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: September 3, 1996
Seafield Capital Corporation
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(Exact name of registrant as specified in its charter)
Missouri 0-16946 43-1039532
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(State of other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
2600 Grand Ave. Suite 500
P. O. Box 410949
Kansas City, MO 64141
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(Address of principal executive offices) (Zip code)
(816) 842-7000
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(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets.
On September 3, 1996, the Registrant's 58% owned subsidiary,
Response Oncology, Inc. (Response), acquired (the "Transaction") from
Alfred M. Kalman, M.D. and Abraham Rosenberg, M.D. (the "Sellers") 100%
of the outstanding common stock (the "Acquired Stock") of Rosenberg &
Kalman, M.D., P.A. (the "Acquired Business"). The total consideration
(the "Purchase Price") paid for the Acquired Stock was approximately
$8.1 million in cash and $1.9 million in Response's unsecured,
subordinated promissory notes payable on or before August 30, 2001. The
Notes may, at the election of the holders, be paid in shares of Response
Common Stock based on a price equal to 110% of the lesser of $12.50 per share
or the average closing price per Share on The Nasdaq Stock Market's National
Market for the ten trading days immediately preceding the Closing Date.
The issuance and delivery of Response common stock in full or partial
payment of the Note have not been registered under the Securities Act of
1933 in reliance upon an exemption from such registration.
The Acquired Stock was purchased by Response directly from the
Sellers. At the time of the Transaction, neither Seller had a 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 business management of a medical
oncology and hematology practice, 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 medical oncology and hematology specialty.
Simultaneous with the consummation of the Transaction, a newly-
formed professional association wholly owned by the Sellers and formed
to continue the group medical practice theretofore conducted by the
Sellers (the "New PA") entered into a long-term management services
agreement (the "Service Agreement") with Response providing for the
management by Response of the non-medical aspects of the practice
thereafter conducted by the New PA. Pursuant to the Service Agreement,
Response 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 Response 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.
The Registrant has exchanged its $10 million loan to Response for
an equity investment in the form of 909,090 shares of common stock, $.01
par value per share.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
It is impracticable for the Registrant to provide with this Current
Report the interim financial statements for the Acquired Business
required to be filed pursuant to Rule 3-05 of Regulation S-X and pro
forma financial information required to be filed pursuant to Article 11
of Regulation S-X because all such financial statements and information
are presently not available. Such financial statements and pro forma
financial information shall be filed as soon as they become available,
but in any event no later than November 15, 1996.
(c) Exhibits
10(a) Form of the Stock Purchase Agreement among Response
Oncology, Inc., Alfred M. Kalman, M.D. and Abraham Rosenberg, M.D. dated
as of September 1, 1996
10(b) Form of the Service Agreement among Response Oncology,
Inc., Rosenberg & Kalman, M.D., P.A., R&K, M.D., P.A. and Stockholders
of R&K, M.D., P.A. dated as of September 1, 1996. Portions of this
exhibit have been omitted and filed separately by Response with the
Commission pursuant to a claim for confidential treatment.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized officer.
Seafield Capital Corporation
Date: September 17, 1996 By: /s/ Steven K. Fitzwater
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Steven K. Fitzwater
Vice President, Chief Accounting
Officer and Secretary
EXHIBIT 10(a)
STOCK PURCHASE AGREEMENT
BY AND AMONG
RESPONSE ONCOLOGY, INC.,
AND
ALFRED M. KALMAN, M.D.,
ABRAHAM ROSENBERG, M.D.
Dated as of
September 1, 1996
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of September 1, 1996, by and
among RESPONSE ONCOLOGY, INC., a Tennessee corporation (the "Purchaser"),
ALFRED M. KALMAN, M.D., and ABRAHAM ROSENBERG, M.D., (collectively, the
"Sellers" and, individually, a "Seller").
W I T N E S S E T H:
WHEREAS, the Sellers own 100% of the issued and outstanding shares
(the "Shares") of the common stock of Rosenberg & Kalman, 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.
"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.
"Cash Consideration" has the meaning set forth in Section 2(b) below.
"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.
"Deferred Intercompany Transaction" has the meaning set forth in
Treasury Regulation 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
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 R&K, M.D., P.A., a Florida professional association
wholly owned by the Sellers, its successors and assigns.
"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.
"Note" means a promissory note of the Purchaser payable to the order
of a Seller in the form set forth as Exhibit 2(b)(i).
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 4(f) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(f) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section
4(f) below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Party" means the Purchaser or any Seller.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or
any department, agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406
and Code Sec. 4975.
"Pro Rata" means, with respect to the Sellers, their proportionate
ownership interests in the Corporation.
"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 a
reasonable allowance for doubtful accounts.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Response Stock" means the common stock of the Purchaser, $.01 par
value per share.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and
payable, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of
money.
"Seller" has the meaning set forth in the preface above.
"Sellers' Disclosure Letter" has the meaning set forth in Section 3(a)
below.
"Shares" means all of the issued and outstanding shares of the Common
Stock of the Corporation.
"Tangible Assets" means total assets of the Corporation, computed
under generally accepted accounting principles, minus intangible assets net
of accumulated amortization and minus Receivables, in each case without
regard to the effect of the transaction contemplated herein.
"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 Nine Million Five Hundred Thousand Dollars
($9,500,000.00) plus the sum of the amount of Tangible Assets and
Receivables, minus the amount of 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) Seven Million Six Hundred
Thousand Dollars ($7,600,000), plus an amount equal to 100% of Receivable
plus 90% of Tangible Assets, minus an amount equal to 100% of Liabilities,
all as of the Closing Date, in cash (the "Cash Consideration") to the
Sellers, Pro Rata, at Closing (hereinafter defined), and (ii) One Million
Nine Hundred Thousand Dollars ($1,900,000) by issuance and delivery of a
Note to each Seller, with each Note being in the principal amount of
$950,000. In the event that after Closing the Purchaser shall collect
Receivables exceeding the amount paid for Receivables pursuant to the
preceding sentence, then the Purchaser shall promptly remit Pro Rata to the
Sellers the amount of such excess as an addition to the 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 to equal the amount so paid at Closing.
As soon as practicable after the Closing, the Purchaser shall prepare
a balance sheet as of the Closing Date and a computation of Tangible Assets
minus Liabilities as of the Closing Date. Such balance sheet and
computation shall be reviewed by the Purchaser's independent accountants
and, at the Sellers' option and expense, an accounting firm of the Sellers'
choice. Within five (5) business days after delivery of such computation
to the Sellers, the parties shall agree upon (i) the difference between the
amount of Tangible Assets reflected in such computation and 90% of Tangible
Assets determined at the time of and in connection with the Closing, and
(ii) the diffence between the amount of Liabilities reflected in such
computation and the amount of Liabilities determined at the time of and in
connection with the Closing. The differences (if any) determined under
clauses (i) and (ii) above shall then be netted (or added together, if
appropriate), and the result of such determination shall be paid, in cash,
by the appropriate party. Any amount not paid by the Sellers shall be
subject to offset by the Purchaser against amounts owed by the Purchaser to
the Sellers pursuant to any other agreement or debt instrument between said
parties.
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Greenberg
Traurig, counsel for the Sellers, 1221 Brickell Avenue, Miami, Florida
33131 commencing at 9:00 a.m. local time on the later of (i) the second
business day following the satisfaction or waiver of all conditions
precedent to the obligations of the Parties to consummate the transactions
contemplated hereby or (ii) September 1, 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 November 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.
(a) Representations and Warranties of the Sellers. The Sellers
jointly and severally represent and warrant to the Purchaser that the
statements contained in this Section 3(a) are correct and complete as of
the date of this Agreement with respect to the Sellers, except as set forth
in the disclosure letter executed and delivered by the Sellers and the
Group contemporaneous with this Agreement (the "Sellers' Disclosure
Letter""). The Sellers' Disclosure Letter shall be satisfactory to the
Purchaser and its counsel and will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Section 3(a) and
Section 4.
(i) Authorization of Transaction. Each Seller has the requisite
legal capacity and has full power and authority to execute and deliver this
Agreement and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of each Seller,
enforceable in accordance with its terms and conditions. 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
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
in all material respects as of the date of this Agreement and will be
correct and complete in all material respects 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 1,000 Shares, of which 100 Shares are issued and
outstanding. All of the issued and outstanding Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held
of record by the Sellers. There are no outstanding or authorized options,
warrants, purchase rights, preemptive rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could require the 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.
(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"): (i) unaudited balance sheet and
statement of income, changes in stockholders' equity, and cash flow as of
and for the fiscal year ended December 31, 1995 (the "Most Recent Fiscal
Year End") for the Corporation; and (ii) unaudited balance sheet and
statement of income, changes in stockholders' equity, and cash flow (the
"Most Recent Financial Statements") as of and for the five (5) months ended
May 31, 1996 (the "Most Recent Fiscal Month End") for the Corporation. The
Financial Statements (including the notes thereto) have been prepared on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Corporation as of such dates and the results of
operations of the Corporation and its subsidiaries for such periods on a
cash basis method of accounting, are correct and complete in all material
respects, and are consistent with the books and records of the Corporation.
(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;
(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 (other than contractual allowances and
adjustments in 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 (other than transactions relating
to the payment of compensation or benefits);
(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;
(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 in all material respects 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
material 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 has Knowledge that
any authority will 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 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 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 basis of the Corporation in its assets;
and (B) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution.
(k) Real Property. The Corporation does not own any real property
and has not executed and delivered or otherwise entered into any contract
to purchase any real property. Paragraph 4(k) of the Sellers' Disclosure
Letter lists and describes briefly all real property leased or subleased to
the Corporation. The Sellers have delivered to the Purchaser correct and
complete copies of the leases and subleases listed in Paragraph 4(k) of the
Sellers' Disclosure Letter (as amended to date). With respect to each
lease and sublease listed in Paragraph 4(k) of the Sellers' Disclosure
Letter, except as otherwise set forth in such Paragraph of the Sellers'
Disclosure Letter:
(i) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(iii) the Corporation, and, to the best of Sellers' Knowledge,
no other party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(iv) the Corporation, and, to the best of Sellers' Knowledge, no
party to the lease or sublease has repudiated any provision thereof;
(v) to the best of Sellers' Knowledge, there are no disputes,
oral agreements, or forbearance programs in effect as to the lease or
sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
(vii) the Corporation has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses,
permits and certificates of need) required in connection with the operation
thereof and have been operated and maintained in accordance with applicable
laws, rules, and regulations; and
(ix) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
(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.
(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 Corporation);
(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 material 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) the
performance of which involves consideration in excess of $25,000.00.
The Sellers has delivered to the Purchaser a correct and complete copy of
each written agreement listed in Paragraph 4(n) of the Sellers' Disclosure
Letter (as amended to date) and a written summary setting forth the terms
and conditions of each oral agreement referred to in Paragraph 4(n) of the
Sellers' Disclosure Letter. With respect to each such agreement: (1) the
agreement is legal, valid, binding, enforceable, and in full force and
effect; (2) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (3) no party is in
breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (4) no party has
repudiated any provision of the agreement.
(o) Notes and Accounts Receivable. All notes and accounts receivable
of the Corporation are reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims except contractual
adjustments with in arrangements with third-party reimbursers, are current
and collectible, and will be collected in accordance with their terms at
their recorded amounts, subject only to the reserve for bad debts as
adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of the Corporation.
(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
(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 either the Corporation or the Group. Neither the
Sellers nor the directors and officers (and employees with responsibility
for litigation matters) of the Corporation has any Knowledge 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 executive,
key employee, or group of employees has any plans to terminate employment
with the Corporation or, after the Closing, with the Group. 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.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
material 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 other payments which are due 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) No such Employee Benefit Plan which is in Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been
completely or partially terminated or been the subject of a Reportable
Event as to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension Benefit Plan
(other than any Multiemployer Plan) has been instituted or threatened.
(B) There have been no Prohibited Transactions with respect
to any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any such
Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of the
assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or threatened. Neither the Sellers nor the directors
and officers (and employees with responsibility for employee benefits
matters) of the Corporation has any Knowledge of any Basis for any such
action, suit, proceeding, hearing, or investigation.
(C) The Corporation has not incurred, and neither the
Sellers nor the directors and officers (and employees with responsibility
for employee benefits matters) of the Corporation has any reason to expect
that the Corporation will incur, any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any
withdrawal Liability) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan.
(iii) The 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 current or future retired or terminated
employees, 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 in all material respects 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 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. 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.
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. No Physician associated with or employed
by the Group 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. 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 and, after the execution and delivery hereof
and of the Service Agreement, the Group will be, in full compliance with
the requirements of all such third party payor programs applicable thereto.
(x) Fraud and Abuse. The 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. 1320a-7b, or the
regulations promulgated thereunder pursuant to such statutes, or related
state or local statutes or regulations, or which are prohibited by rules of
professional conduct, including but not limited to the following:
(i) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(ii) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment;
(iii) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any
benefit or payment on its own behalf or on behalf of another, with intent
to fraudulently secure such benefit or payment; and
(iv) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe, or rebate), directly or
indirectly, overtly or covertly, in cash or in kind or offering to pay or
receive such remuneration (A) in return for referring an individual to a
person for the furnishing or arranging for the furnishing or any item or
service for which payment may be made in whole or in part by Medicare or
Medicaid, or (B) in return for purchasing, leasing, or ordering or
arranging for or recommending purchasing, leasing, or ordering any good,
facility, service or item for which payment may be made in whole or in part
by Medicare or Medicaid.
(y) Facility Compliance. The 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) Rates and Reimbursement Policies. The Corporation has no rate
appeal currently pending before any governmental authority or any
administrator of any governmental third party payor program.
(aa) Disclosure. The representations and warranties contained in
this Section 4 and in the Sellers' Disclosure Letter do not contain any
untrue or misleading statement of a fact.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its best efforts to
take all action and to do all things necessary in order to consummate and
make effective the transactions contemplated by this Agreement (including
satisfaction of the closing conditions set forth in Section 7 below).
(b) Notices and Consents. The Sellers will cause the 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 or the Group to engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Sellers will not
cause or permit the 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, patients, and employees. In addition to the foregoing, the
Sellers will cause the Corporation's articles of incorporation or
organization to be amended to convert the Corporation from a professional
association or corporation to a business corporation under the laws of its
state of organization.
(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.
(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. The Purchaser shall indemnify and hold
each Seller harmless from and against any Liability personally guaranteed
by such Seller if and to the extent the Purchaser is unable to procure the
release of such guaranty.
(i) Issuance of Stock Options. The Purchaser shall cause to be
issued to each Seller options to purchase 5,000 shares of Response Stock
pursuant to the Purchaser's 1996 Stock Incentive Plan, which options shall
have an exercise price equal to $12.50 per share.
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 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 "Rosenberg &
Kalman, M.D., 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 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 Greenberg Traurig,
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;
(viii) the Group, the Corporation and the Sellers shall have
executed and delivered the Service Agreement to the Purchaser;
(ix) the President of the Corporation shall have executed and
delivered to the Purchaser the Certificate of Facts in substantially the
form set forth as Exhibit 7(a)(ix) hereto; and
(x) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinion, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance
to the Purchaser.
The Purchaser may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Purchaser shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and
no such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) the Purchaser shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified above in
Section 7(b)(i)-(iii) is satisfied in all respects;
(v) the Purchaser shall have delivered to the Sellers the
opinion of John A. Good, General Counsel to the Purchaser, as to matters
customarily addressed with respect to Purchasers in connection with
transactions of the nature contemplated herein and as to the enforceability
of the Note, which opinion shall be in form and substance reasonably
acceptable to the Sellers and their counsel; and
(vi) all actions to be taken by the Purchaser in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to the 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) the Cash Consideration, by cashier's check or wire transfer
pursuant to Sellers' instructions;
(ii) a Note payable to the order of each Seller;
(iii) certificates representing 95,000 shares of Response Stock
issuable to each Seller pursuant to Section 2(b) above;
(iv) the Registration Rights Agreement in the form set forth as
Exhibit 8(a)(iv) hereto;
(v) the certificate described in Section 7(b)(iv) above;
(vi) the opinion described in Section 7(b)(v) above; and
(vii) 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;
(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;
(vi) the Service Agreement, duly executed by the Sellers, the
Corporation and the Group;
(vii) the Certificate of Facts described in 7(a)(ix) above; and
(viii) such other documents as the Purchaser may reasonably
request to affect the transactions contemplated by this Agreement.
9. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time
of Closing) and continue in full force and effect for a period of two (2)
years thereafter (subject to 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 Parties. In the
event any Party breaches (or in the event any third party alleges facts
that, if true, would mean the Party has breached) any of such Party's
representations, warranties, and covenants contained herein and, provided
that the other Party (the "Indemnitee") makes a written claim for
indemnification against the breaching party (the "Indemnitor") pursuant to
Section 9(c)(i) below, then the Indemnitor (jointly and severally, if the
Sellers are the Indemnitors) agrees to indemnify the Indemnitee from and
against the entirety of any Adverse Consequences the Indemnitee may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Indemnitee 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 the Indemitor's obligation to indemnify
and hold the Indemnitee harmless pursuant to this Section 9 shall only
accrue if and to the extent that the aggregate claim for indemnification by
the Indemnitee hereunder, determined in the exercise of good faith, shall
exceed $100,000.00 (excluding any items otherwise payable by Indemnitor
pursuant to any other agreement between the Parties, including the Service
Agreement).
(c) Matters Involving Third Parties.
(i) If any third party shall notify the Indemnitee with respect
to any matter (a "Third Party Claim") which may give rise to a claim for
indemnification under this Section 9, then the Indemnitee shall promptly
notify the Indemnitor thereof in writing; provided, however, that no delay
on the part of the Indemnitee in notifying the Indemnitor shall relieve the
Indemnitor from any obligation hereunder unless (and then solely to the
extent) the Indemnitor thereby is prejudiced.
(ii) The Indemnitor will have the right to defend the Indemnitee
against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnitee so long as (A) it notifies the Indemnitee in
writing within 15 days after the Indemnitee has given notice of the Third
Party Claim that the Indemnitor will indemnify the Indemnitee from and
against the entirety of any Adverse Consequences the Indemnitee may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
the Third Party Claim, (B) the Indemnitor provides the Indemnitee with
evidence acceptable to the Indemnitee that the Indemnitor will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnitee, likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnitee,
and (D) the Indemnitor conducts the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Indemnitor is conducting the defense of the
Third Party Claim in accordance with Section 9(c)(ii) above, (A) the
Indemnitee may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the Indemnitee
will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of
the Indemnitor (not to be withheld unreasonably), and (C) the Indemnitor
will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of
the Indemnitee, not to be unreasonably withheld.
(iv) In the event any of the conditions in Section 9(c)(ii) above
is or becomes unsatisfied, however, (A) the Indemnitee may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnitee need not consult with, or obtain any consent from, the
Indemnitor in connection therewith), (B) the Indemnitor will reimburse
the Indemnitee promptly and periodically for the costs of defending against
the Third Party Claim (including attorneys' fees and expenses), and (C) the
Indemnitor will remain responsible for any Adverse Consequences the
Indemnitee may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 9.
(d) Determination of Adverse Consequences. The Parties shall take
into account the time cost of money (using the Applicable Rate as the
discount rate) in determining Adverse Consequences for purposes of this
Section 9. All indemnification payments under this Section 9 shall be
deemed adjustments to the Purchase Price.
(e) Recoupment Under the Note. In the event that the Purchaser shall
suffer Adverse Consequences for which indemnification pursuant to the
foregoing provisions shall be payable by the Sellers and the Sellers shall
not make any such indemnification payment within sixty (60) days after such
indemnity amount shall become payable, the Purchaser shall have the option
of recouping all or any part of any Adverse Consequences it may suffer by
notifying the Sellers that the Purchaser is offsetting the amount of such
Adverse Consequences against the principal amount outstanding under the
Note. An offset pursuant to this subsection shall affect the timing and
amount of payments required under the Note in the same manner as if the
Purchaser had made a permitted prepayment (without premium or penalty)
thereunder.
(f) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant. The Sellers hereby agree that they
will not make any claim for indemnification against the 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 November 1, 1996
by reason of the failure of any condition precedent under Section 7(b)
hereof (unless the failure results primarily from any 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 (except for any Liability of any Party then in breach).
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the
Purchaser and the Seller; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law
or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its best efforts to
advise the other Parties prior to making the disclosure).
(b) Arbitration of Disputes; Legal Fees. Any dispute arising under
this Stock Purchase Agreement shall be submitted by the parties to binding
arbitration pursuant to the 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 Ft. 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.
(d) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(e) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof.
(f) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of the Purchaser and the Seller;
provided, however, that the Purchaser may (i) assign any or all of its
rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Purchaser nonetheless shall
remain responsible for the performance of all of its obligations
hereunder).
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(h) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(i) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Seller: Copy to:
Abraham Rosenberg, M.D. Steven B. Lapidus, Esq.
Rosenberg & Kalman, M.D., P.A. Greenberg Traurig
7421 N. University Drive 1221 Brickell Ave., 21st Floor
Tamarac, Florida 33321 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.
(j) 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.
(k) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Purchaser and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(l) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(m) Expenses. Each of the Parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Sellers agree
that neither the Corporation has not borne or will not bear any of the
Sellers' costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
(n) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any
Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of
the relative levels of specificity) which the Party has not breached shall
not detract from or mitigate the fact that the Party is in breach of the
first representation, warranty, or covenant.
(o) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
(p) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter, in addition to
any other remedy to which they may be entitled, at law or in equity.
* * * * *
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
[as of] the date first above written.
PURCHASER:
Response Oncology, Inc.
By:
Title:
SELLERS:
Abraham Rosenberg, M.D.
Alfred M. Kalman, M.D.
EXHIBIT 10(b)
SERVICE AGREEMENT
BY AND AMONG
RESPONSE ONCOLOGY, INC.
ROSENBERG & KALMAN, M.D., P.A.
R&K, M.D., P.A.,
AND
STOCKHOLDERS OF R&K, M.D., P.A.
Dated as of
September 1, 1996
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION PURSUANT TO CLAIM FOR CONFIDENTIAL TREATMENT
SERVICE AGREEMENT
THIS SERVICE AGREEMENT dated as of September 1, 1996 by and among
RESPONSE ONCOLOGY, INC., a Tennessee corporation ("Response"), ROSENBERG &
KALMAN, M.D., P.A., a Florida professional association (the "Corporation"),
R&K, M.D., P.A., a Florida professional association (the "Provider") and
THE STOCKHOLDERS OF R&K, M.D., 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, effective September 1, 1996, Response Oncology, Inc. and the
Stockholders will execute a definitive agreement (the "Purchase Agreement")
pursuant to which Response will contract to acquire from the Stockholders
all of their rights, title and interests in and to all of the outstanding
common stock of the Corporation;
WHEREAS, the Stockholders have formed the Provider for the purpose of
continuing their medical practice following consummation of the transaction
contemplated by the Purchase Agreement;
WHEREAS, the Provider and the Stockholders desire to retain Response
to perform the practice management functions described herein in order to
permit the Provider and the Stockholders to devote substantially full time
and efforts on a concentrated and continuous basis to the rendering of
medical services to patients;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, effective September 1, 1996, the
Provider, the Stockholders, the Corporation and Response agree to the terms
and conditions provided in this Agreement.
ARTICLE 1.
RELATIONSHIP OF THE PARTIES
1.1. Independent Relationship. The Provider and Response intend to
act and perform as independent contractors, and the provisions hereof are
not intended to create any partnership, joint venture, agency or employment
relationship between the parties. Notwithstanding the authority granted to
Response herein, Response and the Provider agree that the Provider shall
retain the authority to direct the medical, professional, and ethical
aspects of its medical practice. Each party shall be solely responsible
for and shall comply with all state and federal laws pertaining to
employment taxes, income withholding, unemployment compensation
contributions and other employment related statutes applicable to that
party.
1.2. Responsibilities of the Parties. As more specifically set forth
herein, Response shall provide the Provider with offices and facilities,
equipment, supplies, support personnel, management, practice development
and financial advisory services. As more specifically set forth herein,
the Provider shall be responsible for the recruitment and hiring of
Physicians and all issues related to medical practice patterns and
documentation thereof. Notwithstanding anything herein to the contrary, no
"designated health service" as defined in 42 U.S.C. 1395nn, including any
amendments or successors thereto, shall be provided by Response under this
Agreement.
1.3. Provider's Matters. Matters involving the internal agreements
and finances of the Provider, including the distribution of professional
fee income among 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.
1.4. Patient Referrals. The parties agree that the benefits to the
Provider hereunder do not require, are not payment for, and are not in any
way contingent upon the admission, referral or any other arrangement for
the provision of any item or service offered by Response to any of the
Provider's patients in any facility or laboratory controlled, managed or
operated by Response.
1.5. Professional Judgment. Each of the parties acknowledges and
agrees that the terms and conditions of this agreement pertain to and
control the business and financial relationship between and among the
parties but do not pertain to and do not control the professional and
clinical relationship between and among the Provider, the Provider's
employees, and the Provider's patients. Nothing in this Agreement shall be
construed to alter or in any way affect the legal, ethical and professional
relationship between and among the Provider and the Provider's patients,
nor shall anything contained in this Agreement abrogate any right,
privilege, or obligation arising out of or applicable to the
physician-patient relationship.
ARTICLE 2.
DEFINITIONS
2.1. Definitions. For the purposes of this Agreement, the following
definitions shall apply:
Financial and Accounting Definitions:
(a) "Account Debtor" shall mean an account debtor or any other
Person obligated in respect of an Account Receivable.
(b) "Accounts Receivable" shall mean, with respect to the
Provider, all accounts and any and all rights to payment of money or other
forms of consideration of any kind now owned or hereafter acquired (whether
classified under the Uniform Commercial Code as accounts, chattel paper,
general intangibles, or otherwise) for goods sold or leased or for services
rendered by the Provider, including, but not limited to, accounts
receivable, proceeds of any letters of credit naming the Provider as
beneficiary, chattel paper, insurance proceeds, contract rights, notes,
drafts, instruments, documents, acceptances, and all other debts,
obligations and liabilities in whatever form from any other Person,
provided that cash, checks and credit card purchases are not included in
the definition of Accounts Receivable.
(c) References to "amounts recorded" shall mean all amounts
recorded or recordable in accordance with GAAP (hereinafter defined),
including, without limitation, all billed Physician Services Revenue
hereinafter defined and Non-Physician Revenue hereinafter defined, earned
Capitation Revenue hereinafter defined and all expenses that are subject to
accrual under GAAP.
(d) "Annual Surplus" shall mean Practice Revenue (hereinafter
defined) less the sum of the Base Service Fee (hereinafter defined) and
Practice Retainage (hereinafter defined).
(e) "Bad Debt Allowance" shall mean, with respect to Accounts
Receivable, an allowance for uncollectible Accounts Receivable determined
based on a methodology approved by the Oversight Committee.
(f) "Base Service Fee" shall mean the base fee set forth on
Schedule A hereto
(h) "Capitation Revenue" shall mean amounts recorded consisting
of revenue from managed care organizations, where payment is made
periodically on a per member basis, administration payments, co-payments
and all other payments by managed care organizations, including, without
limitation, managed care variable expense bonuses, hospital expense bonuses
or any other bonus or payment which rewards the Provider for its medical
performance under any managed care arrangement.
(i) "Clinic Expenses" shall mean all amounts recorded comprising
the expenses incurred in the operation of any Clinic, including, without
limitation:
(A) Non-Physician Employee Compensation (hereinbelow 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 (other than notes payable by Response to
any Stockholder or his/her assigns ) 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 any amortization
of any intangible asset related to this Service Agreement), (iii) the cost
of any capital expenditures excluding interest and other period charges under
GAAP in respect of such capital expenditures incurred by Response pursuant
hereto, except as otherwise 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; provided.
(j) "Clinic Expense Portion" of the Service Fee shall have the
meaning set forth in Section 8.1 below.
(k) "Fee Adjustment" shall mean any adjustment for any discount,
non-allowed contractual or other adjustment under Medicare, Medicaid, any
preferred provider plan, workers' compensation plan, employee/dependent
health care benefit program or other contractual arrangement between the
Provider and any Third Party Payor, and any professional courtesy or other
reasonable and customary discount that results in fee revenue not being
collected.
(k) "GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession or prescribed
by the Securities and Exchange Commission, which are applicable to the
circumstances as of the date of determination. For purposes of this
Agreement, GAAP shall be applied in a manner consistent with the historic
practices used by Response.
(l) "Governmental Receivables" shall mean an Account Receivable of
the Provider which (i) arises in the ordinary course of business of the
Provider, (ii) has as its Third Party Payor the United States of America or
any state or any agency or instrumentality of the United States of America or
any state which makes any payments with respect to Medicare or Medicaid or
with respect to any other program (including CHAMPUS) established by federal
or state law, and (iii) is required by federal or state law to be paid or to
be made to the Provider as a health care provider. Governmental Receivables
shall not, however, refer to amounts payable by private insurers under
contract to provide benefits under the Federal Employee Health Benefit
Program.
(m) "Non-Physician 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 pays the same.
(n) "Performance Fee" shall mean an amount payable to Response
on a calendar-year basis as computed pursuant to the formula set forth in
Schedule A hereto.
(o) "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.
(p) "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 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.
(q) "Practice Retainage" shall mean an amount equal to the
percentage of Practice Revenue set forth on Schedule A hereto.
(r) "Practice Revenue" shall mean the sum of all amounts
recorded by the Provider as Physician Services Revenue, 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 and all items listed as excluded revenue on
Exhibit 4.2(c).
(s) "Service Fee" shall mean the sum of the Base Service Fee and
the Performance Fee (if any).
Other Definitions:
(t) 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.
(u) "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.
(v) "CHAMPUS" shall mean the Civilian Health and Medical Program
of the Uniformed Services.
(w) "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.
(x "Corporation" shall have the meaning set forth in the initial
paragraph hereof.
(y) "Employment Agreement" shall mean an employment agreement
between each Physician now or hereinafter employed by the Provider and the
Provider pursuant to which the Physician shall be employed by the Provider
to provide medical services on behalf of the Provider, which Employment
Agreement shall be substantially in the form set forth as Exhibit 7.1
hereof.
(z) "Governmental Authority" shall mean any national, state or
local government (whether domestic or foreign), any political subdivision
thereof or any other governmental, quasi-governmental, judicial, public or
statutory instrumentality, authority, board, body, agency, bureau or entity
or any arbitrator with authority to bind a party at law.
(aa) "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.
(ab) "Liquidated Damages Amount" shall mean an amount equal to
the Liquidated Damages Amount set forth on Schedule A hereto.
(ac) "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.
(ad) "Medicare" shall mean any medical program established under
Title VIII of the Social Security Act and administered by the Health Care
Financing Administration.
(ae) "Necessary Authorization" shall mean with respect to the
Provider all certificates of need, authorization, certifications, consents,
approvals, permits, licenses, notices, accreditations and exemptions,
filings and registrations, and reports required by Applicable Law,
including, without limitation, Health Care Law, which are required,
necessary or reasonably useful to the lawful ownership and operation of the
Provider's business.
(af) "Oversight Committee" shall mean a three (3) member
committee established pursuant to Section 4.1. Except as otherwise
provided, the act of a majority of the members of the Oversight Committee
shall be the act of the Oversight Committee.
(ag) "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.
(ah) "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.
(ai) "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.
(aj) "Physician Extender Personnel" shall mean employees of
Response who deliver services to the Provider, including without
limitation nurse anesthetists, physician assistants, registered and
licensed practical nurses, nurse practitioners, psychologists, and other
such persons except Physicians and Non-Physician Employees.
(ak) "Physician Stockholders" shall mean those Physicians who
are from time to time hereafter stockholders of the Provider.
(al) "Practice Assets" shall have the meaning ascribed to that
term in Section 11.5 of this Agreement.
(am) "Provider" shall have the meaning set forth in the initial
paragraph hereof.
(an) "Provider Event of Default" shall have the meaning ascribed
to such term in Section 11.4 hereof.
(ao) "Purchase Agreement" shall mean that certain Stock Purchase
Agreement dated as of September 1, 1996 by and among Response Oncology,
Inc. and the Stockholders.
(ap) "Remaining Physician Stockholder" shall mean any Physician
Stockholder who shall have been a Stockholder at the effective time of this
Agreement and who, at any time within one (1) year prior to the occurrence
of 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, disability or retirement from employment
with the Provider at or after age 55.
(aq) "Response" shall mean Response Oncology, Inc., a Tennessee
corporation, and its wholly owned subsidiaries, including the Corporation.
(ar) "Response Event of Default" shall have the meaning ascribed
to such term in Section 11.3 of this Agreement.
(as) "Stockholder" shall mean each Stockholder of the Provider
as of the date hereof.
(at) "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.
(au) "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 and/or the Corporation 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
reasonable directions of the Oversight Committee in respect of improvements
to the offices, facilities and equipment to be used by the Provider. The
Provider shall not amend, modify or terminate any sub-lease agreements
without the prior written consent of Response.
3.2 Use of Facilities. The Provider shall not use or occupy any
facility 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.
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 three (3)
members. Response shall designate, and shall have the right to remove and
replace, in its sole discretion, one (1) member of the Oversight Committee.
The Provider shall designate, and shall have the right to remove and
replace, in its sole discretion, two (2) 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 unanimous vote 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 unanimous vote
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) 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.
(g) Strategic Planning. The Oversight Committee shall develop
long-term strategic planning objectives.
(h) Capital Expenditures. The Oversight Committee shall
determine the priority of major capital expenditures benefiting the
Clinics.
(i) Physician Hiring. The Oversight Committee shall determine
the number and type of physicians required for the efficient operation of
each Clinic. The approval of the Oversight Committee shall be required for
any variations to the restrictive covenants in any Physician Employment
Agreement.
(j) Executive Director. The selection and retention of any
Executive Director pursuant to Section 5.6 and the salary and cash fringe
benefits of each Executive Director shall be pursuant to the direction and
control of the Oversight Committee. If the Provider is dissatisfied with
the services provided by any Executive Director, the Provider shall refer
the matter to the Oversight Committee. The Oversight Committee shall, in
good faith, determine whether the performance of such Executive Director
could be brought to acceptable levels through counsel and assistance, or
whether the Executive Director's employment should be terminated.
ARTICLE 5.
ADMINISTRATIVE SERVICES TO BE PROVIDED BY RESPONSE
5.1. Performance of Management Functions. Response shall provide or
arrange for the services set forth in this Article 5, the cost of all of
which shall be paid by Response 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.
5.3. Financial Statements. Response shall prepare 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. The Provider hereby indemnifies and holds Response, its
officers, directors, shareholders, agents and affiliates, their successors
and assigns ("Indemnified Persons") harmless, and shall reimburse the
Indemnified Persons for, from and against each claim, loss, liability, cost
and expense (including, without limitation, interest, penalties, costs of
preparation and investigation, and the reasonable fees and disbursement
expenses of attorneys and other professional advisors) directly or
indirectly relating to, resulting from or arising out of any medical
function performed, or which should have been performed, under the
supervision of the Provider or Non-Physician Employees.
(b) Response shall, on behalf of the Provider and under the
Provider's provider number, bill patients and Third Party Payors, and shall
collect the professional fees for medical services rendered by the Provider
in each Clinic, for services performed outside a Clinic for the Provider's
hospitalized patients, and for all other professional and Clinic services.
Response's billing and collection practice shall be consistent with those
of comparable, nationally recognized, well managed group medical practices.
The Provider hereby appoints Response for the term hereof to be its true
and lawful attorney-in-fact, for the following purposes: (i) to bill
patients in the Provider's name and on its behalf; (ii) to collect
Accounts Receivable resulting from such billing in the Provider's name and
on its behalf; (iii) to receive payments from insurance companies,
prepayments from health care plans, and payments from all other Third Party
Payors; (iv) to take possession of and endorse in the name of the Provider
(and/or in the name of an individual Physician, such payment intended for
purpose of payment of a Physician's bill) any notes, checks, money orders,
insurance payments and other instruments received in payment of Accounts
Receivable; and (v) with the advance consent of the Oversight Committee,
to initiate legal proceedings in the name of the Provider or any Physician
to collect any accounts and monies owed to the Provider, Clinic or any
Physician, to enforce the rights of the Provider or any Physician as a
creditor under any contract or in connection with the rendering of any
service, and to contest adjustments and denials by any Governmental
Authority (or its fiscal intermediaries) as Third Party Payors. All
adjustments made for uncollectible accounts, professional courtesies and
other activities that do not generate a collectible fee shall be done in a
reasonable and consistent manner.
(c) Response shall design, supervise and maintain custody of all
files and records relating to the operation of each Clinic, including but
not limited to accounting, billing, patient medical records, and collection
records. Patient medical records shall at all times be and remain the
property of the Provider and shall be located at Clinic facilities so that
they are readily accessible for patient care. The Physicians shall have
the obligation to oversee the preparation and maintenance of patient
medical records, and to provide such medical information as shall be
necessary and appropriate to the clinical function of such records, and to
maintain such records so as to ensure the availability of Third-party Payor
reimbursement for services rendered. The management of all files and
records shall comply with applicable state and federal statutes. Response
shall use its best efforts to preserve the confidentiality of patient
medical records and use information contained in such records only for the
limited purpose necessary to perform the services set forth herein;
provided, however, in no event shall a breach of said confidentiality be
deemed a default under this Agreement. Response shall indemnify and hold
the Provider harmless from and against any monetary loss suffered by the
Provider on account of Response's breach of the foregoing confidentiality
provisions.
(d) Response shall supply to the Provider necessary clerical,
accounting, payroll, bookkeeping and computer services, laundry, linen,
uniforms, printing, stationary, advertising, postage and duplication
services, medical transcribing services and any other ordinary, necessary
or appropriate item or service for the operation of a Clinic, the cost of
all of which shall be Clinic Expense.
(e) Subject to the provisions of Section 4.2(d), Response shall
design and implement adequate and appropriate public relations programs on
behalf of the Provider, with appropriate emphasis on public awareness of
the availability of services at the Provider's Clinics. Any public
relations program shall be conducted in compliance with applicable laws and
regulations governing advertising by medical professionals and applicable
canons or principles of professional ethics governing the Provider and its
physicians.
(f) Response shall provide the data necessary for the Provider
to prepare its annual income tax returns and financial statements, and
shall provide payroll and related services for Physicians and Non-Physician
Employees. Response shall have no responsibility for the filing of such
tax returns, the payment of such income taxes or the cost of preparation of
income tax returns or financial statements on behalf of the Provider or any
Physician employed thereby.
(g) Response shall assist the Provider in recruiting additional
Physicians and Non-Physician Employees, carrying out such administrative
functions as may be appropriate such as advertising for and identifying
potential candidates, checking credentials, and arranging interviews;
provided, however, the Provider shall interview and make the ultimate
decision as to the suitability of any Physician or Non-Physician Employee
to become associated with a Clinic. All Physicians recruited by Response
and accepted by the Provider shall be the sole employees of the Provider,
to the extent such Physicians are hired as employees. Subject to the
provisions of Section 6.4, any expenses incurred in the recruitment of
Physicians or Non-Physician Employees, including, but not limited to,
employment agency fees, relocation and interviewing expenses, shall be
Clinic Expenses.
(h) Subject to the provisions of Section 4.2(g), Response shall
negotiate and administer all managed care contracts on behalf of the
Provider.
(i) Subject to the provisions of Sections 5.3 and 5.5(f),
Response shall arrange for legal and accounting services related to Clinic
operations incurred traditionally in the ordinary course of business,
including the cost of enforcing any physician contract containing
restrictive covenants, provided such services shall be approved in advance
by the Executive Director.
(j) Response shall provide for the proper cleanliness of the
physical premises occupied and/or utilized by the Provider, and maintenance
and cleanliness of the equipment, furniture and furnishings located upon
such premises.
5.6. Executive Director. Subject to the provisions of Section
4.2(k), Response shall recruit, hire and appoint an Executive Director to
manage and administer all of the day-to-day business functions of each
Clinic (it being understood and agreed that, if reasonable, a single
Executive Director may have responsibility for multiple Clinics). Subject
to Oversight Committee approval, Response shall determine the salary,
bonuses (if any) and fringe benefits of each Executive Director, which
salary, bonuses (which may be payable in Response common stock or by
issuance of options on Response common stock) and benefits shall, to the
extent the same are current expenses under GAAP, be Clinic Expenses. At the
direction, supervision and control of Response, the Executive Director,
subject to the terms of this Agreement, shall implement the policies
established by the Oversight Committee and shall generally perform the
duties and have the responsibilities of an administrator. The Executive
Director shall be responsible for organizing the agenda for the meetings of
the Oversight Committee referred to in Article 4.
5.7. Personnel. Response shall provide Physician Extender Personnel
and other non-physician professional support (other than 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 physician who is an employee but not a Physician Stockholder of the
Provider ("Associate Physician"). Operating deficiency with respect to any
Associate Physician is hereby defined as the excess of the amount payable
to such Associate Physician pursuant to any salary guarantee over an amount
("Associate Physician Net Operating Income") equal to the Associate
Physician's net revenues less direct expenses (excluding any such salary
guarantee), as determined in accordance with GAAP. Any advance pursuant to
this paragraph shall be repaid from time to time out of the excess of
Associate Physician Net Operating Income over such salary guarantee. Such
advances shall be repaid in full within thirty (30) days after the
Associate Physician becoming a Physician Stockholder.
5.8. Events Excusing Performance. Response shall not be liable to
the Provider for failure to perform any of the services required herein in
the event of strikes, lock-outs, calamities, acts of God, unavailability of
supplies or other events over which Response has no control for so long as
such events continue, and for a reasonable period of time thereafter.
5.9. Compliance with Applicable Laws. Response shall comply with all
Applicable Law, in the conduct of its obligations under this Agreement.
5.10. Quality Assurance. Response shall assist the Provider in
fulfilling its obligations to its patients to maintain the optimal quality
of medical and professional services consistent with the efficient
operation of the Clinic.
5.11. Provider 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, (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. Provided that the Provider shall establish its banking
relationship with the financial institution providing Response with cash
management services, Response shall cause a weekly report of cash receipts
and disbursements to be delivered to the Provider no later than Wednesday
of each week.
5.12. Credit Line. Response shall from time to time 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 termination of this Agreement, in which event outstanding
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.
Advances on the Receivables Line will be secured by a security interest in
and to Accounts Receivable granted pursuant to Section 15.7 below.
5.13. Ancillary Services. Response shall operate such ancillary
services as approved by the Oversight Committee.
ARTICLE 6.
OBLIGATIONS OF THE PROVIDER
6.1. Professional Services. The Provider shall provide professional
services to patients in compliance at all times with ethical standards,
laws and regulations applying to the medical profession, in a manner and to
an extent consistent with that established by the Provider prior to
effectiveness of this Agreement. The Provider shall also make all reports
and inquiries to the National Practitioners Data Bank and/or any state
medical licensing board required by Applicable Law. The Provider shall use
its best efforts to ensure that each Non-Physician Employee and Technical
Employee associated with the Provider to provide medical care to patients
of the Provider is licensed by the State of 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 and Non-Physician Employees. The
Provider shall have complete control of and responsibility for the hiring,
compensation, supervision, evaluation and termination of its Physicians and
Non-Physician Employees, although at the request of the Provider, Response
shall consult with the Provider respecting such matters. The Provider
shall be responsible for the payment of all Physician Expense and
Non-Physician Employee Compensation now or hereafter applicable to
Physicians and Non-Physician Employees; provided, however, that Response
shall provide the payroll service for computing, accounting for and
disbursing or paying all salaries and benefits of the Provider employees,
all of whom may be paid out of the Provider Operating Account. With
respect to Physicians, the Provider shall only employ and contract with
licensed Physicians meeting applicable credentialling guidelines
established by the Provider.
To the extent permissible under the Employee Retirement and Income
Security Act of 1974, as amended ("ERISA"), the Internal Revenue Code of
1986, as amended (the "Code"), and applicable Health Care Law and to the
extent such practice does not violate Applicable Law or jeopardize
reimbursement for medical related services provided by any person
associated with a Clinic, Response shall pay any overtime or other
non-salary compensation of and shall provide employee benefits to
Non-Physician Employees, notwithstanding their employment by the Provider.
The cost of such items shall be Clinic Expense. Response shall not provide
any benefit to such persons to the extent the Provider is required to
provide same under ERISA, the Code or any other statute or regulation.
6.4. Licensing Fees, Professional Dues and Education Expenses.
Except as provided in Section 5.5(g), the Provider and Physicians shall be
solely responsible for payment of the cost of professional licenses and
dues for membership in professional associations and continuing
professional education costs. The Provider shall ensure that each of its
Physicians and Non-Physician Employees participates in such continuing
medical education as is necessary for such person to maintain current
practical and academic knowledge of the field of medicine and health care
in which the Provider is engaged.
6.5. Professional Insurance Eligibility. The Provider shall be
primarily responsible, with assistance from Response, if requested, for
obtaining and retaining of professional liability insurance by assuring
that its Physicians and Non-Physician Employees are insurable, and
participating in an ongoing risk management program. Professional
liability insurance with respect 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) Effective as of the date of the closing under the Acquisition
Agreement, the Provider shall amend the tax-qualified retirement plan(s)
described on Exhibit 6.9(a) (the "Provider Plan") to provide that employees
of Response who are classified as "leased employees" (as defined in Code
Section 414(n)) of the Provider shall be treated as the Provider's
employees for purposes described in Code Section 414(n)(3). Not less often
than annually, the Provider and Response shall agree upon and identify in
writing those individuals to be classified as leased employees of the
Provider (the "Designated Leased Employees"). The Provider and Response
shall establish mutually agreeable procedures with respect to the
participation of Designated Leased Employees in the Provider Plan. Such
procedures shall be designed to avoid the tax disqualification of the
Provider Plan, similar plans of practices similarly situated,
(collectively, the "Plans").
(b) If the Oversight Committee determines that the relationship
between Response and the Provider (and other practices similarly situated)
constitutes an "affiliated service group" (as defined in Code
Section 414(m)), Response and the Provider shall take such actions as may
be necessary to avoid the tax disqualification of the Plans. Such actions
may include the amendment, freeze, termination or merger of the Provider
Plan.
(c) The Plans described on Exhibit 6.9(a) attached hereto are
approved by Response. The Provider shall not enter into any new "employee
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). In addition, the
Provider shall not offer any retirement benefits or make any material
retirement payments other than under the Provider Plan to any Stockholder
of the Provider without the express written consent of Response (which will
not be unreasonably withheld). Except as otherwise required by law, the
Provider shall not materially amend, freeze, terminate or merge the
Provider Plan without the express written consent of Response (which will
not be unreasonably withheld). In the event of either of the foregoing,
Response's consent shall not be withheld if such action would not
jeopardize the qualification of any of the Plans. The Provider agrees to
make such changes to the Provider Plan, including the amendment freeze,
termination or merger of the Provider Plan, as may be approved by the
Oversight Committee and Response but only if such changes are necessary to
prevent the disqualification of any of the Plans and do not have a material
adverse impact on Provider.
(d) Expenses incurred in connection with the Provider Plan or other
Provider employee benefit plans, including, without limitation, the
compensation of counsel, accountants, corporate trustees, and other agents
shall be included in Clinic Expenses.
(e) The contribution and administration expenses for the Designated
Leased Employees shall be included in the Provider's operating budget. The
Provider and Response shall not make employee benefit plan contributions or
payments to the Provider for their respective employees in excess of such
budgeted amounts unless required by law or the terms of the Provider Plan.
Response shall make contributions or payments with respect to the Provider
Plan or other Provider employee benefit plans, as a Clinic Expense, on
behalf of eligible Designated Leased Employees, and other eligible Provider
employees. In the event a Provider Plan or other Provider employee benefit
plan is terminated, Response shall be responsible, as a Clinic Expense, for
any funding liabilities related to eligible Designated Leased Employees;
provided, however, Response shall only be responsible for the funding of
any liability accruing after the date of the Acquisition Agreement.
(f) Response shall have the sole and exclusive authority to adopt,
amend or terminate any employee benefit plan for the benefit of its
employees, regardless of whether such employees are Designated Leased
Employees, unless such actions would require the amendment, freeze or
termination of the Provider Plan to avoid disqualification of the Provider
Plan, in which case any such action would be subject to the express prior
written consent of the Oversight Committee. Response shall have the sole
and exclusive authority to appoint the trustee, custodian and administrator
of any such plan.
(g) In the event that any "employee welfare benefit plan" (as defined
in ERISA 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.
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 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. Each Physician Stockholder shall not
engage in the above-described activities during the term of his employment
by the Provider and for a period of five (5) years after 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, (iii) assuming directorships of
hospices, or (iv) performing such services that render revenue excluded
from Practice Revenue as listed on Schedule 4.2(c) following termination of
any such employment relationship with the Provider; and (B) such
restrictive covenant shall not apply to any Stockholder if this Agreement
shall be terminated by the Provider pursuant to Section 11.5 below upon a
Response Event of Default.
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 Broward County, Florida 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.
Rymer, Faig and Zaravinos in Fort Lauderdale, Florida, Drs. Weisberg, Weiss
and Weinreb in Tamarac, Florida, and The Center for Hematology-Oncology,
P.A., Boca Raton, Florida (which operates a clinic in North Broward County,
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.
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 shall exceed the aggregate
Practice Revenue of the Provider, then (i) first, the Fixed Portion of Base
Service Fee shall be reduced by the amount of such excess, and (ii) to the
extent such excess is greater than the Fixed Portion, such remaining excess
will be reimbursed by Response to the Provider. 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.
ARTICLE 9.
RECORDS
9.1. Patient Records. Upon termination of this Agreement, the
Provider shall retain all patient medical records maintained by the
Provider or Response in the name of the Provider. Response shall, at its
option, and if allowed under Applicable Law be entitled to have reasonable
access during normal business hours to the Provider's patient medical
records applicable to the period of Response's performance under this
Agreement. Moreover, the Provider shall, at its option, be entitled to
retain copies of financial and accounting records relating to all services
performed by the Provider or Response under this Agreement. All parties
agree to maintain the confidentiality of patient identifying information
and not to disclose such information except as may be required or permitted
by Applicable Law.
9.2. Records Owned by Response. All records relating in any way to
the operation of a Clinic which are not the property of the Provider under
the provisions of Section 9.1 above, shall at all times be the property of
Response.
9.3. Access to Records. During the term of this Agreement and
thereafter, the Provider or its designee shall have reasonable access
during normal business hours in Tamarac, 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, the Provider shall maintain comprehensive
professional liability insurance with limits of not less than $500,000 per
claim and with aggregate policy limits of not less than $1,000,000 per
Physician and a separate limit for the Provider. The Provider shall be
responsible for all liabilities in excess of the limits of such policies.
Response shall have the option, with Oversight Committee approval, of
providing such professional liability insurance through an alternative
program, provided such program meets the requirements of the Insurance
Commissioner of the State of 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. Moreover, Response shall, at its election,
be entitled to acquire a "tail policy" covering potential claims against
the Corporation for which the Corporation might be liable after
consummation of the transaction contemplated by the Purchase Agreement, the
cost of which coverage shall be a Clinic Expense.
10.3. Additional Insureds. The Provider and Response each agrees to
use its best efforts to have the other named as an additional insured on
the their respective professional liability insurance programs.
10.4. Indemnification Matters Involving Third Parties. The Provider
and Response ("Indemnitor") shall indemnify, hold harmless and defend the
other ("Indemnitee") from and against any and all liability, loss, damage,
claim, causes of action, and expenses (including reasonable attorneys'
fees, except to the extent limited below), whether or not covered by
insurance ("Adverse Consequences"), caused or asserted to have been caused,
directly or indirectly, by or as a result of the acts (intentional or
negligent) or omissions by, in the case of the Provider, any Physician
Stockholder or other person acting under the supervision and control
thereof, or, in the case of Response, by any employee, agent, officer,
director or shareholder thereof who is not acting under the supervision and
control of a Physician Stockholder of the Provider.
(a) If any third party shall notify an Indemnitee with respect to
any matter (a "Third Party Claim") which may give rise to a claim for
indemnification under this Section 10.4, then the Indemnitee shall promptly
notify the Indemnitor in writing; provided, however, that no delay on the
part of the Indemnitee in notifying the Indemnitor shall relieve the
Indemnitor from any obligation hereunder unless (and then solely to the
extent) the Indemnitor is prejudiced by such delay.
(b) The Indemnitor will have the right to defend the Indemnitee
against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnitee so long as (A) the Indemnitor notifies the
Indemnitee in writing within 15 days after the Indemnitee has given notice
of the Third Party Claim that the Indemnitor will indemnify the Indemnitee
in accordance with this Article 10, (B) the Indemnitor provides the
Indemnitee with evidence acceptable to the Indemnitee that the Indemnitor
will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not, in
the good faith judgment of the Indemnitee, likely to establish a
precedential custom or practice adverse to the continuing business
interests of the Indemnitee, and (D) the Indemnitor conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnitor is conducting the defense of the
Third Party Claim in accordance with Section 10.4(b) above, (A) the
Indemnitee may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the Indemnitee
will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of
the Indemnitor (not to be withheld unreasonably), and (C) the Indemnitor
will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of
the Indemnitee (not to be unreasonably withheld).
(d) In the event any of the conditions in Section 10.4(b) above
is or becomes unsatisfied, however, (A) the Indemnitee may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnitee need not consult with, or obtain any consent from, the
Indemnitor in connection therewith), (B) the Indemnitor will reimburse the
Indemnitee promptly and periodically for the costs of defending against the
Third Party Claim (including attorneys' fees and expenses), and (C) the
Indemnitor will remain responsible for any Adverse Consequences the
Indemnitee may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 10.4.
10.5. Determination of Adverse Consequences. The parties hereto
shall take into account the time cost of money (using the Applicable Rate
as the discount rate) in determining Adverse Consequences for purposes of
this Section 10.
10.6. Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of,
any statutory, equitable, or common law remedy any party may have for
breach of representation, warranty, or covenant.
ARTICLE 11.
TERM AND TERMINATION
11.1. Term of Agreement. This Service Agreement shall be effective
as of September 1, 1996 and shall expire on July 31, 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 sixty (60) days thereafter.
(b) any material default by Response in the performance of any
of its duties or obligations under this Agreement or breach of its
representations and warranties as set forth in Article 14, and such default
or breach shall continue for a period of sixty (60) days (fifteen (15) days
in the case of Response's failure to provide required advances under the
Receivables Line) after written notice thereof has been given to Response
by the Provider.
(c) in the event Response shall, intentionally or in bad faith,
misapply funds or assets of the Provider or commit a similar act which
cause material harm to the Provider.
11.4. Provider Event of Default. The occurrence of any of the
following events shall constitute a default by the Provider (an "Provider
Event of Default") under this Agreement, giving Response the right to the
remedies set forth in Section 11.6 below:
(a) the filing by the Provider of a petition in voluntary
bankruptcy or an assignment by the Provider for the benefit of creditors,
or upon other action taken or suffered, voluntarily or involuntarily, under
any federal or state law for the benefit of debtors by the Provider, except
for the filing of a petition in involuntary bankruptcy against the Provider
which is dismissed within sixty (60) days thereafter; provided, further,
that if the Physicians comprising the Provider are lawfully able, within 60
days after the occurrence of such event, to reorganize the practice or form
a new entity to continue the practice, and if such new entity and its
principal stockholders or owners, with the reasonable consent of Response,
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.
(b) any material default by the Provider in the performance of
any of its material duties or obligations under Sections 6.1, 6.8, 7.2,
8.1, 8.2 and 15.1 of 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; provided, however, that such
curative period shall be extended for an additional 60 days if the Provider
shall be acting in good faith to cure such default throughout the initial
curative period.
(c) the final determination of termination or suspension of the
Provider's Medicare or Medicaid Provider Number, or the Medicare or
Medicaid Provider Numbers of a majority of the Physicians employed thereby,
and such termination or suspension shall continue for sixty (60) 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); provided,
however, that the foregoing curative period shall be extended for an
additional 60 days if the Provider shall be acting in good faith to cure
such default throughout the initial curative period.
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. Moreover, to the extent permissable under the terms of
any lease to which Response is a party, upon the request of the Provider,
Response shall sublease to the Provider any leased real or personal
property utilized in the Provider's practice for a subrent equal to the
rental charged Response pursuant to the underlying lease. 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 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, in cash, one-half (1/2) of the
Liquidated Damages Amount not otherwise paid by the Provider, provided that
and to the extent he is a Remaining Physician Stockholder for purposes of
this Agreement. At the election of a Stockholder, such Stockholder's
obligation to pay Liquidated Damages hereunder may be satisfied by delivery
of shares of common stock of Response, valued at the average closing price
of such common stock on the Nasdaq Stock Market for the ten (10) trading
days immediately preceding the date of delivery of such shares and by
cancellation of any promissory note payable by Response to such
Stockholder, with only the difference between the Liquidated Damages
payable by such Stockholder and the sum of the value of common stock and
principal cancellation of any note being payable in cash by such
Stockholder. 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. Moreover, to the extent permissable under
the terms of any lease to which Response is a party, upon the request of
the Provider, Response shall sublease to the Provider any leased real or
personal property utilized in the Provider's practice for a subrent equal
to the rental charged Response pursuant to the underlying lease. 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.
11.7. 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 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.
13.4. Provider Compliance. The Provider has all licenses necessary
to operate each Clinic in accordance with the requirements of all
Applicable Laws and has all Necessary Authorizations for the use and
operation of all assets comprising each Clinic, all of which are in full
force and effect. There are no outstanding notices of deficiencies
relating to the Provider issued by any Governmental Authority or Third
Party Payor requiring conformity or compliance with any Applicable Law or
condition for participation of such Governmental Authority or Third Party
Payor, and after reasonable and independent inquiry and due diligence and
investigation, the Provider has neither received notice nor has any
knowledge or reason to believe that such Necessary Authorizations may be
revoked or not renewed in the ordinary course.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES OF RESPONSE
Response represents, warrants, covenants and agrees with the Provider
as follows:
14.1. Organization. Response is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Tennessee. Response has the full power to own its property, to carry on
its business as presently conducted, to enter into this Agreement and to
consummate the transactions contemplated hereby.
14.2. Authority. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary action, and this Agreement is a valid and
binding Agreement of Response enforceable in accordance with its terms.
Response has taken all necessary action to authorize the execution,
delivery and performance of this Agreement, as well as the consummation of
the transactions contemplated hereby. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated
hereby will not, violate any provisions of the charter or the bylaws of
Response or any indenture, mortgage, deed of trust, lien, lease, agreement,
arrangement, contract, instrument, license, order, judgment or decree or
result in the acceleration of any obligation thereunder to which Response
is a party or by which it is bound.
14.3. 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 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. 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 "Rosenberg & Kalman, 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.
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, Broward County,
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:
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: Abraham Rosenberg, M.D.
Rosenberg & Kalman, M.D., P.A.
7421 N. University Drive
Tamarac, Florida 33321
With copies to: Steven B. Lapidus, Esq.
Greenberg Taurig
1221 Brickell Ave., 21st 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
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 (including any obligation of the
Provider under Section 11.6) 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
R&K, M.D., P.A.
By:
Title:
RESPONSE ONCOLOGY, INC.
By:
Title:
ROSENBERG & KALMAN, M.D., P.A.
By:
Title
STOCKHOLDERS:
Alfred M. Kalman, M.D.
Abraham Rosenberg, M.D.
RESPONSE ONCOLOGY, INC.
SERVICE AGREEMENT
SCHEDULE A
Base Service Fee
The Base Service Fee shall be equal to the sum of (i) amounts recorded
as Clinic Expenses (the "Clinic Expense Portion") plus (ii) ***% of
Practice Revenue (the "Fixed Portion").
Performance Fee
During the entire term of the Service Agreement, including any
extended term, a Performance Fee in an amount equal to 50% 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, Clinic Expenses, Practice Retainage and
the Fixed Portion of the Base Service Fee (the latter two items being
computed on Practice Revenue for such period) from such commencement date
until the end of the calendar year of commencement shall be determined. The
sum of Clinic Expenses, Practice Retainage and the Fixed Portion of the
Base Service Fee will be subtracted from Practice Revenue, with the
difference then being divided by the number of days in such period, and the
quotient multiplied by 365. The computation formula set forth above will
be applied to the annualized Annual Surplus to compute an annualized
Performance Fee, which shall then be divided by 365 and multiplied by the
number of days in the partial period to yield the Performance Fee payable
with respect to such short period.
b) For any partial period that commences on the first day of a
calendar year and ends prior to the last day thereof, Annual Surplus for
the full year will be computed based on the definition thereof, which
result shall then be divided by 365 and multiplied by the number of days
during the partial period to yield the Performance Fees payable with
respect to such short period.
Liquidated Damages Amount
The amount of $***, decreased by ***% per year until August 31, 2001,
at which time such amount shall be $*** per Remaining Physician Stockholder
for the duration of this Agreement.
Practice Retainage
For purposes of this Agreement, the Practice Retainage shall equal
***% of Practice Revenue.
*** Material redacted pursuant to a claim for confidential treatment.
