
30, 1996 (the "Most Recent Fiscal Month End") for the Corporation. The
Financial Statements (i) are materially accurate, correct and complete based on
the income tax basis of accounting; (ii) are prepared on the income tax basis
of accounting in accordance with the books of account and records of the
Corporation; and (iii) fairly present the assets, liabilities and equity and
revenues and expenses, income tax basis, of the Corporation for the periods
presented.
(g) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Corporation. Without limiting the generality of the foregoing,
since that date:
(i) the Corporation 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 Corporation has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $25,000.00 or outside the
Ordinary Course of Business;
(iii) no party (including the Association) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $25,000.00 to which the Corporation is a
party or by which the Corporation or its properties are bound;
(iv) the Corporation has not created, suffered or permitted to
attach or be imposed any Security Interest upon any of its assets,
tangible or intangible;
(v) the Corporation 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;
7
<PAGE> 9
(vi) the Corporation 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 Corporation 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 Corporation has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) the Corporation has not canceled, 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 Corporation has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of the Corporation;
(xii) the Corporation has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xiii) the Corporation has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiv) the Corporation has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property;
(xv) the Corporation has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) the Corporation 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 Corporation has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii) the Corporation has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xix) the Corporation has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xx) the Corporation has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
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(xxi) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Corporation; and
(xxii) the Corporation has not committed to any of the foregoing.
(h) Undisclosed Liabilities. The Corporation 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 Corporation that
may result in any Liability), except for (i) Liabilities set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto); (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business and (iii) Liabilities described with particularity
in Paragraph 4(h) of the Sellers' Disclosure Letter (and, with
respect to each Liability described in items (i) through (iii) immediately
above, none of which results from, arises out of, relates to, is in the nature
of, or was caused by any breach of contract, breach of warranty, tort,
malpractice, infringement, or violation of law).
(i) Legal Compliance. The Corporation and its respective predecessors
and Affiliates have complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
(j) Tax Matters.
(i) The Corporation has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects.
All Taxes owed by the Corporation (whether or not shown on any Tax
Return) through the Closing Date have been duly paid or accrued. The
Corporation 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 Corporation does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of either the Corporation that
arose in connection with any failure (or alleged failure) to pay any Tax.
(ii) The Corporation has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other
third party.
(iii) Neither the Sellers nor any director or officer (or employee
responsible for Tax matters) of the Corporation expects any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability of
the Corporation either (A) claimed or raised by any authority in writing
or (B) as to which the Sellers or the directors and officers (and
employees responsible for Tax matters) of the Corporation have Knowledge.
Paragraph 4(j) of the Sellers' Disclosure Letter lists all federal,
state, local, and foreign income Tax Returns filed with respect to the
Corporation for taxable periods ended on or after December 31, 1992,
indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The Sellers have
delivered to the Purchaser correct and complete copies of all examination
reports and statements of deficiencies assessed against or agreed to by
the Corporation since December 31, 1991.
(iv) The Corporation has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Corporation has not filed a consent under Code Section
341(f) concerning collapsible corporations. The Corporation has not made
any payment, is not obligated to make any payment, or is not a party to
any agreement that under certain circumstances could obligate it to make
any payments that will
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not be deductible under Code Section 280G. The Corporation has not
been a United States real property holding corporation within the meaning
of Code Sec. 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). The Corporation has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Code Section 6662. The Corporation is not a party to any Tax allocation
or sharing agreement. The Corporation (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return or (B)
has no Liability for the Taxes of any Person (other than of the
Corporation under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(vi) Paragraph 4(j) of the Sellers' Disclosure Letter sets forth
the following information with respect to the Corporation as of the most
recent practicable date: (A) the depreciation schedule attached to the
Corporation's most recent tax return; and (B) the amount of any net
operating loss, net capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution.
(k) Real Property. The Corporation does not own any real property and
has not executed and delivered or otherwise entered into any contract to
purchase any real property. As of the Closing Date, the Purchaser and a owners
comprised of the Sellers have executed and delivered a new lease for the office
facilities at 5700 North Federal Highway, Suite 5, Fort Lauderdale, Florida
33308.
(l) Tangible Assets. The Corporation owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
its business as presently conducted. The Corporation has received with respect
to all such buildings, machinery, and equipment all approvals of governmental
authorities (including licenses, permits and certificates of need) required in
connection with the operation thereof, and the same have been operated and
maintained in accordance with applicable laws, rules, and regulations
(m) Inventory. The inventory of the Corporation consists of medical
supplies and pharmaceuticals, all of which is merchantable and fit for the
purpose for which it was procured or manufactured.
(n) Contracts. Paragraph 4(n) of the Sellers' Disclosure Letter lists
the following contracts and other agreements to which the Corporation is a
party:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $25,000.00 per annum;
(ii) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result in a loss to the Corporation, or involve consideration in excess
of $25,000.00;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which the
Corporation has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation, in
excess of $25,000.00 or under which it has imposed a Security Interest on
any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with either the Sellers or their Affiliates
(other than the Association);
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(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000.00 or providing severance benefits;
(x) any agreement under which the Corporation has advanced or loaned
any amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Corporation; or
(xii) any other agreement (or group of related agreements, except
contracts with third party payors) the performance of which involves
consideration in excess of $25,000.00.
The Sellers have delivered to the Purchaser a correct and complete copy of each
written agreement in the possession of the Sellers or the Corporation listed in
Paragraph 4(n) of the Sellers' Disclosure Letter (as amended to date), and each
written agreement in the possession of the Corporation with third party payors,
and a written summary setting forth the terms and conditions of each oral
agreement referred to in Paragraph 4(n) of the Sellers' Disclosure Letter.
With respect to each such agreement: (1) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (2) the agreement will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (3) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (4) no
party has repudiated any provision of the agreement.
(o) Accounts Receivable. All accounts receivable of the Corporation
are valid receivables subject to no setoffs or counterclaims except contractual
adjustments within arrangements with third-party reimbursers and other
adjustments customarily made by the Corporation's third party reimbursers.
(p) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Corporation.
(q) Insurance. Paragraph 4(q) of the Sellers' Disclosure Letter sets
forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, medical
malpractice, and workers' compensation coverage and bond and surety
arrangements) to which the Corporation has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past five (5)
years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate)
of coverage; and
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(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is in full force and
effect; (B) the policy will continue to be in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby unless and until canceled by the Purchaser; (C) neither the Corporation
nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or acceleration, under
the policy; and (D) no party to the policy has repudiated any provision
thereof. The Corporation has been covered during the past five (5) years by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. Paragraph 4(q) of the
Sellers' Disclosure Letter describes any self-insurance arrangements affecting
the Corporation.
(r) Litigation. Section 4(r) of the Sellers' Disclosure Letter sets
forth each instance in which either the Corporation (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(r) of the Sellers' Disclosure Letter
could result in any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of the
Corporation . Neither the Sellers nor the directors and officers (and
employees with responsibility for litigation matters) of the Corporation has
any reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Corporation .
(s) Employees. To the best of the Sellers' Knowledge, no physician, key
employee, or group of employees has any plans to terminate employment with the
Corporation . The Corporation is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances filed
pursuant to any work rules of any organized labor organization, claims of
unfair labor practices, or other collective bargaining disputes. To the best
of the Sellers' Knowledge, the Corporation has not committed any unfair labor
practice. To the best of the Sellers' Knowledge, no organizational effort is
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Corporation.
(t) Employee Benefits.
(i) Paragraph 4(t) of the Sellers' Disclosure Letter lists each
Employee Benefit Plan that the Corporation maintains or to which the
Corporation contributes or has contributed prior to closing.
(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 Corporation. All premiums
or
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other payments for all periods ending on or before the Closing
Date have been paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Sec. 401(a) and has received, within the last two years,
a favorable determination letter from the Internal Revenue Service.
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than
any Multiemployer Plan) equals or exceeds the present value of all
vested and nonvested Liabilities thereunder determined in
accordance with PBGC methods, factors, and assumptions applicable
to an Employee Pension Benefit Plan terminating on the date for
determination.
(F) The Sellers have delivered to the Purchaser correct and
complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from
the Internal Revenue Service, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts, and
other funding agreements which implement each such Employee Benefit
Plan.
(ii) With respect to each Employee Benefit Plan that the Corporation
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
(A) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of
any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other
than routine claims for benefits) is pending or threatened. Neither
the Sellers nor the directors and officers (and employees with
responsibility for employee benefits matters) of the Corporation has
any Knowledge of any Basis for any such action, suit, proceeding,
hearing, or investigation.
(iii) The Corporation does not contribute to, has never contributed
to, and has not been required to contribute to any Multiemployer Plan or
has any Liability (including withdrawal Liability) under any
Multiemployer Plan.
(iv) The Corporation does not maintain, has never maintained, has
never contributed, and has not been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or
other welfare-type benefits for retired or terminated employees (either
current or future), their spouses, or their dependents (other than in
accordance with Code Sec. 4980B).
(u) Guaranties. The Corporation is not a guarantor or is not otherwise
liable for any Liability or obligation (including indebtedness) of any other
Person.
(v) Environment, Health, and Safety.
(i) Each of the Sellers, the Corporation and their respective
Affiliates has complied with all Environmental, Health, and Safety Laws,
and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply. Without limiting the
generality of the preceding sentence, each of the Sellers, the
Corporation and their respective Affiliates has obtained and been in
compliance with all of the terms and conditions of all permits, licenses,
and other authorizations which are required under, and has complied
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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 Corporation has no Liability (and none of the Sellers, the
Corporation and their respective Affiliates has handled or disposed of
any substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could form the Basis
for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the
Corporation giving rise to any Liability) for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of the
Sellers, the Corporation and their respective Affiliates have been free
of asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(w) Healthcare Compliance. To the best of the Sellers' knowledge,
neither the Corporation nor any physician associated with or employed by the
Corporation 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. Section 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. To the best of the
Sellers' knowledge, no Physician associated with or employed by the Corporation
has made any referral of any patient to any entity in which such Physician or a
member of his or her immediate family has any ownership or investment interest
or with which such Physician or family member has any financial relationship in
violation of 42 U.S.C. Section 1395 nn of any state law prohibiting referrals
to such entities. The Corporation and/or each physician employed thereby is
participating in or otherwise authorized to receive reimbursement from or is a
party to Medicare, Medicaid, and other third-party payor programs. All
necessary certifications and contracts required for participation in such
programs are in full force and effect and have not been amended or otherwise
modified, rescinded, revoked or assigned and, to the best of the Sellers'
Knowledge, no condition exists or event has occurred which in itself or with
the giving of notice or the lapse of time or both would result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such third
party payor program. The Corporation is in full compliance with the
requirements of all such third party payor programs applicable thereto.
(x) Fraud and Abuse. To the best of the Sellers' knowledge, the
Corporation and persons and entities providing professional services for the
Corporation have not engaged in any activities which are prohibited under 42
U.S.C. Section 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
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such remuneration (A) in return for referring an individual to a
person for the furnishing or arranging for the furnishing or any item or
service for which payment may be made in whole or in part by Medicare or
Medicaid, or (B) in return for purchasing, leasing, or ordering or
arranging for or recommending purchasing, leasing, or ordering any good,
facility, service or item for which payment may be made in whole or in
part by Medicare or Medicaid.
(y) Facility Compliance. The Corporation is duly licensed, and the
Corporation and its clinics, offices and facilities are lawfully operated in
accordance with the requirements of all applicable laws and certificates of
need and has all necessary authorizations and certificates of need for their
use and operation, all of which are in full force and effect. There are no
outstanding notices of deficiencies relating to the Corporation or any
physician employed thereby issued by any governmental authority or third party
payor requiring conformity or compliance with any applicable law or condition
for participation of such governmental authority or third party payor, and
after reasonable and independent inquiry and due diligence and investigation,
the Corporation has no Knowledge or reason to believe that such necessary
authorizations may be revoked or not renewed in the ordinary course.
(z) Disclosure. The representations and warranties contained in this
Section 4 and in the Sellers' Disclosure Letter do not contain any untrue or
misleading statement of a fact.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its best efforts to
take all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction of the closing conditions set forth in Section 7 below).
(b) Notices and Consents. The Sellers will cause the Corporation to
give any notices to third parties, and will cause the Corporation to use its
best efforts to obtain any third-party consents, that may be required by law or
the terms of any contract to which the Sellers may be subject or that the
Purchaser may request in connection with the transaction contemplated by this
Agreement. Each of the Parties will (and the Sellers will cause the Corporation
to) give any notices to, make any filings with, and use its best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies required to consummate the transaction contemplated by
this Agreement.
(c) Operation of Business. The Sellers will not cause or permit the
Corporation to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Sellers will not cause or permit the
Corporation to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock or (ii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 4(g) above.
(d) Preservation of Business. The Sellers will cause the Corporation to
keep its properties substantially intact, including its present physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, and employees.
(e) Full Access. The Sellers will permit, and the Sellers will cause the
Corporation to permit, representatives of the Purchaser to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Corporation, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Corporation. In that regard, the Sellers will cause the
Corporation to permit the independent accountants for the Purchaser to conduct
such audits of the financial statements of the Corporation as the Purchaser
shall elect or be required to obtain, and shall cause the accounting personnel
of the Corporation to assist such accountants in the preparation for and
conduct of such audit.
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(f) Notice of Developments. The Sellers will give prompt written notice
to the Purchaser of any material adverse development of which any of them
learns which would constitute or otherwise cause a breach of any of the
representations and warranties in Section 4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in Section 3
above. No disclosure by any Party pursuant to this Section 5(f), however,
shall be deemed to amend or supplement the Sellers' Disclosure Letter or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g) Exclusivity. For so long as this Stock Purchase Agreement shall
remain in effect, the Sellers will not (and the Sellers will not cause or
permit the Corporation to) (i) solicit, initiate, or encourage the submission
of any proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets of, the Corporation (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Sellers will not vote their
Shares in favor of any such acquisition structured as a merger, consolidation,
or share exchange. The Sellers will notify the Purchaser immediately if any
Person makes any proposal, offer, inquiry, or contact with respect to any of
the foregoing.
(h) Release from Personal Guaranties. The Purchaser shall use its best
efforts to obtain the release of each Seller from any personal guarantee of any
obligation of the Corporation. Failure of the Purchaser to obtain any such
release shall not be a breach of this Agreement or otherwise, without the
existence of a separate breach hereof, excuse any Seller from performance
hereunder.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all at
the sole cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefor under Section 9 below). The Sellers
acknowledge and agree that from and after the Closing the Purchaser will be
entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the
Corporation.
(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 Corporation or any Seller, each of the other
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Section 9 below).
(c) Transition. The Sellers will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Corporation from maintaining the
same business relationships with the Corporation or the Group after the Closing
as it maintained with the Corporation prior to the Closing. The Sellers will
refer all inquiries relating to the businesses of the Corporation to the
Purchaser from and after the Closing.
(d) Name Change. At the time of Closing, the Purchaser shall cause the
name of the Corporation to be changed to something distinguishable, within the
meaning of the corporation statutes of the state of Florida, from
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<PAGE> 18
the name of the Corporation and shall execute, deliver and/or cause to
be filed such documents or instruments that may be necessary to permit the
Group to change its name to and to do business under the name "Southeast
Florida Hematology Oncology Group, P.A."
(e) Custody of Patient Records. The Purchaser shall maintain custody of
all existing records, files, charts, x-ray files and similar data pertaining to
each patient in accordance with Applicable Laws and canons of professional
ethics.
7. CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE.
(a) Conditions to Obligation of the Purchaser. The obligation of the
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(a) and
Section 4 above shall be true and correct in all material respects at and
as of the Closing Date;
(ii) the Sellers shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) the Sellers shall have caused the Corporation to make all
filings, give all notices and procure all of the third party consents and
authorizations specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation,
(C) affect adversely the right of the Purchaser to own the Shares and to
control the Corporation, or (D) affect adversely the right of the
Corporation to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the Sellers and the Corporation shall have delivered to the
Purchaser a certificate to the effect that each of the conditions
specified above in Section 7(a)(i)-(iv) is satisfied in all respects;
(vi) the Purchaser shall have received the resignations, effective
as of the Closing, of each director and officer of the Corporation other
than those whom the Purchaser shall have specified in writing at least
five business days prior to the Closing;
(vii) the Purchaser shall have received from Geiger, Kasdin, Heller,
Kuperstein, Chames & Weil, P.A., counsel to the Sellers and the
Corporation, 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; and
(viii) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinion, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and
substance to the Purchaser.
The Purchaser may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
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<PAGE> 19
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Purchaser shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation
(and no such injunction, judgment, order, decree, ruling, or charge shall
be in effect);
(iv) the Purchaser shall have delivered to the Sellers a certificate
to the effect that each of the conditions specified above in Section
7(b)(i)-(iii) is satisfied in all respects; and
(v) all actions to be taken by the Purchaser in connection with
consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Sellers.
The Sellers may waive any condition specified in this Section 7(b) if they
execute a writing so stating at or prior to the Closing.
8. DELIVERIES AT CLOSING.
(a) Documents to be Delivered by the Purchaser. At the Closing, the
Purchaser shall deliver the following instruments and documents to the Sellers
or other appropriate party:
(i) certificates representing 117,600 shares of Response Stock
issuable to the Sellers pursuant to Section 2(b) above;
(ii) the certificate described in Section 7(b)(iv) above; and
(iii) such other documents as the Sellers may reasonably request to
affect the transactions contemplated by this Agreement.
(b) Documents to be Delivered by the Seller. At the Closing, the Sellers
shall deliver the following instruments and documents to the Purchaser:
(i) stock certificates representing all of the Shares, endorsed in
blank or accompanied by duly executed assignment documents;
(ii) a certificate of existence from the Florida Secretary of State
evidencing the existence and good standing of the Corporation, dated not
more than five (5) days prior to the Closing Date;
(iii) all consents necessary regarding the transaction contemplated
by this Agreement;
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<PAGE> 20
(iv) the opinion of counsel to the Sellers, in a form reasonably
satisfactory to the Purchaser's counsel, required by Section 7(a)(vii)
above;
(v) the Certificate described in Section 7(a)(v) above; and
(vi) such other documents as the Purchaser may reasonably request to
affect the transactions contemplated by this Agreement.
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of three (3) years thereafter
(subject to reduction by any applicable statutes of limitations); provided,
however, that with respect to Federal and state tax matters, such survival
period shall be equal to the statute of limitations (without regard to any
extension by the Purchaser following Closing) for assessment of additional
taxes.
(b) Indemnification Provisions for Benefit of the Purchaser. In the
event any of the Sellers breaches (or in the event any third party alleges
facts that, if true, would mean the Seller has breached) in a manner that
materially adversely affects the Purchaser any of such Seller's
representations, warranties, and covenants contained herein and, provided that
the Purchaser makes a written claim for indemnification against the Seller
pursuant to Section 9(c)(i) below, then the Sellers , jointly and severally,
agree to indemnify the Purchaser from and against the entirety of any Adverse
Consequences the Purchaser may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences the Purchaser may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or the alleged
breach), or otherwise; provided, however, that if an event for which the
Purchaser shall be entitled to indemnification is directly attributable to a
particular Seller or disproportionately among the Sellers, then the Purchaser
shall first seek satisfaction of any indemnification obligation hereunder from
those Sellers to whom such event is attributable, and shall seek satisfaction
from the other Sellers only after every reasonable effort shall have been made
to recover in the manner hereinabove described..
(c) Matters Involving Third Parties.
(i) If any third party shall notify the Purchaser with respect to
any matter (a "Third Party Claim") which may give rise to a claim for
indemnification under this Section 9, then the Purchaser shall promptly
notify the Sellers thereof in writing; provided, however, that no delay
on the part of the Purchaser in notifying the Sellers shall relieve the
indemnitor from any obligation hereunder unless (and then solely to the
extent) the indemnitor thereby are prejudiced.
(ii) The Sellers will have the right to defend the Purchaser
against the Third Party Claim with counsel of its choice satisfactory to
the Purchaser so long as (A) they notify the Purchaser in writing within
15 days after the Purchaser has given notice of the Third Party Claim
that the Sellers will indemnify the Purchaser from and against the
entirety of any Adverse Consequences the Purchaser may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim, (B) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, , and (C) the
Sellers conduct the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Sellers are conducting the defense of the Third
Party Claim in accordance with Section 9(c)(ii) above, (A) the Purchaser
may retain separate co-counsel at its sole cost and expense and
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<PAGE> 21
participate in the defense of the Third Party Claim, (B) the Purchaser
will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Sellers (not to be withheld unreasonably), and
(C) the Sellers will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the
prior written consent of the Purchaser.
(iv) In the event any of the conditions in Section 9(c)(ii) above is
or becomes unsatisfied, however, (A) the Purchaser may defend against,
and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it may deem
appropriate (and the Purchaser need not consult with, or obtain any
consent from, the Seller in connection therewith), (B) the Sellers will
reimburse the Purchaser promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys' fees and
expenses), and (C) the Sellers will remain responsible for any Adverse
Consequences the Purchaser may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 9.
(d) Determination of Adverse Consequences. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this Section 9. All
indemnification payments under this Section 9 shall be deemed adjustments to
the Purchase Price.
(e) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. The Sellers hereby agree that they will
not make any claim for indemnification against the Corporation by reason of the
fact that they were directors, officers, employees, or agents of the
Corporation or were serving at the request thereof as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought by the Purchaser
against the Sellers (whether such action, suit, proceeding, complaint, claim,
or demand is pursuant to this Agreement, applicable law, or otherwise).
10. TERMINATION.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Purchaser and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Purchaser may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A) in the event
any of the Sellers has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Purchaser has notified the Seller 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 October 1,
1996, by reason of the failure of any condition precedent under Section
7(a) hereof (unless the failure results primarily from the Purchaser
itself breaching any representation, warranty, or covenant contained in
this Agreement); and
(iii) the Sellers 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, any of the
Sellers has 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 October 1,
1996 by reason of the failure of any condition precedent under Section
7(b) hereof (unless the failure results primarily from any
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<PAGE> 22
of the Sellers themselves breaching any representation, warranty, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party.
11. MISCELLANEOUS.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Purchaser and the
Seller; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Parties prior to
making the disclosure).
(b) Arbitration of Disputes; Legal Fees. Any dispute arising under this
Stock Purchase Agreement shall be submitted by the parties to binding
arbitration pursuant to the Florida Uniform Arbitration Act, with any such
arbitration proceeding being conducted in accordance with the rules of the
American Arbitration Corporation. Any arbitration panel presiding over any
arbitration proceeding hereunder is hereby empowered to render a decision in
respect of such dispute, to award costs and expenses (including reasonable
attorney fees) as it shall deem equitable and to enter its award in any court
of competent jurisdiction. Each of the Parties submits to the jurisdiction of
any state or federal court sitting in Fort Lauderdale, Broward County, Florida
for purposes of enforcement of any arbitration award hereunder. Each Party
also agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety, or other security that might be required of any
other Party with respect thereto.
(c) 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.
(d) 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.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Purchaser and the Seller; provided, however, that the
Purchaser may (i) assign any or all of its rights and interests hereunder to
one or more of its Affiliates and (ii) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which cases the
Purchaser nonetheless shall remain responsible for the performance of all of
its obligations hereunder).
(f) 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.
(g) 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.
(h) 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:
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<PAGE> 23
If to the Seller: Copy to:
William Rymer, M.D. Stanley H. Kuperstein, Esq.
5700 North Federal Highway, Suite 5 Geiger, Kasdin, Heller & Kuperstein, P.A.
Fort Lauderdale, Florida 33308 1428 Brickell Ave., 6th Floor
Miami, Florida 33131
If to the Purchaser: Copy to:
Joseph T. Clark John A. Good, Esq.
Response Oncology, Inc. Response Oncology, Inc.
1775 Moriah Woods Blvd. 1775 Moriah Woods Blvd.
Memphis, Tennessee 38117 Memphis, Tennessee 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.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Florida without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Florida or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Florida.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Purchaser and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) 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.
(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.
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<PAGE> 24
(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.
* * * * *
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<PAGE> 25
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on [as
of] the date first above written.
PURCHASER:
Response Oncology, Inc.
By:_______________________________________________
Title:____________________________________________
SELLERS:
__________________________________________________
William Rymer, M.D.
__________________________________________________
Theodore Zaravinos, M.D.
__________________________________________________
Douglas Faig, M.D.
24
<PAGE> 1
Exhibit 99.2
CONFIDENTIAL TREATMENT REQUESTED BY RESPONSE ONCOLOGY, INC.
- -------------------------------------------------------------------------------
SERVICE AGREEMENT
BY AND AMONG
RESPONSE ONCOLOGY OF FT. LAUDERDALE, INC.
SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP, P.A.
AND
STOCKHOLDERS OF SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY ASSOCIATES, P.A.
July 1, 1996
- -------------------------------------------------------------------------------
<PAGE> 2
SERVICE AGREEMENT
THIS SERVICE AGREEMENT dated as of July 1, 1996 by and among RESPONSE
ONCOLOGY OF FT. LAUDERDALE, INC., a Florida corporation ("Response"), SOUTHEAST
FLORIDA HEMATOLOGY ONCOLOGY GROUP, P.A., a Florida professional association
(the "Provider") and THE STOCKHOLDERS OF SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY
ASSOCIATES, P.A. (the "Stockholders").
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, the Provider desires to retain Response to perform the
practice management functions described herein in order to permit the Provider
and its employees 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 July 1, 1996, the
Provider, the Stockholders 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. The Provider shall have absolute control over all matters
pertaining to physician compensation, benefits, vacation, leave time, office
hours, call schedules and other physician-related matters. 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. Section 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 individual Physician Stockholders (as hereinafter defined), tax
planning, and pension and investment planning (and expenses relating solely to
these internal business matters), and hiring, firing and licensing of
Non-Physician Employees (hereinafter defined) shall remain the sole
responsibility of the Provider and the individual Physician Stockholders.
1
<PAGE> 3
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) "Ancillary Clinic Expenses" shall mean all amounts
recorded comprising items described in the definition of Clinic
Expenses below that are directly attributable to the delivery of
Ancillary Services (hereinbelow defined), including interest on
indebtedness incurred by Reponse to finance the delivery of such
Ancillary Services.
(e) "Ancillary Net Operating Income" shall mean the excess
(if any) of Ancillary Revenue over Ancillary Clinic Expenses.
(f) "Ancillary Revenue" shall mean all amounts recorded as
Practice Revenue that are directly attributable to the delivery of
Ancillary Services.
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<PAGE> 4
(g) "Annual Surplus" shall mean (A) Practice Revenue
(hereinafter defined) less Ancillary Revenue, reduced by (B) the sum
of Clinic Expenses (except Ancillary Clinic Expenses), Practice
Retainage and the Base Portion of the Base Service Fee
(h) "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.
(i) "Base Service Fee" shall mean the Base Service Fee as set
forth on Schedule A hereto.
(j) "Base Portion" of the Fixed Portion of the Service Fee
shall have the meaning set forth on Schedule A hereto.
(k) "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.
(l) "Clinic Expenses" shall mean all amounts recorded
comprising the expenses incurred in the operation of any Clinic,
including, without limitation:
(A) Non-Physician Employee Compensation (hereinafter
defined), regardless of by whom paid, 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;
(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 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 disposal.
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 benefiting from such
expenditure as Response shall reasonably determine with the approval
of the Oversight Committee. Clinic Expenses shall not include (i)
Physician Expense, (ii) any corporate overhead charges of Response
(which shall include amortization of any intangible asset related to
this Service Agreement), (iii) any capital expenditures incurred by
Response pursuant hereto, except to the extent provided herein, (iv)
any federal or state income taxes, and (v) any expenses which are
expressly designated herein as expenses or responsibilities of and are
paid by the Provider.
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(m) "Clinic Expense Portion" of the Service Fee shall have
the meaning set forth in Section 8.1 below.
(n) "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.
(o) "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.
(p) "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.
(q) "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 Non-Physician Employees (hereinafter defined), which shall
be a Clinic Expense regardless of who shall pay same.
(r) "Percentage Portion" of the Fixed Portion of the Service
Fee shall have the meaning set forth in Schedule A below.
(s) "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.
(t) "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 Stockholders; (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.
(u) "Physician Services Revenue" shall mean all amounts
recorded as fees and revenue (net of Fee Adjustments and Bad Debt
Allowance) by or on behalf of the Provider or received directly by
Physicians as a result of professional medical services furnished to
patients by Physicians and Non-Physician Employees, whether rendered
in an inpatient or outpatient setting, and excluding any items
approved pursuant to Section 4.2(c) below, and specifically including
amounts paid directly to the Physicians by North Broward Hospital and
VITAS.
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(v) "Practice Retainage" shall mean an amount equal to the
percentage of Practice Revenue (less Ancillary Revenue) set forth on
Schedule A hereto.
(w) "Practice Revenue" shall mean the sum of all amounts
recorded by the Provider as Physician Services Revenue and Capitation
Revenue and other revenue (including chemotherapy and other drug
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,
professional association and any other revenue not derived from the
providing of services by employees of the Provider or Response.
(x) "Service Fee" shall mean the sum of the Base Service Fee
and the Performance Fee (if any).
Other Definitions:
(y) 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.
(z) "Ancillary Services" shall mean diagnostic, treatment or
other medical services that may from time to time be offered by
Provider after the effective date hereof, which were not offered by
the Provider or Response on the effective date hereof, and which are
delivered by the Provider utilizing equipment and other capitalized
assets acquired by Response at a cost in excess of $100,000.
(aa) "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.
(ab) "CHAMPUS" shall mean the Civilian Health and Medical
Program of the Uniformed Services.
(ac) "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.
(ad) "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 7.1 hereof.
(ae) "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.
(af) "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 1395nn and 42 U.S.C.
Section 1320a-7b.
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(ag) "Liquidated Damages Amount" shall mean an amount equal
to the Liquidated Damages Amount set forth on Schedule A hereto.
(ah) "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.
(ai) "Medicare" shall mean any medical program established
under Title VIII of the Social Security Act and administered by the
Health Care Financing Administration.
(aj) "Necessary Authorization" shall mean with respect to the
Provider all Medicare/Medicaid Provider Numbers, 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.
(ak) "Oversight Committee" shall mean a five (5) member
committee established pursuant to Section 4.1. Except as otherwise
provided, the act of a majority of the votes by members of the
Oversight Committee shall be the act of the Oversight Committee. In
the event that one or more of the Provider designees on the Oversight
Committee shall have a conflict with respect to the matter to be voted
on by the Oversight Committee, then the remaining Provider designees
shall have the right to cast the vote of such designee on the matter
under consideration.
(al) "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.
(am) "Physician" shall mean any medical doctor employed by
the Provider or with whom the Provider has entered into independent
contractor or other non-employee relationships.
(an) "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 Florida.
(ao) "Physician Extender Personnel" shall mean employees of
Response who deliver patient care services to the Provider, including
without limitation nurse anesthetists, physician assistants,
registered and licensed practical nurses, nurse practitioners,
psychologists, and other such persons except Physicians and
Non-Physician Employees.
(ap) "Physician Stockholders" shall mean those Physicians who
are from time to time hereafter members of the Provider.
(aq) "Practice Assets" shall have the meaning ascribed to
that term in Section 11.5 of this Agreement.
(ar) "Provider" shall have the meaning set forth in the
initial paragraph hereof.
(as) "Provider Event of Default" shall have the meaning
ascribed to such term in Section 11.4 hereof.
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(at) "Purchase Agreement" shall mean that certain Purchase
Agreement dated as of July 1, 1996 by and among Responseand the
Stockholders.
(au) "Remaining Physician Stockholder" shall mean any
Physician Stockholder who shall have been a Stockholder at the
effective time of this Agreement and who, at any time within one (1)
year prior to the occurrence of a Provider Event of Default shall have
been a Physician Stockholder; provided, however, that such term shall
not include any Stockholder who shall have, within such one year
period, ceased to be a Physician Stockholder by reason of death, total
disability (as defined in the Physician Stockholder's Employment
Agreement), or retirement at age 55 or with the consent of the
Oversight Committee.
(av) "Response" shall mean Response Oncology of Ft.
Lauderdale, Inc., a Florida corporation.
(aw) "Response Event of Default" shall have the meaning
ascribed to such term in Section 11.3 of this Agreement.
(ax) "Stockholder" shall mean each Stockholder of the
Provider as of the date hereof.
(ay) "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.
(az) "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 and make available 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 as hereinafter provided 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. Response shall comply with all terms and provisions of
any lease or other agreement with respect to such facility and 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 equipment, 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
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 or equipment 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.
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ARTICLE 4.
DUTIES OF THE OVERSIGHT COMMITTEE
4.1. Formation and Operation of the Oversight Committee. The parties
shall establish an Oversight Committee which shall be responsible for
developing management and administrative policies for the overall operation of
each Clinic. The Oversight Committee shall consist of five (5) members.
Response shall designate, and shall have the right to remove and replace, in
its sole discretion, two (2) members of the Oversight Committee. The Provider
shall designate, and shall have the right to remove and replace, in its sole
discretion, three (3) members of the Oversight Committee. The Oversight
Committee shall have the authority to adopt bylaws (which shall include the
fixing of a quorum for the conduct of business by the Oversight Committee),
establish regular meeting times and places, call special meetings for any
purpose and elect a chairman and a secretary who shall preside over and record,
respectively, the proceedings at any meeting of the Oversight Committee.
Except as otherwise provided herein, the affirmative vote of a majority of the
members of the Oversight Committee shall be required for approval of any action
taken thereby.
4.2. Duties and Responsibilities of the Oversight Committee. The
Oversight Committee shall have the following duties and obligations:
(a) Capital Improvements and Expansion. Any renovation and
expansion plans and capital equipment expenditures with respect to any
Clinic shall be reviewed and approved by the Oversight Committee and
shall be based upon economic feasibility, physician support,
productivity and then current market conditions.
(b) Annual Budgets. All annual capital and operating budgets
prepared by Response, as set forth in Section 5.2, shall be subject to
the review and approval of the Oversight Committee, which shall have
the authority to reject individual items in the budget and to fix such
amounts so rejected; provided, however, that in the event the
Oversight Committee exercises such authority and increases any budget
amount by more than ten (10%) percent of the amount proposed by
Response 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 four-fifths (4/5) of the Oversight Committee.
(c) Exceptions to Inclusion in the Physician Services
Calculation. The exclusion of any revenue from Practice Revenue,
whether now or in the future, shall be subject to the approval by a
vote of four-fifths (4/5) of the Oversight Committee. Current
approved exceptions are listed in the attached Exhibit 4.2(c).
(d) Advertising. All advertising and other marketing of the
services performed at any Clinic shall be subject to the prior review
and approval of the Oversight Committee.
(e) Patient Fees; Collection Policies. As a part of the
annual operating budget, in consultation with 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) Retirement of Stockholders. The Oversight Committee
shall determine and act upon the request of any Stockholder to retire
before attaining age 55.
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(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 benefiting the
Clinics.
(j) Physician Hiring. Except as provided in Section 15.9
below, 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. Lisa Fox shall initially
be retained as Executive Director.
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 in accordance with this Agreement 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 outpatient treatment centers, renovations to Clinic facilities, the
addition of satellite locations and new and replacement equipment pursuant to
Section 3.1, and new services, including, without limitation, radiation
therapy, radiology and stem cell supported high dose chemotherapy. Upon the
direction of the Oversight Committee, 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.
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5.3. Financial Statements. Response shall prepare monthly,
quarterly and annual financial statements on an accrual basis reflecting the
results of operations of the Provider. 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 tax reporting.
5.4. Inventory and Supplies. Response shall order and purchase
reasonable and requested medical and office inventory, pharmaceuticals and
supplies required by the Provider 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 Physician Extender 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.
(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 collection
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.
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(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) 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.
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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 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 reasonable effort consistent with sound business practices to
honor the specific requests of the Provider with regard to the assignment of
its employees.
In addition to the foregoing, Response shall advance to the Provider
from time to time the amount of any operating deficiency with respect to any
new physician who is an employee but not a shareholder of the Provider ("Junior
Physician"). Operating deficiency with respect to a Junior Physician is hereby
defined as the excess of the amount payable to such Junior Physician pursuant
to any salary guarantee over the amount of salary payable to such Junior
Physician under the Provider's normal and customary compensation system, as the
same may be modified from time to time by the Provider. Upon the earliest to
occur of (i) the Junior Physician becoming a shareholder of the Provider, or
(ii) the Junior Physician recognizing billings in excess of his cost (as
determined by the Oversight Committee, a "Surplus"), the Provider shall begin
repaying the amounts theretofore advanced in respect of such Junior Physician.
Such advanced amounts shall be repaid in full within thirty (30) days after the
occurrence of the event enumerated (i) above, and, in the event item (ii) above
shall occur, shall be repaid as Surplus is recognized, in quarterly amounts
equal to such surplus for each quarter, within sixty (60) days after the end of
each such quarter; provided, however, that all such advances shall be payable
in full by the Provider no later than the third anniversary of the employment
date of such Junior Physician.
5.8. Events Excusing Performance. Response shall not be liable to
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.
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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 Bank Accounts. The Provider agrees to establish and
maintain two (2) separate bank accounts. One such account, which shall be
referred to as the Provider Receipts Account, will be under the sole direct
control of the Provider and will be utilized only as a depository for Practice
Revenue. Such account shall be subject to, and the Provider agrees to execute
and deliver to an appropriate commercial bank, a Lockbox Operating Procedural
Agreement, and, pursuant thereto, shall instruct such bank to transfer
automatically all amounts deposited in the Provider Receipts Account to the
Provider Operating Account. The second account shall be referred to as the
Provider Operating Account, and shall be maintained for the purpose of (a)
depositing amounts swept from the Provider Receipts Account 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,
which shall be paid to a separate bank account under the Provider's sole
control, (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. Provider hereby designates, constitutes and appoints
Response, through its duly authorized officers and employees as approved by the
Oversight Committee, 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. Response shall from time to time, but no less
frequent than monthly, during the term of this Agreement advance to Provider,
in readily available United State funds, by wire transfer, intrabank transfer
or other electronic means, to be deposited into the Provider Operating Account,
an amount (the "Receivables Line") equal to 100% of Accounts Receivable, net of
any Bad Debt Allowance and all Fee Adjustments with respect thereto. Amounts
advanced by Response under the Receivables Line will not bear interest except
after payment shall have become due hereunder, in which event such advanced
amounts shall bear interest at the maximum rate permitted to be lawfully
charged. Amounts advanced by Response pursuant to this Section 5.12 shall be
payable by Provider upon termination of this Agreement or occurrence of a
Provider Event of Default. Response shall have the authority from time to time
pursuant to Section 5.11 above to make principal payments on the Receivables
Line. 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 assist this Provider in
adding and operating such ancillary services, including Ancillary Services as
defined in Section 2.1(z) of this Service Agreement, as approved by the
Oversight Committee.
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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 Florida 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
named party to any proceeding alleging violation of any law relating to such
person's professional activities or seeking to revoke or suspend such person's
professional license or privileges to practice in any hospital or medical
center; or (iv) shall become the subject of any proceeding to exclude such
person from any Federal or state reimbursement program or shall suffer the
revocation or suspension of such person's Medicare provider number, DEA permit,
professional license or privileges to practice in any hospital or medical
center. In the event that any disciplinary action or medical malpractice
actions is initiated against any Physician or other person assisting in the
providing of medical services, the Provider shall immediately inform the
Executive Director and/or Response 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. The Provider shall have complete
control of and responsibility for the hiring, compensation, supervision,
evaluation and termination of its Physicians , 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.
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 and
Responseshall collaborate in obtaining and retaining of professional liability
insurance by assuring that all Physicians and Non-Physician Employees are
insurable, and participating in an ongoing risk management program.
Professional liability insurance with respect
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to Physicians shall be paid for by the Provider or its Physicians and shall not
be Clinic Expense. Professional liability insurance with respect to
Non-Physician Employees shall be paid for by Response and shall 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; Clinical Trials. At Response's request, the
Provider agrees to participate in Response's clinical trials program or any
data collection and analysis program maintained by Response from time to time.
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.
6.9 Provider Employee Benefit Plans.
(a) The Provider shall not enter into any new "employee pension
benefit plan" (as defined in Section 3(3) of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA") without the consent of Response
(which will not be unreasonably withheld).
(b) 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 leased employees, unless such actions
would require the amendment, freeze or termination of any tax qualified
retirement plan of the Provider to avoid disqualification of any such 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.
(c) In the event that any "employee welfare benefit plan" (as defined
in ERISA Section 3(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.
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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 Agreement.
7.2. Restrictive Covenants by Provider and Physicians. As a material
inducement to Response to consummate the Purchase Agreement and execute,
deliver and perform this Service Agreement, the Provider and each Physician
Stockholder shall not engage in the practice of oncology or hematology,
including providing or supervising the provision of chemotherapy, radiation
treatment or other cancer therapies, within Broward County, Florida (the
"Practice Territory") during the term of this Agreement and for a period of
five (5) years after any termination of this Agreement or cessation of a
Physician's employment with the Provider. Notwithstanding the foregoing, (A)
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; and (B) such
restrictive covenant shall not apply to any Stockholder if such Stockholder
pays any Liquidated Damages to Response pursuant to Section 11.6 hereunder.
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 services 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. In that regard, the Provider and the Stockholders hereby
consent to Response acquiring the practices of and entering into management
services agreements with Drs. Rosenberg & Kalman and Drs. Weisberg, Weiss and
Weinreb in Tamarac, Florida.
7.4. Enforcement. Response, the Provider and the Stockholders
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 provision of this Agreement.
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ARTICLE 8.
FINANCIAL ARRANGEMENTS
8.1. Service Fees. Subject to the terms of Section 5.11, 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. The Service Fees shall be determined
on an annual basis, based on annual financial statements prepared pursuant to
Section 5.3 above. The Base Service Fee shall be 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, based
on the annual financial statements, shall exceed the aggregate Practice Revenue
of the Provider (a "deficiency"), then (i) first, the Fixed Portion of the Base
Service Fee shall be reduced by the amount of such deficiency and Response
shall reimburse the Provider for the amount of such deficiency, to the extent
the same shall have been retained by Response pursuant to Section 8.2 below,
and (ii) to the extent such deficiency is greater than the Fixed Portion, such
remaining deficiency will be reimbursed by Response to the Provider. Any
reimbursement pursuant to this Section 8.1 shall be made by Response no later
than the 15th day of March following the year in which such deficiency arose.
In the event that Response is required to fund any deficiency pursuant to this
Section 8.1, then in any future year in which an Annual Surplus exists, such
Annual Surplus will first be paid to Response to the extent of any cumulative
deficiency funded by Response.
8.2. Base Service 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 based on monthly financial statements prepared pursuant to Section 5.6
above, provided that Response shall have made all advances pursuant to the
Receivables Line pursuant to Section 5.12 above, and, provided, further, that
if at any time there shall be insufficient funds in the Provider Operating
Account to pay all or any part of the Fixed Portion, then such unpaid Fixed
Portion (if any) shall be accrued. The Performance Fee will be computed as of
the end of each calendar year based on amounts recorded during the calendar
year.
8.3 Interim Closing. At the election of either party, given to the
other in writing no later than June 15 of each year, Response shall, not later
than July 20 of such year, make an interim computation of the Service Fee
earned, and/or deficiency, as the case may be, pursuant to Section 8.1 above,
which computation shall be effective as of June 30 of such year. Response and
the Provider shall settle, in cash, the computed Service Fee or deficiency, as
the case may be, resulting from such interim closing.
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.
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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 Ft. Lauderdale, Florida 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, each Physician 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. 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 Florida. 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 canceled 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 and Physician
Extender Employees, 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.
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ARTICLE 11.
TERM AND TERMINATION
11.1. Term of Agreement. This Service Agreement shall be effective
immediately preceding the closing of the Purchase Agreement and shall expire on
June 30, 2036, 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 one hundred twenty (120) days
thereafter.
(b) any material default by Response in the performance of
any of its duties or obligations under this Agreement , 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.
Notwithstanding the foregoing, if a particular default listed above is
subject to cure, the occurrence of such default more than twice in any twelve
month period extending from July 1 to June 30 of the next succeeding year shall
not carry the curative right provided above.
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
one hundred twenty (120) days thereafter; provided, further, that if
the Physicians comprising the Provider are lawfully able, within 120
days after the occurrence of such event, to reorganize the practice or
transfer its assets, patients, goodwill and going concern value to a
newly-formed entity and continue such practice, and if such new entity
and its principal stockholders or owners assumes all of the
obligations of the Provider under the Service Agreement or enter into
a new Service Agreement with Response for the remaining term and
containing substantially the same terms and conditions as the original
Service Agreement, then Response will not terminate the original
Service Agreement.
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(b) any material default by the Provider in the performance
of any of its duties or obligations under this Agreement, 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 termination or suspension of the Provider's Medicare
Provider Number as a result of the action or inaction of physicians,
and such termination or suspension shall continue for ninety (90)
days, or if any Physician employed by the Provider shall have his
license to practice medicine or DEA license revoked or suspended and
the affected physician or the Provider, as the case may be, shall not,
within 90 days, either gain reinstatement of such license or otherwise
find a suitable replacement for such physician (which replacement may
be the shifting of case load to an existing physician employee of the
Provider), unless the Provider shall at that time be acting in good
faith (and shall provide reasonable evidence of the action being
taken) to reverse such termination or suspension. Notwithstanding any
good faith effort on the part of Oncology to reverse such termination
or suspension, if such termination or suspension shall not be reversed
within ninety (90) days after occurrence, an event of default shall be
deemed to have occurred.
Notwithstanding the foregoing, if a particular default listed above is
subject to cure, the occurrence of such default more than once in any twelve
month period extending from July 1 to June 30 of the next succeeding year shall
not carry the curative right provided above.
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 the Service Fee 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 (which 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 book 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.
11.6. Remedies upon Provider Event of Default. Upon the occurrence
of a Provider Event of Default, Response shall have the right (and, during the
initial two (2) years hereof, the obligation) to terminate this Agreement by
written notice to the Provider, and the Provider shall have no further
obligation to Response for the Service Fee 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 Stockholder 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 Stockholder for purposes of this
Agreement, with the pro rata share being equal to the Liquidated Damages
Amount times (x) such Remaining Physician Stockholder's proportionate interest
in the Provider as of the date hereof, less (v) the amount of the Liquidated
Damages Amount paid by the Provider times such Remaining Physician
Stockholder's proportionate interest in the Provider as of the date of such
payment by the Provider; provided, however, that if a Stockholder is not a
Remaining Physician Stockholder at the time of a Provider Event of Default
because of his permissive retirement before age 55 with consent of the
Oversight Committee, then the Remaining Physician Stockholders' pro rata share
of the foregoing guaranteed amount shall be increased by their respective pro
rata shares of the obligation that such retiring Stockholder would have had had
he not retired. Moreover, in such event the Provider shall have the obligation
to purchase from Response, and Response shall sell to the Provider, (i) all
Practice Assets for a price equal to the book value of the Practice Assets as
of the date of the Provider Event of Default, and (ii) any intangible asset
then carried on Response's books for a price equal to its then book value.
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11.7. Closing of Repurchase by the Provider and Effective
Date of Termination. The Provider shall pay cash for Practice Assets and
intangible 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, by the amount of Liquidated Damages received by Response from the
Provider or any Physician Stockholder pursuant to Section 11.6 above, and 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 90 days from the date of the notice of
termination. In the event of such repurchase, 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 closing of the repurchase 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.
ARTICLE 12
DAMAGE AND LOSS; CONDEMNATION
12.1. Use of Insurance Proceeds. All insurance or condemnation
proceeds payable by reason of any physical loss of any of the improvements
comprising the facilities or the furniture, fixtures and equipment used by the
Clinics, shall be available for the reconstruction, repair or replacement, as
the case may be, of any damage, destruction or loss. The Oversight Committee,
in consultation with 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.
ARTICLE 13
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
Florida. 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. 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.
13.3. 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
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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 Corporation 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.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES OF RESPONSE
Response represents, warrants, covenants and agrees with the Provider
as follows:
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.
14.4. 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.
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
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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 Stockholders 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, after deposit into the Provider Operating Account,
from the collection of Governmental Receivables) 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. The Provider agrees that five (5) days shall be reasonable prior
notice of the date of any public or private sale or other disposition of all or
part of such pledged Receivables. 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 professional association, and the medical
practice conducted by the Provider was formerly conducted under the name
"Rymer, Zaravinos & Faig, M.D., P.A.," a Florida professional association. The
Provider shall notify Response in writing thirty (30) days prior to any change
in any such name.
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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.
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 Florida Uniform Arbitration Act, with any such arbitration
proceeding being conducted in Ft. Lauderdale, Florida 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:
<TABLE>
<S> <C>
To Response: Response Oncology, Inc.
1775 Moriah Woods Blvd.
Memphis, Tennessee 38117
Attn: Joseph T. Clark, CEO
With copies to: John A. Good, Esq.
Executive Vice-President -- General Counsel
Response Oncology, Inc.
1775 Moriah Woods Blvd.
Memphis, Tennessee 38117
To Provider: Southeast Florida Hematology Oncology Group, P.A.
Attn: William Rymer, M.D.
5700 N. Federal Highway
Suite 5
Ft. Lauderdale, Florida 33308
</TABLE>
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With copies to: Stanley H. Kuperstein, Esq.
Geiger, Kasdin, Heller & Kuperstein, P.A.
1428 Brickell Avenue, 6th Floor
Miami, Florida 33131
or to such other addresses as either party shall notify the other.
16.6. Binding on Successors. Subject to Section 16.1, this Agreement
shall be binding upon the parties hereto, and their successors, assigns, heirs
and beneficiaries.
16.7. Waiver of Provisions. Any waiver of any terms and conditions
hereof must be in writing, and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a
waiver of any other terms and conditions hereof.
16.8. Governing Law. The validity, interpretation and performance of
this Agreement shall be governed by and construed in accordance with the laws
of the State of Florida. The parties acknowledge that Response is not
authorized or qualified to engage in any activity which may be construed or
deemed to constitute the practice of medicine. To the extent any act or
service required of Response in this Agreement should be construed or deemed,
by any governmental authority, agency or court to constitute the practice of
medicine, the performance of said act or service by Response shall be deemed
waived and forever unenforceable.
16.9. Severability. The provisions of this Agreement shall be deemed
severable and if any portion shall be held invalid, illegal or unenforceable
for any reason, the remainder of this Agreement shall be effective and binding
upon the parties.
16.10. Additional Documents. Each of the parties hereto agrees to
execute any document or documents that may be requested from time to time by
the other party to implement or complete such party's obligations pursuant to
this Agreement.
16.11. Time is of the Essence. Time is hereby expressly declared to
be of the essence in this Agreement.
16.12. Confidentiality. Except for disclosure to its bankers,
underwriters or lenders, or as necessary or desirable for conduct of business,
including negotiations with other acquisition candidates, neither party hereto
shall disseminate or release to any third party any information regarding any
provisions of this Agreement, or any financial information regarding the other
(past, present or future) that was obtained by the other in the course of the
negotiations of this Agreement or in the course of the performance of this
Agreement, without the other party's written approval; provided, however, the
foregoing shall not apply to information which (i) is generally available to
the public other than as a result of a breach of confidentiality provisions;
(ii) becomes available on a non-confidential basis from a source other than the
other party or its affiliates or agents, which source was not itself bound by a
confidentiality agreement, or (iii) which is required to be disclosed by law or
pursuant to court order.
16.13. Contract Modifications for Prospective Legal Events. In the
event any state or federal laws or regulations, now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decisions, a regulatory agency or legal counsel in such a manner as to
indicate that the structure of this Agreement may be in violation of such laws
or regulations, 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
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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; Nonrecourse Obligation. 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. The Stockholders, their heirs, legatees, successors
and assigns shall have no individual obligation for the performance of the
provisions hereof except as expressly provided herein
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.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP, P.A.
By:
-------------------------------------------------
Title:
----------------------------------------------
RESPONSE ONCOLOGY OF FT. LAUDERDALE, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
STOCKHOLDERS:
------------------------------------------
William Rymer, M.D.
------------------------------------------
Theodore Zaravinos, M.D.
------------------------------------------
Douglas Faig, M.D.
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RESPONSE ONCOLOGY OF FT. LAUDERDALE, 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) the sum of (A) ***
of the difference of Practice Revenue minus Ancillary Revenue (the "Base
Portion"); plus (B) *** of Ancillary Net Operating Income (if any, the
Percentage Portion) (the Base Portion and Percentage Portion, collectively the
"Fixed Portion").
PERFORMANCE FEE
During the entire term of the Service Agreement, including any
extended term, a Performance Fee in an amount equal to *** of any Annual
Surplus shall be paid to Response.
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, the Clinic Expenses (less
Ancillary Clinic Expenses) and Practice Revenue (less Ancillary
Revenue) from such commencement date until the end of the calendar
year of commencement shall be determined. The sum of Clinic Expenses
(less Ancillary Clinic Expenses), Practice Retainage and the Base
Portion of the Fixed Portion of the Service Fee (both computed on
Practice Revenue, less Ancillary Revenue, for such period) will be
subtracted from Practice Revenue, less Ancillary Revenue for such
period, 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.
LIQUIDATED DAMAGES AMOUNT
The amount of *** until ***, at which time such amount shall
be *** per Remaining Physician Stockholder for the duration of this Agreement.
*** MATERIAL REDACTED PURSUANT TO CLAIM FOR CONFIDENTIAL TREATMENT
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PRACTICE RETAINAGE
For purposes of this Agreement, the Practice Retainage shall equal
*** of Practice Revenue, and amounts received directly by Physicians as
salary from sources other than Provider (unless covered by Schedule 4.2(c))
shall be charged against this number.
*** MATERIAL REDACTED PURSUANT TO CLAIM FOR CONFIDENTIAL TREATMENT
29
