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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 21, 1998
(December 13, 1998)
PHYSICIAN RELIANCE NETWORK, INC.
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(Exact name of registrant as specified in its charter)
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Texas 0-24872 75-2495107
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
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Two Lincoln Centre, Suite 900
5420 LBJ Freeway
Dallas, Texas 75240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 392-8700
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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Physician Reliance, L.P. ("PRLP"), a Texas limited partnership and a
wholly owned subsidiary of Physician Reliance Network, Inc., a Texas corporation
(the "Company"), has entered into a Second Amended and Restated Service
Agreement dated December 13, 1998, to be effective November 1, 1998 (the
"Agreement"), between Texas Oncology, P.A., a Texas professional association
("TOPA") and PRLP. The Agreement supersedes the Amended and Restated Service
Agreement dated as of January 1, 1996 between PRLP (as assignee of the Company)
and TOPA, and Amendment No. 1 thereto. Pursuant to and subject to the terms and
conditions of the Agreement, PRLP will continue to perform management and
administrative services and to furnish equipment and facilities to TOPA in
connection with the medical practice operated by TOPA.
The foregoing description of the contractual relationship established
by the Agreement does not purport to be complete and is qualified in its
entirety by reference to the Agreement, which is attached hereto as Exhibit 2.1
and is incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Not applicable.
(b) Not applicable.
(c) Exhibits: See Exhibit Index following signature page.
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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.
PHYSICIAN RELIANCE NETWORK, INC.
Date: December 18, 1998 By: /s/ George P. McGinn, Jr.
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George P. McGinn, Jr.
Executive Vice President, General Counsel,
and Secretary
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EXHIBIT INDEX
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No. Document
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10.1 Second Amended and Restated Service Agreement dated December 13,
1998, between Physician Reliance, L.P. and Texas Oncology, P.A.
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EXHIBIT 10.1
SECOND AMENDED AND RESTATED SERVICE AGREEMENT
THIS SECOND AMENDED AND RESTATED SERVICE AGREEMENT (the "Agreement") is
entered into on December 13, 1998, to be effective as of November 1, 1998 (the
"Effective Date"), by and between Physician Reliance, LP, a Texas limited
partnership ("PHYN"), and Texas Oncology, P.A., a Texas professional
association.
RECITALS:
WHEREAS, the Practice (as defined in Section 2.1.11) is a group medical
practice that provides medical care to the general public;
WHEREAS, PHYN is in the business of and has experience in providing
management, administrative and other business support services to and furnishing
medical practices with or arranging for the provision of facilities, equipment,
supplies and administrative support staff;
WHEREAS, the Practice desires to obtain the services of PHYN in
performing such management functions so as to permit the Practice to devote its
efforts on a concentrated and continuous basis to the rendering of medical
services to its patients; and
WHEREAS, PHYN (as assignee of Physician Reliance Network, Inc.) and the
Practice previously entered into a Restated Service Agreement dated as of
October 1, 1993, and an Amended and Restated Service Agreement dated as of
January 1, 1996, and PHYN and the Practice intend that this Agreement will
supersede and replace each such agreement in its entirety.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Practice hereby agrees to purchase the management and
support services herein described and PHYN agrees to provide such services on
the terms and conditions provided in this Agreement.
ARTICLE 1.
RELATIONSHIP OF THE PARTIES
1.1 Independent Relationship. The Practice and PHYN 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 PHYN herein, PHYN
and the Practice agree that the Practice shall retain
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sole authority to direct the medical, professional and ethical aspects of its
medical practice, and PHYN's authority under this Agreement extends only to the
non-medical business operations of the Practice with respect to those activities
expressly provided for herein. Each party shall be solely responsible for and
shall comply with all state and federal laws pertaining to employment
agreements, income tax 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, PHYN shall provide the Practice with offices and facilities, equipment,
supplies, support personnel, utilities, capital improvements, information
systems hardware and software, upgrades of equipment, hardware and software as
set forth herein, financial management, assistance with provider recruitment,
marketing materials and management services in a manner that is reasonably
competent and efficient. As more specifically set forth herein, the Practice
shall be responsible for the hiring of physicians and all issues related to
medical practice patterns and documentation thereof.
1.3 The Practice's Matters. Matters involving the internal agreements
and finances of the Practice shall remain the sole responsibility of the
Practice and its shareholders. In addition, the Practice solely shall control
and be responsible for all treatment decisions, diagnoses and clinical
protocols, and for the preparation and content of medical records and reports.
PHYN shall neither exercise control over nor interfere with any
physician-patient relationship, which shall be maintained strictly between the
Physician Employees and their patients.
1.4 Patient Referrals. The parties agree that the benefits to the
Practice hereunder do not require, are not payment or inducement for, and are in
no way contingent upon the admission or referral of any patient of the Practice
to any other person or entity. The Physician Employees shall be free to refer
their patients to any qualified provider in accordance with medical necessity
and their medical judgment, and in all cases in accordance with such Physician
Employee's belief as to the best interests of the patient.
ARTICLE 2.
DEFINITIONS
2.1 Definitions. For the purposes of this Agreement, the following
definitions shall apply:
2.1.1 "Accounts Receivable" shall mean all "accounts", "contract
rights", "chattel paper," "instruments," and "general intangibles" as
defined in Article Nine of the Uniform Commercial Code (as adopted in
Texas) with respect to Clinical Revenues.
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2.1.2 "Adjustments" shall mean any adjustments to Clinical
Revenues for uncollectible accounts, discounts, Medicare and Medicaid
disallowances, other contractual discounts, worker's compensation
discounts, employee/dependent healthcare benefit programs,
professional courtesies and other activities that either do not
generate a collectible fee or cause a reduction in accounts as billed.
2.1.3 "Clinical Facility" shall mean the facilities, including
satellite locations, related businesses, equipment and other assets of
PHYN which are utilized by the Practice and described in more detail
in Section 3.1 below and Exhibit 3.1 attached hereto and incorporated
herein by this reference.
2.1.4 "Clinical Facility Expenses" shall mean all expenses
(including depreciation and amortization) incurred, directly or
indirectly, in the operation of the Clinical Facility, other than
those expenses to be paid by the Practice or PHYN as specifically
provided herein, all determined in accordance with GAAP. Exhibit 2.1.4
attached hereto and incorporated herein by this reference, sets forth
(i) certain categories and types of expenses that will be deemed to be
Clinical Facility Expenses, (ii) the categories and types of expenses
that will be the sole responsibility of the Practice, and (iii) the
categories and types of expenses that will be the sole responsibility
of PHYN. To the extent a particular expense related to the Clinical
Facility is not specifically identified as an expense to be paid by
the Practice, PHYN or as a Clinical Facility Expense, it shall be a
Clinical Facility Expense. The cost of radiology professional services
provided to the Practice pursuant to contracts described in Section
4.2(k) shall be a Clinical Facility Expense.
2.1.5 "Clinical Revenues" shall mean all fees actually recorded
each month (net of Adjustments), in accordance with GAAP, by or on
behalf of either the Practice or Physician Employees arising from, or
in connection with (i) the operation of the Clinical Facility, (ii)
professional services furnished by Physician Employees or provided
under the supervision of Physician Employees, (iii) consulting
services rendered by Physician Employees, (iv) research programs
conducted by Physician Employees, (v) professional service contracts
between any Physician Employee or Practice Employee and a third party,
or (vi) income derived by PRN or the Practice from operations in
Beaumont, Texas. Clinical Revenues shall not include fees received by
Physician Employees arising from, or in connection with
(i) depositions, (ii) acting as an expert witness, (iii) honoraria, or
(iv) any other fees excluded from Clinical Revenues by the Operating
Board. The parties acknowledge that the technical component of imaging
revenue derived from the Clinical Facility will be Clinical Revenues.
2.1.6 "EBIT" shall mean the earnings before interest and income
taxes resulting from the operation of the Clinical Facility. All
Clinical Revenues shall be included as revenues and all Clinical
Facility Expenses shall be included as expenses.
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2.1.7 "Exclusive Area" shall be the state of Texas and the
portion of New Mexico identified on Exhibit 2.1.7.
2.1.8 "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, 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
accounting practices used by PHYN in preparation of PHYN's financial
statements.
2.1.9 "Operating Board" shall mean the board established pursuant
to Section 4.1.
2.1.10 "Physician Employees" shall mean those individuals who are
employees of the Practice and provide professional services to
patients of the Practice and are duly licensed as a physician to
provide professional medical services.
2.1.11 "Practice" shall mean Texas Oncology, P.A. and any entity
owned by or controlled by, directly or indirectly, Texas Oncology,
P.A. which is engaged in the practice of medicine.
2.1.12 "Practice Employees" shall mean nurses, medical
technologists and technicians, radiology technologists and
technicians, radiation technologists and technicians, physicists,
nurse anesthetists, physician assistants, nurse practitioners, and all
other such employees of the Practice directly or indirectly involved
with providing medical care to patients.
2.1.13 "Professional Revenues" shall mean all Clinical Revenues
resulting from professional medical services personally furnished to
patients by Physician Employees or provided under the supervision of,
in conjunction with, Physician Employees and other fees or income
generated by Physician Employees which were properly billed as
physician professional fees (or as the physician professional fee
component of capitated or global fees) under then recognized codes
approved by the American Medical Association.
2.1.14 "Technical Revenues" shall mean all Clinical Revenues
which are not Professional Revenues.
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ARTICLE 3.
FACILITIES TO BE PROVIDED BY PHYN
3.1 Clinical Facilities. PHYN hereby agrees to provide to the Practice
on an exclusive full-time basis the offices and facilities more fully described
in Exhibit 3.1 hereto. PHYN shall be responsible for paying (which costs shall
be Clinical Facility Expenses) all rent, additional lease costs, costs of
repairs, maintenance and improvements, upgrades, utilities (including, without
limitation, telephones, cellular telephones, facsimile machines, pagers and
other telecommunications devices to the extent used in the business of the
Practice, electricity, gas, heat, air conditioning and water), normal janitorial
services, refuse disposal including disposal of medical and hazardous waste,
property taxes and assessments, parking, security services, medical records
storage, and all other costs and expenses reasonably incurred in conducting
operations in the Clinical Facility during the term of this Agreement. PHYN
shall keep the Clinical Facilities in good order and repair, and shall provide
or arrange for maintenance and repair reasonably promptly after any request from
the Practice. PHYN shall notify the Practice prior to making any significant
capital improvements or repairs, and PHYN shall not change or relocate the
location of Clinical Facilities without the prior written consent of the
Practice, which consent shall not be unreasonably delayed or withheld. PHYN and
the Practice acknowledge that the Clinical Facility may be used by radiologists
who are not Physician Employees to provide radiology professional services.
ARTICLE 4.
DUTIES OF THE OPERATING BOARD
4.1 Formation and Composition of the Operating Board. The parties shall
establish an Operating Board which shall provide advice to PHYN concerning the
management and administrative policies for the overall operation of the Clinical
Facility and shall approve those items set forth in Section 4.2. The Operating
Board shall consist of an equal number of members designated by PHYN and the
Practice, respectively, and the total number of members shall not be less than
four (4) or more than eight (8). The PHYN representatives shall have in the
aggregate one vote, and the Practice representatives shall have in the aggregate
one vote. The unanimous vote of the Operating Board shall be the act of the
Operating Board. The presence in person by at least one PHYN representative and
by at least one Practice representative shall constitute a quorum. The President
of the Practice shall act as chairman of the Operating Board, shall prepare the
agenda for Operating Board meetings, shall distribute the agenda at least two
(2) working days prior to the meeting, and shall conduct meetings in accordance
with Section 4.3 below.
4.2 Matters Requiring Operating Board Approval. The Operating Board
shall have the following duties and obligations:
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(a) Any renovation and expansion plans, as well as any capital
equipment expenditures, relating to the Clinical Facilities shall be approved by
the Operating Board, which approval shall not be unreasonably withheld, and
shall be based upon economic feasibility, productivity, then current market
conditions, and, to the extent applicable, overall viability of the affiliated
practice site location under review.
(b) All annual operating and capital budgets for the operation
of the Practice shall be submitted by PHYN for review and approval by the
Operating Board.
(c) The Operating Board shall develop long-term and short-term
strategic and growth plans, including potential expansion of the geographic
coverage or expansion of services provided by the Practice.
(d) The Operating Board shall establish general parameters for
managed care contracts to be entered into by or on behalf of the Practice, and
approval of the Operating Board shall be required to enter into a capitated
contract.
(e) The Operating Board shall determine the priority of major
capital expenditures on behalf of the Practice.
(f) The Operating Board shall advise PHYN and the Practice
regarding litigation on behalf of the Practice.
(g) The Operating Board shall consider and approve the sale or
transfer of all or substantially all of the assets used in connection with any
of the Clinical Facilities.
(h) Approval of the Operating Board shall be required to
establish general parameters for implementing the community relations programs
contemplated by Section 5.5(f).
(i) No real property costs or expenses arising out of any
unoccupied real property owned, directly or indirectly, by PHYN shall be a
Clinical Facility Expense without the prior approval of the Operating Board.
(j) Approval of the Operating Board shall be required for the
Practice to make any material change to the terms of the covenant not to compete
contained in an employment agreement between the Practice and a Physician
Employee.
(k) The Operating Board shall establish general parameters for
any contract between the Practice and any provider relating to the provision of
radiology professional services at a Clinical Facility. It is contemplated that
these contracts will be entered into when the Practice bills on a "global" basis
for radiology services performed at the Clinical Facility.
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(l) The Operating Board shall determine the physician professional
fee component of capitated or global fees if required to calculate Professional
Revenues.
4.3 Meetings and Procedures.
(a) Regular and special meetings of the Operating Board shall be
held at the principal location of PHYN or other location that is agreed upon by
the Operating Board from time to time. Any meeting, regular or special, may be
held by conference telephone or similar communication equipment, so long as all
members participating in the meeting can hear one another, and all such members
shall be deemed to be present in person at the meeting. Attendance at meetings
of the Operating Board shall be limited to (i) members of the Operating Board;
(ii) accountants, attorneys and investment bankers of the Practice or PHYN; and
(iii) others mutually agreed upon by the Practice and PHYN.
(b) Notice of the time and place of special meetings shall be
delivered personally or by telephone to each member or sent by first-class mail
or facsimile, charges prepaid, addressed to each member at that member's
address. In case the notice is mailed, it shall be deposited in the United
States mail at least four (4) days before the time of the holding of the
meeting. In case the notice is delivered personally, or by telephone or by
facsimile or by telegram, it shall be delivered personally or by telephone or
facsimile least forty-eight (48) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the member or to a person at the office of the member who the person
giving the notice has reason to believe will promptly communicate it to the
member. The notice need not specify the purpose of the meeting nor the place if
the meeting is to be held at the regular location.
(c) A majority of the members present, whether or not constituting
a quorum, may adjourn any meeting to another time and place.
(d) Notice of the time and place of holding an adjourned meeting
need not be given, unless the meeting is adjourned for more than twenty-four
(24) hours, in which case notice of the time and place shall be given before the
time of the adjourned meeting, in the manner specified above, to the members who
were not present at the time of the adjournment.
(e) Any action required or permitted to be taken by the
Operating Board may be taken without a meeting, if all members thereof shall
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
Operating Board. Such written consent or consents shall be filed with the
minutes of the proceedings of the Operating Board.
(f) Proxies will not be permitted.
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(g) Any deadlocked vote of the Operating Board shall be submitted
to the President of the Practice and the President of PHYN for resolution
informally. If, after good faith efforts to resolve such a dispute, such parties
are unable to agree upon a resolution, the proposal shall be deemed to have been
rejected by the Operating Board.
ARTICLE 5.
CERTAIN OBLIGATIONS OF PHYN
5.1 Performance of Management Functions. PHYN shall provide or arrange
for the services set forth in this Article 5 in a competent and efficient
manner, and in accordance with the operating and capital budgets approved by the
Operating Board. The cost of all of such services shall be included in Clinical
Facility Expenses. PHYN shall be responsible for paying all Clinical Facility
Expenses. PHYN is hereby expressly authorized to perform its services hereunder
in a manner it determines in good faith to be reasonably appropriate to meet the
day-to-day requirements of the Practice's operations. The Practice will not act
in a manner which would prevent PHYN from efficiently managing the day-to-day
operations of the Practice in a business-like manner, and PHYN will not
interfere with any physician-patient relationship.
5.2 Financial Planning and Goals.
5.2.1 Preparation of Budgets. PHYN shall prepare for approval by
the Operating Board annual capital and operating budgets reflecting,
in reasonable detail, the anticipated revenues and expenses, sources
and uses of capital for growth in the Practice's practice and medical
services rendered at the Clinical Facility, and the allocation of costs
between Clinical Facility Expenses and the Practice's expenses. PHYN
shall reasonably determine the amount and form of capital to be
invested annually in the Clinical Facility. The budget for the next
succeeding fiscal year shall be presented to the Operating Board for
review at least forty-five (45) days prior to the end of the preceding
fiscal year. PHYN shall respond promptly to requests for information or
modifications in connection with any proposed budget submitted to the
Operating Board. If the Operating Board fails to approve a new
operating and/or capital budget as of the commencement of a fiscal
year, the prior year's budget shall continue in effect, increased by
the applicable CPI or agreed-upon percentage until the new budget has
been approved.
5.2.2 Service Development. PHYN realizes that the Practice has
opportunities to provide new services, expand existing facilities and
utilize new technologies in the Clinical Facility that will require
capital expenditures, and PHYN anticipates that such opportunities may
include new and replacement equipment as may be economically justified.
The provision of new or upgraded equipment or other financial resources
of PHYN to enable the Practice to develop new services will depend on,
among other factors, physician composition, anticipated volume,
reimbursement, number of
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physicians, physician support, Clinical Facility performance, and
appropriate physician specialty mix, subject to the requirements of
any applicable statutes, regulations or contracts. PHYN will use its
reasonable efforts to enable the Practice to add new services or to
supplement existing services.
5.3 Audits and Statements. PHYN shall prepare unaudited annual
financial statements for the operations of the Clinical Facility. If the
Practice desires an audit of such financial statements, the Practice shall
notify PHYN, and the cost of such audit shall be (i) paid by PHYN if such audit
discloses that EBIT has been understated in an amount in excess of the greater
of $2,000,000 or two (2%) percent of EBIT, and (ii) paid equally by PHYN and the
Practice if such audit discloses that EBIT has not been understated in an amount
in excess of the greater of $2,000,000 or two (2%) percent of EBIT. Any audit
conducted in accordance with this section shall be conducted in accordance with
GAAP. PHYN shall prepare monthly unaudited financial statements containing
statements of income (including itemization of Clinical Revenues and Clinical
Facility Expenses for such period and year to date), a statement of aged
accounts receivable, all with respect to Clinical Facility operations, which
shall be delivered to the Practice within twenty (20) business days after the
close of each calendar month. PHYN shall prepare quarterly a list of depreciable
and amortizable assets located in the Clinical Facility with a book value in
excess of $100,000. Such statements shall be prepared both on the basis of
regional practice sites and in the aggregate. The cost of the preparation of
such financial statements and other financial statements of the Practice by
PHYN, and local business, use and property taxes all shall be included in
Clinical Facility Expenses. The Practice shall be solely responsible only for
its income taxes, whether state or federal, and fees imposed on professional
licenses.
5.4 Inventory and Supplies. PHYN shall order and purchase inventory and
supplies, and such other ordinary, necessary or appropriate materials which PHYN
shall deem to be necessary in the operation of the Clinical Facility and which
are reasonably requested by the Practice to deliver quality medical services in
a cost-effective manner. The costs thereof reflected as Clinical Facility
Expenses shall be PHYN's actual direct cost therefor, without markup or premium,
and including any discount received by PHYN. PHYN shall use all reasonable
efforts to maintain at all times an adequate inventory of drugs and other
supplies related to the delivery of medical services by the Practice.
5.5 Management Services and Administration.
(a) The Practice hereby appoints PHYN as its sole and exclusive
manager and administrator of all day-to-day business functions. The
Practice agrees that the purpose and intent of this Service Agreement
is to relieve the Practice, its shareholders and Physician Employees
to the maximum extent possible of the administrative, accounting,
personnel and business aspects of their practice, with PHYN assuming
responsibility and being given all necessary authority to perform
these functions. PHYN agrees that the
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Practice, and only the Practice, will perform medical functions. PHYN
will have no authority, directly or indirectly, to perform, and will
not perform, any medical function.
(b) PHYN shall, on behalf of the Practice, bill patients and,
except for government payors such as Medicare and Medicaid, collect the
professional fees for medical services rendered by the Practice in the
Clinical Facility, for services performed outside the Clinical Facility
for the Practice's hospitalized patients, and for all other
professional and Clinical Facility services. The Practice hereby
appoints PHYN for the term hereof to be its true and lawful
attorney-in-fact, for the following purposes: (i) to bill patients in
the Practice's name and on its behalf, except for accounts receivable
from government payors; (ii) to collect accounts receivable resulting
from such billing in the Practice's name and on its behalf, except for
accounts receivable from government payors; (iii) to receive payments
from Blue Cross/Blue Shield, insurance companies, prepayments received
from health care plans and all other nongovernmental third party payors
in the Practice's name and on its behalf for deposit in a bank account;
(iv) to take possession of, endorse in the name of the Practice (and/or
in the name of an individual physician, in the event that such payment
is intended for purpose of payment of a physician's bill), and deposit
in a bank account any notes, checks, money orders, insurance payments
and other instruments received in payment of nongovernmental accounts
receivable; (v) following prior written approval of the Operating
Board, to initiate the institution of legal proceedings in the name of
the Practice to collect any accounts and moneys owed to the Practice;
(vi) to enforce the rights of the Practice as creditor under any
contract or in connection with the rendering of any service; and (vii)
to contest adjustments and denials by governmental agencies (or fiscal
intermediaries) as third-party payors. All Adjustments and other
activities that do not generate a collectible fee shall be done in a
reasonable and consistent manner. The performance of all billing and
collection functions by PHYN shall comply with state and federal
statutes, regulations, and directives applicable to such functions.
(c) With respect to the collection of payments for physician
medical services from government payors, including Medicare and
Medicaid, PHYN shall be responsible for submitting claims for payment
to such payors in the name of the Practice and on its behalf. All of
the payments with respect to such claims shall be made by check (or
electronic funds transfer) payable to the Practice and shall be
deposited into a bank account with the bank designated by the Practice
and whose deposits are insured by the FDIC (the "Special Account Bank")
under the exclusive domain and control of the Practice (the "Practice
Special Account"). The Practice shall, effective as of the Effective
Date, direct the Special Account Bank in writing to transfer all
amounts in the Practice Special Account at the end of each business day
of the bank to an account designated by PHYN ("Practice Account").
Amounts deposited into the Practice Account pursuant to this Section
5.5(c) shall be disbursed by PHYN in accordance with the remaining
provisions of this Agreement. The Practice agrees that it will not take
any actions that interfere with the transfer of funds from the Practice
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Special Account to the Practice Account as provided in this Section
5.5(c) nor will the Practice or its agents remove, withdraw or
authorize the removal or withdrawal of any funds from the Practice
Special Account for any purpose except to accomplish the transfer of
funds provided in this Section 5.5(c).
(d) PHYN shall supervise and maintain custody of all files and
records relating to the operation of the Clinical Facility, 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 Practice and shall be located at the
Clinical Facility so that they are readily accessible for patient care.
Access to patient records shall be governed by applicable state and
federal laws governing confidentiality of patient records. Information
extracted from patient records of the Practice to create databases
desired by PHYN shall be the exclusive property of PHYN. Information
extracted from patient records of the Practice to create databases
desired by the Practice shall be the exclusive property of the
Practice. The management of all files and records shall comply with
applicable local, state and federal statutes and regulations. PHYN
shall use its best efforts to preserve the confidentiality of patient
medical records, shall use information contained in such records only
for the limited purpose necessary to perform the services set forth
herein, and shall be responsible for damages resulting from a breach of
the foregoing to the extent due solely to its negligence; provided,
however, in no event shall a breach of said confidentiality be deemed a
default under this Agreement.
(e) PHYN shall provide personnel, in accordance with Section 5.6
below, necessary and appropriate to provide clerical, payroll,
accounting, bookkeeping, employee benefit administration, accounts
payable processing, human resources, information and computer services,
risk management, printing, postage and duplication services, medical
transcribing services, and any other ordinary, necessary or appropriate
services for the operation of the Clinical Facility.
(f) PHYN shall design and implement an appropriate community
relations program on behalf of and in conjunction with the Practice,
with appropriate emphasis on public awareness of the availability of
services at the Clinical Facility. The community relations program
shall be conducted in compliance with applicable laws and regulations
governing advertising by the medical profession, and with due regard to
such standards as may from time to time be promulgated by the American
Medical Association.
(g) PHYN shall assist the Practice in recruiting additional
physicians, carrying out such administrative functions as may be
appropriate such as advertising for and identifying potential
candidates, checking credentials, and arranging interviews; provided,
however, that the Practice shall interview and make the ultimate
decision as to the suitability of any physician to become associated
with the Clinical Facility. All physicians hired by the Practice shall
be the sole employees of the Practice. Any relocation or moving
expenses shall be a Clinical Facility Expense up to a maximum of
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Ten Thousand Dollars ($10,000) per Physician Employee. The salaries
and benefits of the PRN Physician Services Department staff and the
costs incurred by the PRN Physician Services Department in providing
the services described in this Section 5.5(g) shall be borne solely by
PHYN.
(h) PHYN shall identify potential payors and providers with
whom the Practice should consider contracting for managed care
contracts, and PHYN shall negotiate and administer all managed care
contracts on behalf of the Practice. An officer of the Practice or an
agent thereof must execute all managed care contracts. In connection
with all managed care contracts, PHYN shall be responsible for
administration of risk pools, collection and disbursement of encounter
data, assignment and transfer of enrollees, and providing information
and reports to payors and providers as required under applicable
contracts provided the Practice cooperates with PHYN to satisfy these
obligations. In addition, PHYN shall identify and negotiate on behalf
of the Practice research clinical drug trials.
(i) PHYN shall provide for the proper cleanliness of the premises
comprising the Clinical Facility, as well as maintenance and
cleanliness of the equipment, furniture and furnishings located upon
such premises in good working order. PHYN shall conduct or arrange for
regular inspections of equipment, furnishings and fixtures in order to
identify required cleaning, maintenance or refurbishing.
(j) PHYN shall assist the Practice by identifying alternative
insurers and policies, and preparing a comparison of rates for such
policies, and negotiating for premiums to be paid, with respect to
professional liability insurance and other insurance provided for in
Section 10.1. Premiums with respect to such policies covering the
Physician Employees shall be a Practice expense.
5.6 Personnel. PHYN shall provide professional management and
administrative personnel, clerical, secretarial, bookkeeping, collection and
other personnel necessary and appropriate to provide the services to be provided
by PHYN pursuant to this Agreement. In addition, PHYN shall supervise (but only
with respect to non-medical matters) any personnel of the Practice at the
Clinical Facility, subject to the ultimate authority of the Practice to hire,
fire and discipline its own personnel in accordance with applicable laws and
regulations. PHYN shall determine and cause to be paid the salaries and fringe
benefits of all of its personnel. Such personnel shall be under the direction,
supervision and control of PHYN. If the Practice is dissatisfied with the
services of any person other than a Practice Employee, the Practice shall
consult with PHYN. PHYN shall in good faith determine whether the performance of
that employee could be brought to acceptable levels through counsel and
assistance, or whether the employment of such employee should be terminated. All
of PHYN's obligations regarding staff shall be governed by the overriding
principle and goal of enabling the Practice to provide quality medical care.
Employee assignments shall be made to promote consistent and continued rendering
of quality medical support services and to provide prompt availability and
accessibility
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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. PHYN shall
maintain established working relationships wherever possible and PHYN shall make
every effort consistent with sound business practices to honor the specific
requests of the Practice with regard to the assignment of personnel.
5.7 Events Excusing Performance. PHYN shall not be liable to the
Practice 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 PHYN has no control for so long as such events continue,
and for a reasonable period of time thereafter.
5.8 Compliance with Applicable Laws. PHYN shall comply in all material
respects with all applicable federal, state and local laws, regulations and
restrictions in the conduct of its obligations under this Agreement.
5.9 Quality Assurance. PHYN shall assist the Practice in fulfilling its
obligations to its patients to maintain quality medical and professional
services.
5.10 Reimbursed Employee Expenses. PHYN will reimburse the Practice for
all reasonable compensation paid by the Practice to Practice Employees other
than Physician Employees and benefits provided by the Practice to Practice
Employees other than Physician Employees (including any incremental cost
associated with the Practice obtaining malpractice insurance for Clinical
Employees) in an amount not to exceed an amount approved in advance by the
Operating Board.
ARTICLE 6.
OBLIGATIONS OF THE PRACTICE AND RELATED MATTERS
6.1 Professional Services. The Practice shall provide the Practice
Employees in accordance with Section 5.6 above. The Practice shall employ all
Physician Employees for oncology and infectious disease professional services.
All professional services shall be provided to patients in compliance at all
times with ethical standards, laws and regulations applying to the medical
profession. The Practice shall ensure that each physician associated with the
Practice to provide medical care to patients of the Practice is licensed by all
required agencies or authorities. In the event that any disciplinary actions or
medical malpractice actions are initiated against any such physician, the
Practice shall promptly inform PHYN of such action and the underlying facts and
circumstances. The Practice shall carry out a program to monitor the quality of
medical care practiced at the Clinical Facility. Each physician associated with
the Practice shall maintain active medical staff membership or clinical
privileges appropriate for the range of services provided by such physician at
one or more hospitals utilized by the Practice for patients serviced
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by such physician, as determined on an individual basis between the Practice and
each Physician Employee.
6.2 Medical Practice. The Practice shall use and occupy the Clinical
Facility exclusively for the practice of medicine, and related activities such
as clinical research drug trials and medical consulting, and shall comply with
all applicable laws, rules, ordinances and all recognized standards of medical
care, and with the terms of any lease for such facilities. The Practice shall
use reasonable efforts to maintain or cause its Physician Employees to maintain
complete and accurate medical records reflecting all care provided by the
Practice to its patients and as are necessary to support charges submitted on
behalf of the Practice. PHYN shall cooperate with the Practice to satisfy this
obligation. It is expressly acknowledged by the parties that the medical
practice or practices conducted at the Clinical Facility shall be conducted
solely by Physician Employees , and no other physician or medical practitioner
shall be permitted to use or occupy the Clinical Facility without the prior
written consent of PHYN. The provision of medical care by Practice Employees
shall be under the supervision of a Physician Employee as necessary and
appropriate in order to meet applicable billing requirements and to comply with
applicable standards of medical care.
6.3 Employment of Physician Employees. The Practice shall have complete
control of and responsibility for the hiring, compensation, supervision,
evaluation and termination of its Physician Employees. The Practice shall be
responsible for the payment of such Physician Employees' salaries, wages, taxes
and benefits as the Practice's sole cost and expense. PHYN will reimburse the
Practice for thirty-five (35%) percent of the salary and benefits associated
with a Physician Employee's participation in development activities and Clinical
Facility management (but not internal Practice governance or strategic planning)
but only (i) to the extent approved in advance by the Operating Board, and (ii)
if such Physician Employee is not otherwise receiving compensation from PHYN.
With respect to physicians, the Practice shall employ and contract only with
licensed physicians meeting applicable credentialling guidelines established by
the Practice. The Practice agrees to maintain a sufficient number of Physician
Employees to adequately staff and treat patients at the Clinical Facility.
6.4 Professional Dues and Education Expenses. The cost of hospital
staff membership dues, professional licenses, medical staff dues and IPA or PHO
or similar managed care entity dues shall be a Clinical Facility Expense. In
addition, continuing medical education costs of Practice Employees shall be a
Clinical Facility Expense. Board certification fees shall be the sole
responsibility of the Practice. The Practice shall ensure that each of its
Physician Employees and Practice Employees participates in continuing medical
education as is necessary for such employee to provide medical services,
consistent with recognized and acceptable standards of professional practice.
6.5 Professional Insurance. The Practice shall be responsible for
obtaining and retaining professional liability insurance for its Physician
Employees and shall assure that its Physician Employees are insurable. During
the term of this Agreement, Physician Employees shall be provided with
occurrence or claims made medical malpractice insurance coverage
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under primary and excess policies in minimum amounts of One Million Dollars
($1,000,000) per occurrence and Three Million Dollars ($3,000,000) annual
aggregate. In the event the Practice provides claims made coverage, then upon
expiration or the earlier termination of employment of a Physician Employee, the
Practice shall use reasonable efforts to purchase "tail" insurance for the
benefit of Physician Employees covering the applicable statute of limitations
with respect to such Physician Employee's acts and omissions during the term of
his or her employment; provided, however, that if a terminated Physician
Employee chooses to maintain insurance coverage with the same insurance carrier
which would result in no tail coverage being required, the Practice shall not be
required to purchase said tail insurance policy.
6.6 Events Excusing Performance. The Practice shall not be liable to
PHYN for failure to perform any of the services required herein in event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies or other
events over which the Practice has no control for so long as such events
continue, and for a reasonable period of time thereafter.
6.7 Fees for Professional Services. Legal, accounting and other
professional fees incurred by the Practice (other than as specifically set forth
elsewhere in this Agreement) related solely to internal corporate governance and
internal corporate financial affairs of the Practice shall be the sole cost and
expense of the Practice. All other professional fees incurred by the Practice
shall be a Clinical Facility Expense, except for (i) all costs incurred in
connection with sexual harassment or malpractice claims involving Physician
Employees, which shall be the sole responsibility of the Practice, (ii) tax
return preparation costs in excess of Ten Thousand Dollars ($10,000) per year,
which shall remain the sole responsibility of the Practice, and (iii) all
uninsured costs incurred in connection with malpractice claims involving a
Practice Employee, which shall be borne equally by the Practice and PHYN. All
other professional fees incurred by PHYN shall be the sole responsibility of
PHYN, except for (i) claims not involving sexual harassment or malpractice
against PHYN relating to a Physician Employee or Practice Employee, which costs
shall be a Clinical Facility Expense and (ii) 50% of either (A) the salary and
benefits of one staff attorney or (B) the costs paid for one attorney retained
as an independent contractor, which will be a Clinical Facility Expense.
6.8 Employment of Practice Employees. The Practice shall employ and
supervise all Practice Employees necessary to provide efficient medical care to
patients of the Practice.
ARTICLE 7.
RESTRICTIVE COVENANTS
The Parties recognize that the services to be provided by PHYN shall be
feasible only if the Practice operates an active medical practice to which the
physicians associated with the Practice devote their full time and attention. To
that end:
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7.1 Restrictive Covenants by the Practice. During the term of this
Agreement, except as otherwise waived in writing by PHYN with respect to one or
more particular services, the Practice shall not establish, operate or provide
physician services at any medical office, clinic or other health care facility
providing services substantially similar to those provided by PHYN to the
Practice pursuant to this Agreement anywhere within the Exclusive Area other
than at the Clinical Facility.
7.2 Restrictive Covenants by PHYN. During the term of this Agreement,
except as otherwise waived in writing by the Practice with respect to one or
more particular services, PHYN shall not establish, operate or provide
management or administrative services at any medical office, clinic or other
health care facility providing oncological or infectious disease services
substantially similar to those provided to the Practice pursuant to this
Agreement anywhere within the Exclusive Area other than the Clinical Facility.
The provision of this Section 7.2 shall apply to PHYN, Physician Reliance
Network, Inc., and subsidiaries thereof.
7.3 Restrictive Covenants By Physician Employees. The Practice shall
use all reasonable efforts to enforce the existing formal agreements with its
Physician Employees pursuant to which the Physician Employees have agreed to
certain limitations on their ability to compete with the Practice. The Practice
shall obtain and enforce formal agreements with all new Physician Employees
substantially in the form of Exhibit 7.3 attached hereto.
7.4 Enforcement. PHYN and the Practice 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, each party hereto 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. The prevailing party in any action arising out of the provisions of this
Article 7 shall recover its costs and expenses, including reasonable attorneys'
fees.
7.5 Limitation on Restrictive Covenants. Notwithstanding the foregoing
provisions of Article 7, PHYN and the Practice acknowledge that the provisions
of Article 7 shall not interfere with the ability of Physician Employees to
utilize any facility necessary to provide appropriate patient care.
ARTICLE 8.
FINANCIAL ARRANGEMENTS
8.1 Service Fee. Subject to the provisions of Section 8.4, PHYN shall
be paid by the Practice a fee equal to the Clinical Facility Expenses plus
thirty-five percent (35%) of EBIT, as full and complete compensation for all of
the goods and services provided by PHYN pursuant to
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this Agreement, and without any further recourse to the Practice or any
Physician Employee. The amounts to be paid to PHYN under this Section 8.1 shall
be payable monthly. The amounts shall be estimated based upon the previous
month's operating results of the Clinical Facility. Adjustments to the estimated
payments shall be made to reconcile actual amounts due under this Section 8.1 by
the end of the following month. Upon preparation of quarterly financial
statements, final adjustments to the service fee for the quarter shall be made
and any additional payments owing to PHYN or the Practice shall then be made,
upon mutual review and agreement by PHYN and the Practice. The service fee set
forth above will be reviewed annually (commencing one year from the date hereof)
to ensure that the intended underlying economic arrangements between the
Practice and PHYN are preserved. Such review shall take place in the first
quarter of PHYN's fiscal year. If changes in state or federal laws or
regulations, changes in the amount or method of reimbursing healthcare services,
or changes in the services or facilities provided by PHYN, result in a material
adverse change in the economic benefits of this Agreement to the Practice or
PHYN, the fees set forth above shall be equitably adjusted as soon as reasonably
possible. In the event of any dispute between the parties regarding the
calculation or reconciliation of any amount hereunder, the parties shall decide
upon an accounting firm or other financial specialist acceptable to the parties
to make a binding determination. The fees of such specialist shall be borne
equally by the parties.
8.2 Accounts Receivable. Effective the last business day of each month,
PHYN shall purchase the Accounts Receivable (other than Accounts Receivable from
the Medicare Program) of the Practice arising during the month just ended, by
payment of cash or other readily available funds into an account of the
Practice. The consideration for the purchase shall be an amount equal to actual
charges of the Clinical Facility for the month just ended, reduced by PHYN to
reflect historical Adjustments. For purposes of determining historical
Adjustments, reference shall be made to the average monthly collections of the
Clinical Facility for the three (3) month period preceding the month for which a
payment is made. Payment for the Accounts Receivable shall be reduced by the
amount of the service fees due to PHYN under Section 8.1 and shall be made on
the fifteenth (15th) business day of the month following the month in which the
Accounts Receivable are generated. For example, if PHYN is purchasing
receivables generated in July 1998, payment will be made on August 20, 1998, and
the amount of the payment shall be made by reference to the average monthly
collections of the Clinical Facility during the preceding months of April, May
and June.
Although it is the intention of the parties that PHYN purchase and
thereby become owner of the Accounts Receivable of the Practice, in case such
purchase shall be ineffective for any reason, the Practice has entered into a
Security Agreement to grant a security interest in the Accounts Receivable PHYN
to secure the immediate repayment to PHYN of all indebtedness and obligations of
the Practice to PHYN arising under or in connection with this Agreement. In
addition, the Practice shall cooperate with PHYN and execute all necessary
documents in connection with the pledge of such Accounts Receivable to PHYN or
at PHYN's option, its lenders. All collections in respect of such Accounts
Receivable shall be deposited in a bank account designated by PHYN. To the
extent the Practice comes into possession of any payments
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in respect of such Accounts Receivable, the Practice shall direct such payments
to PHYN for deposit in bank accounts designated by PHYN.
8.3 Amounts Retained by the Practice. The Practice shall retain
sixty-five percent (65%) of EBIT payable monthly as provided in Section 8.1.
8.4 Other Financial Agreements
(a) In the event PHYN shortens its corporate amortization
schedule for intangibles charged as Clinical Facility Expenses to
twenty-five (25) years, the new amortization schedule for the Practice
shall be no less favorable to the Practice than the amortization
schedule applied with respect to any other medical group managed by
PHYN (except for such groups whose current management agreement would
prohibit such treatment). In no event shall such amortization schedule
be shorter than twenty-five (25) years. If PHYN subsequently adopts a
period longer than twenty-five (25) years for amortization of such
expenses, the parties hereto agree to amend this Agreement to make a
corresponding change.
(b) The Practice agrees that it shall receive only the
percentage of site fees from PRN Research that result from research
activities conducted at the Clinical Facility. The PRN Research
facility shall not be deemed to be a Clinical Facility for any purpose
of this Agreement, and PHYN shall be entitled to all of the expenses
and revenues therefrom, including the costs of services rendered by
scientists, research directors and administrators for PRN Research. PRN
Research will operate as a site management organization and retain a
percentage of the contractual site fees to cover all related expenses
and potential profit of the site management organization. Site
management fees, less the percentage retained by the site management
organization, will be Clinical Facility Revenues. The direct costs for
the research nurse, facility and professional services rendered
pursuant to the research contract will be Clinical Facility Expenses.
There will be no further allocation of PRN Research expenses to the
Practice.
(c) Development of additional markets.
(i) For markets entered into by PHYN and the Practice after
the Effective Date, the fee payable to PHYN for practice
sites in which there are no radiation therapy technical
revenues received by the Practice ("New Practice Markets")
will be ten (10%) percent of Professional Revenues plus all
Technical Revenues until the earlier of: (a) expiration of a
24 month period subsequent to the commencement of operations
in a New Practice Market; or (b) the date of first billing
of a radiation therapy patient in a cancer center located in
the New Practice Market; after which time, the fee payable
to PHYN will be as set forth in Section 8.1.
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(ii) The Practice will assume all economic risks agreed to
by the Operating Board (purchase price of assets, including
goodwill, necessary compensation subsidies and working
capital deficits) associated with the acquisition by the
Practice of medical oncology and radiation oncology
practices. The Practice will be paid by PHYN five (5) times
thirty-five (35%) percent of first-year projected EBIT of
the acquired practice. The Operating Board will agree upon
the projected EBIT of the acquired practice. The provisions
of this Section 8.4(c)(ii) will be re-evaluated by the
Operating Board on a periodic basis.
ARTICLE 9.
RECORDS
9.1 Patient Records and Financial Records. Upon termination of this
Agreement, the Practice shall retain all patient medical records and all
financial and accounting records maintained by the Practice or PHYN in the name
of the Practice. At all times during the term of this Agreement, access to
patient records shall be governed by applicable state and federal laws governing
confidentiality of patient records. PHYN shall, at its option, be entitled to
retain copies of financial and accounting records relating to all services
performed by the Practice. The cost of producing such copies shall be borne
equally by the Practice and PHYN.
9.2 Records Owned by PHYN. All records relating in any way to the
operation of the Clinical Facility which are not the property of the Practice
and records relating to the personnel employed by PHYN shall at all times be the
property of PHYN.
9.3 Access to Records. During the term of this Agreement, each party or
its designee shall have reasonable access during normal business hours to the
records, including, but not limited to, records of collections, expenses and
disbursements, as kept by PHYN in performing PHYN's obligations under this
Agreement. After the termination or expiration of this Agreement, PHYN may copy
any or all records of the Practice, as described in Section 9.1 above, only to
the extent reasonably necessary to defend against a lawsuit or governmental
investigation or other administrative proceeding or audit. In such a case, PHYN
may copy at its expense any or all of such records, subject to the
confidentiality provisions of this Agreement. Access to patient records shall be
governed by applicable state and federal laws regarding confidentiality of
patient records.
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ARTICLE 10.
INSURANCE AND INDEMNITY
10.1 Insurance to be Maintained by the Practice. Throughout the term of
this Agreement, the Practice shall maintain comprehensive professional liability
insurance for its Physician Employees with a reputable insurance company or
companies and with such limits and coverages as specified in Section 6.5 above.
The Practice shall be responsible for all liabilities in excess of the limits of
such policies.
10.2 Insurance to be Maintained by PHYN. Throughout the term of this
Agreement, PHYN shall provide and maintain, as a Clinical Facility Expense, (i)
comprehensive professional liability insurance for all employees with limits as
determined reasonable by PHYN in its national program and reasonably acceptable
to the Practice and (ii) comprehensive general liability and property insurance
covering the Clinical Facility premises and operations in amounts as determined
reasonable by PHYN and acceptable to the Practice. PHYN will use reasonable
efforts to have the Practice named as an additional insured on such policies.
10.3 Tail Insurance Coverage. Unless the Practice elects to provide its
Physician Employees with an "occurrence" form of professional liability
insurance providing continuation of coverage after termination of employment,
the Practice will cause each individual physician who associates with the
Practice after the date hereof to enter into an agreement with the Practice that
upon termination of such physician's relationship with the Practice, for any
reason, tail insurance coverage (or final endorsement premium or prior acts
coverage) will be purchased by the individual physician. Such provisions may be
contained in employment agreements, restrictive covenant agreements or other
agreements entered into by the Practice and the individual physicians, and the
Practice hereby covenants with PHYN to enforce to the best of its ability such
provisions relating to the tail insurance coverage or to provide such coverage
at the expense of the Practice.
ARTICLE 11.
TERM AND TERMINATION
11.1 Term of Agreement. This Agreement shall expire on December 31,
2038 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 two (2) years each, unless either party delivers to the
other party, not less than six (6) months nor earlier than nine (9) months prior
to the expiration of the preceding term, written notice of such party's
intention not to extend the term of this Agreement.
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11.3 Termination by the Practice. The Practice may terminate this
Agreement as follows:
(a) In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by PHYN, or
upon the receivership or voluntary or involuntary dissolution of PHYN
without reinstatement within thirty (30) days, or other action taken or
suffered, voluntarily or involuntarily, under any federal or state law
for the benefit of debtors by PHYN, except for the filing of a petition
in involuntary bankruptcy against PHYN which is dismissed within sixty
(60) days thereafter, the Practice may give notice of the immediate
termination of this Agreement.
(b) In the event PHYN shall materially default in the
performance of any duty or obligation to make a payment to the Practice
imposed upon PHYN by Section 8.3 of this Agreement, and such default
shall continue for a period of ten (10) days after written notice
thereof has been given to PHYN by the Practice, the Practice may
terminate this Agreement. In the event PHYN shall materially default in
the performance of any duty or obligation (other than its obligations
under Section 8.3) imposed upon it by this Agreement, and such default
shall continue for a period of ninety (90) days after written notice
thereof has been given to PHYN by the Practice, the Practice may
terminate this Agreement.
11.4 Termination by PHYN. PHYN may terminate this Agreement as follows:
(a) In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by the
Practice, or upon the receivership or voluntary or involuntary
dissolution of the Practice without reinstatement within thirty (30)
days, or upon other action taken or suffered, voluntarily or
involuntarily, under any federal or state law for the benefit of
debtors by the Practice, except for the filing of a petition in
involuntary bankruptcy against the Practice which is dismissed within
sixty (60) days thereafter, PHYN may give notice of the immediate
termination of this Agreement.
(b) In the event the Practice shall materially default in the
performance of any duty or obligation imposed upon it by this
Agreement, and such default shall continue for a period of ninety (90)
days after written notice thereof has been given to the Practice by
PHYN, PHYN may terminate this Agreement.
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ARTICLE 12.
GENERAL PROVISIONS
12.1 Assignment. PHYN shall have the right, upon prior notice to the
Practice, to assign its rights hereunder to any person, firm or corporation
under common control with PHYN. Except as set forth above, neither PHYN nor the
Practice shall have the right to assign their respective rights and obligations
hereunder without the written consent of the other party. PHYN specifically
shall retain all obligations to perform the services to be provided by it
hereunder, unless the Practice specifically otherwise agrees in writing.
12.2 Whole Agreement, Modification. There are no other agreements or
understandings, written or oral, between the parties regarding this Agreement
and the Exhibits, other than as set forth herein. This Agreement, including the
Exhibits incorporated herein, shall not be modified or amended except by a
written document executed by both parties to this Agreement, and such written
modifications shall be attached hereto.
12.3 Notices. All notices required or permitted by this Agreement
shall be in writing and shall be addressed as follows:
To PHYN: Physician Reliance Network, Inc.
5420 LBJ Freeway, Suite 900
Dallas, Texas 75240
Attention: President
With a copy to: Chief Financial Officer
To the Practice: Texas Oncology, P.A.
5420 LBJ Freeway, Suite 800
Dallas, Texas 75240
Attention: President
or to such other address as either party shall notify the other.
12.4 Binding on Successors. This Agreement shall be binding upon the
parties hereto, and their successors and assigns.
12.5 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.
12.6 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 Texas. The parties acknowledge that PHYN 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 PHYN in this Agreement should be construed or deemed, by any governmental
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authority, agency or court to constitute the practice of medicine, the
performance of said act or service by PHYN shall be deemed waived by the
Practice and forever unenforceable; provided, however, in no event shall the
unenforceability of an act or service caused by this section affect the
enforceability of any other provisions of this Agreement unless the failure by
PHYN to perform such act or service would constitute a material and incurable
default in the performance of a duty or obligation imposed on it by this
Agreement.
12.7 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 unless the invalidity, illegality or unenforceability of such
provisions prevent the parties hereto from achieving the primary benefits sought
to be achieved by this Agreement.
12.8 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.
12.9 Confidentiality. Except for disclosure to its attorneys, bankers,
underwriters, lenders, directors, officers, shareholders or agents, or as
necessary or desirable for conduct of business, including negotiations with
acquisition candidates, neither party hereto shall disseminate or release to any
third party any information regarding any provision of this Agreement, or any
financial information regarding the other (past, present or future) obtained by
the other in the course of the negotiation 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 including securities laws, or pursuant to court
order.
12.10 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
decision, 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, and upon receipt of a reasoned legal analysis from competent
counsel setting forth such an analysis, the Practice and PHYN shall amend this
Agreement as necessary. To the maximum extent possible, any such amendment shall
preserve the underlying economic and financial arrangements between the Practice
and PHYN. If PHYN and the Practice are unable to agree to any amendments
required by this Section, the matter shall be submitted to binding arbitration
in accordance with Section 12.15 below.
12.11 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
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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.
12.12 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.
12.13 No Obligation to Third Parties. None of the obligations and
duties of PHYN or the Practice under this Agreement shall in any way or in any
manner be deemed to create any obligation of PHYN or of the Practice to, or any
rights in, any person or entity not a party to this Agreement.
12.14 Communications. The Practice and PHYN 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 matters relating to the successful operation of the Practice's practice at
the Clinical Facility.
12.15 Dispute Resolution. In the event any disagreement, dispute or
claim (collectively, a "Dispute") arises between the parties hereto with respect
to the enforcement or interpretation of this Agreement or any specific terms and
provisions set forth in this Agreement or with respect to whether an alleged
breach hereof has or has not occurred, (other than Disputes arising under
Section 4.2) such Dispute shall be settled in accordance with the following
procedures:
(a) In the event of a Dispute between the parties pursuant
hereto, either party may give written notice to the other party setting
forth the nature of such Dispute ("Dispute Notice"). The parties shall
meet and confer to discuss the Dispute in good faith within ten (10)
days of the other party's receipt of a Dispute Notice in an attempt to
resolve the Dispute ("Meet and Confer Discussions"). All
representatives shall meet at such date(s) and time(s) as are mutually
convenient to the representatives of each party within the Meet and
Confer Period (as defined below).
(b) If the parties are unable to resolve the Dispute within
thirty (30) days following the date of receipt of the Dispute Notice by
the receiving party ("Meet and Confer Period"), then the parties agree
to try in good faith to settle the Dispute through nonbinding mediation
under the Rules of Practice and Procedures (the "Rules") of the
Judicial Arbitration and Mediation Services, Inc. ("JAMS") or AAA (as
defined below, if the parties agree to use such rules). A single
disinterested third-party mediator shall be selected by JAMS in
accordance with its then current Rules (or by AAA in accordance with
its comparable rules). The parties to the Dispute shall share the
expenses of the mediator and the other costs of mediation equally.
24
<PAGE> 25
(c) Any Dispute which cannot be resolved by the parties within
sixty (60) days following the end of the Meet and Confer Period may be
submitted at the option of either party to binding arbitration, which
arbitration shall be conducted in accordance with the following
provisions. Arbitration proceedings shall be held in Dallas, Texas. The
governing law shall be the law of the State of Texas. A single
disinterested third-party arbitrator shall be selected by the
Commercial Panel of the American Arbitration Association (the "AAA") in
accordance with its then current Commercial Rules. The arbitration
shall be administered by AAA.
(d) Each of the parties hereto shall pay its own expenses of
arbitration and one-half of the expenses of the arbitrator. If any
position by either party hereunder, or any defense or objection
thereto, is deemed by the arbitrator to have been unreasonable, the
arbitrator shall assess, as part of the award against the unreasonable
party or reduce the award to the unreasonable party, all or part of the
arbitration expenses of the other party and of the arbitrator.
(e) The decision of the arbitrator shall be final and binding
upon each of the parties hereto, and judgment upon the award may be
entered in any court of competent jurisdiction in the United States, if
applicable. The arbitrator shall decide the Dispute in accordance with
federal and/or Texas laws, as applicable. The award shall include
written findings of fact, a summary of the evidence and reasons
underlying the decision and conclusions of law. As part of the award,
the arbitrator may award reasonable and necessary costs actually
incurred by the prevailing party, including that party's share of the
arbitrators fees, costs and expenses, as well as any administration
fees. The arbitrator may also include reasonable attorneys fees in an
award of costs if the arbitrator finds that the party against whom the
fees are assessed acted frivolously or in bad faith in its demand for,
or participation in, the arbitration. However, the arbitrator shall not
have the right to award punitive damages.
(f) By executing this Agreement below, the parties to this
Agreement are agreeing to have any Dispute, other than Disputes
arising under Section 4.2, decided by neutral arbitration as provided
by Texas law (provided that such Dispute has not been resolved through
the meet and confer and mediation procedures described above) and the
parties are giving up any rights they might possess to have the
Dispute litigated in a court or jury trial. By executing this
Agreement below, the parties to this Agreement are giving up their
judicial rights to discovery and appeal, unless those rights are
specifically included in this Agreement. If a party to this Agreement
refuses to submit to arbitration after agreeing to this provision,
such party may be compelled to arbitrate under the authority of Texas
law.
25
<PAGE> 26
(g) Nothing in this Agreement shall be interpreted to limit
any party's right to terminate this Agreement or to pursue equitable
relief, including, without limitation, specific performance, from a
court of competent jurisdiction at any time.
26
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TEXAS ONCOLOGY, P.A.
By: /s/ Charles S. White, III, M.D.
------------------------------------------
Charles S. White, III, M.D.
Vice President
PHYSICIAN RELIANCE, LP, a wholly-owned
subsidiary of Physician Reliance Network, Inc.
By: PRN Physician Reliance, LLC,
its General Partner
By: /s/ O. Edwin French
------------------------------------------
O. Edwin French
President and COO
For purposes of agreeing to Section 7.2 only:
PHYSICIAN RELIANCE NETWORK, INC.
By: /s/ O. Edwin French
------------------------------------------
O. Edwin French
President and COO
27
<PAGE> 28
EXHIBIT 2.1.4
SERVICE AGREEMENT
CLINICAL FACILITY EXPENSES, PHYN EXPENSES AND PRACTICE EXPENSES
- - CLINICAL FACILITY EXPENSES: Salaries and benefits of all Practice Employees
(Section 5.10).
- - All supplies, pharmaceuticals, general and administrative, and purchased
services costs incurred in the operation of Clinical Facilities (Section
5.4).
- - Occupancy and usage expenses related to Clinical Facilities (Section 3.1).
- - Occupancy and usage expenses related to the Practice's corporate premises.
- - Bad debt costs related to billing of Clinical Revenues.
- - Depreciation of fixed assets of the Clinical Facility (Section 2.1.4).
- - Amortization of goodwill and intangibles (Section 2.1.4).
- - Cost of hospital staff membership dues, professional licenses, medical
staff dues (Section 6.4).
- - IPA/managed care fees (Section 6.4).
- - Continuing medical education costs of Practice Employees (Section 6.4).
- - Any fair allocation of PHYN corporate expenses directly related to Clinical
Facilities, including human resources, billing, information services,
managed care, purchasing, real estate, technical services, general
accounting, accounts payable, and payroll.
- - Portion of senior physician management, including officers and medical
directors, conducting development activities or other Clinical Facility
management activity in an amount approved by the Operating Board
(Section 6.3).
- - Salaries, benefits and other reasonable expenses of Texas Oncology, P.A.
Physician Accounting.
- - Physician recruitment relocation expenses, up to $10,000 per physician
recruited (Section 5.5(g)).
- - Tax return preparation, up to $10,000 (Section 6.7).
- - All other costs and expenses related to the provision of clinical services.
- - Legal fees occurred in connection with the operation of the Clinical
Facility (Section 6.7).
- - Costs of enforcing restrictive covenants in physician employment
agreements.
28
<PAGE> 29
EXHIBIT 2.1.4
SERVICE AGREEMENT
CLINICAL FACILITY EXPENSES, PHYN EXPENSES AND PRACTICE EXPENSES
(Continued)
THE PRACTICE:
- The cost of malpractice insurance for Physician Employees and Practice
Employees and deductibles for Physician Employees (Section 6.5).
- The cost of malpractice litigation (Section 6.7).
- Cost of board certification (Section 6.4).
- Legal fees and costs related to sexual harassment suits in which a
physician is a defendant (Section 6.7).
- Legal fees and costs related solely to internal corporate governance
issues of the Practice (Section 6.7).
PHYN:
- Salaries, benefits and all departmental expenses of PHYN senior
management.
- Legal fees and costs of PHYN not borne by the Practice or treated as a
Clinical Facility Expense (Section 6.7).
- Physician Services Department salaries and benefits and other
recruiting costs incurred by the Physician Services Department
(Section 5.5(g).
- Legal department expense, other than 50% of either (i) the salary and
benefits of one staff attorney or (ii) the costs paid for one attorney
retained as an independent contractor, which will be a Clinical
Facility Expense (Section 6.7).
29
<PAGE> 30
EXHIBIT 2.1.7
SERVICE AGREEMENT
EXCLUSIVE AREA
Exclusive area shall be the State of Texas and the Southern part of the State of
New Mexico shown on the attached map.
30
<PAGE> 31
As required by Rule 304 of Regulation S-T, the following is a narrative
description of the map that appears attached to Exhibit 2.1.7 to the Amended
and Restated Services Agreement.
A map depicting a small portion of northern Texas and approximately the
southern half of the state of New Mexico.
<PAGE> 32
EXHIBIT 3.1
SERVICE AGREEMENT
CLINICAL FACILITIES
See Attached.
31
<PAGE> 33
EXHIBIT 3.1
CLINICAL FACILITIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
LOCATION ADDRESS
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C>
Abilene - Texas Cancer Center Abilene South 1957 Antilley Road 79606
- -------------------------------------------------------------------------------------------------------
Abilene - (N) 1100 North 19th St., Ste. 1A, 1B 79601
- -------------------------------------------------------------------------------------------------------
Alamagordo, NM 1209 9th Street 88310
- -------------------------------------------------------------------------------------------------------
Arlington - (N) 801 Road to Six Flags, Ste. 105 76012
- -------------------------------------------------------------------------------------------------------
Arlington - Texas Cancer Center Arlington 515 West Mayfield, Ste. 101 76014
- -------------------------------------------------------------------------------------------------------
Athens 302 Bryson St. 75751
- -------------------------------------------------------------------------------------------------------
Austin 1600 W. 38th St., Stes. 104, 120 & 122 78731
- -------------------------------------------------------------------------------------------------------
Austin 11111 Research Blvd., Ste. 390 78759
- -------------------------------------------------------------------------------------------------------
Austin - South Austin Cancer Center 4101 James Casey St. 78745
- -------------------------------------------------------------------------------------------------------
Beaumont 690 N. 14th St. 77702 2nd and 3rd Floors
- -------------------------------------------------------------------------------------------------------
Big Spring 1501 W. 11th Place 79720
- -------------------------------------------------------------------------------------------------------
Brownsville - South Texas Cancer Center 2150 N. Expressway 83 78521
- -------------------------------------------------------------------------------------------------------
Brownwood 118 South Park Drive 76801
- -------------------------------------------------------------------------------------------------------
Burnet 516 Buchanan Dr. 78611
- -------------------------------------------------------------------------------------------------------
Clifton 201 S. Ave. TOPA 76634
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - C/1 Atrm. 3535 Worth St., Ste. 100 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - C/1 BMT 3535 Worth St., Ste. 185 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - C/1 Mail/File 3535 Worth St., Ste. 190 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - C/1 Pharmacy 3535 Worth St., Ste. 170 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - C/2 Med/Onc 3535 Worth St., Ste. 200 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - C/3 Infusion 3535 Worth St., Ste. 301 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - C/5 Research 3535 Worth St., Ste. 500 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - S/1 Rad/Onc Sammons CC 3535 Worth St., Ste. 100 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - S/2 Gyn/Onc 3535 Worth St., Ste. 200 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - S/3 Komen 3535 Worth St., Ste. 305 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - S/3 Komen 3535 Worth St., Ste. 330 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Baylor - S/B Med.Rec. 3535 Worth St., Ste. 50 75246
- -------------------------------------------------------------------------------------------------------
Dallas - Doctor's Hospital 1151 N. Buckner Blvd., Ste. 408 75218
- -------------------------------------------------------------------------------------------------------
Dallas - MCD - BMT 7777 forest Lane, Bldg. D, Ste. 220 75230
- -------------------------------------------------------------------------------------------------------
Dallas - MCD - Med.Onc./Ped. 7777 forest Lane, Bldg. D, Ste. 400 75230
- -------------------------------------------------------------------------------------------------------
Dallas - MCD - Rad/Onc - Tx Cancer Ctr 7777 forest Lane, Bldg. D, Ste. 110 75230
- -------------------------------------------------------------------------------------------------------
Dallas - Methodist 221 W. Colorado, Pavillion II, Ste. 535 75208
- -------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
LOCATION ADDRESS
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C>
Dallas - Presbyterian 8230 Walnut Hill Ln, Bldg. III,Ste. 312 75231
- -------------------------------------------------------------------------------------------------------
Dallas - Presbyterian 8230 Walnut Hill Ln, Bldg. III,Ste. 320 75231
- -------------------------------------------------------------------------------------------------------
Dallas - Presbyterian 8230 Walnut Hill Ln, Bldg. III,Ste. 300 75231
- -------------------------------------------------------------------------------------------------------
Dallas - St. Paul 5939 Harry Hines Blvd, Ste. 845 Bldg II 75235
- -------------------------------------------------------------------------------------------------------
Dallas - St. Paul 5939 Harry Hines Blvd, Ste. 923 Bldg II 75235
- -------------------------------------------------------------------------------------------------------
Dallas - St. Paul 5939 Harry Hines Blvd, Ste. 945 Bldg II 75235
- -------------------------------------------------------------------------------------------------------
Dallas - St. Paul 5939 Harry Hines Blvd, Ste. 800 Bldg II 75235
- -------------------------------------------------------------------------------------------------------
Dallas - Methodist 221 W. Colorado, Pavillion II, Ste. 535 75208
- -------------------------------------------------------------------------------------------------------
Dallas - Presbyterian 8230 Walnut Hill Ln, Bldg. III,Ste. 312 75231
- -------------------------------------------------------------------------------------------------------
Dallas - Presbyterian 8230 Walnut Hill Ln, Bldg. III,Ste. 320 75231
- -------------------------------------------------------------------------------------------------------
Dallas - Presbyterian 8230 Walnut Hill Ln, Bldg. III,Ste. 300 75231
- -------------------------------------------------------------------------------------------------------
Dallas - St. Paul 5939 Harry Hines Blvd, Ste. 845 Bldg II 75235
- -------------------------------------------------------------------------------------------------------
Dallas - St. Paul 5939 Harry Hines Blvd, Ste. 923 Bldg II 75235
- -------------------------------------------------------------------------------------------------------
Dallas - St. Paul 5939 Harry Hines Blvd, Ste. 945 Bldg II 75235
- -------------------------------------------------------------------------------------------------------
Dallas - St. Paul 5939 Harry Hines Blvd, Ste. 800 Bldg II 75235
- -------------------------------------------------------------------------------------------------------
Dallas - Texas Cancer Center Dallas SW 3555 W. Wheatland Road 75237
- -------------------------------------------------------------------------------------------------------
Denison - Texoma Cancer Center 1331 Memorial Drive 75020-2088
- -------------------------------------------------------------------------------------------------------
Denton - Regional 4401 N. IH-35, Ste. 3 76207
- -------------------------------------------------------------------------------------------------------
Denton - Scripture 2501 Scripture, Ste. 300 76201
- -------------------------------------------------------------------------------------------------------
Durant, OK 1600 University Blvd. 74701
- -------------------------------------------------------------------------------------------------------
Eastland 304 S. Daugherty 76448
- -------------------------------------------------------------------------------------------------------
Edinburg 2709 Cornerstone Blvd. 78539
- -------------------------------------------------------------------------------------------------------
El Paso - El Paso Cancer Center - East 7848 Gateway East 79915
- -------------------------------------------------------------------------------------------------------
El Paso - El Paso Cancer Center - West 1901 Grandview 79902
- -------------------------------------------------------------------------------------------------------
Ennis 802 W. Lampasas 75119
- -------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
LOCATION ADDRESS
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C>
Fort Stockton Hospital Annex, Sanderson Hwy. 79735
- -------------------------------------------------------------------------------------------------------
Fort Worth - 8th Street 918 8th Avenue 76104
- -------------------------------------------------------------------------------------------------------
Fort Worth - Harris 6100 Harris Parkway, Ste. 290 76132
- -------------------------------------------------------------------------------------------------------
Fort Worth - Texas Cancer Center - Ft. Worth 601 W. Terrell 76104
- -------------------------------------------------------------------------------------------------------
Garland 777 Walter Reed Blvd., Ste. 201 75042
- -------------------------------------------------------------------------------------------------------
Graham 1339 East Street 76405
- -------------------------------------------------------------------------------------------------------
Grapevine 1600 W. College St. 76051
- -------------------------------------------------------------------------------------------------------
Greenville 4215 Joey Ramsey Blvd. 75403
- -------------------------------------------------------------------------------------------------------
Groesbeck 900 N. Ellis St. 76642
- -------------------------------------------------------------------------------------------------------
Harlingen 2121 Pease, Ste. 1-D 78550-8321
- -------------------------------------------------------------------------------------------------------
Harlingen - Kleberg Cancer Treatment Ctr. 2101 Pease 78550-8321
- -------------------------------------------------------------------------------------------------------
HEB Mid-Cities 401 Westpark Way, Euless 76040
- -------------------------------------------------------------------------------------------------------
Henderson 105 N. High St., Ste. 1 75652
- -------------------------------------------------------------------------------------------------------
Houston - Katy 5616 Medical Center Dr., Ste. 200 77494
- -------------------------------------------------------------------------------------------------------
Houston - Long Point 8830 Long Point Rd., Ste. 702 77055
- -------------------------------------------------------------------------------------------------------
Houston - Main St. 7515 S. Main St., Ste. 740 77030
- -------------------------------------------------------------------------------------------------------
Houston - Memorial City 909 Frostwood, Ste. 221 77024
- -------------------------------------------------------------------------------------------------------
Houston - Memorial N.W. 1631 N. Loop West, Ste. 180 77008
- -------------------------------------------------------------------------------------------------------
Houston - Memorial S.E. 11914 Astoria Blvd., Ste. 520 77089
- -------------------------------------------------------------------------------------------------------
Houston - Memorial Sugar Land 7777 Southwest Fwy., Ste. 1004 77074
- -------------------------------------------------------------------------------------------------------
Houston - N. Loop East 9343 N. Loop E., Ste. 410 77029
- -------------------------------------------------------------------------------------------------------
Houston - N. Loop East 9343 N. Loop E., Ste. 404 77029
- -------------------------------------------------------------------------------------------------------
Houston - Pasadena 908 E. Southmore, Ste. 220 77502
- -------------------------------------------------------------------------------------------------------
Houston - Texas city 6518 Memorial Dr., Ste. B 77591
- -------------------------------------------------------------------------------------------------------
Houston - Webster - Clear Lake 450 Medical Center Blvd., Ste. 610 77598
- -------------------------------------------------------------------------------------------------------
Houston - Webster - Medical Center 400 Medical Center Blvd., Ste. 111 77598
- -------------------------------------------------------------------------------------------------------
Irving 2001 N. MacArthur, Ste. 630 75061-2244
- -------------------------------------------------------------------------------------------------------
Irving 6750 N. MacArthur, Ste. 205 75063
- -------------------------------------------------------------------------------------------------------
LaGrange 890 E. Travis St. 78945
- -------------------------------------------------------------------------------------------------------
LaGrange 430 E. Guadalupe 78945
- -------------------------------------------------------------------------------------------------------
Las Cruces, NM 2902 Hillrise 88001
- -------------------------------------------------------------------------------------------------------
Las Cruces, NM 1161 Mall Dr., #D 88011
- -------------------------------------------------------------------------------------------------------
Las Cruces, NM 1161 Mall Dr., #ABC 88011
- -------------------------------------------------------------------------------------------------------
Las Cruces, NM - Ikard/Memorial Cancer... 2450 S. Telshor Blvd. 88001
- -------------------------------------------------------------------------------------------------------
Lewisville 475 W. Elm Street, Ste. 101 75057
- -------------------------------------------------------------------------------------------------------
Longview 725 North 4th St. 75601
- -------------------------------------------------------------------------------------------------------
Longview Cancer Center 1300 North 4th Street 75601
- -------------------------------------------------------------------------------------------------------
Luling 130 Hays Street 78748
- -------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
LOCATION ADDRESS
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C>
Marshall 815 S. Washington, Ste. 204 75670
- -------------------------------------------------------------------------------------------------------
McAllen - S. Texas Cancer Center-McAllen 1901 South 2nd St. 78502-1298
- -------------------------------------------------------------------------------------------------------
McAllen - Vannie Cook 101 W. Expressway 83 78503
- -------------------------------------------------------------------------------------------------------
Mesquite - Texas Cancer Center - Mesquite(1) 4700 N. Galloway 75150
- -------------------------------------------------------------------------------------------------------
Midland - Allison Cancer Center 301 North N St. 79701-5946
- -------------------------------------------------------------------------------------------------------
Mt. Pleasant 2001 N. Jefferson, Ste. 210 75445
- -------------------------------------------------------------------------------------------------------
North Richland Hills 4351 Booth Calloway Rd., Ste. 308 76180
- -------------------------------------------------------------------------------------------------------
Odessa - West Texas Cancer Center 600 N. Grant 79761
- -------------------------------------------------------------------------------------------------------
Palestine 3215 W. Oak 75801
- -------------------------------------------------------------------------------------------------------
Paris - Paris Regional Cancer Center 3550 N.E. Loop 286 75460
- -------------------------------------------------------------------------------------------------------
Pecos 2323 Texas Street 79772
- -------------------------------------------------------------------------------------------------------
Plano - North Texas Regional Cancer Center 3705 West 15th 75075
- -------------------------------------------------------------------------------------------------------
San Antonio 12602 Toepperwein, Ste. 202
- -------------------------------------------------------------------------------------------------------
San Antonio 7940 Floyd Curl Dr., Ste. 720 78229
- -------------------------------------------------------------------------------------------------------
San Antonio 1605 Hwy. 97 East, Jordanton, TX 78026
- -------------------------------------------------------------------------------------------------------
Sherman - Texoma Regional Cancer Center 2800 Hwy. 75 North 75090-0504
- -------------------------------------------------------------------------------------------------------
Sulphur Springs 101 Medical Plaza 75482
- -------------------------------------------------------------------------------------------------------
Sweetwater 201 East Arizona St. 79556
- -------------------------------------------------------------------------------------------------------
Terrell 1553 Hwy 34 South, Ste. 400 75160
- -------------------------------------------------------------------------------------------------------
Tyler - Tyler Cancer Center 910 E. Houston St., Ste. 100 75702
- -------------------------------------------------------------------------------------------------------
Vernon 1015 Hillcrest Dr. 76384
- -------------------------------------------------------------------------------------------------------
Waco 405 Londonderry Dr., Ste. 107 76712
- -------------------------------------------------------------------------------------------------------
Waco 3301 Westminster, Ste. 101 76708
- -------------------------------------------------------------------------------------------------------
Waxahachie 1404 W. Jefferson 75165
- -------------------------------------------------------------------------------------------------------
Weslaco 1330 E. 6th St., Ste. 204 78599
- -------------------------------------------------------------------------------------------------------
Wichita Falls 1718 10th Street 76301
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excluding the imaging facility known as Texas Diagnostic Imaging Center -
Mesquite.
The following facilities are not included in the definition of Clinical
Facility: Susan G. Komen Breast Centers; Texas Women's Imaging; The Center for
Breast Care; Texas Diagnostic Imaging - Baylor (Sammons); Texas Diagnostic
Imaging - Baylor (Junius); North Texas Clinical P.E.T. Institute.
35
<PAGE> 37
EXHIBIT 7.3
SERVICE AGREEMENT
RESTRICTIVE COVENANT
The Practice will enter into an employment agreement with each new
Physician Employee that provides the following:
RESTRICTIVE COVENANTS. Physician agrees that during his employment with
the Association and for a period of two (2) years after the date of cessation of
his employment, he will not engage in or become associated with, directly or
indirectly, any medical practice, either as a stockholder, partner, investor
(other than in a publicly held corporation in which he is not an officer,
director or employee), sole proprietor, agent, employee or consultant, which is
in any way competitive with the Association, within the Restricted Area. For
purposes of this Agreement, the Restricted Area is any county in which the
Physician, as an employee of the Association, is engaged in an active medical
practice, which includes any county in which the Physician (i) holds full
hospital privileges, or (ii) provides medical services on a regular basis. It is
intended by the parties that for the agreed period Physician will perform no act
which may confer any competitive benefit or advantage upon any enterprise
competing with the Association in the foregoing counties. This Agreement is not
intended to prevent any Physician from practicing his profession as a physician,
but is intended to protect the Association's investment in the specialized
practice of oncology and infectious diseases. The parties acknowledge that the
Association, through its employees, provides medical services to patients in an
extensive geographical area as a result of the specialized nature of such
medical services. In the event of any breach of the covenants contained in this
paragraph 17, it is understood and agreed that damages will be difficult to
ascertain and the Association may petition a court at law or in equity for
injunctive relief, in addition to any other relief which the Association may
have under existing laws, including, but not limited to the recovery of
reasonable
36
<PAGE> 38
attorney's fees and expenses. Physician shall not, during the term of his
employment or at any time thereafter, disclose to any person, firm or
corporation, any confidential information or trade secrets relating to the
business of the Association or any related or affiliated association and/or
entity. The Association and Physician recognize and agree that the covenants
described in this Section 17 are ancillary to an otherwise enforceable
agreement, that the duration and scope are fair, reasonable and necessary, that
adequate compensation has been received by Physician under this Agreement for
such obligations, that these obligations do not prevent Physician from earning a
livelihood, and that enforcement of the covenants described in this Section 17
is necessary to prevent irreparable harm and damage to the business of the
Association. If, however, for any reason, any court of competent jurisdiction
determines that the restrictions in this Section 17 are not reasonable, that the
consideration is inadequate, or that Physician has been prevented from earning a
livelihood, such restriction shall be interpreted, modified or rewritten to
include as much of the duration and scope as will render such restrictions valid
and enforceable, and both parties agree to be bound by such modified provisions.
37
