<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 25, 1997
AMERICAN ONCOLOGY RESOURCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-26190 84-1213501
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
16825 NORTHCHASE DRIVE, SUITE 1300
HOUSTON, TEXAS
77060
(Address of principal executive office)
(Zip Code)
(281) 873-2674
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 25, 1997, American Oncology Resources, Inc., through an indirect
wholly owned subsidiary (together, the "Company"), acquired the nonmedical
assets of, and entered into a long-term management agreement with, the
medical practice conducted through Texas Radiation Oncology Group, L.L.P.
(TROG), a four-physician radiation oncology practice located in Austin,
Texas comprised of Austin Cancer Center, Ltd. and Austin Cancer Center II,
Ltd. as partners. In connection with such transaction, the TROG practice
merged with and into Central Texas Oncology Associates, P.A. (CTOA), a
medical oncology practice already affiliated with the Company. In
exchange, the Company delivered aggregate consideration of approximately
$12,065,000 consisting of (i) cash and transaction costs of $5,574,000,
(ii) promissory notes of $4,223,000, (iii) an agreement to deliver a
specified number of shares of Common Stock at specified future dates,
valued at $1,754,000 and (iv) an assumption of liabilities of approximately
$514,000. The purchase price was determined after arms-length negotiation
between the Company and the TROG practice. The cash component of the
purchase price was funded from proceeds from the Company's credit facility.
In connection with the TROG practice's merger into CTOA, the Company and
CTOA amended their management services agreement, which provides for
payment to the Company of a management fee, which includes reimbursement
for all practice costs (other than amounts retained by the physicians), a
fixed fee and, if certain criteria are satisfied, a performance fee. Each
of the TROG practice's physicians also entered into an employment agreement
with CTOA.
The acquired nonmedical assets include equipment and other tangible
personal property. The TROG practice used the nonmedical assets in
connection with the operation of its radiation oncology practice, and the
Company intends to employ these assets to provide services under the terms
of the management agreement, as amended, with CTOA.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Report of Independent Accountants
Texas Radiation Oncology Group, LLP, Austin Cancer Center, Ltd. and
Austin Cancer Center II, Ltd. Combined Balance Sheet as of
December 31, 1996
Texas Radiation Oncology Group, LLP, Austin Cancer Center, Ltd. and
Austin Cancer Center II, Ltd. Combined Statement of Operations and
Partners' Capital for the Year Ended December 31, 1996
Texas Radiation Oncology Group, LLP, Austin Cancer Center, Ltd. and
Austin Cancer Center II, Ltd. Combined Statement of Cash Flows for
the Year Ended December 31, 1996
Notes to Financial Statements
(b) Pro forma financial information.
Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1996
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1996
2
<PAGE>
(c) Exhibits:
2.1 Master Transaction Agreement, dated as of April 25, 1997, among
American Oncology Resources, Inc., AOR of Texas Management Limited
Partnership, Shannon D. Cox, M.D., John H. Wilbanks, M.D., George R.
Brown, M.D., Bruce M. Turner, M.D., Texas Radiation Oncology Group,
L.L.P., Austin Cancer Center, Limited, Austin Cancer Center II,
Limited, Central Texas Radiation Oncology Physicians, P.A. and Central
Texas Oncology Associates, P.A.
2.2 Purchase Agreement, dated as of April 25, 1997, among American
Oncology Resources, Inc., AOR of Texas Management Limited Partnership,
Shannon D. Cox, M.D., John H. Wilbanks, M.D., George R. Brown, M.D.,
Bruce M. Turner, M.D., Texas Radiation Oncology Group, L.L.P., Austin
Cancer Center, Limited, Austin Cancer Center II, Limited, Central
Texas Radiation Oncology Physicians, P.A. and Central Texas Oncology
Associates, P.A.
2.3 Management Services Agreement, effective as of September 1, 1996,
between Central Texas Oncology Associates, P.A. and American Oncology
Resources, Inc. (as assigned to AOR of Texas Management Limited
Partnership), as amended effective April 25, 1997.
Each of the above-listed agreements contains a list identifying all omitted
exhibits and schedules. The Company agrees to furnish a supplementary copy of
any omitted exhibit or schedule to the Securities and Exchange Commission upon
request.
3
<PAGE>
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 thereunto duly authorized.
AMERICAN ONCOLOGY RESOURCES, INC.
Date: May 9, 1997 By: /s/ R. DALE ROSS
-----------------------------------
R. Dale Ross, Chairman of the Board
and Chief Executive Officer
4
<PAGE>
ITEM 7. (A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Texas Radiation Oncology Group, LLP,
Austin Cancer Center, Ltd. and
Austin Cancer Center II, Ltd.
In our opinion, the accompanying combined balance sheet and the related
combined statements of operations and partners' capital and of cash flows
present fairly, in all material respects, the financial position of Texas
Radiation Oncology Group, LLP, Austin Cancer Center, Ltd. and Austin Cancer
Center II, Ltd. (collectively, the Group) at December 31, 1996 and the
results of their operations and their cash flows for the year then ended,
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Group's management; our
responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
February 26, 1997
5
<PAGE>
TEXAS RADIATION ONCOLOGY GROUP, LLP,
AUSTIN CANCER CENTER, LTD. AND
AUSTIN CANCER CENTER II, LTD.
COMBINED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
ASSETS
Current assets:
Cash $ 330
Accounts receivable, net of allowance for doubtful
accounts of $529 1,399
Prepaid assets 17
------
Total current assets 1,746
------
Property and equipment:
Medical equipment 677
Furniture and fixtures 164
Leasehold improvements 120
------
961
Less - accumulated depreciation (274)
------
687
------
Total assets $2,433
======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 152
Payor credit balances 131
Accrued compensation 108
Current portion of indebtedness 251
------
Total current liabilities 642
Long-term indebtedness 93
------
Total liabilities 735
Partners' capital 1,698
------
Commitments and contingencies (Note 5)
------
Total liabilities and partners' capital $2,433
======
The accompanying notes are an intergral part of this statement.
<PAGE>
TEXAS RADIATION ONCOLOGY GROUP, LLP,
AUSTIN CANCER CENTER, LTD. AND
AUSTIN CANCER CENTER II, LTD.
COMBINED STATEMENT OF OPERATIONS AND PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
Revenue $ 8,036
-------
Operating expenses:
Compensation and benefits 1,011
Other practice costs 907
Depreciation and amortization 186
-------
2,104
-------
Income from operations 5,932
Interest expense (15)
Other income 7
-------
Net income 5,924
Partners' capital:
Beginning of period 2,188
Contributions 121
Distributions (6,535)
-------
End of period $ 1,698
=======
The accompanying notes are an integral part of this statement.
<PAGE>
TEXAS RADIATION ONCOLOGY GROUP, LLP,
AUSTIN CANCER CENTER, LTD. AND
AUSTIN CANCER CENTER II, LTD.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
Cash flows from operating activities:-
Net income $ 5,924
Noncash adjustment:
Depreciation and amortization 186
Cash provided (used) by changes in:
Accounts receivable 54
Prepaid assets 18
Accounts payable 97
Accrued compensation (10)
Payor credit balances 79
-------
Net cash provided by operating activities 6,348
-------
Cash flows from investing activities:
Acquisitions of property and equipment (594)
-------
Net cash used by investing activities (594)
-------
Cash flows from financing activities:
Partners' contributions 121
Partners' distributions (6,535)
Repayment of indebtedness (21)
Proceeds from promissory note 225
Proceeds from draw note 140
-------
Net cash used by financing activities (6,070)
-------
Net decrease in cash (316)
Cash:
Beginning of period 646
-------
End of period $ 330
=======
Supplemental cash flow disclosures:
Interest paid $ 14
The accompanying notes are an integral part of this statement.
<PAGE>
TEXAS RADIATION ONCOLOGY GROUP, LLP,
AUSTIN CANCER CENTER, LTD. AND
AUSTIN CANCER CENTER II, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Texas Radiation Oncology Group, LLP is a physician-owned group serving the
greater Austin, Texas area. The partnership was formed in January 1995 for the
purpose of rendering professional radiation oncology services. Austin Cancer
Center, Ltd. is a limited partnership formed in February 1995 for the principle
purpose of operating a radiation therapy treatment facility servicing the
greater Austin area. Austin Cancer Center II, Ltd. is a limited partnership
formed in January 1996 for the principle purpose of operating a radiation
therapy treatment facility servicing the northern Austin area. These entities
(collectively, the Group) which are under substantially common control, have
been combined for financial statement purposes.
The following is a summary of the Group's significant accounting policies:
Principles of combination
The financial statements of Texas Radiation Oncology Group, LLP, Austin
Cancer Center, Ltd., and Austin Cancer Center II, Ltd. have been combined to
present the aggregate financial position and results of operations of these
entities which are under common control. All significant intercompany
transactions and balances have been eliminated.
Use of estimates
The preparation of the Group's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, as well as disclosures of contingent assets and
liabilities. Because of inherent uncertainties in this process, actual future
results could differ from those expected at the reporting date.
Fair value
Management believes the carrying amounts of indebtedness approximate fair
value. The Group's accounts receivable, payables and accrued liabilities are
substantially current and believed by management to approximate fair value.
<PAGE>
Revenue recognition
Revenues for services rendered to patients by the Group are recognized when
the services are provided based on established charges reduced to the net
amounts estimated to be collectible for patients covered under contractual
programs and by allowances for doubtful accounts.
For the year ended December 31, 1996, approximately 18% of the Group's net
revenues were derived from Medicare. At December 31, 1996, 14% of the Group's
accounts receivable are due from Medicare. These accounts receivable are
uncollateralized but are believed to have minimum credit risk.
Property and equipment
Property and equipment is stated at cost. Medical equipment and furniture
and fixtures are depreciated using accelerated methods over the estimated useful
lives of five to seven years. Leasehold improvements are depreciated using the
straight-line method over the estimated useful life not in excess of the
remaining lease terms.
Income taxes
No provision for income taxes has been recorded for the Group because the
Group's income is reported by the partners in their respective income tax
returns. The net excess of reported amounts of assets and liabilities over
their tax basis at December 31, 1996 is approximately $1,009 which is
principally comprised of differences associated with the cash basis of
accounting for income tax reporting purposes.
NOTE 2 - LEASE OBLIGATIONS
Future minimum lease payments for noncancelable operating leases are as
follows (in thousands):
1997 $157
1998 107
1999 104
2000 102
2001 102
Thereafter 224
----
Total $796
====
Rental expense under noncancelable operating leases for the year ended
December 31, 1996 approximated $253,000.
<PAGE>
NOTE 3 - INDEBTEDNESS
Indebtedness at December 31, 1996 consists of the following (in thousands):
Bank promissory note, principal and
interest at prime plus 1.00% (9.25% at
December 31, 1996) payable monthly
with final payment due December 10, 2000 $119
Bank draw note, total amount available
of $275, principal and variable rate 225
interest (8.25% at December 31, 1996) ----
payable on demand 344
Less - current portion 251
----
$ 93
====
The Group has two unused $200,000 revolving loans available at
December 31, 1996. One note has a variable interest rate (8.25% at December 31,
1996) and the other has a variable interest rate (8.25% at December 31, 1996)
plus .25%. Each note is due on demand or in monthly installments with final
principal and accrued interest payments due December 19, 1997.
Subsequent to December 31, 1996, the Group repaid the bank draw note from
proceeds of a $350,000 term loan. Principal on the new note and variable rate
interest (8.50% at December 31, 1996) are due on demand or in monthly
installments of $7,000 beginning January 19, 1997 with a final payment of
principal and accrued interest due December 19, 2001.
Substantially all of the Group's equipment has been pledged to secure
borrowings under the promissory note and revolving loans. The partners of the
Group have also personally guaranteed the loans.
Future maturities of indebtedness, as refinanced, are $250,000 in 1997,
$29,000 in 1998, $30,000 in 1999 and $35,000 in 2000.
NOTE 4 - EMPLOYEE BENEFIT PLANS
The Group has a 401(k) profit sharing plan and Money Purchase Plan (the
Plans) in which substantially all employees meeting age requirements are
eligible to participate after completion of six months of service, as defined by
the Plans' agreements. Contributions to the Plans are discretionary and are
determined by the Group on an annual basis. Employees vest pro rata in the
Group's contributions over four years and the partners of the Group are the
trustees of the Plan. Group contributions to the Plans for the year ended
December 31, 1996 approximated $60,000.
<PAGE>
NOTE 5 - COMMITMENTS, CONTINGENCIES AND RELATED PARTIES
The Group maintains insurance with respect to medical malpractice risks on
a claims-made basis in amounts management believes to be adequate. Management
is not aware of any outstanding claims.
The Company has a noncancelable operating lease for office space with an
entity owned by a partner in the Group. Related party rental expense for the
year ended December 31, 1996 was approximately $168,000. Future minimum lease
payments to related parties are approximately $28,000 for 1997. The Group does
not guarantee debt, if any, associated with the leased property. Such related
party rental expense and future minimum lease commitments are included in the
amounts in Note 2.
Subsequent to year end, the Group committed to purchase a used accelerator
for $115,000.
NOTE 6 - SUBSEQUENT EVENT
The Group has entered into a letter of intent to negotiate the sale of
substantially all of its operating assets. The physicians are also negotiating
an agreement whereby the purchaser will manage the physicians' medical practice
on a long-term basis.
<PAGE>
ITEM 7. (B) PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1996 and the Unaudited Pro Forma Consolidated
Balance Sheet as of December 31, 1996 have been prepared to reflect
adjustments to the Company's historical results of operations and financial
position to give effect to the TROG transactions.
The Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1996 has been prepared as if the TROG transactions
occurred on January 1, 1996. The Unaudited Pro Forma Consolidated Balance
Sheet has been prepared as if the TROG transactions occurred on December
31, 1996.
The pro forma financial statements have been prepared by the Company based
on the financial statements of the Company. To prepare the pro forma
financial statements, the Company has estimated revenues for the periods
prior to the Company's affiliation with TROG by applying the management fee
formula contained in the management agreement with TROG to the historical
medical practice revenue of the group. No adjustments to the operating
costs or expenses of the group were made. These pro forma financial
statements are presented for illustrative purposes only and are not
necessarily indicative of the results that would have been obtained had the
transaction been completed at the time above. This information should be
read in conjunction with the Company's Consolidated Financial Statements
and the notes thereto and the historical financial statements of TROG and
the notes thereto included in the Registration Statement and elsewhere
herein.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------ ----------------------------
AMERICAN
ONCOLOGY REPORTED TRANSACTION AS
RESOURCES, INC. TRANSACTON(1) ADJUSTMENTS ADJUSTED
-------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and equivalent $ 3,429 $ 330 $ (330) (2) $ 3,429
Accounts receivable 61,183 1,399 (1,399) (2) 61,183
Prepaids and other current assets 5,775 17 (17) (2) 5,775
Due from affiliated physician groups 5,356 5,356
----------- ----------- ---------- -----------
Total current assets 75,743 1,746 (1,746) 75,743
Property and equipment, net 18,943 687 19,630
Management service agreements 240,034 11,207 (3) 251,241
Other assets 4,680 4,680
----------- ----------- ---------- -----------
Total assets $ 339,400 $ 2,433 $ 9,461 $ 351,294
=========== =========== ========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term indebtedness $ 9,783 $ 251 $ 10,034
Accounts payable 15,148 152 (152) (2) 15,148
Payor credit balances 131 (131) (2) -
Due to medical groups 616 616
Accrued compensation costs 1,806 108 (108) (2) 1,806
Accrued interest payable 2,325 2,325
Income taxes payable 641 641
Other accrued liabilities 2,452 2,452
----------- ----------- ---------- -----------
Total current liabilities 32,771 642 (391) 33,022
Deferred income taxes 3,068 3,068
Long-term indebtedness 81,707 93 9,797 (4) 91,597
----------- ----------- ---------- -----------
Total liabilities 117,546 735 9,406 127,687
----------- ----------- ---------- -----------
Stockholders' equity:
Common stock 284 284
Additional paid-in capital 139,804 139,804
Common stock to be issued 61,225 1,753 (6) 62,978
Treasury stock (8,530) (8,530)
Retained earnings 29,071 1,698 (1,698)(5) 29,071
----------- ----------- ---------- -----------
Total stockholders' equity 221,854 1,698 55 223,607
----------- ----------- ---------- -----------
Total liabilities and stockholders'
equity $ 339,400 $ 2,433 $ 9,461 $ 351,294
=========== =========== ========== ===========
</TABLE>
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations
Twelve Months Ended December 31, 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------ ----------------------------
AMERICAN REPORTED
ONCOLOGY REPORTED TRANSACTION AS
RESOURCES, INC. TRANSACTON(1) ADJUSTMENTS ADJUSTED
-------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue $ 205,460 $ 8,036 $ (3,222) $ 210,274
----------- ----------- ---------- -----------
Operating Expenses:
Pharmaceuticals and supplies 85,210 85,210
Practice compensation and benefits 41,350 1,011 42,361
Other Practice Costs 23,495 907 24,402
General and Administrative 14,095 14,095
Depreciation and Amortization 9,343 186 280 (8) 9,809
----------- ----------- ---------- -----------
173,493 2,104 280 175,877
----------- ----------- ---------- -----------
Income from operations 31,967 5,932 (3,502) 34,397
Other income (expense)
Interest income 1,062 1,062
Interest expense (4,307) (15) (686) (9) (5,008)
Other income (net) 7 7
----------- ----------- ---------- -----------
Income before taxes 28,722 5,924 (4,188) 30,458
Income tax provision/(benefit) 11,072 668 (10) 11,740
----------- ----------- ---------- -----------
Net income/(loss) $ 17,650 $ 5,924 $ (4,856) $ 18,718
=========== =========== ========== ===========
Net income per share 0.37 0.39
=========== ===========
Shares used in per share calculations 47,549 47,892
=========== ===========
</TABLE>
Notes To Unaudited Pro Forma Information
(1) The column includes the historical financial information for TROG. The
historical financial data was taken from the entity's financial
statements included herein.
(2) Adjustments to eliminate assets not acquired and liabilities not
assumed in the transaction.
(3) Adjustment to reflect the cost of management agreements, estimated for
purposes of the pro forma balance sheet as $11,207,000. Such estimate
is not expected to change materially when the Company completes its
valuations of the acquired assets and assumed liabilities.
<PAGE>
(4) Adjustment to record $5,574,000 of funds borrowed under revolving line
of credit to pay cash component of consideration and transaction costs
and $4,223,000 for 7% promissory notes issued to the affiliated
physicians.
(5) Adjustment to eliminate the historical ownership interest of the TROG
practice.
(6) Adjustment to reflect commitment to issue 342,632 shares of Common
Stock at specified future dates for no additional consideration.
(7) Adjustment to eliminate medical practice revenues of the TROG practice
that would not constitute revenue to the Company pursuant to the
management agreement.
(8) Adjustment to reflect additional amortization attributable to the
newly obtained management agreement over the contractual term of 40
years.
(9) Adjustment to reflect the impact of interest expense on funds borrowed
under revolving line of credit and promissory notes granted as
consideration.
(10) Adjustment to reflect the impact of previous adjustments on the income
taxes of the Company and the elimination of the partnership impact
included in the TROG practice.
<PAGE>
Exhibit Index
Exhibit numbers are in accordance with the Exhibit Table
in Item 601 of Regulation S-K
Exhibit Sequential
Number Exhibit Description Page Number
- ------- ------------------- -----------
2.1 Master Transaction Agreement, dated
as of April 25, 1997, among American
Oncology Resources, Inc., AOR of
Texas Management Limited Partnership,
Shannon D. Cox, M.D., John H.
Wilbanks, M.D., George R. Brown,
M.D., Bruce M. Turner, M.D., Texas
Radiation Oncology Group, L.L.P.,
Austin Cancer Center, Limited, Austin
Cancer Center II, Limited, Central
Texas Radiation Oncology Physicians,
P.A. and Central Texas Oncology
Associates, P.A.
2.2* Purchase Agreement, dated as of April
25, 1997, among American Oncology
Resources, Inc., AOR of Texas
Management Limited Partnership,
Shannon D. Cox, M.D., John H.
Wilbanks, M.D., George R. Brown,
M.D., Bruce M. Turner, M.D., Texas
Radiation Oncology Group, L.L.P.,
Austin Cancer Center, limited, Austin
Cancer Center II, Limited, Central
Texas Radiation Oncology Physicians,
P.A. and Central Texas Oncology
Associates, P.A.
2.3* Management Services Agreement,
effective as of September 1, 1996,
between Central Texas Oncology
Associates, P.A. and American
Oncology Resources, Inc. (as assigned
to AOR of Texas Management Limited
Partnership), as amended effective
April 25, 1997.
__________________
* Certain information in this exhibit is subject to request for confidential
treatment. In accordance with Rule 24b-2 of the Securities Exchange Act of
1934, as amended, such information has been omitted and filed separately with
the Securities and Exchange Commission.
<PAGE>
EXHIBIT 2.1
MASTER TRANSACTION AGREEMENT
BY AND AMONG
AMERICAN ONCOLOGY RESOURCES, INC.
AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP
SHANNON D. COX, M.D.
JOHN H. WILBANKS, M.D.
GEORGE R. BROWN, M.D.
BRUCE M. TURNER, M.D.
TEXAS RADIATION ONCOLOGY GROUP, LLP
AUSTIN CANCER CENTER, LIMITED
AUSTIN CANCER CENTER II, LIMITED
CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A.
AND
CENTRAL TEXAS ONCOLOGY ASSOCIATES, P.A.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I. DEFINITIONS..................................................... 1
ARTICLE II. RESTRUCTURING................................................... 5
Section 2.01 Pre-Closing Actions............................................. 5
Section 2.02 Purchase and Conveyance Agreement............................... 5
Section 2.03 Transfer of Management Services Agreement....................... 6
Section 2.04 Employment and Settlement Agreements............................ 6
Section 2.05 Merger.......................................................... 6
Section 2.06 Noncompetition and Confidentiality Covenants.................... 6
ARTICLE III. THE CLOSING..................................................... 7
Section 3.01 Closing......................................................... 7
Section 3.02 Deliveries to the AOR Parties at the Closing.................... 7
Section 3.03 Deliveries to the Physician Parties at the Closing.............. 8
ARTICLE IV. CONDITIONS...................................................... 8
Section 4.01 Conditions Precedent to the Obligations of All Parties.......... 8
Section 4.02 Conditions Precedent to the Obligations of the AOR Parties...... 9
Section 4.03 Conditions Precedent to the Obligations of the
Physician Parties.............................................. 9
ARTICLE V. MISCELLANEOUS................................................... 10
Section 5.01 Taxes........................................................... 10
Section 5.02 Expenses........................................................ 10
Section 5.03 Parties Bound................................................... 10
Section 5.04 Choice of Law................................................... 10
Section 5.05 Assignment...................................................... 10
Section 5.06 Multiple Counterparts........................................... 10
Section 5.07 Headings........................................................ 11
</TABLE>
EXHIBITS
Exhibit A Form of Amendment to Management Services Agreement
Exhibit B Form of Buy-Sell Agreement
Exhibit C Form of Conveyance Agreement
Exhibit D Form of CTROP Bylaws
Exhibit E Form of CTROP Charter
Exhibit F Form of CTROP Organizational Minutes
Exhibit G Form of Employment Agreement
Exhibit H Form of Escrow Agreement
Exhibit I Form of Management Services Agreement
Exhibit J Form of Merger Agreement
i
<PAGE>
Exhibit K Form of New P Partnership Agreement
Exhibit L Form of Note
Exhibit M Form of Option Agreement
Exhibit N Form of Partnership Interest Purchase Agreement
Exhibit O Form of Purchase Agreement
Exhibit P Form of Settlement Agreement
ii
<PAGE>
MASTER TRANSACTION AGREEMENT
This Master Transaction Agreement ("Master Transaction Agreement"), dated
and effective as of April 25, 1997 (the "Closing Date"), is by and among
AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation ("AOR"); AOR OF TEXAS
MANAGEMENT LIMITED PARTNERSHIP, a Texas limited partnership ("AOR Management");
SHANNON D. COX, M.D., JOHN H. WILBANKS, M.D., GEORGE R. BROWN, M.D. and BRUCE M.
TURNER, M.D. (individually a "Physician" and collectively the "Physicians");
TEXAS RADIATION ONCOLOGY GROUP, LLP, a Texas limited liability partnership
("TROG"); AUSTIN CANCER CENTER, LIMITED, a Texas limited partnership ("ACC");
AUSTIN CANCER CENTER II, LIMITED, a Texas limited partnership ("ACC II");
CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A., a Texas professional
association ("CTROP"); and CENTRAL TEXAS ONCOLOGY ASSOCIATES, P.A., a Texas
professional association ("CTOA") (AOR, AOR Management, the Physicians, TROG,
ACC, ACC II, CTROP and CTOA are individually referred to herein as a "Party" and
collectively referred to herein as "Parties").
RECITALS
A. Each Physician is a physician licensed to practice medicine in the
State of Texas. Each Physician currently conducts such Physician's medical
oncology practice with the other Physicians, practicing together through TROG.
B. The Physicians desire to restructure their medical practice currently
conducted through TROG by consummation of the transactions described in this
Master Transaction Agreement.
C. The Parties to this Master Transaction Agreement desire to set forth
the terms and conditions upon which the restructuring described above shall be
accomplished and to agree upon other matters set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
Parties agree as follows:
ARTICLE I. DEFINITIONS
For purposes of this Master Transaction Agreement, the following terms, in
addition to other capitalized terms used in this Master Transaction Agreement
that are defined elsewhere herein, shall have the meanings set forth herein.
Amendment. The Amendment to the Management Services Agreement to be
executed between AOR Management and CTOA in the form set forth in Exhibit A.
<PAGE>
AOR Audited Financial Statements. As defined in Section 5.01(e) of the
Purchase Agreement.
AOR Common Stock. The Common Stock, par value $.01 per share, of AOR.
AOR Indemnified Persons. As defined in Section 9.01 of the Purchase
Agreement.
AOR Parties. AOR and AOR Management.
Assumed Obligations. As defined in Section 3.03 of the Purchase Agreement.
Buy-Sell Agreement. The Buy-Sell Agreement, a joinder to which is to be
executed between CTOA and the Physicians in the form set forth in Exhibit B.
Closing. The closing of the transactions contemplated by this Master
Transaction Agreement.
Closing Date. As defined in the introduction to this Master Transaction
Agreement.
Code. The Internal Revenue Code of 1986, as amended.
Conveyance Agreement. The Conveyance Agreement to be executed between TROG
and CTROP in the form set forth in Exhibit C.
CTROP Bylaws. The Bylaws of CTROP in the form set forth in Exhibit D.
CTROP Charter. The Articles of Association of CTROP in the form set forth
in Exhibit E.
CTROP Organizational Minutes. The organizational minutes of CTROP in the
form set forth in Exhibit F.
Disclosure Schedule. The disclosure schedule attached to the Purchase
Agreement setting forth, with reference to the applicable section and subsection
of the Purchase Agreement, certain information and exceptions to the
representations, warranties and covenants of the Physicians.
Employment Agreements. Collectively, the Employment Agreements to be
executed between each Physician and CTROP in the form set forth in Exhibit G.
Environmental Claim. As defined in Section 9.01(a)(iv) of the Purchase
Agreement.
Environmental Laws. As defined in Section 4.01(m) of the Purchase
Agreement.
ERISA. As defined in Section 4.01(l) of the Purchase Agreement.
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Escrow Agent. As defined in the Escrow Agreements.
Escrow Agreement. Collectively, the Escrow Agreements that, subject to the
occurrence of certain events described in Section 10.02 of the Purchase
Agreement, will be executed among the Escrow Agent, AOR and a Physician
substantially in the form set forth in Exhibit H.
Exchange Act. The Securities Exchange Act of 1934, as amended.
GAAP. Generally accepted accounting principles, consistently applied.
Governmental Authority. Any national, state, provincial, local or tribal
governmental, judicial or administrative authority or agency.
Hazardous Wastes. As defined in Section 4.01(m) of the Purchase Agreement.
Indemnity Loss. As defined in Section 9.01 of the Purchase Agreement.
Investment Representations Schedule. The schedule attached to the Purchase
Agreement setting forth exceptions to each Physician's representations,
warranties and covenants set forth in Section 6.01 of the Purchase Agreement.
Management Services Agreement. The Management Services Agreement between
New P and CTROP in the form set forth in Exhibit I.
Market Price. The market price per share of AOR Common Stock determined in
the following manner: (i) the closing price (which shall be the last reported
sales price, or, in case no such sales take place on such day, the average of
the closing bid and the asked prices) per share of the AOR Common Stock on the
principal national securities exchange on which the AOR Common Stock is then
listed or admitted to trading, if the AOR Common Stock is then listed or
admitted to trading on any national securities exchange; (ii) if the AOR Common
Stock is not then so listed on a national securities exchange, the average of
the closing bid and asked prices of the AOR Common Stock in the over-the-counter
market as reported by Nasdaq; (iii) if the AOR Common Stock is not then quoted
by Nasdaq, as furnished by any member of NASD selected by AOR for that purpose;
or (iv) if no member of NASD furnishes quotes with respect to the AOR Common
Stock, an amount determined in good faith by the board of directors of AOR.
Medical Assets. As defined in Section 3.02 of the Purchase Agreement.
Merger Agreement. The Merger Agreement (including the Certificate of
Merger to be executed and filed with the Secretary of State of the State of
Texas in connection therewith) to be executed between CTROP and CTOA in the form
set forth in Exhibit J.
NASD. The National Association of Securities Dealers, Inc.
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Nasdaq. The National Association of Securities Dealers Automated Quotation
System.
New P. Radiation Oncology Management Partnership, a Texas general
partnership.
New P Partnership Agreement. The Partnership Agreement of New P in the
form set forth in Exhibit K.
Nonmedical Assets. As defined in Section 3.01 of the Purchase Agreement.
Notes. Collectively, the subordinated non-negotiable promissory notes to
be delivered to the Physicians pursuant to the Purchase Agreement in the form
set forth in Exhibit L.
Option Agreement. The Option Agreement, a joinder to which is to be
executed between the Physicians and Lloyd K. Everson, M.D. in the form set forth
in Exhibit M.
Partnership Interest Purchase Agreement. The Partnership Interest Purchase
Agreement to be executed between John M. Barnett, M.D. and AOR in the form set
forth in Exhibit N.
Physician Indemnified Persons. As defined in Section 9.02 of the Purchase
Agreement.
Physician Parties. The Physicians, CTROP, TROG, ACC and ACC II.
Practice. The radiation oncology and all other related health-care
practices conducted from time to time by TROG prior to the Closing and CTROP
after the Closing.
Purchase Agreement. The Purchase Agreement to be executed by and among
AOR, AOR Management, the Physicians, TROG, CTROP, ACC and ACC II in the form set
forth in Exhibit O.
Real Property Leases. As defined in Section 3.02(f) of the Purchase
Agreement.
SEC. The Securities and Exchange Commission.
Securities. The Notes and the shares of AOR Common Stock to be issued
pursuant to the Purchase Agreement.
Securities Act. The Securities Act of 1933, as amended.
Settlement Agreement. The Settlement Agreement to be executed among the
AOR Parties, the Physician Parties and John M. Barnett, M.D. in the form set
forth in Exhibit P.
Taxes. As defined in Section 4.01(j) of the Purchase Agreement.
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Transaction Documents. This Master Transaction Agreement, the Amendment,
the Buy-Sell Agreement, the Conveyance Agreement, the CTROP Bylaws, the CTROP
Charter, the CTROP Organizational Minutes, the Employment Agreements, the Escrow
Agreements, the Management Services Agreement, the Merger Agreement, the New P
Partnership Agreement, the Option Agreement, the Partnership Interest Purchase
Agreement, the Purchase Agreement, the Settlement Agreement and each other
document and instrument executed and delivered at the Closing.
TROG Audited Financial Statements. As defined in Section 4.01(d) of the
Purchase Agreement.
TROG Balance Sheet. As defined in Section 4.01(d) of the Purchase
Agreement.
TROG Balance Sheet Date. As defined in Section 4.01(d) of the Purchase
Agreement.
ARTICLE II. RESTRUCTURING
Section 2.01 Pre-Closing Actions. Prior to the Closing, the following
actions shall have occurred in the order set forth in this Section 2.01:
(a) each Physician and TROG have terminated any existing employment
agreement, oral, written or otherwise, between such Physician and TROG or
the other Physicians;
(b) the Physicians have caused CTROP to be duly organized and, to that
end, have caused (i) the CTROP Charter to be filed with the Secretary of
State of the State of Texas, (ii) the CTROP Bylaws to be adopted, (iii) the
CTROP Organizational Minutes to be approved and (iv) shares of CTROP to be
issued to the Physicians in the amounts set forth in the CTROP
Organizational Minutes for the consideration described therein;
(c) the Physicians, together with John M. Barnett, M.D., have duly
organized New P by executing and delivering the New P Partnership
Agreement; and
(d) New P and CTOA have executed and delivered the Management Services
Agreement.
Section 2.02 Purchase and Conveyance Agreements. Each Physician, TROG,
CTROP, ACC, ACC II, AOR and AOR Management will execute and deliver the Purchase
Agreement; and AOR will execute and deliver, and the Physicians will cause John
M. Barnett, M.D. to execute and deliver, the Partnership Interest Purchase
Agreement. By virtue of AOR's purchase of 100% of the partnership interests of
New P pursuant to the Purchase Agreement, New P will dissolve and will transfer,
assign and convey to AOR all of the assets of New P, and AOR will assume all of
the liabilities, duties and obligations of New P. In addition, pursuant to the
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Purchase Agreement, AOR Management will purchase the Nonmedical Assets from
TROG, ACC and ACC II, and will assume the Assumed Obligations.
After the actions listed in the foregoing paragraph, TROG and CTROP will
execute and deliver the Conveyance Agreement pursuant to which TROG will convey
to CTROP the Medical Assets.
Section 2.03 Transfer of Management Services Agreement. At the Closing,
after the occurrence of the events described in Section 2.02, AOR will transfer
and contribute to AOR Management all of AOR's right, title and interest in and
to the Management Services Agreement, and AOR Management will assume all
liabilities, duties and obligations under the Management Services Agreement.
Section 2.04 Employment and Settlement Agreements. At the Closing, after
the occurrence of the events set forth in Section 2.03, CTROP and each Physician
will execute and deliver an Employment Agreement. In addition, the AOR Parties,
the Physician Parties and John M. Barnett, M.D. will execute and deliver the
Settlement Agreement.
Section 2.05 Merger. At the Closing, after the occurrence of the events
set forth in Section 2.04, CTROP and CTOA will execute and deliver the Merger
Agreement and will cause the Certificate of Merger to be filed on or about
April 25, 1997 with the Secretary of State of the State of Texas. Pursuant
thereto, CTROP will merge with and into CTOA, with CTOA being the surviving
corporation. In connection with the merger of CTROP into CTOA, the steps set
forth below will occur:
(a) Buy-Sell and Option Agreements. As set forth in the Merger
Agreement, each Physician will become a shareholder of CTOA. As a
shareholder of CTOA, each Physician will execute and deliver joinders to
the Buy-Sell Agreement and the Option Agreement.
(b) Amendment. Following the merger of CTROP with and into CTOA,
without the taking of any additional action, the Management Services
Agreement shall terminate and cease to be of any further force or effect;
and CTOA and AOR Management shall execute and deliver the Amendment.
(c) Employment Agreements. CTROP shall assign and delegate all of its
rights and obligations under each Employment Agreement to CTOA, with each
such Physician to become an employee of CTOA under the terms of such
Employment Agreement.
Section 2.06 Noncompetition and Confidentiality Covenants. In connection
with the consummation of the transactions contemplated by this Master
Transaction Agreement, and by executing and delivering certain of the other
Transaction Documents, the Physicians will be entering into certain
noncompetition and confidentiality covenants. The Physicians recognize
6
<PAGE>
that such covenants are an essential part of the transactions contemplated by
this Master Transaction Agreement and certain other Transaction Documents and
that, but for the contemplated agreement of each Physician to comply with such
covenants, the AOR Parties would not have entered into this Master Transaction
Agreement.
ARTICLE III. THE CLOSING
Section 3.01 Closing.
(a) The Closing shall take place at the offices of Mayor, Day,
Caldwell & Keeton, L.L.P., 700 Louisiana, Suite 1900, Houston, Texas 77002,
at 10:00 A.M. on the Closing Date.
(b) At the Closing, the Parties shall complete the transactions
provided for in Sections 2.02, 2.03, 2.04 and 2.05 in the sequence
specified in Article II hereof. The consummation of the transactions
contemplated by Sections 2.02, 2.03, 2.04 and 2.05 shall be effective for
all purposes as of 12:01 a.m., April 25, 1997, but none of the transactions
contemplated by such Sections shall be deemed to have been consummated
until each such transaction shall have been consummated.
Section 3.02 Deliveries to the AOR Parties at the Closing. At the
Closing, and simultaneously with the deliveries to the Physician Parties
specified in Section 3.03 hereof, and in addition to any other deliveries
required to be made to an AOR Party pursuant to any other Transaction Document
at the Closing, the Physician Parties shall deliver or cause to be delivered to
the AOR Parties the following:
(a) the CTROP Bylaws, the CTROP Charter and the CTROP Organizational
Minutes;
(b) the New P Partnership Agreement duly executed by each Physician
and John M. Barnett, M.D.;
(c) the Management Services Agreement duly executed by New P and
CTROP;
(d) the Purchase Agreement duly executed by the Physicians, TROG,
CTROP, ACC and ACC II;
(e) the Partnership Interest Purchase Agreement duly executed by John
M. Barnett, M.D.
(f) the Conveyance Agreement duly executed by TROG and CTROP;
(g) the Employment Agreements duly executed by the Physicians and
CTROP;
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(h) the Settlement Agreement duly executed by the Physician Parties
and John M. Barnett, M.D.
(i) the Merger Agreement (together with the Certificate of Merger)
duly executed by CTROP and CTOA;
(j) the joinder to the Buy-Sell Agreement duly executed by the
Physicians;
(k) the joinder to the Option Agreement duly executed by the
Physicians;
(l) the Amendment duly executed by CTOA; and
(m) such other closing documents, certificates and instruments as are
contemplated by the other Transaction Documents or as shall have been
reasonably requested by the AOR Parties and as are customarily delivered in
connection with transactions of the type contemplated herein.
Section 3.03 Deliveries to the Physician Parties at the Closing. At the
Closing, and simultaneously with the deliveries to the AOR Parties specified in
Section 3.02, and in addition to any other deliveries required to be made to a
Physician Party pursuant to any other Transaction Document at the Closing, the
AOR Parties shall deliver or cause to be delivered to the Physician Parties the
following:
(a) the Purchase Agreement duly executed by AOR and AOR Management;
(b) the Partnership Interest Purchase Agreement duly executed by AOR;
(c) the Settlement Agreement duly executed by the AOR Parties;
(d) the Amendment duly executed by AOR Management; and
(e) such other closing documents, certificates and instruments as are
contemplated by the other Transaction Documents or as shall have been
reasonably requested by the Physician Parties and as are customarily
delivered in connection with transactions of the type contemplated herein.
ARTICLE IV. CONDITIONS
Section 4.01 Conditions Precedent to the Obligations of All Parties. The
obligations of the Parties to complete the Closing shall be subject to the
fulfillment, at or prior to the time of the Closing, of each of the following
conditions:
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(a) all permits, approvals, waivers, releases and consents of any
Governmental Authority or of any third party necessary or appropriate for
consummation of the Closing shall have been obtained;
(b) no preliminary or permanent injunction or other order of a court
or other Governmental Authority in the United States shall have been issued
and be in effect, and no United States federal or state statute, rule or
regulation shall have been enacted or promulgated after the date hereof and
be in effect, that prohibits the consummation of the Closing; and
(c) there shall not be any action or proceeding commenced by or before
any court or other Governmental Authority in the United States that
challenges the consummation of the Closing.
Section 4.02 Conditions Precedent to the Obligations of the AOR Parties.
The obligations of the AOR Parties to complete the Closing shall be subject to
the fulfillment, at or prior to the time of the Closing, of each of the
following conditions:
(a) the Physician Parties shall have performed, complied with and
fulfilled all the covenants, agreements, obligations and conditions
required by any of the Transaction Documents to be performed, complied with
or fulfilled by them prior to or at the Closing; and
(b) the AOR Parties shall have received all of the instruments,
documents and other items described in Section 3.02, and the form and
substance of all such deliveries shall be satisfactory in all reasonable
respects to the AOR Parties and their counsel.
Section 4.03 Conditions Precedent to the Obligations of the Physician
Parties. The obligations of the Physician Parties to complete the Closing shall
be subject to the fulfillment at or prior to the time of the Closing, of each of
the following conditions:
(a) the AOR Parties shall have performed, complied with and fulfilled
all of the covenants, agreements, obligations and conditions required by
any of the Transaction Documents to be performed, complied with or
fulfilled by them prior to or at the Closing; and
(b) the Physician Parties shall have received from the AOR Parties all
of the instruments, documents and other items described in Section 3.03,
and the form and substance of all such deliveries shall be satisfactory in
all reasonable respects to the Physician Parties and their counsel.
9
<PAGE>
ARTICLE V. MISCELLANEOUS
Section 5.01 Taxes. The Physician Parties will pay all transfer
taxes, sales and other taxes and charges, if any, which may become payable in
connection with the transactions contemplated by the Transaction Documents.
Section 5.02 Expenses. Whether or not the transactions contemplated
by this Master Transaction Agreement are consummated, each of the Parties shall
pay the fees and expenses of their respective counsel, accountants and other
experts incident to the negotiation and preparation of the Transaction Documents
and consummation of the transactions contemplated thereby.
Section 5.03 Parties Bound. Except to the extent otherwise expressly
provided herein, this Master Transaction Agreement shall be binding upon and
inure to the benefit of the Parties and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
SECTION 5.04 CHOICE OF LAW. THIS MASTER TRANSACTION AGREEMENT SHALL
BE CONSTRUED, INTERPRETED, AND THE RIGHTS OF THE PARTIES DETERMINED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT WITH RESPECT TO MATTERS
OF LAW CONCERNING THE INTERNAL AFFAIRS OF ANY CORPORATE OR PARTNERSHIP ENTITY
WHICH IS A PARTY TO OR THE SUBJECT OF THIS MASTER TRANSACTION AGREEMENT, AND AS
TO THOSE MATTERS THE LAW OF THE STATE OF INCORPORATION OR ORGANIZATION OF THE
RESPECTIVE ENTITY SHALL GOVERN. THE PARTIES AGREE THAT IF A CONTROVERSY OR
CLAIM BETWEEN OR AMONG THEM ARISES OUT OF OR IN RELATION TO THIS MASTER
TRANSACTION AGREEMENT AND RESULTS IN LITIGATION, THE COURTS OF TRAVIS COUNTY,
TEXAS OR THE COURTS OF THE UNITED STATES OF AMERICA LOCATED IN TRAVIS COUNTY,
TEXAS SHALL HAVE JURISDICTION TO HEAR AND DECIDE SUCH MATTER, AND THE PARTIES
HEREBY SUBMIT TO JURISDICTION TO SUCH COURTS.
Section 5.05 Assignment. The Master Transaction Agreement may not be
assigned by operation of law or otherwise except that AOR shall have the right
to assign this Master Transaction Agreement, at any time, to any direct or
indirect wholly owned subsidiary of AOR. No such assignment shall relieve AOR
of its obligations hereunder.
Section 5.06 Multiple Counterparts. This Master Transaction
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 5.07 Headings. The headings of the several Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Master Transaction Agreement.
10
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IN WITNESS WHEREOF, the parties have caused this Master Transaction
Agreement to be duly executed as of April 25, 1997.
AMERICAN ONCOLOGY RESOURCES, INC.,
a Delaware corporation
By:___________________________________
Name:_________________________________
Title:________________________________
AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP, a
Texas limited partnership
By: AOR Management Company of Texas, Inc.,
its General Partner
By:___________________________________
Name:_________________________________
Title:________________________________
______________________________________
SHANNON D. COX, M.D.
______________________________________
JOHN H. WILBANKS, M.D.
______________________________________
GEORGE R. BROWN, M.D.
______________________________________
BRUCE M. TURNER, M.D.
11
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TEXAS RADIATION ONCOLOGY GROUP, LLP,
a Texas limited liability partnership
By:______________________________________
Name:____________________________________
Title:___________________________________
AUSTIN CANCER CENTER, LIMITED,
a Texas limited partnership
By: GP Austin Cancer Center, Inc.,
Its General Partner
By:_________________________________
Name:_______________________________
Title:______________________________
AUSTIN CANCER CENTER II, LIMITED,
a Texas limited partnership
By: GP Austin Cancer Center, Inc.,
Its General Partner
By:_________________________________
Name:_______________________________
Title:______________________________
CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A.,
a Texas professional association
By:______________________________________
Name:____________________________________
Title:___________________________________
12
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CENTRAL TEXAS ONCOLOGY ASSOCIATES, P.A.,
a Texas professional association
By:______________________________________
Name:____________________________________
Title:___________________________________
13
<PAGE>
EXHIBIT 2.2
CERTAIN INFORMATION IN THIS EXHIBIT IS SUBJECT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. IN ACCORDANCE WITH RULE 24B-2 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, SUCH INFORMATION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF SUCH
OMITTED INFORMATION HAS BEEN INDICATED WITH AN ASTERISK [*].
PURCHASE AGREEMENT
BY AND AMONG
AMERICAN ONCOLOGY RESOURCES, INC.
AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP
TEXAS RADIATION ONCOLOGY GROUP, LLP
AUSTIN CANCER CENTER, LIMITED
AUSTIN CANCER CENTER II, LIMITED
CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A.
SHANNON D. COX, M.D.
JOHN H. WILBANKS, M.D.
GEORGE R. BROWN, M.D.
AND
BRUCE M. TURNER, M.D.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS............................................ 1
ARTICLE II TERMS OF PARTNERSHIP INTEREST PURCHASE................. 2
Section 2.01 Purchase and Sale...................................... 2
Section 2.02 Consideration.......................................... 2
ARTICLE III TERMS OF ASSET PURCHASE................................ 3
Section 3.01 Purchase and Sale...................................... 3
Section 3.02 Medical Assets......................................... 5
Section 3.03 Assumption of Obligations and Liabilities.............. 6
Section 3.04 Purchase Price......................................... 7
Section 3.05 Tax Allocation......................................... 7
ARTICLE IV REPRESENTATIONS OF THE PHYSICIAN PARTIES............... 7
Section 4.01 Representations of the Physician Parties............... 7
(a) Organization, Valid Authorization and Good Standing.... 7
(b) Compliance............................................. 8
(c) Approvals.............................................. 8
(d) Financial Statements................................... 8
(e) Undisclosed Liabilities................................ 8
(f) Absence of Changes or Events........................... 9
(g) Litigation............................................. 10
(h) Permits; Compliance with Laws.......................... 10
(i) Insurance.............................................. 11
(j) Tax Matters............................................ 11
(k) Contracts.............................................. 12
(l) Employee Benefit Plans................................. 12
(m) Environmental Protection............................... 14
(n) Labor Matters.......................................... 14
(o) Employees.............................................. 15
(p) Title to Nonmedical Assets............................. 15
(q) Value of Assets........................................ 15
(r) Inventory.............................................. 15
(s) ....................................................... 15
(t) Tangible Personal Property............................. 15
(u) Leases................................................. 15
(v) Contract Rights........................................ 16
(w) Prepaid Items.......................................... 16
(x) Accounts Payable....................................... 16
(y) Completeness and Conditions of Assets.................. 16
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C>
(z) Brokers................................................ 16
(aa) Disclosure............................................. 17
Section 4.02 Representations of the Physicians...................... 17
(a) Valid Authorization.................................... 17
(b) Compliance............................................. 17
(c) Approvals.............................................. 17
(d) Litigation............................................. 18
(e) Permits................................................ 18
(f) Staff Privileges....................................... 18
(g) Organization of New P.................................. 18
(h) Title to Partnership Interests......................... 19
(i) Management Services Agreement.......................... 19
(j) Undisclosed Liabilities................................ 19
(k) Intentions............................................. 19
(l) Disclosure............................................. 19
ARTICLE V REPRESENTATIONS OF THE AOR PARTIES..................... 20
Section 5.01 Representations of the AOR Parties..................... 20
(a) Organization, Valid Authorization and Good Standing.... 20
(b) Compliance............................................. 20
(c) Approvals.............................................. 20
(d) Capitalization......................................... 21
(e) Financial Statements................................... 21
(f) Litigation............................................. 21
(g) Registration Rights.................................... 21
(h) Brokers................................................ 21
(i) Disclosure............................................. 22
ARTICLE VI ADDITIONAL AGREEMENTS.................................. 22
Section 6.01 Investment Representations and Covenants of Physicians. 22
Section 6.02 No Corporate Practice.................................. 24
Section 6.03 Current Public Information............................. 24
Section 6.04 Rule 144 Covenant...................................... 24
Section 6.05 Consents of Accountants................................ 25
Section 6.06 Access to Business Records............................. 25
ARTICLE VII NON-COMPETITION AND CONFIDENTIALITY COVENANTS.......... 25
Section 7.01 Physician Non-Competition Covenant..................... 25
Section 7.02 Physician Confidentiality Covenant..................... 27
ARTICLE VIII CLOSING................................................ 28
Section 8.01 Documents to be Delivered by........................... 28
Section 8.02 Documents to be Delivered by AOR Parties............... 29
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE IX INDEMNIFICATION........................................ 29
Section 9.01 Indemnification by the Physician Parties............... 29
Section 9.02 Indemnification by the AOR Parties..................... 31
Section 9.03 Notice................................................. 31
Section 9.04 Defense of Third-Party Claims.......................... 32
Section 9.05 Payment of Losses...................................... 33
Section 9.06 Limitations............................................ 34
Section 9.07 EXTENT OF INDEMNIFICATION.............................. 34
ARTICLE X PIGGYBACK REGISTRATION RIGHTS.......................... 35
Section 10.01 Registration Rights.................................... 35
Section 10.02 Covenants of AOR....................................... 36
Section 10.03 Covenants of the Physicians............................ 37
Section 10.04 Indemnification of Physicians.......................... 38
Section 10.05 Indemnification of AOR................................. 38
Section 10.06 Defense of Claim....................................... 39
Section 10.07 Transfer of Registration Rights........................ 40
ARTICLE XI ARBITRATION............................................ 40
Section 11.01 Scope.................................................. 40
Section 11.02 Arbitrators............................................ 40
Section 11.03 Applicable Rules....................................... 41
ARTICLE XII MISCELLANEOUS.......................................... 41
Section 12.01 Taxes.................................................. 42
Section 12.02 Remedies Not Exclusive................................. 42
Section 12.03 Parties Bound.......................................... 42
Section 12.04 Notices................................................ 42
Section 12.05 Choice of Law.......................................... 43
Section 12.06 Entire Agreement; Amendments and Waivers............... 43
Section 12.07 Confidentiality Agreements............................. 44
Section 12.08 Reformation Clause..................................... 44
Section 12.09 Assignment............................................. 44
Section 12.10 Attorneys' Fees........................................ 44
Section 12.11 Further Assurances..................................... 44
Section 12.12 Announcements and Press Releases....................... 45
Section 12.13 Antidilution........................................... 45
Section 12.14 No Tax Representations................................. 45
Section 12.15 No Rights as Stockholder............................... 46
Section 12.17 Headings............................................... 46
Section 12.18 Severability........................................... 46
</TABLE>
(iii)
<PAGE>
SCHEDULES:
Disclosure Schedule
Investment Representations Schedule
EXHIBITS:
Exhibit A TROG General Bill of Sale, Conveyance, Transfer and
Assignment and Agreement Regarding Assumption of Liabilities
Exhibit B ACC General Bill of Sale, Conveyance, Transfer and
Assignment and Agreement Regarding Assumption of Liabilities
Exhibit C ACC II General Bill of Sale, Conveyance, Transfer and
Assignment and Agreement Regarding Assumption of Liabilities
(iv)
<PAGE>
PURCHASE AGREEMENT
This Purchase Agreement ("Purchase Agreement"), dated and effective as of
April 25, 1997, is by and among AMERICAN ONCOLOGY RESOURCES, INC., a Delaware
corporation ("AOR"); AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP, a Texas
limited partnership ("AOR Management"); TEXAS RADIATION ONCOLOGY GROUP, LLP, a
Texas limited liability partnership ("TROG"); AUSTIN CANCER CENTER, LIMITED, a
Texas limited partnership ("ACC"); AUSTIN CANCER CENTER II, LIMITED, a Texas
limited partnership ("ACC II"); CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS,
P.A., a Texas professional association ("CTROP"); and SHANNON D. COX, M.D., JOHN
H. WILBANKS, M.D., GEORGE R. BROWN, M.D. and BRUCE M. TURNER, M.D.
(collectively, the "Physicians" and individually, a "Physician") (AOR, AOR
Management, TROG, ACC, ACC II, CTROP and the Physicians are individually
referred to herein as a "Party" and collectively referred to herein as
"Parties").
RECITALS
A. In connection with the transactions contemplated by the Master
Transaction Agreement, dated and effective as of April 25, 1997, among the
Parties and Central Texas Oncology Associates, P.A. (the "Master Transaction
Agreement"), the Physicians desire to sell all of their partnership interests in
Radiation Oncology Management Partnership, a Texas general partnership ("New
P"), and AOR desires to purchase such partnership interests in New P.
B. In addition, in connection with the transactions contemplated by the
Master Transaction Agreement, each of TROG, ACC and ACC II desires to sell and
transfer all of its nonmedical assets, and AOR Management desires to purchase
and acquire such nonmedical assets and desires to assume certain liabilities.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Any capitalized term not defined herein shall have the meaning ascribed to
such term in the Master Transaction Agreement.
<PAGE>
ARTICLE II
TERMS OF PARTNERSHIP INTEREST PURCHASE
Section 2.01 Purchase and Sale. Subject to the terms and conditions set
forth herein and in the Master Transaction Agreement, and in reliance upon the
representations, warranties and covenants set forth herein, at the Closing, each
Physician agrees to sell and hereby sells to AOR, and AOR agrees to purchase and
hereby purchases from each such Physician, the partnership interest of New P set
forth after such Physician's name on the Disclosure Schedule. Each Physician's
partnership interest of New P is hereinafter referred to as "Partnership
Interest," and all such partnership interests of New P are hereinafter referred
to as "Partnership Interests."
Section 2.02 Consideration for Such Transfer. In consideration for the
aforesaid transfer of the Partnership Interests, AOR shall deliver the following
consideration to the Physicians in the amounts and on the dates set forth below:
(a) At the Closing, AOR shall deliver to each Physician cash in the
amount set forth opposite such Physician's name:
Physician Cash Amount
--------- -----------
Shannon D. Cox, M.D. $1,273,194
John H. Wilbanks, M.D. 1,013,016
George R. Brown, M.D. 879,743
Bruce M. Turner, M.D. 812,807
----------
$3,978,760
==========
Payment of such cash amounts shall be made by AOR by wire transfer at
Closing in immediately available funds to bank accounts designated by the
Physicians.
(b) At the Closing, AOR shall deliver to each Physician a Note in the
original principal amount set forth opposite such Physician's name:
Principal Amount
Physician of Note
--------- ----------------
Shannon D. Cox, M.D. $ 858,085
John H. Wilbanks, M.D. 676,266
George R. Brown, M.D. 586,800
Bruce M. Turner, M.D. 536,355
----------
$2,657,506
==========
; provided, however, that, to secure for CTOA the benefits of each
Employment Agreement and as an additional inducement for the performance by
each Physician of
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<PAGE>
such Physician's obligations thereunder, in the event the Employment
Agreement between CTOA and any Physician is terminated prior to the fifth
anniversary of the Closing Date by (i) CTOA for cause and without such
Physician's payment of the appropriate amount of liquidated damages, as
specified in such Employment Agreement, or (ii) such Physician without
cause and without such Physician's payment of the appropriate amount of
liquidated damages, as specified in such Employment Agreement, then such
Physician shall execute an appropriate assignment of the Note held by the
Physician pursuant to which all of the Physician's rights under such Note
are assigned to CTOA; provided, however, that in no event shall the total
amount paid to CTOA under such Physician's Note and under Section 4.2 or
Section 4.3 of such Physician's Employment Agreement exceed the total
amount of liquidated damages to which CTOA is entitled under such
Physician's Employment Agreement. If such Physician fails to execute the
assignment of Note provided for in this Section 2.02(b), such Note shall be
deemed assigned to CTOA, and AOR shall be and hereby is authorized to make
all payments under the Note subsequent to such assignment, whether express
or deemed, directly to CTOA.
(c) On the third, fourth and fifth anniversaries of the Closing Date,
AOR shall deliver to each Physician the number of shares of AOR Common
Stock set forth opposite such Physician's name:
Number of Shares
----------------
Shannon D. Cox, M.D.
John H. Wilbanks, M.D. [*]
George R. Brown, M.D.
Bruce M. Turner, M.D.
ARTICLE III
TERMS OF ASSET PURCHASE
Section 3.01 Purchase and Sale. Subject to the terms and conditions
herein set forth, and in reliance upon the representations and warranties set
forth herein, each of TROG, ACC and ACC II agrees to sell, convey, assign,
transfer and deliver to AOR Management, and AOR Management agrees to purchase
and acquire, the assets consisting of all the assets (other than the Medical
Assets specified in Section 3.02 hereof and any accounts receivable) owned by
such Party as a going concern as of the Closing Date, of every kind, character
and description, whether tangible, real, personal, or mixed, and wheresoever
located, whether carried on the books of such Party or not carried on the books
of such Party due to having been expensed, fully depreciated, or otherwise (such
Party's assets are referred to herein as the "Nonmedical Assets"), including
without limitation the following (except to the extent that any of the following
are specifically enumerated as Medical Assets in Section 3.02 hereof):
- --------------
* This information has been omitted from this exhibit and is subject to a
request for confidential treatment. In accordance with Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, such information has been filed
separately with the Securities and Exchange Commission.
3
<PAGE>
(a) All of the inventory owned by such Party ("Inventory");
(b) [Intentionally left blank]
(c) All of such Party's rights in, to and under all leases of
supplies, instruments, equipment, furniture, machinery and other items of
tangible personal property ("Personal Property Leases"), including without
limitation the Personal Property Leases described on the Disclosure
Schedule;
(d) All of such Party's rights in, to and under all contracts,
agreements, insurance policies, purchase orders and commitments (the
"Transferred Contracts"), including without limitation the Transferred
Contracts described on the Disclosure Schedule;
(e) All tangible personal property (including supplies, instruments,
equipment, furniture and machinery) owned by such Party ("Tangible Personal
Property"), including without limitation the Tangible Personal Property
described on the Disclosure Schedule;
(f) All books and records of such Party, including without limitation,
all credit records, payroll records, computer records, computer programs,
contracts, agreements, operating manuals, schedules of assets,
correspondence, books of account, files, papers, books and all other public
and confidential business records (together the "Business Records"),
whether such Business Records are in hard copy form or are electronically
or magnetically stored;
(g) All franchises, licenses, permits, certificates, approvals and
other governmental authorizations necessary to own and operate any of the
other Nonmedical Assets, a complete and correct list of which is set forth
on the Disclosure Schedule (the "Licenses");
(h) All (i) United States and foreign patents, patent applications,
trademarks, trademark applications and registrations, service marks,
service mark applications and registrations, copyrights, copyright
applications and registrations and trade names of such Party; (ii)
proprietary data and technical, manufacturing know-how and information (and
all materials embodying such information) of such Party; (iii)
developments, discoveries, inventions, ideas and trade secrets of such
Party; and (iv) rights to sue for past infringement (all of the foregoing,
collectively, "Intellectual Property");
(i) All of such Party's right, title and interest in, to and under all
telephone numbers used in connection with the Practice, including all
extensions thereto;
4
<PAGE>
(j) All rights in, to and under all representations, warranties,
covenants and guaranties made or provided by third parties to or for the
benefit of such Party with respect to any of the other Nonmedical Assets;
(k) All of such Party's prepaid expenses, prepaid insurance, deposits
and other similar items ("Prepaid Items"); and
If and to the extent the assignment of any personal property lease,
contract, agreement, purchase order, work order, commitment, license, permit,
certificate or approval listed on the Disclosure Schedule shall require the
consent of another party thereto, then (i) such personal property lease,
contract, agreement, purchase order, work order, commitment, license, permit,
certificate or approval shall constitute a Personal Property Lease, Transferred
Contract or License, as the case may be, only upon and subject to receipt of
such consent; (ii) such personal property lease, contract, agreement, purchase
order, work order, commitment, license, permit, certificate or approval shall
not be a Personal Property Lease, Transferred Contract or License, as the case
may be, if and for so long as the attempted assignment would constitute a breach
thereof; and (iii) such Party shall cooperate fully with AOR Management in
seeking such consent or reasonable arrangement designed to provide to AOR
Management the benefits, claim or rights arising thereunder.
Section 3.02 Medical Assets. None of TROG, ACC or ACC II shall sell,
convey, assign, transfer or deliver to AOR Management, and AOR Management shall
not be obligated to acquire (or make any payments or otherwise discharge any
liability or obligation of TROG with respect to), the following assets of such
Party (the "Medical Assets"):
(a) Any of such Party's right, title and interest in, to or under, or
possession of, all drugs, pharmaceuticals, products, substances, items or
devices whose purchase, possession, maintenance, administration,
prescription or security requires the authorization or order of a licensed
health care provider or requires a permit, registration, certification or
any other governmental authorization held by a licensed health care
provider as specified under any federal or state law, or both;
(b) Any of such Party's right, title and interest in and to records of
identity, diagnosis, evaluation or treatment of patients;
(c) Any of such Party's right, title and interest in, to and under
insurance policies covering or relating to medical malpractice;
(d) The name of such Party;
(e) Any franchises, licenses, permits, certificates, approvals and
other governmental authorizations necessary or desirable to own and operate
any of the other Medical Assets, a complete and correct list of which is
set forth on the Disclosure Schedule;
5
<PAGE>
(f) The leasehold estates created by, and all rights conferred on such
Party under or by virtue of, all real property lease agreements (such real
property lease agreements are hereinafter referred to as "Real Property
Leases" and the parcels of real property in which such Party has a
leasehold interest and that are subject to the Real Property Leases are
hereinafter referred to as "Leased Property"), including without limitation
estates created by, and rights conferred under, the Real Property Leases
described on the Disclosure Schedule, and any and all estates, rights,
titles and interests in, to and under all warehouses, storage facilities,
buildings, works, structures, fixtures, landings, constructions in
progress, improvements, betterments, installations, and additions
constructed or located on or attached or affixed to the Leased Property;
and
(g) Any of such Party's right, title or interest in, to or under any
contract or agreement that requires performance by a licensed health care
provider under federal or applicable state law ("Medical Contracts").
Section 3.03 Assumption of Obligations and Liabilities. At the Closing,
AOR Management shall assume and agree to pay or perform, promptly as they become
due, only those obligations and liabilities of TROG, ACC and ACC II expressly
set forth below in this Section 3.03 (such Party's obligations and liabilities
are referred to herein as the "Assumed Obligations"). Except for the Assumed
Obligations, neither AOR nor AOR Management shall assume or be deemed to have
assumed and shall not be responsible for any other obligation or liability of
such Party, direct or indirect, known or unknown, choate or inchoate, absolute
or contingent, including without limitation (i) any and all obligations
regarding any foreign, Federal, state or local income, sales, use, franchise or
other tax liabilities, (ii) any and all obligations or liabilities relating to
any of fees or expenses of the Physician Parties' counsel, accountants or other
experts incident to the negotiation and preparation of the Transaction Documents
and consummation of the transactions contemplated thereby, and (iii) any and all
liabilities relating to or arising from the provision of professional medical
services (or failure to provide professional medical services) prior to the
Closing Date. The Assumed Obligations are:
(a) The accounts payable and other obligations of such Party
specifically set forth on the Disclosure Schedule and incurred in
connection with the operation of the Practice in the ordinary course of
business ("Accounts Payable"); and
(b) The obligations or liabilities of such Party that relate to
periods, events or circumstances occurring on or after the Effective Date,
and not to events or circumstances occurring prior to the Effective Date
in, to and under the Personal Property Leases listed on the Disclosure
Schedule and the Transferred Contracts listed on the Disclosure Schedule;
provided, however, that (i) each of such Personal Property Leases listed on
the Disclosure Schedule and such Transferred Contracts listed on the
Disclosure Schedule shall be on the same terms and conditions as are in
effect prior to and on the Effective Date, and (ii) AOR Management shall
assume no obligation or liability in, to or under any such lease, agreement
or order that is not included on the Disclosure Schedule.
6
<PAGE>
Section 3.04 Purchase Price. AOR Management agrees that, subject to the
terms and conditions of this Purchase Agreement, and in full consideration for
the aforesaid sale, transfer, conveyance, assignment and delivery of the
Nonmedical Assets to AOR Management, and the assumption of the Assumed
Obligations by AOR Management, AOR Management shall deliver to (i) TROG cash in
an amount equal to $40,223; (ii) ACC cash in the amount of $294,363; and (iii)
ACC II cash in the amount of $1,000 (collectively, the "Purchase Price").
Payment of such cash amount shall be made by AOR by wire transfer at Closing in
immediately available funds to a bank account designated by each such Party.
Section 3.05 Tax Allocation. The Purchase Price plus the Assumed
Obligations constitute, for federal income tax purposes, the total consideration
paid by AOR Management for all of the Nonmedical Assets (the "Tax
Consideration"). The Parties estimate the Tax Consideration to be allocated
among all of the Nonmedical Assets in the manner set forth on the Disclosure
Schedule. The allocation set forth on the Disclosure Schedule is estimated to
be based on the fair market value of the assets acquired, and the allocation is
intended to be in compliance with Section 1060 of the Code. AOR Management and
TROG, ACC and ACC II, as appropriate, agree to finalize the allocation within
150 days of the Closing Date and to use the final allocations in all tax returns
or statements filed with any taxing authority. AOR Management and TROG, ACC and
ACC II, as appropriate, agree to file timely the applicable Forms 8594 with
their respective federal income tax returns for the taxable year in which the
Closing Date occurs.
ARTICLE IV
REPRESENTATIONS OF THE PHYSICIAN PARTIES
Section 4.01 Representations of the Physician Parties. The Physician
Parties jointly and severally represent and warrant to the AOR Parties that:
(a) Organization, Valid Authorization and Good Standing. Each of
TROG, ACC, ACC II and CTROP is duly organized, validly existing and in good
standing under the laws of the State of Texas. TROG, ACC and ACC II have
the power and authority to own all of their properties and assets and to
conduct the Practice prior to the Closing Date, and CTROP has the power and
authority to own all of its properties and assets and to conduct the
Practice after the Closing Date. Each of TROG, ACC, ACC II and CTROP has
the power and authority to enter into the Transaction Documents to which it
is a party and to carry out its obligations thereunder. The execution and
delivery of the Transaction Documents to which any of TROG, ACC, ACC II or
CTROP is a party and the consummation of the transactions contemplated
thereby have been duly and validly authorized by such Party, and no other
corporate or other proceedings on the part of such Party are necessary to
authorize the Transaction Documents and the transactions contemplated
thereby. This Purchase Agreement has been duly and validly executed and
delivered by each of TROG, ACC, ACC II and CTROP and constitutes the valid
and binding agreement of each such Party enforceable against it in
accordance with its terms.
7
<PAGE>
Each Transaction Document executed and delivered by any of TROG, ACC, ACC
II or CTROP will upon such execution and delivery constitute the valid and
binding agreement of such Party enforceable against it in accordance with
its terms.
(b) Compliance. Except as disclosed on the Disclosure Schedule, the
execution and delivery of the Transaction Documents and the consummation of
the transactions contemplated thereby by each of TROG, ACC, ACC II and
CTROP will not (i) violate any provision of its organizational documents,
(ii) violate any material provision of or result in the breach of or
entitle any party to accelerate (whether after the giving of notice or
lapse of time or both) any material obligation under, any mortgage, lien,
lease, contract, license, instrument or any other agreement to which such
Party is a party, (iii) result in the creation or imposition of any
material lien, charge, pledge, security interest or other material
encumbrance upon any property of such Party or (iv) to the best of the
Physician Parties' knowledge, violate or conflict with any order, award,
judgement or decree or other material restriction or any law, ordinance or
regulation to which such Party or its property is subject.
(c) Approvals. To the best of the Physician Parties' knowledge, no
consent, approval, order or authorization of, or registration, declaration
or filing with, any Governmental Authority or other person is required in
connection with the execution and delivery of the Transaction Documents by
each of TROG, ACC, ACC II and CTROP or the consummation by such Party of
the transactions contemplated thereby, except for those consents or
approvals set forth in the Disclosure Schedule.
(d) Financial Statements. TROG, together with ACC and ACC II, has
furnished to the AOR Parties TROG's audited financial statements for the
year ended December 31, 1996, and for the -month period ended ,
1997, consisting of a balance sheet, the related statement of income and
changes in stockholders' equity and cash flows, together with the report
thereon of Price Waterhouse LLP, independent accountants (the "TROG Audited
Financial Statements"). Except as disclosed on the Disclosure Schedule,
the TROG Audited Financial Statements (i) have been prepared in accordance
with GAAP and (ii) present fairly, in all material respects, the financial
position of TROG at such dates and the results of its operations for the
periods ended on such dates. Except as set forth in the Disclosure
Schedule, the TROG Audited Financial Statements reflect all of the
liabilities and obligations that are required to be reflected or disclosed
therein in accordance with GAAP. For purposes of this Purchase Agreement,
the latest balance sheet included in the TROG Audited Financial Statements
is referred to as the "TROG Balance Sheet" and the date thereof is referred
to as the "TROG Balance Sheet Date."
(e) Undisclosed Liabilities. None of TROG, ACC or ACC II has any
liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, whether due or to become due, and whether
choate or inchoate) individually or in the aggregate
8
<PAGE>
in excess of $10,000, and to the best of the Physician Parties' knowledge,
there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against such
Party giving rise to any liability, except as set forth on the TROG Balance
Sheet or on the Disclosure Schedule.
(f) Absence of Changes or Events. Except as set forth on the
Disclosure Schedule, since the TROG Balance Sheet Date, each of TROG, ACC
and ACC II has conducted the Practice only in the ordinary course of
business, and none of TROG, ACC or ACC II has:
(i) Incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, whether
individually or in the aggregate, that has had or might have a
material adverse effect on such Party or the Practice;
(ii) Pledged or subjected to any material lien, charge, security
interest or any other encumbrance or restriction on any of its assets;
(iii) Sold, transferred, leased to others or otherwise disposed
of any of its assets material to the operation of the Practice, except
in the ordinary course of the business of such Party;
(iv) Canceled or compromised any material debt or claim, or
waived or released any right of substantial value;
(v) Received any notice of termination of any contract, lease or
other agreement, or suffered any damage, destruction or loss that,
individually or in the aggregate, has had or might have a material
adverse effect on such Party or the Practice;
(vi) Instituted, settled or agreed to settle any litigation,
action, proceeding or arbitration;
(vii) Failed to replenish its inventory or supplies in a normal
and customary manner or made any material purchase commitment other
than in the ordinary course of business of such Party;
(viii) Failed to pay any accounts or notes payable or any other
obligations on a timely basis consistent with the past practices of
such Party;
(ix) Entered into any material transaction, contract or
commitment other than in the ordinary course of the business of such
Party;
9
<PAGE>
(x) Suffered any event or events, whether individually or in the
aggregate, that has had or could be reasonably expected to have a
material adverse effect on the financial condition, results of
operations, properties, assets, liabilities, business, operations or
prospects of such Party, CTROP or the Practice;
(xi) Made any material change in the rate of compensation,
commission, bonus or other remuneration payable, or paid or agreed to
pay any material bonus, extra compensation, pension, severance or
vacation pay, to any partner or employee;
(xii) Issued any equity interests, declared or paid any
distribution on equity interests (not including bonuses) or entered
into any agreement or understanding to do or engage in any of the
foregoing actions;
(xiii) Engaged in any activities or practices other than the
Practice; or
(xiv) Entered into any agreement or made any commitment to take
any of the actions described in Subsections (i) through (xiii)
inclusive of this Section 4.01(f).
(g) Litigation. Except as disclosed on the Disclosure Schedule, there
are no material claims, actions, suits, proceedings (arbitration or
otherwise) or investigations pending or, to the best of the Physician
Parties' knowledge, threatened against any of TROG, ACC, ACC II or the
Practice at law or in equity in any court or before or by any Governmental
Authority, and, to the best of the Physician Parties' knowledge, there are
no, and have not been any, facts, conditions or incidents that may result
in any such actions, suits, proceedings (arbitration or otherwise) or
investigations. To the best of the Physician Parties' knowledge, none of
TROG, ACC, ACC II or the Practice is in default in respect of any judgment,
order, writ, injunction or decree of any court or other Governmental
Authority.
(h) Permits; Compliance with Laws. To the best of the Physician
Parties' knowledge, each of TROG, ACC, ACC II and CTROP has all permits,
licenses, orders and approvals of all Governmental Authorities material to
the conduct of the Practice, a true and correct list of which is set forth
on the Disclosure Schedule. To the best of the Physician Parties'
knowledge, all such permits, licenses, orders and approvals are in full
force and effect, and no suspension or cancellation of any of them is
pending or threatened. To the best of the Physician Parties' knowledge,
none of such permits, licenses, orders or approvals, and no application for
any of such permits, licenses, orders or approvals, will be adversely
affected by the consummation of the transactions contemplated by this
Purchase Agreement or any other Transaction Document. Except as set forth
on the Disclosure Schedule, no consent or approval is required for, and no
other impediment or restriction exists that will prohibit or limit, the
transfer of any of
10
<PAGE>
such permits, licenses, orders and approvals (and any applications
therefor) in accordance with the terms of the Transaction Documents. To
the best of the Physician Parties' knowledge, each of TROG, ACC and ACC II
has complied in all material respects with the rules and regulations of all
Governmental Authorities having authority over it, including without
limitation, agencies concerned with occupational safety, environmental
protection, employment practices, and Medicare and Medicaid requirements
applicable to billing procedures (except denials of claims in the ordinary
course of business), and none of TROG, ACC or ACC II has received notice of
violation of any such rules or regulations, whether corrected or not,
within the last three years.
(i) Insurance. The Physician Parties have obtained and maintained in
full force and effect insurance to protect them and the Practice against
the types of liabilities, including medical malpractice, customarily
insured against by persons in connection with the operation of similar
practices, and all premiums due on such policies have been paid. Such
insureds have complied in all material respects with the provisions of all
such policies. Except as set forth on the Disclosure Schedule, no consent
or approval is required for, and no other impediment or restriction exists
that will prohibit or limit, the transfer of any such insurance policies
included within the Nonmedical Assets in accordance with the terms of this
Purchase Agreement. The Physician Parties have made available to the AOR
Parties complete and correct copies of all such policies, together with all
riders and amendments thereto. The Physician Parties have set forth on the
Disclosure Schedule a complete and correct list of all such insurance
policies and a list of malpractice insurance policies previously maintained
within the last ten (10) years by them. The Physician Parties have also
set forth on such Disclosure Schedule a list of all malpractice claims and
similar types of claims, actions or proceedings asserted against any of the
Physician Parties at any time within the last ten (10) years.
(j) Tax Matters. To the best of the Physician Parties' knowledge, all
federal, state, local and foreign tax returns required to be filed by each
Physician Party prior to the Closing Date have been filed on a timely basis
with the appropriate Governmental Authorities in all jurisdictions in which
such returns are required to be filed and all such returns are true and
correct. To the best of the Physician Parties' knowledge, all federal,
state, local and foreign income, franchise, sales, use, property, and all
other taxes, fees, assessments or other governmental changes (including
withholding taxes), and all interest and penalties thereon (all of the
foregoing, collectively "Taxes") due from, or properly accruable by, each
Physician Party with respect to taxable periods ending on or prior to, and
the portion of any interim period through, the date hereof have been fully
and timely paid or, in the case of Taxes for which payment is not yet
required, properly and fully accrued for on the TROG Audited Financial
Statements. The AOR Parties will not after the Closing owe to any person
or entity or be liable for, directly or indirectly, any taxes imposed upon
any Physician Party. No Physician Party is currently the subject of any
audit, examination or any similar investigation by any Governmental
Authority. The Disclosure Schedule sets forth all audits, examinations or
similar investigations of any Physician Party by any
11
<PAGE>
Governmental Authority since January 1, 1992. There are no liens for taxes
(other than for current taxes not yet due and payable) upon any of the
Nonmedical Assets. To the best of the Physician Parties' knowledge, none
of the Nonmedical Assets is property that is required to be treated as
being owned by any other person pursuant to the so-called "safe harbor
lease" provisions of former Section 168(f)(8) of the Code. To the best of
the Physician Parties' knowledge, none of the Nonmedical Assets is "tax-
exempt use property" within the meaning of Section 168(h) of the Code. The
consummation of the transactions contemplated by this Purchase Agreement
will not be subject to any sales or other transfer tax of any state or
local taxing authority.
(k) Contracts. Set forth on the Disclosure Schedule is a complete and
correct list of all material agreements, contracts and commitments, written
or oral, to which any of TROG, ACC or ACC II is a party or by which it or
any of its properties or the Practice is bound, including without
limitation: (i) mortgages, indentures, notes, letters or credit, security
agreements and other agreements and instruments relating to the borrowing
of money by or extension of credit to or by such Party; (ii) employment and
consulting agreements, employee benefit, profit-sharing and retirement
plans and all collective bargaining agreements; (iii) joint venture or
partnership agreements; (iv) licenses of software or any patent, trademark
or other intellectual property rights; (v) agreements or commitments for
capital expenditures; (vi) brokerage or finder's agreements; (vii)
agreements regarding clinical research; and (viii) agreements with payors,
leases for real or personal property or contracts to provide medical or
health-care services. The Physician Parties have made available to the AOR
Parties complete and correct copies of all written agreements, contracts
and commitments (together with all amendments thereto) and accurate
descriptions of all oral agreements set forth on the list on the Disclosure
Schedule. All such agreements, contracts and commitments are in full force
and effect and, to the best of the Physician Parties' knowledge, all
parties thereto have performed all material obligations required to be
performed by them to date, are not in default in any material respect
thereunder, and have not violated any representation or warranty, explicit
or implied, contained therein. No claim or default by any party has been
made or is now pending under any such agreement, contract or commitment,
and, to the best of the Physician Parties' knowledge, no event has occurred
and is continuing that with notice or the passing of time or both would
constitute a default thereunder or would excuse performance by any party
thereto. No such agreement, contract or commitment materially adversely
affects the business, condition, properties, assets, earnings or operations
of the Practice. Except as set forth in the Disclosure Schedule, no
consents or approvals are required under the terms of any agreement listed
on the Disclosure Schedule in connection with any of the transactions
contemplated by the Transaction Documents including, without limitation,
the transfer of any such agreement pursuant to this Purchase Agreement.
(l) Employee Benefit Plans. Except as set forth on the Disclosure
Schedule, none of TROG, ACC, ACC II or any other entity, whether or not
incorporated, which is deemed to be under common control (as defined in
Section 414 of the Code or 4001(b)
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of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) with such Party ("Commonly Controlled Entity") maintains or
contributes to any employee pension benefit plan (as defined in Section
3(2) of ERISA) that is a defined contribution plan described in Section
3(34) of ERISA or Section 414(i) of the Code, or that is a defined benefit
plan described in Section 3(35) of ERISA or Section 414(j) of the Code, and
that gives, or will give, rise to any liability of such Party for (i) any
premium payments due under Section 4007 of ERISA with respect to any such
defined benefit plan or (ii) any unpaid minimum funding contributions that
would result in the imposition of a lien on any assets of such Party
pursuant to Section 412(c)(11) of the Code or Section 302(c)(11) of ERISA.
to the best of the Physician Parties' knowledge, none of TROG, ACC, ACC II
or any Commonly Controlled Entity sponsors or sponsored, or maintains or
maintained, any defined benefit plan (described in the immediately
preceding sentence) that has been, or will be, terminated in a manner that
would result in any liability of such Party to the Pension Benefit Guaranty
Corporation or that would result in the imposition of a lien on any assets
of such Party pursuant to Section 4068 of ERISA. At no time during the
five (5) consecutive year period immediately preceding the first day of the
year in which the Closing Date occurs has any of TROG, ACC, ACC II or any
Commonly Controlled Entity participated in or contributed to any
multiemployer plan defined in Section 4001(a)(3) of ERISA or Section 414(f)
of the Code, nor during such period has any of TROG, ACC, ACC II or any
Commonly Controlled Entity had an obligation to participate in or
contribute to any such multiemployer plan. Except as set forth on the
Disclosure Schedule, none of TROG, ACC or ACC II is obligated under any
agreement or other arrangement pursuant to which compensation or benefits
will become payable as a result of the consummation of the transactions
contemplated in this Purchase Agreement. To the best of the Physician
Parties' knowledge, none of TROG, ACC, ACC II or any of its respective
directors, officers, employees or agents has, with respect to any employee
benefit plan (as defined in Section 3(3) of ERISA) that is or has been
established by or contributed to, or with respect to which costs or
liabilities are accrued by TROG, ACC or ACC II, engaged in any conduct that
would result in any material taxes or penalties on prohibited transactions
under Section 4975 of the Code or under Section 502(i) or (1) of ERISA or
in breach of fiduciary duty liability under Section 409 of ERISA which, in
the aggregate, could be material to the business, financial condition or
results of operation of TROG, ACC or ACC II, taken as a whole, and no
actions, investigations, suits or claims with respect to the fiduciaries,
administrators or assets of any such employee benefit plan (other than
routine claims for benefits) is pending or threatened, which in the
aggregate could reasonably be expected to give rise to material liability
of TROG, ACC or ACC II or that could otherwise be material to the business,
financial condition or results of operations of TROG, ACC or ACC II, taken
as a whole. None of TROG's, ACC's or ACC II's welfare benefit plans (as
defined in Section 3(1) of ERISA) provides for or promises retiree medical,
disability or life insurance benefits to any current or former employee,
officer or director of TROG, ACC or ACC II other than "continuation
coverage" required under the Controlled Omnibus Budget Reconciliation Act
of 1985. Any and all plans, policies, programs or arrangements of TROG,
ACC, ACC II or any Commonly Controlled Entity which are subject to
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Section 4980B of the Code have been and are in compliance with the
requirements of Section 4980B of the Code and Part 6 of Title I of ERISA.
The Physician Parties will remain fully liable with respect to all plans,
programs, policies or other arrangements, including but not limited to any
pension, profit-sharing, thrift or other retirement plan; deferred
compensation; or any other pension benefit plan of any kind; stock
ownership, stock purchase, performance share, bonus or other incentive
plan; severance plan; disability, medical, dental, vision or other health
plan; life insurance or death benefit plan; vacation, sick leave, holiday
or other paid leave plan; cafeteria plan, medical flexible spending account
reimbursement plan; dependent care plan; or any other welfare benefit plan
of any kind; or any other benefit plan, policy, program or arrangement
whether or not any such plan, policy, program or other arrangement is, or
is intended to be, qualified under Section 401(a) of the Code, and whether
or not any such plan, policy, program or arrangement is subject to the
provisions of ERISA, and the AOR Parties will not be required to assume by
law or under any form of any such plans, policies, programs or arrangements
any of the liabilities for or under such plans, policies, programs or
arrangements.
(m) Environmental Protection. To the best of the Physician Parties'
knowledge, TROG, ACC, ACC II and CTROP have each obtained all permits,
licenses and other authorizations that are required under any federal,
state and local laws and the regulations promulgated thereunder relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of hazardous
substances, materials or wastes (collectively, "Hazardous Wastes"), into
the environment (including, without limitation, ambient air, surface water,
ground water or land) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Wastes (collectively, "Environmental Laws"). To the best of the
Physician Parties' knowledge, TROG, ACC, ACC II, CTROP and the Practice are
each in material compliance with all terms and conditions of such required
permits, licenses and authorizations, and are also in compliance with all
applicable Environmental Laws. Except as set forth on the Disclosure
Schedule, no consent or approval is required for, and no other impediment
or restriction exists that will prohibit or limit, the transfer of such
permits, licenses and authorizations in accordance with the terms of this
Purchase Agreement. There are no pending or, to the best of the Physician
Parties' knowledge, threatened, investigations, actions or proceedings of
whatsoever nature involving TROG, ACC, ACC II or the Practice arising under
any Environmental Laws.
(n) Labor Matters. Except as described on the Disclosure Schedule,
none of the employees of TROG, ACC or ACC II is represented by any union or
other collective bargaining representative, and there are no contracts for
the employment of any officer or employee of TROG, ACC or ACC II in effect.
The Physician Parties are not aware of any organizational efforts by any
union directed towards any of the employees of TROG, ACC or ACC II. Except
as listed on the Disclosure Schedule, there has not been, nor to the
knowledge of TROG, ACC or ACC II is there threatened or
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contemplated, any strike, slowdown, picketing or work stoppage by any such
employees, any lockout of any of such employees or any labor trouble or
other occurrence, event or condition of a similar character materially
affecting, individually or in the aggregate, or which may materially
affect, individually or in the aggregate, the operations, assets,
properties or prospects of TROG, ACC, ACC II or the Practice.
(o) Employees. The Disclosure Schedule sets forth a complete list of
the names and positions held of all employees of TROG, ACC and ACC II and
the current annual rate of compensation (including bonuses) paid to each
such employee.
(p) Title to Nonmedical Assets. Except as set forth on the Disclosure
Schedule, each of TROG, ACC and ACC II is the owner and has, as of the date
hereof, good and marketable title to such Party's Nonmedical Assets, free
and clear of any and all liens, charges, pledges, claims, security
interests, exceptions or other encumbrances of any kind.
(q) Value of Assets. As of the date hereof, the sum of the book
values of all of the Nonmedical Assets less all of the Assumed Obligations
is not less than $335,586.
(r) Inventory. Except as set forth on the Disclosure Schedule, to the
best of the Physician Parties' knowledge: (i) the Inventory of each of
TROG, ACC and ACC II is in its originally manufactured condition, fit for
the use for which it is intended, free from any known defect and in a
quality and quantity usable in the ordinary course of business; (ii) such
Party's Inventory does not contain material amounts of items that are slow-
moving, obsolete or of below-standard quality; (iii) the qualities and
quantities of such Party's Inventory are reasonable and warranted in the
present and anticipated circumstances of the Practice; and (iv) there has
been no decrease in the quantities of Inventory since the TROG Balance
Sheet Date, other than in the ordinary course of business.
(s) [Intentionally left blank]
(t) Tangible Personal Property. Except as set forth on the Disclosure
Schedule, to the best of the Physician Parties' knowledge, the Tangible
Personal Property of each of TROG, ACC and ACC II is in good operating
condition, working order and repair (normal wear and tear excepted) and is
fully suitable for the uses for which it is employed in the conduct of the
Practice.
(u) Leases. With respect to each of the Real Property Leases and
Personal Property Leases of each of TROG, ACC and ACC II, except as set
forth on the Disclosure Schedule:
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(i) such lease is legal, valid, binding, enforceable and in full
force and effect;
(ii) such lease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following
the Closing;
(iii) no party to such lease is in material breach or default,
and no event has occurred that, with notice or lapse of time, would
constitute a material breach or default or permit termination,
modification or acceleration thereunder;
(iv) no party to such lease has repudiated in writing any
provision thereof;
(v) there are no disputes, oral agreements or forbearance
programs in effect as to such lease; and
(vi) TROG, ACC or ACC II, as applicable, has performed and
satisfied in full each material obligation to be performed by such
Party under such lease.
(v) Contract Rights. Except as set forth on the Disclosure Schedule,
each of the Transferred Contracts of each of TROG, ACC and ACC II is valid
and enforceable and is in full force and effect, and there is no material
default or existing condition that, with the giving of notice or the
passage of time or both, would constitute such a default by such Party or
by any parties thereto. Such Party has performed and satisfied in full
each material obligation required to be performed by such Party under each
Transferred Contract. If services are to be provided to such Party under
any of such Transferred Contract, such services have been and are being
performed satisfactorily and timely, substantially in accordance with terms
of such Transferred Contract.
(w) Prepaid Items. Each of the Prepaid Items may be transferred to
AOR Management without the necessity of obtaining any consent or approval.
(x) Accounts Payable. Each of the Accounts Payable was incurred in
the ordinary and usual course of business of the applicable Party may be
transferred to AOR Management and is due and payable in the ordinary course
of business of such Party.
(y) Completeness and Conditions of Assets. All of the Nonmedical
Assets, together with all of the Medical Assets, include all the assets and
properties used to conduct the Practice as presently conducted.
(z) Brokers. All negotiations relating to the Transaction Documents
and the transactions contemplated hereby have been carried on without the
intervention of any
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person acting on behalf of the Physician Parties as a group in such manner
as to give rise to any valid claim for any broker's or finder's fee or
similar compensation.
(aa) Disclosure. To the best of the Physician Parties' knowledge, no
representation, warranty or statement made by any of the Physician Parties
in this Purchase Agreement or any of the exhibits or schedules hereto, or
any agreements, certificates, documents or instruments delivered or to be
delivered to the AOR Parties in accordance with this Purchase Agreement or
the other Transaction Documents, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of
the circumstances under which they were made, not misleading. The
Physician Parties do not know of any fact or condition (other than general
economic conditions or legislative or administrative changes in health-care
delivery) that materially adversely affects, or in the future may
materially adversely affect, the condition, properties, assets,
liabilities, business, operations or prospects of the Practice that has not
been set forth herein or in the Disclosure Schedule.
Section 4.02 Representations of the Physicians. Each of the Physicians
severally represents and warrants to the AOR Parties as to such Physician that:
(a) Valid Authorization. Such Physician is competent and has full
power, capacity and authority to enter into the Transaction Documents to
which such Physician is a party and to carry out such Physician's
obligations thereunder. This Purchase Agreement has been duly and validly
executed and delivered by such Physician and constitutes the valid and
binding agreement of such Physician enforceable against such Physician in
accordance with its terms. Each Transaction Document executed and
delivered at the Closing by such Physician will upon such execution and
delivery constitute the valid and binding agreement of such Physician
enforceable against such Physician in accordance with its terms.
(b) Compliance. Except as set forth on the Disclosure Schedule, the
execution and delivery of the Transaction Documents and the consummation of
the transactions contemplated thereby by such Physician will not (i)
violate any material provision of or result in the breach of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation under any mortgage, lien, lease, contract,
license, instrument or any other agreement to which such Physician is a
party, (ii) result in the creation or imposition of any material lien,
charge, pledge, security interest or other encumbrance upon any property of
such Physician or (iii) to the best of such Physician's knowledge, violate
or conflict with any order, award, judgment or decree or other material
restriction or any law, ordinance or regulation to which such Physician or
the property of such Physician is subject.
(c) Approvals. Except as set forth on the Disclosure Schedule, to the
best of such Physician's knowledge, no consent, approval, order or
authorization of, or
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registration, declaration or filing with, any Governmental Authority or
other person is required in connection with the execution and delivery of
the Transaction Documents by such Physician or the consummation by such
Physician of the transactions contemplated thereby.
(d) Litigation. Except as disclosed on the Disclosure Schedule, there
are no claims, actions, suits, proceedings (arbitration or otherwise) or
investigations pending or, to the best of such Physician's knowledge,
threatened against such Physician or New P at law or in equity in any court
or before or by any Governmental Authority, and, to the best of such
Physician's knowledge, there are no, and have not been any, facts,
conditions or incidents that may result in any such actions, suits,
proceedings (arbitration or otherwise) or investigations. To the best of
such Physician's knowledge, neither such Physician nor New P is in default
in respect of any judgement, order, writ, injunction or decree of any court
or other Governmental Authority. Except as set forth on the Disclosure
Schedule, there have been no disciplinary, revocation or suspension
proceedings or similar types of claims, actions or proceedings, hearings or
investigations against any of the Physicians.
(e) Permits. To the best of such Physician's knowledge, such
Physician has all permits, licenses, orders and approvals of all
Governmental Authorities necessary to perform the services performed by
such Physician in connection with the conduct of the Practice. To the best
of such Physician's knowledge, all such permits, licenses, orders and
approvals are in full force and effect and no suspension or cancellation of
any of them is pending or threatened. To the best of such Physician's
knowledge, none of such permits, licenses, orders or approvals, and no
application for any of such permits, licenses, orders or approvals will be
adversely affected by the consummation of the transactions contemplated by
the Transaction Documents. Such Physician is a participating physician, as
such term is defined by the Medicare program, and such Physician has not
been disciplined, sanctioned or excluded from the Medicare program and has
not been subject to any plan of correction imposed by any professional
review body.
(f) Staff Privileges. The Disclosure Schedule lists all hospitals at
which such Physician has full staff privileges. Such staff privileges have
not been revoked, surrendered, suspended or terminated, and to the best of
such Physician's knowledge, there are no, and have not been any, facts,
conditions or incidents that may result in any such revocation, surrender,
suspension or termination.
(g) Organization of New P. To the best of such Physician's knowledge,
the New P Partnership Agreement is in full force and effect and has not
been amended or repealed. No party to the New P Partnership Agreement is
in violation or breach of any of the provisions thereof. The Partnership
Interests, together with John M. Barnett, M.D.'s partnership interest,
constitute all interests in New P. There are no options, subscription
rights or similar rights to purchase any interest in New P.
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(h) Title to Partnership Interests. Each Physician is the sole owner
of his Partnership Interest, free and clear of any lien, charge, security
interest, encumbrance or claim whatsoever, with full legal power, right and
authority to sell and transfer his Partnership Interest to AOR as provided
herein and to enter into and perform his obligations under this Purchase
Agreement. Upon the sale and transfer of each Physician's Partnership
Interest as provided herein, AOR will acquire good and marketable title to
such Physician's Partnership Interest free and clear of any lien, charge,
security interest, encumbrance or other claim. Upon the sale and transfer
of such Physician's Partnership Interest to AOR as provided herein, such
Physician shall have no further interest, beneficial or otherwise, in New
P.
(i) Management Services Agreement. Except for the Management Services
Agreement and except for the amount of cash on hand and in banks as set
forth on the Disclosure Schedule, New P has no assets, including without
limitation any ownership interest, beneficial or otherwise, in any other
entity, and is not a party to any contract, agreement, order, lease or
commitment. Except for executing and delivering the Management Services
Agreement, since the date of New P's formation, New P has not conducted any
business whatsoever. The Management Services Agreement is in full force
and effect, and, to the best of such Physician's knowledge, there is no
default or existing condition that, with the giving of notice or the
passage of time or both, would constitute such a default by any of the
parties thereto. To the best of such Physician's knowledge, New P has
performed and satisfied in full each obligation required to be performed by
it under the Management Services Agreement.
(j) Undisclosed Liabilities. Except for obligations relating to or
arising from the Management Services Agreement, to the best of such
Physician's knowledge, New P does not have any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, whether
due or to become due, and whether choate or inchoate), and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against New P giving rise
to any liability.
(k) Intentions. Except as set forth on the Disclosure Schedule, such
Physician intends to continue practicing medicine on a full-time basis for
the next five (5) years with CTOA and does not know of any fact or
condition that materially adversely affects, or in the future may
materially adversely affect, his ability or intention to practice medicine
on a full-time basis for the next five years with CTOA.
(l) Disclosure. Such Physician does not know of any fact or condition
(other than general economic conditions or legislative or administrative
changes in health-care delivery) that materially adversely affects, or in
the future may materially adversely affect, the condition, properties,
assets, liabilities, business, operations or prospects of the Practice that
has not been set forth herein or in the Disclosure Schedule.
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ARTICLE V
REPRESENTATIONS OF THE AOR PARTIES
Section 5.01 Representations of the AOR Parties. The AOR Parties jointly
and severally represent and warrant to each of the Physicians that:
(a) Organization, Valid Authorization and Good Standing. AOR is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and AOR Management is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Texas. Each of the AOR Parties has the power and authority to own
all of its properties and assets and to conduct its business. Each of the
AOR Parties has the power and authority to enter into the Transaction
Documents to which it is a party and to carry out its obligations
thereunder. The execution and delivery of the Transaction Documents to
which it is a party and the consummation of the transactions contemplated
thereby have been duly and validly authorized by each of the AOR Parties,
and no other corporate or other proceedings on the part of either of the
AOR Parties are necessary to authorize the Transaction Documents and the
transactions contemplated thereby. This Purchase Agreement has been duly
and validly executed and delivered by each of the AOR Parties and
constitutes the valid and binding agreement of each of the AOR Parties
enforceable against the AOR Parties, in accordance with its terms. Each
Transaction Document executed and delivered at the Closing by an AOR Party
will upon such execution and delivery constitute the valid and binding
agreement of such AOR Party, enforceable against such AOR Party in
accordance with its terms.
(b) Compliance. The execution and delivery of the Transaction
Documents and the consummation of the transactions contemplated thereby by
the AOR Parties will not (i) violate any provision of their respective
charters, limited partnership agreements or bylaws, (ii) violate any
material provision of or result in the breach of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both)
any material obligation under, any mortgage, lien, lease, contract,
license, instrument or any other agreement to which either of the AOR
Parties is a party, (iii) result in the creation or imposition of any
material lien, charge, pledge, security interest or other encumbrance upon
any property of either of the AOR Parties or (iv) violate or conflict with
any order, award, judgement or decree or other material restriction or any
law, ordinance or regulation to which either of the AOR Parties or the
property of either of the AOR Parties is subject.
(c) Approvals. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority or
other person not yet obtained is required in connection with the execution
and delivery of the Transaction Documents by either of the AOR Parties or
the consummation by either of the AOR Parties of the transactions
contemplated thereby, except for (i) any filings and approvals required
under the rules and regulations of the Securities and Exchange Commission,
and
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filings and approvals required by the Blue Sky laws of the various states
and (ii) the approval by First Union National Bank of North Carolina of the
transactions contemplated by the Transaction Documents.
(d) Capitalization. The authorized capital stock of AOR consists of
(i) 60,000,000 shares of AOR Common Stock of which, as of March 24, 1997,
26,643,582 shares are issued and outstanding, and (ii) 1,000,000 shares of
Preferred Stock, $.01 par value per share, none of which is outstanding.
All of the issued and outstanding shares of AOR Common Stock are, and all
shares of AOR Common Stock to be issued pursuant to the transactions
described in Article II will be, validly issued, fully paid and non-
assessable.
(e) Financial Statements. AOR has furnished to the Physician Parties
AOR's audited financial statements for the year ended December 31, 1996,
consisting of a balance sheet, the related statement of income and changes
in stockholders' equity (the "AOR Audited Financial Statements"). The AOR
Audited Financial Statements (i) have been prepared in accordance with
GAAP, (ii) are true, complete and correct in all material respects as of
their date and for the period above stated and (iii) fairly present the
financial position of AOR at such date and the results of its operations
for the period ended on such date. Except as set forth on the Disclosure
Schedule, the AOR Audited Financial Statements reflects all of the
liabilities and obligations of AOR that are required to be reflected or
disclosed therein in accordance with GAAP.
(f) Litigation. There are no claims, actions, suits, proceedings
(arbitration or otherwise) or investigations pending or, to either of the
AOR Parties' knowledge, threatened against either of the AOR Parties at law
or in equity in any court or before or by any Governmental Authority, and,
to such AOR Parties' knowledge, there are no, and have not been any, facts,
conditions or incidents that may result in any such actions, suits,
proceedings (arbitration or otherwise) or investigations. Neither of the
AOR Parties is in default in respect of any judgment, order, writ,
injunction or decree of any court or other Governmental Authority.
(g) Registration Rights. AOR has not granted registration rights to
any member of a physician group managed by AOR or a subsidiary thereof
that, with respect to (i) the period during which registration rights may
be exercised and (ii) the percentage of shares of AOR Common Stock that are
registrable, are superior to the terms and provisions of the corresponding
limitations of the registration rights that are granted pursuant to Article
X hereto.
(h) Brokers. All negotiations relating to the Transaction Documents
and the transactions contemplated hereby have been carried on without the
intervention of any person acting on behalf of the AOR Parties in such
manner as to give rise to any valid claim for any broker's or finder's fee
or similar compensation.
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(i) Disclosure. No representation, warranty or statement made by any
of the AOR Parties in this Purchase Agreement or any of the exhibits or
schedules hereto, or any agreements, certificates, documents or instruments
delivered or to be delivered to the Physician Parties in accordance with
this Purchase Agreement or the other Transaction Documents contains or will
contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 Investment Representations and Covenants of Physicians.
(a) Each Physician understands that the Securities will not be
registered under the Securities Act or any state securities laws on the
grounds that the issuance of the Securities is exempt from registration
pursuant to Section 4(2) of the Securities Act or Regulation D promulgated
under the Securities Act and pursuant to similar provisions of applicable
state securities laws, and that the reliance of AOR on such exemptions is
predicated in part on the Physician's representations, warranties,
covenants and acknowledgments set forth in this Section.
(b) Except as disclosed on the Investment Representations Schedule
attached hereto, each Physician represents and warrants that such Physician
is an "accredited investor" as defined in Rule 501 promulgated under the
Securities Act.
(c) Each Physician represents and warrants that the Securities to be
acquired by such Physician upon consummation of the transactions described
in Article II hereof will be acquired by such Physician for such
Physician's own account, not as a nominee or agent, and without a view to
resale or other distribution within the meaning of the Securities Act and
the rules and regulations thereunder, except as contemplated in Article X
hereof, and that such Physician will not distribute any of the Securities
in violation of the Securities Act.
(d) Each Physician represents and warrants that the address set forth
below such Physician's name in the Investment Representations Schedule is
such Physician's principal residence.
(e) Each Physician (i) acknowledges that the Securities issued to such
Physician must be held indefinitely by such Physician unless subsequently
registered under the Securities Act or an exemption from registration is
available, (ii) is aware that any routine sales of Securities made pursuant
to Rule 144 under the Securities Act may be made only in limited amounts
and in accordance with the terms and conditions of that
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Rule and that in such cases where the Rule is not applicable, compliance
with some other registration exemption will be required, and (iii) is aware
that Rule 144 is not currently available for use by such Physician for
resale of any of the Securities to be acquired by such Physician upon
consummation of the transactions described in Article II hereof.
(f) Each Physician represents and warrants to AOR that such Physician
has such knowledge and experience in financial and business matters such
that such Physician is capable of evaluating the merits and risks of such
Physician's investment in any of the Securities to be acquired by such
Physician upon consummation of the transactions described in Article II
hereof.
(g) Each Physician confirms that such Physician has received and
reviewed (i) AOR's Annual Report for 1996 and (ii) AOR's Proxy Statement
for AOR's 1997 Annual Meeting of Stockholders. Each Physician also
confirms that AOR has made available to such Physician the opportunity to
ask questions of and receive answers from it concerning the terms and
conditions of such Physician's investment in the Securities, and the
Physician has received to such Physician's satisfaction, such additional
information, in addition to that set forth herein, about AOR's operations
and the terms and conditions of the offering as such Physician has
requested.
(h) In order to ensure compliance with the provisions of paragraph (c)
hereof, each Physician agrees that after the Closing such Physician will
not sell or otherwise transfer or dispose of Securities or any interest
therein (unless such shares have been registered under the Securities Act)
without first complying with either of the following conditions, the
expenses and costs of satisfaction of which shall be fully borne and paid
for by such Physician:
(i) AOR shall have received a written legal opinion from legal
counsel, which opinion and counsel shall be satisfactory to AOR in the
exercise of its reasonable judgment, or a copy of a "no-action" or
interpretive letter of the Securities and Exchange Commission
specifying the nature and circumstances of the proposed transfer and
indicating that the proposed transfer will not be in violation of any
of the registration provisions of the Securities Act and the rules and
regulations promulgated thereunder; or
(ii) AOR shall have received an opinion from its own counsel to
the effect that the proposed transfer will not be in violation of any
of the registration provisions of the Securities Act and the rules and
regulations promulgated thereunder.
Each Physician also agrees that the certificates or instruments representing the
Securities to be issued to such Physician pursuant to this Purchase Agreement
may contain a restrictive legend noting the restrictions on transfer described
in this Article and required by federal and applicable state securities laws,
and that appropriate "stop-transfer" instructions will be given to AOR's
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transfer agent, if any, provided that this paragraph (h) shall no longer be
applicable to any Securities following their transfer pursuant to a registration
statement effective under the Securities Act or in compliance with Rule 144 or
if the opinion of counsel referred to above is to the further effect that
transfer restrictions and the legend referred to herein are no longer required
in order to establish compliance with any provisions of the Securities Act.
Section 6.02 No Corporate Practice. No Physician Party has knowledge that
the actions, transactions or relationships arising from, and contemplated by the
Transaction Documents violate any law, rule or regulation relating to the
corporate practice of medicine. Each Physician Party accordingly agrees that
such Physician Party will not, in an attempt to void or nullify any Transaction
Document or any relationship involving any AOR Party or any Physician Party,
sue, claim, aver, allege or assert that any such Transaction Document or any
such relationship violates any law, rule or regulation relating to the corporate
practice of medicine; provided, however, such Physician Party is entitled to
make any such claim, averment, allegation or assertion if such Physician Party
reasonably believes, on advice from counsel, that failure to terminate such
Transaction Document or such relationship will subject such Physician Party to
material liability or will materially adversely affect such Physician Party's
right to practice medicine.
Section 6.03 Current Public Information. AOR shall use commercially
reasonable efforts to comply with the requirements of Rule 144 under the
Securities Act, as such Rule may be amended from time to time (or any similar
rule or regulation hereafter adopted by the SEC) regarding the availability of
current public information to the extent required to enable any holder of shares
of AOR Common Stock to sell such shares without registration under the
Securities Act pursuant to Rule 144 (or any similar rule or regulation). Upon
the request of any holder of the shares of AOR Common Stock issued pursuant to
this Purchase Agreement, AOR will deliver to such holder a written statement as
to whether AOR has complied with such requirements.
Section 6.04 Rule 144 Covenant. AOR believes that the holding period, as
determined by Rule 144(d)(3)(iii) enacted under the Securities Act of 1933, as
in effect on the Closing Date (the "Holding Period"), for any shares of AOR
Common Stock acquired by any Physician pursuant to Section 2.02(c) of this
Purchase Agreement should commence on the Closing Date. In the event that a
Physician elects to sell any of such shares pursuant to Rule 144 within sixty
days of receipt thereof and is unable to do so by reason of the Holding Period
being deemed to have commenced on a date later than the Closing Date (other than
by reason of a change in the law), then (i) such Physician shall promptly notify
AOR of such inability and provide AOR with the opportunity for five business
days after receipt of such notice (the "Assistance Period") to assist such
Physician in effecting the proposed sale and (ii) in the event that such
proposed sale is not effected within the Assistance Period, AOR shall redeem a
number of such shares of AOR Common Stock from such Physician up to a number
equal to the quotient determined by dividing such Physician's Tax Liability by
the value per share used to calculate such Tax Liability. For purposes of this
Section 6.04, a Physician's "Tax Liability" shall be determined by multiplying
the number of shares that are delivered to such Physician at a given time by the
Market Price
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on such date (or such lesser price as the Physician represents such Physician
intends to use for purposes of preparing his applicable income tax return), and
then multiplying such product by the highest stated federal and state income
rate applicable to individuals.
Section 6.05 Consents of Accountants. CTROP and the Physicians shall
cause Price Waterhouse LLP, independent accountants, to deliver in a timely
fashion to AOR all reports, opinions and consents required to be filed by Price
Waterhouse LLP in any SEC filing made by AOR.
Section 6.06 Access to Business Records. For a period of four (4) years
from and after the date of Closing, or for such longer period as may be required
by law, AOR shall retain and preserve the Business Records of the Physician
Parties acquired by AOR hereunder, and will give the Physician Parties, and
their counsel, accountants, consultants and other agents and representatives,
full and complete access, during reasonable business law and upon reasonable
request, to such records.
ARTICLE VII
NON-COMPETITION AND CONFIDENTIALITY COVENANTS
Section 7.01 Physician Non-Competition Covenant.
(a) The Physicians recognize that the covenants of each Physician
contained in this Section 7.01 are an essential part of this Purchase
Agreement and that, but for the agreement of each Physician to comply with
such covenants, the AOR Parties would not have entered into this Purchase
Agreement. Each Physician acknowledges and agrees that each Physician's
covenant not to compete is necessary to ensure the continuation of the
Business (as defined herein) and the reputation of the AOR Parties and that
irrevocable harm and damage will be done to the AOR Parties if any
Physician competes with either of them. Each Physician accordingly agrees
that for a period of five (5) years from and after the date hereof, such
Physician shall not:
(i) directly or indirectly, either as principal, agent,
independent contractor, consultant, director, officer, employee,
employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for such Physician's own
benefit or for the benefit of any other person or entity either
knowingly (A) hire, attempt to hire, contact or solicit with respect
to hiring any employee of AOR (or of any of its direct or indirect
subsidiaries) or (B) induce or otherwise counsel, advise or encourage
any employee of AOR (or of any of its direct or indirect subsidiaries)
to leave the employment of AOR;
(ii) act or serve, directly or indirectly, as a principal,
agent, independent contractor, consultant, director, officer,
employee, employer or
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advisor or in any other position or capacity with or for, or acquire a
direct or indirect ownership interest in or otherwise conduct (whether
as stockholder, partner, investor, joint venturer, or as owner of any
other type of interest), any Competing Business as such term is
defined herein; provided, however, that this clause (ii) shall not
prohibit such Physician from being the owner of up to 5% of any class
of outstanding securities or any company or entity if such class of
securities is publicly traded; or
(iii) directly or indirectly, either as principal, agent,
independent, contractor, consultant, director, officer, employee,
employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for such Physician's own
benefit or for the benefit of any other person or entity, call upon,
solicit, divert or take away, any customers or clients of the
Business.
(b) For the purposes of this Section 7.01, the following terms shall
have the meaning set forth below:
(i) "Business" shall mean management and administration of the
nonmedical aspects of oncology and hematology practices.
(ii) "Competing Business" shall mean an individual, business,
corporation, association, firm, undertaking, company, partnership,
joint venture, organization or other entity that either (A) conducts a
business substantially similar to the Business within the State of
Texas or (B) provides or sells a service which is the same or
substantially similar to, or otherwise competitive with the services
provided by the Business within the State of Texas; provided, however,
that "Competing Business" shall not include the Physician's internal
management and administration of such Physician's medical practice or
participation in the management and administration of a physician
group in which such Physician devotes a significant amount of time to
the practice of medicine.
(c) Should any portion of this Section 7.01 be deemed unenforceable
because of the scope, duration or territory encompassed by the undertakings
of such Physician hereunder, and only in such event, then such Physician
and AOR consent and agree to such limitation on scope, duration or
territory as may be finally adjudicated as enforceable by a court of
competent jurisdiction after the exhaustion of all appeals.
(d) This covenant shall be construed as an agreement ancillary to the
other provisions of this Purchase Agreement, and the existence of any claim
or cause of action of such Physician against an AOR Party, whether
predicated on this Purchase Agreement or otherwise, shall not constitute a
defense to the enforcement by AOR of this covenant. Without limiting other
possible remedies to AOR for breach of this covenant such Physician agrees
that injunctive or other equitable relief will be available to enforce the
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covenants of this provision, such relief to be without the necessity of
posting a bond, cash or otherwise. Such Physician further expressly
acknowledges that the damages that would result from a violation of his
non-competition covenant would at a minimum be not less than $250,000.
Such Physician shall pay to AOR in cash $250,000 within sixty (60) business
days after AOR notifies such Physician that such Physician has breached
this non-competition covenant as determined solely by AOR in the reasonable
exercise of its discretion. If such Physician fails to make payment as
contemplated by this Section, AOR shall be entitled to (i) cancel the
number of shares of AOR Common Stock held by such Physician or, with
respect to shares of AOR Common Stock entitled to be received by such
Physician, terminate its obligation to deliver such number of shares of AOR
Common Stock, valued at the Market Price per share, representing $250,000
or (ii) set off all or any of such $250,000 against amounts payable under
the Note held by such Physician, or each of the foregoing, but in no event
shall AOR be entitled to offset amounts in excess of $250,000 pursuant to
this Section 7.01. Such Physician agrees to deliver to AOR the
certificates representing any such shares canceled by AOR or any Note that,
as a result of the exercise of set-off rights, is paid in full.
(e) In the event that such Physician violates such Physician's non-
competition covenant set forth above, then, notwithstanding any provision
herein to the contrary, the time period specified above for which the non-
competition covenant is effective shall be extended day for day for the
time period that such Physician is in violation of any such covenant.
(f) Notwithstanding anything contained herein, this Section 7.01 shall
not be construed to (i) limit the freedom of any patient of any Physician
to choose the facility or physician from whom such patient shall receive
health-care services or (ii) limit or interfere with such Physician's
ability to exercise his professional medical judgment in treating his
patients or his ability or provide medical services to his patients.
Section 7.02 Physician Confidentiality Covenant. From the date hereof,
each Physician shall not, directly or indirectly, use for any purpose (other
than in connection with the performance of such Physician's duties under such
Physician's Employment Agreement with CTROP) or disclose to any third party, any
trade secret, supplier list, financial data, pricing or marketing policy or plan
or any other proprietary or confidential information that is the property of AOR
(or of any of its direct or indirect subsidiaries). Without limiting the other
possible remedies to AOR for the breach of this covenant, such Physician agrees
that injunctive or other equitable relief shall be available to enforce this
covenant, such relief to be without the necessity of posting a bond, cash or
otherwise. Such Physician further agrees that if any restriction contained in
this Section 7.02 is held by any court to be unenforceable or unreasonable, a
lesser restriction shall be enforced in its place and remaining restrictions
contained herein shall be enforced independently of each other. Such Physician
further acknowledges that the damages that would result from a violation of this
Section 7.02 would be at a minimum not less than $250,000. Such Physician shall
pay to AOR in cash $250,000 within sixty (60) business days after AOR notifies
such Physician that such Physician has breached this Section 7.02, as
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determined solely by AOR in the reasonable exercise of its discretion. If such
Physician fails to make payment as contemplated by this Section 7.02, AOR shall
be entitled to (i) cancel the number of shares of AOR Common Stock held by such
Physician or, with respect to shares of AOR Common Stock entitled to be received
by such Physician, terminate its obligation to deliver such number of shares of
AOR Common Stock, valued at the Market Price per share, representing $250,000 or
(ii) set off all or any of such $250,000 against amounts payable under the Note
held by such Physician, or each of the foregoing, but in no event shall AOR be
entitled to offset amounts in excess of $250,000 pursuant to this Section 7.02.
Such Physician agrees to deliver to AOR the certificates representing any such
shares canceled by AOR or any Note that, as a result of the exercise of set-off
rights, is paid in full.
ARTICLE VIII
CLOSING
Section 8.01 Documents to be Delivered by Physician Parties. At the
Closing, pursuant to this Purchase Agreement, the Physician Parties shall
deliver, or cause to be delivered, to AOR Management the following:
(a) Bills of sale, endorsements, assignments, drafts, checks or other
instruments, as to all Nonmedical Assets, and any other appropriate
instruments in such reasonable or customary form as shall be requested by
AOR Management and its counsel and reasonably satisfactory to TROG and its
counsel, including without limitation the TROG General Bill of Sale,
Conveyance, Transfer and Assignment and Agreement Regarding Assumption of
Liabilities covering all the Nonmedical Assets and the Assumed Obligations
substantially in the form attached hereto as Exhibit A;
(b) Bills of sale, endorsements, assignments, drafts, checks or other
instruments, as to all Nonmedical Assets, and any other appropriate
instruments in such reasonable or customary form as shall be requested by
AOR Management and its counsel and reasonably satisfactory to ACC and its
counsel, including without limitation the ACC General Bill of Sale,
Conveyance, Transfer and Assignment and Agreement Regarding Assumption of
Liabilities covering all the Nonmedical Assets and the Assumed Obligations
substantially in the form attached hereto as Exhibit B;
(c) Bills of sale, endorsements, assignments, drafts, checks or other
instruments, as to all Nonmedical Assets, and any other appropriate
instruments in such reasonable or customary form as shall be requested by
AOR Management and its counsel and reasonably satisfactory to ACC II and
its counsel, including without limitation the ACC II General Bill of Sale,
Conveyance, Transfer and Assignment and Agreement Regarding Assumption of
Liabilities covering all the Nonmedical Assets and the Assumed Obligations
substantially in the form attached hereto as Exhibit C; and
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(d) Evidence satisfactory to AOR management that all liens, claims,
pledges, security interests and other encumbrances on the Nonmedical Assets
have been released.
Section 8.02 Documents to be Delivered by AOR Parties. At the Closing,
pursuant to this Purchase Agreement, AOR or AOR Management, as the case may be,
shall deliver the following:
(a) Appropriate instruments of assumption, as to all Assumed
Obligations, and any other appropriate instruments in such reasonable or
customary form as shall be requested by TROG and its counsel and reasonably
satisfactory to AOR Management and its counsel, including without
limitation the TROG General Bill of Sale, Conveyance, Transfer and
Assignment and Agreement Regarding Assumption of Liabilities covering all
the Nonmedical Assets and Assumed Obligations substantially in the form
attached hereto as Exhibit A;
(b) Appropriate instruments of assumption, as to all Assumed
Obligations, and any other appropriate instruments in such reasonable or
customary form as shall be requested by ACC and its counsel and reasonably
satisfactory to AOR Management and its counsel, including without
limitation the ACC General Bill of Sale, Conveyance, Transfer and
Assignment and Agreement Regarding Assumption of Liabilities covering all
the Nonmedical Assets and Assumed Obligations substantially in the form
attached hereto as Exhibit B;
(c) Appropriate instruments of assumption, as to all Assumed
Obligations, and any other appropriate instruments in such reasonable or
customary form as shall be requested by ACC II and its counsel and
reasonably satisfactory to AOR Management and its counsel, including
without limitation the ACC II General Bill of Sale, Conveyance, Transfer
and Assignment and Agreement Regarding Assumption of Liabilities covering
all the Nonmedical Assets and Assumed Obligations substantially in the form
attached hereto as Exhibit C; and
(d) The Notes in the original principal amounts set forth in this
Purchase Agreement.
ARTICLE IX
INDEMNIFICATION
Section 9.01 Indemnification by the Physician Parties.
(a) Except as provided in Section 9.01(b) and subject to the
limitations set forth in Section 9.06, each of the Physician Parties,
jointly and severally, hereby agrees to indemnify, defend and hold the AOR
Parties, and their respective officers, directors, employees and
shareholders (collectively, "AOR Indemnified Persons") harmless from
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and against all demands, suits, claims, actions or causes of action,
assessments, losses, damages, liabilities, liens, settlements, penalties,
and forfeitures, and reasonable costs and expenses incident thereto
(including reasonable attorneys' fees) (collectively, the "Indemnity
Losses" and individually, an "Indemnity Loss"), asserted against or
suffered or incurred, directly or indirectly, by any of the AOR Indemnified
Persons and resulting from:
(i) any misrepresentation in or breach of the representations or
warranties of any of the Physician Parties or the failure of any of
the Physician Parties to perform any of their respective covenants or
obligations contained in this Purchase Agreement or in any exhibit,
schedule, certificate or other instrument or document furnished or to
be furnished by any of the Physician Parties pursuant to this Purchase
Agreement;
(ii) any and all obligations or liabilities of any of the
Physician Parties of any kind, description or character, direct or
indirect, absolute or contingent, known or unknown;
(iii) any tax liability arising out of, or by virtue of, or
based on any Physician Party;
(iv) any Environmental Claim (as hereinafter defined) arising
out of or based upon (i) operation of the properties covered by any of
the Real Property Leases on or prior to the Closing Date or (ii)
operation of the Practice on or prior to the Closing Date. For
purposes of this Purchase Agreement, the term "Environmental Claim"
means any liabilities, responsibilities, third party (including
private parties, governmental agencies and employees) actions,
lawsuits, claims or proceedings (whether they arise under common law
or statute or are recognized now or at a later time and regardless of
form, including strict liability and negligence) which relate to or
arise from or in connection with any Environmental Law or Hazardous
Wastes, including, but not limited to, any liability which relates to
or arises from or in connection with any investigation, remediation or
removal of any Hazardous Wastes.
(b) Notwithstanding the foregoing provisions of Section 9.01(a), the
Physician Parties shall not be obligated to jointly and severally
indemnify, defend or hold the AOR Indemnified Parties harmless from and
against any Indemnity Losses asserted against or suffered or incurred by
any of the AOR Indemnified Parties and resulting from any misrepresentation
in or breach of any representation of any Physician contained in Section
4.02 hereof or Section 6.01 hereof or from the failure of any Physician to
perform any of such Physician's covenants or obligations contained in
Sections 7.01 or 7.02 hereof. In each of these cases, each Physician shall
severally and not jointly indemnify, defend and hold the AOR Parties
harmless from and against all Indemnity Losses asserted against or suffered
or incurred by any of the AOR Indemnified Parties
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and resulting from any misrepresentation in or breach of such
representations of such Physician or from the failure of such Physician to
perform any of such covenants or obligations.
Section 9.02 Indemnification by the AOR Parties. Subject to the
limitations set forth in Section 9.06, the AOR Parties, jointly and severally,
hereby agree to indemnify, defend and hold the Physician Parties and their
respective officers, directors, employees, partners and shareholders
(collectively "Physician Indemnified Persons") harmless from and against any
Indemnity Loss asserted against or suffered or incurred by any of Physician
Indemnified Persons and resulting from:
(i) any misrepresentation in or breach of the representations and
warranties of any of the AOR Parties or the failure of any of the AOR
Parties to perform any of their respective covenants or obligations
contained in this Purchase Agreement or in any exhibit, schedule,
certificate or other instrument or document furnished or to be furnished by
any of the AOR Parties pursuant to this Purchase Agreement;
(ii) the use of any of the Nonmedical Assets after the Closing;
(iii) the Assumed Obligations;
(iv) any tax liability arising out of, or by virtue of, or based on
any AOR Party; or
(v) any Environmental Claim arising out of or based upon the operation
of the business of AOR on or prior to the Closing Date.
Section 9.03 Notice. If any person or entity has reason to believe that
he, she or it has suffered or incurred (or has a reasonable belief that he, she
or it will suffer or incur) any Indemnity Loss subject to indemnity hereunder,
such person or entity shall so notify the indemnifying party promptly in writing
describing such loss or expense, the amount thereof, if known, and the method of
computation of such Indemnity Loss, all with reasonable particularity. If the
nature of the Indemnity Loss set forth in the notice does not involve any third
party claim, and if the indemnifying party does not respond to the indemnified
party in writing contesting the existence of amount of any Indemnity Loss within
thirty (30) days after delivery of such notice, then such indemnifying party
shall be obligated to pay, and shall pay in accordance with Section 9.05, the
amount of the Indemnity Loss set forth in such notice to the indemnified party.
If any action at law, suit in equity, administrative action or arbitration or
mediation proceeding is instituted by or against a third party with respect to
which any person intends to claim any liability or expense as an Indemnity Loss
under this Article IX, such person shall promptly notify the indemnifying party
of such action. The failure to give or to timely give any notice required by
this Section 9.03 shall not relieve the party from whom indemnity is sought of
any of its obligations under this Article IX, except to the extent that such
failure results in actual prejudice to the indemnifying party.
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Section 9.04 Defense of Third-Party Claims.
(a) With respect to any action at law, suit in equity, administrative
action or arbitration or mediation proceeding that is instituted by or
against a third party with respect to which any person intends to claim any
liability or expense under this Article IX, the indemnifying party shall
have ten (10) business days after receipt of the notice with respect
thereto referred to in the first sentence of Section 9.03 to notify the
indemnified party that it elects to conduct and control any action, suit or
proceeding with respect to such claim. If the indemnifying party does not
give such notice, the indemnified person shall have the right to defend,
contest, settle or compromise such action, suit or proceeding in the
exercise of its exclusive discretion, and the indemnifying party shall,
upon request from the indemnified person, promptly pay the indemnified
person in accordance with the other terms and conditions of this Article IX
the amount of any Indemnity Loss subject to indemnity hereunder resulting
from its liability to the third party claimant. If the indemnifying party
gives such notice, it shall have the right to participate in, and, to the
extent that it shall desire, to undertake, conduct and control, through
counsel of its own choosing (which counsel shall be satisfactory to the
indemnified party in the reasonable judgment of the indemnified party and
shall not, except with the consent of the indemnified party, be counsel to
the indemnified party) and at its sole expense, the conduct and settlement
of such action, suit or proceeding, and the indemnified person shall
cooperate with the indemnifying party in connection therewith; provided,
however, that (i) the indemnifying party shall not thereby permit to exist
any lien, encumbrance or other adverse charge securing the claims
indemnified hereunder upon any asset of the indemnified person, (ii) the
indemnifying party shall not thereby consent to the imposition of any
injunction against the indemnified person without the written consent of
the indemnified person, (iii) the indemnifying party shall permit the
indemnified person to participate in such conduct or settlement through
counsel chosen by the indemnified person, but the fees and expenses of such
counsel shall be borne by the indemnified person except as provided below,
and (iv) upon a final determination of such action, suit or proceeding, the
indemnifying party shall promptly reimburse to the extent required under
this Article IX the indemnified person for the full amount of any Indemnity
Loss resulting from such action, suit or proceeding and all reasonable and
related expenses incurred by the indemnified person, other than fees and
expenses of counsel for the indemnified person incurred after the
assumption of the conduct and control of such action, suit or proceeding by
the indemnifying party (except as provided below); provided further,
however, that such fees and expenses of counsel for the indemnified party
shall be borne and paid on a current basis by the indemnifying party if (i)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (ii) the indemnified party has
reasonably concluded (based on the advice of counsel) that there may be
legal defenses available to it that are different from or in addition to
those available to the indemnifying party, (iii) a conflict or potential
conflict exists (based on advice of counsel to the indemnified party)
between such party and the indemnifying party in which case the
indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party, or
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(iv) the indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after giving notice of its
intent to assume such defense. So long as the indemnifying party is
contesting any such action in good faith, the indemnified person shall not
pay or settle any such action, suit or proceeding. Notwithstanding the
foregoing, the indemnified person shall have the right to pay or settle any
such action, suit or proceeding, provided that in such event the
indemnified person shall waive any right to indemnity therefor from the
indemnifying party and no amount in respect thereof shall be claimed as an
Indemnity Loss under this Article IX.
(b) If requested by the indemnifying party, the indemnified person
agrees to cooperate with the indemnifying party and its counsel in
contesting any claim which the indemnifying party elects to contest or, if
appropriate, in making any counterclaim against the person asserting the
claim, or any cross-complaint against any person asserting the claim, or
any cross-complaint against any person and further agrees to take such
other action as reasonably may be requested by an indemnifying party to
reduce or eliminate any loss or expense for which the indemnifying party
would have responsibility, but the indemnifying party will reimburse the
indemnified person for any expenses incurred by it in so cooperating or
acting at the request of the indemnifying party.
(c) The indemnified person agrees to afford the indemnifying party and
its counsel the opportunity to be present at, and to participate in,
conferences with all persons, including governmental authorities, asserting
any claim against the indemnified person or conferences with
representatives of or counsel for such persons.
Section 9.05 Payment of Losses. Except as specifically set forth in any
other section of this Purchase Agreement with respect to payment of losses,
which section shall govern payment of losses with respect to matters set forth
therein, the indemnifying party shall pay to the indemnified person in cash the
amount of any Indemnity Loss to which the indemnified person may become entitled
by reason of the provisions of this Agreement, such payment to be made within
sixty (60) business days after any such amount of losses is finally determined
either pursuant to mutual agreement of the Parties, pursuant to the second
sentence of Section 9.03, pursuant to the provisions of Section 9.04(a) or
pursuant to the dispute resolution provisions set forth in Article XI or
pursuant to a final, unappealable binding judgment of a court with jurisdiction.
If any of the Physicians is the indemnifying party and fails to make payment as
contemplated by this Section 9.05, AOR, at its election, shall be entitled to
(i) cancel the number of shares of the AOR Common Stock held by such
indemnifying party or, with respect to shares of AOR Common Stock entitled to be
received by such indemnifying party, terminate its obligation to deliver such
number of shares of AOR Common Stock, valued at the Market Price per share as of
the date payment was due under this Section 9.05, representing the amount equal
to or less than the amount of Indemnity Loss, or (ii) set off all or any amounts
payable under the Note held by such Physician, representing the amount equal to
or less than the amount of the Indemnity Loss, or each of the foregoing, but in
no event shall AOR be entitled to offset amounts in excess of the Indemnity Loss
pursuant to this Section 9.05. Such indemnifying party
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agrees to redeliver to AOR the certificates representing any such shares
canceled by AOR or any Note that, as a result of the exercise of set-off rights
is paid in full. If AOR or AOR Management is the indemnifying party and fails
to make payment as contemplated by this Section 9.05, CTROP, at its election,
shall be entitled to set off all or any amounts payable to AOR Management under
Section 6.1 of the Management Services Agreement.
Section 9.06 Limitations. Notwithstanding anything contained to the
contrary in this Purchase Agreement, a Party's right to recover any amounts
under the indemnification provisions of this Article IX shall be limited as
provided in this Section 9.06.
(a) All representations, warranties and indemnities made by the
Parties shall survive the Closing and shall thereafter terminate and expire
twenty-four (24) months after the Closing Date, except that
representations, warranties (Section 4.01(j)) and associated indemnities
with respect to tax matters, and representations, warranties (Section
4.01(m)) and associated indemnities with respect to environmental matters,
shall survive for a period equal to the statute of limitations applicable
to any claim arising from or attributable to such matters; provided,
however, that notwithstanding the foregoing, the rights and obligations
with respect to indemnification as provided in Article IX shall continue
with respect to any matter for which indemnification has been properly
sought pursuant to the terms and conditions of this Purchase Agreement
prior to the expiration of any such survival period.
(b) The Physician Parties' liabilities to AOR Indemnified Persons
pursuant to this Article IX shall be limited as follows: with respect to
any claim for indemnification under Section 9.01, no AOR Indemnified Person
shall be entitled to indemnification pursuant to Article IX until the AOR
Indemnified Parties in the aggregate have suffered or incurred Indemnity
Losses of $25,000, and each Physician Party's obligations under this
Article IX shall be limited to the amount set forth opposite such Physician
Party's name on the Disclosure Schedule; provided, however, that nothing
contained in this Section 9.06(b) shall be deemed to limit or impair an AOR
Party's right to seek injunction or other equitable relief for a
Physician's breach of any provision set forth in Article VII.
(c) The AOR Parties' liabilities to Physician Indemnified Persons
pursuant to this Article IX shall be limited as follows: with respect to
any claim for indemnification under Section 9.02, no Physician Indemnified
Person shall be entitled to indemnification pursuant to Article IX until
the Physician Indemnified Persons in the aggregate have suffered or
incurred Indemnity Losses of $25,000, and the AOR Parties' obligations in
the aggregate under this Article IX shall be limited to $9,291,666.
Section 9.07 EXTENT OF INDEMNIFICATION. WITHOUT LIMITING OR ENLARGING THE
SCOPE OF THE INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS SET FORTH
HEREIN, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF,
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REGARDLESS OF WHETHER THE INDEMNITY LOSS GIVING RISE TO SUCH INDEMNIFICATION
OBLIGATION IS THE RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF, OR VIOLATION OF ANY
LAW BY, SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS STATEMENT
CONSTITUTES A CONSPICUOUS LEGEND.
ARTICLE X
PIGGYBACK REGISTRATION RIGHTS
Section 10.01 Registration Rights. In the event that AOR proposes to file
a registration statement with the SEC on Form S-1, S-2 or S-3 or such other
comparable successor form as may be prescribed from time to time by the SEC (the
"Registration Statement") with respect to an underwritten public offering by AOR
of AOR Common Stock for cash, whether or not for AOR's own account, during the
period commencing on the date hereof and ending on the fifth anniversary of the
Closing Date, AOR shall give written notice of such proposed filing to the
Physicians at least fifteen (15) days before the anticipated filing date (in
which notice AOR shall use its best efforts to name the proposed managing
underwriters of such offering and the anticipated price range per share of AOR
Common Stock), and such notice shall offer each Physician the opportunity to
register such number of the Physician's shares of AOR Common Stock as such
Physician may request in writing within ten (10) days after receipt of such
notice; provided, however, that the maximum numbers of shares of AOR Common
Stock that such Physician may request to include shall be equal to the lesser of
(i) that fraction of his shares of AOR Common Stock which equals the maximum
fraction of shares of AOR Common Stock held by any person having piggyback
registration rights (other than AOR or the Physicians) that such other person is
permitted to request to include in such filing and (ii) 50% of such Physician's
shares of AOR Common Stock. Notwithstanding the foregoing, if the managing
underwriter of such offering advises AOR that the total numbers of shares of AOR
Common Stock which AOR, the Physicians and any other persons intend to include
in such offering would adversely affect the success of such offering, then the
amount of shares of AOR Common Stock to be offered for the account of the
Physicians shall be reduced to the extent necessary to reduce the total number
of shares of AOR Common Stock to be included in such offering to the amount
recommended by such managing underwriter; provided that if shares of AOR Common
Stock are being offered for the account of other persons as well as the
Physicians, such reduction shall not represent a greater fraction of the number
of shares of AOR Common Stock requested to be registered by the Physicians than
the fraction of similar reductions imposed on such other persons over the amount
of securities requested to be registered by such other persons. Nothing
contained herein shall require AOR to (a) reduce the amount of shares of AOR
Common Stock to be offered by AOR in such offering for any reason or (b) include
any shares of AOR Common Stock of any Physician in any public offering for which
a Registration Statement is or is proposed to be filed if such shares of AOR
Common Stock are, at the time of effectiveness of such Registration Statement,
eligible to be sold under paragraph (k) of Rule 144 under the Securities Act.
Nothing in this Article X shall create any liability on the part of AOR to such
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Physician if AOR for any reason should decide not to file a Registration
Statement or decide not to request that the Registration Statement be declared
effective or otherwise elect not to consummate the public offering contemplated
thereby. The rights hereunder are subject to the condition that Physicians
desiring to include shares of AOR Common Stock in the public offering agree to
timely execute and deliver the underwriting agreement to be executed and
delivered by AOR and the other sellers, if any, in connection with such public
offering.
Section 10.02 Covenants of AOR.
(a) AOR hereby covenants and agrees:
(i) To take such steps as may be necessary to comply with the
Blue Sky laws of such states as the managing underwriter may
reasonably request; provided that in no event shall AOR be obligated
to qualify to do business in any state where it is not so qualified or
to take any action which would subject it to unlimited service of
process in any state where it is not at such time so subject;
(ii) To use reasonable efforts to cause the Registration
Statement to become effective and to keep the Registration Statement
effective for such period as may be required under the terms of the
underwriting agreement relating thereto, to file such post-effective
amendments as may be necessary to keep any prospectus contained in
such Registration Statement true and complete during such period as
the Registration Statement shall be effective, and to furnish and file
such other amendments, supplements, and other documents the managing
underwriter may reasonably request;
(iii) To supply such numbers of prospectuses as may be
reasonably required by the managing underwriter or the Physician;
(iv) To pay the reasonable costs and expenses of the
Registration Statement incurred by AOR, including without limitation
all registration and Blue Sky filing fees, all fees and expenses of
AOR's counsel (but not the fees and expenses of counsel for such
Physician), all accounting costs (including costs associated with the
preparation of interim period financial statements) incurred by AOR,
NASD fees, printing costs, experts' fees and expenses incurred by AOR,
costs of post-effective amendments, and all other usual and customary
expenses in connection with the Registration Statement, except for
such Physician's pro rata share of underwriting discounts and selling
commissions (calculated in the manner set forth in this Article X);
(v) With respect to any Registration Statement filed pursuant to
this Article X, to cooperate with the underwriters to the best of its
abilities and to enter into an underwriting agreement with such
underwriters containing such
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representations, warranties, and covenants on the part of AOR as are
usual and customary in an underwritten public sale of common stock;
and
(vi) After the filing of the Registration Statement, to promptly
notify the Physician of any stop order issued or threatened by the
SEC, and to take all actions required to prevent the entry of such
stop order or remove it if entered.
(b) If, at the time AOR notifies a Physician pursuant to the first
sentence of Section 10.01, AOR is obligated to issue in the future
additional shares of AOR Common Stock to such Physician pursuant to Section
2.02(c) hereof, and if a Physician notifies AOR pursuant to the first
sentence of Section 10.01 that it desires to register the offer and sale of
such unissued shares of AOR Common Stock of which such Physician will be
the owner, then AOR shall be obligated to issue such number of shares of
AOR Common Stock (issuing such shares in the order they would otherwise be
issuable pursuant to Section 2.02(c)) to such Physician; provided, however,
that AOR is not obligated to issue such shares of AOR Common Stock if such
Physician is not otherwise entitled to register the offer and sale of such
shares pursuant to Section 10.01; and provided further, that prior to AOR's
issuance of such additional shares of AOR Common Stock, AOR, AOR
Management, the Escrow Agent and such Physician shall execute and deliver
the Escrow Agreement.
(c) If, subsequent to the Closing Date, AOR grants registration rights
to physicians in connection with AOR's or a wholly owned subsidiary's
management of such physicians' medical practice pursuant to a management
agreement or similar arrangement, and if the terms of such registration
rights relating to limitations with respect to (i) the period during which
registration rights may be exercised and (ii) the percentage of shares of
AOR Common Stock that are registrable are superior to the terms of the
registration rights relating to such limitations granted pursuant to this
Article X, then, without the taking of any additional action, such terms of
registration rights granted pursuant to this Article X shall be amended to
equal such terms of the subsequently granted registration rights.
Section 10.03 Covenants of the Physicians. Each Physician hereby
covenants and agrees:
(a) To cooperate with AOR in its compliance with all federal and state
securities laws, including without limitation providing such information
and signing such documents as are reasonably necessary to effect a
registration pursuant to this Purchase Agreement;
(b) To pay his pro rata portion (calculated on the basis of the ratio
of the aggregate offering price attributable to the shares of such
Physician being registered and sold in relation to the aggregate offering
price attributable to the total number of securities being registered and
sold, including securities being registered and sold by
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other selling stockholders) of the underwriting discounts and selling
commissions and to pay all the fees and disbursements of his counsel in
connection with such registration; and
(c) In addition to the transfer restrictions otherwise provided for
herein, unless otherwise so agreed to in writing by AOR, such Physician
will agree, whether or not such Physician has the right or elects to cause
the registration of his shares pursuant to this Article X, not to sell or
otherwise dispose of any shares of AOR Common Stock (other than the shares
covered by such registration, which may be sold in accordance with the plan
or plans of distribution described in the Registration Statement) owned by
such Physician for a period of the shorter of (i) the lock-up period
applicable to AOR, if any, or (ii) one hundred twenty (120) days following
the effective date of such Registration Statement. The maximum amount of
liability of any Physician under this Section 10.05 shall be limited to the
aggregate amount of all sale proceeds actually received by such Physician
upon the sale of such Physician's AOR Common Stock in connection with such
registration.
Section 10.04 Indemnification of Physicians. Whenever registration with
respect to any shares of a Physician's AOR Common Stock is effected under the
Securities Act pursuant hereto, AOR will indemnify and hold harmless such
Physician, each underwriter, the directors, officers, employees and agents of
each underwriter, and each person, if any, who controls each underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, liabilities, expenses and
damages (including any and all investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, liabilities, expenses or damages arise out of or
are based on any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any prospectus included in such
Registration Statement or any amendment or supplement to the Registration
Statement or any such prospectus or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading, provided that AOR will not be liable to
such Physician to the extent that such loss, claim, liability, expense or damage
is based on an untrue statement or omission made in reliance on and in
conformity with information furnished to AOR by such Physician, or by such
Physician through any attorney-in-fact, expressly for inclusion in the
Registration Statement or any prospectus included in such Registration
Statement.
Section 10.05 Indemnification of AOR. Whenever registration with respect
to any shares of a Physician's AOR Common Stock is effected under the Securities
Act pursuant hereto, such Physician will indemnify and hold harmless AOR, each
of AOR's directors, each of AOR's officers, each person who controls AOR within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, each underwriter, the directors, officers, employees and agents of each
underwriter, and each person, if any, who controls each underwriter within the
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meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, liabilities, expenses and damages
(including any and all investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they, or any of them, may
become subject under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, liabilities, expenses or damages arise out of or are based on
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any prospectus included in such Registration
Statement or any amendment or supplement to the Registration Statement or any
such prospectus or the omission or alleged omission to state in such document a
material fact required to be stated in it or necessary to make the statements in
it not misleading, provided that the Physician will not be liable except to the
extent that such loss, claim, liability, expense or damage arises from or is
based upon an untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information furnished to AOR
by the Physician, or by such Physician through any attorney-in-fact, expressly
for inclusion in the Registration Statement or any prospectus included in such
Registration Statement.
Section 10.06 Defense of Claim. Promptly after receipt by an indemnified
party of notice of the commencement of any action, the indemnified party shall
notify the indemnifying party in writing of the commencement thereof if a claim
in respect thereof is to be made against an indemnifying party under this
Article X, but the omission of such notice shall not relieve the indemnifying
party from liability which it may have to the indemnified party under this
Article X, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than under this Article X. In case any action is brought against the
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in, and to the
extent that it chooses, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party that it so chooses, the indemnifying party shall
not be liable for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof; provided however that
(i) if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim within twenty (20) days after receiving notice from the
indemnified party that the indemnified party believes the indemnifying party has
failed to diligently defend such claim, or (ii) if the indemnified party who is
a defendant in any action or proceeding which is also brought against the
indemnifying party reasonably shall have concluded that there are legal defenses
available to the indemnified party which are not available to the indemnifying
party, or (iii) if representation of both parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct, then
the indemnified party shall have the right to assume or continue its own defense
as set forth above and the indemnifying party shall reimburse each indemnified
party for the costs of such defense as provided in Sections 10.04 and 10.05. In
no event shall the indemnifying party be responsible for the fees of more than
one firm of counsel for all indemnified parties.
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Section 10.07 Transfer of Registration Rights. The rights to register AOR
Common Stock pursuant to this Article X may be assigned in connection with any
transfer or assignment by a Physician of AOR Common Stock provided that such
transfer may otherwise be effected in accordance with applicable securities
laws. No transfer or assignment will divest a Physician or any subsequent owner
of such rights and powers unless all AOR Common Stock owned by such Physician
are transferred or assigned.
ARTICLE XI
ARBITRATION
Section 11.01 Scope. Unless otherwise specifically provided in any other
Transaction Document, the parties hereto agree that any claim, controversy,
dispute or disagreement between or among any of the parties to any of the
Transaction Documents arising out of or relating to any Transaction Document
(other than claims involving any noncompetition or confidentiality covenant)
shall be governed exclusively by the terms and provisions of this Article XI;
provided, however, that the terms and provisions of this Article XI shall not
preclude any party hereto from seeking, or a court of competent jurisdiction
from granting, a temporary restraining order, temporary injunction or other
equitable relief for any breach of (i) any noncompetition or confidentiality
covenant in any Transaction Document or (ii) any duty, obligation, covenant,
representation or warranty, the breach of which may cause irreparable harm or
damage.
Section 11.02 Arbitrators. In the event any claim or claims for an
Indemnity Loss is brought by any of the AOR Parties or any of the Physician
Parties, or there is any other claim, controversy, dispute or disagreement among
any of the AOR Parties or the Physician Parties arising out of or relating to
any Transaction Document, and the parties are unable to resolve such claim,
controversy, dispute or disagreement within thirty (30) days after notice is
first delivered pursuant to Section 9.03, the Parties agree to select
arbitrators to hear and decide all such claims under this Article XI. If such
claim, controversy, dispute or disagreement is between any of the Physician
Parties, on the one hand, and any of the AOR Parties, on the other hand, then
such Physician Parties shall select one arbitrator, and the AOR Parties shall
select one arbitrator. If such claim, controversy, dispute or disagreement is
between any of the Physicians, on the one hand, and CTROP, on the other hand,
then the Physician shall select one arbitrator, and CTROP shall select one
arbitrator. The two arbitrators so chosen shall then select a third arbitrator
who is experienced in the matter or action that is subject to such arbitration.
If such matter or action involves health-care issues, then the third arbitrator
shall have such qualifications as would satisfy the requirements of the National
Health Lawyers Association Alternative Dispute Resolution Service. Each of the
arbitrators chosen shall be impartial and independent of all parties to the
Transaction Documents. If either of the parties fails to select an arbitrator
within twenty days after the end of such thirty-day period, or if the
arbitrators chosen fail to select a third arbitrator within twenty days, then
any party may in writing request the United States District Court for the
Western District of Texas senior in term of service to appoint the arbitrator or
arbitrators and, subject to this Article XI, such arbitrators shall hear all
arbitration matters arising under this Article XI and, in default of such
selection, may ask the American Arbitration Association.
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Section 11.03 Applicable Rules.
(a) Each arbitration hearing shall be held at a place in Austin, Texas
acceptable to a majority of the arbitrators. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association to the extent such rules do not conflict
with the terms hereof. The decision of a majority of the arbitrators shall
be reduced to writing and shall be binding on the parties. Judgment upon
the award(s) rendered by a majority of the arbitrators may be entered and
execution had in any court of competent jurisdiction or application may be
made to such court for a judicial acceptance of the award and an order of
enforcement. The charges and expenses of the arbitrators shall be shared
equally by the parties to the hearing.
(b) The arbitration shall commence within thirty (30) days after the
arbitrators are selected in accordance with the provisions of this Article
XI. In fulfilling their duties with respect to determining the amount of
an Indemnity Loss, the arbitrators may consider such matters as, in the
opinion of the arbitrators, are necessary or helpful to make a proper
valuation. The arbitrators may consult with and engage disinterested third
parties to advise the arbitrators. The arbitrators shall add any interest
factor reflecting the time value of money to the amount of any Indemnity
Loss and shall not award any punitive damages.
(c) If any of the arbitrators selected hereunder should die, resign or
be unable to perform his or her duties hereunder, the remaining arbitrators
or such senior judge (or such judge's successor) shall select a replacement
arbitrator. The procedure set forth in this Article XI for selecting the
arbitrators shall be followed from time to time as necessary.
(d) As to any determination of the amount of an Indemnity Loss, or as
to the resolution of any other claim, controversy, dispute or disagreement,
that under the terms hereof is made subject to arbitration, no lawsuit
based on such claimed Indemnity Loss or such resolution shall be instituted
by any of the AOR Parties or the Physician Parties, other than to compel
arbitration proceedings or enforce the award of the arbitrators.
(e) All privileges under Texas and federal law, including attorney-
client and work-product privileges, shall be preserved and protected to the
same extent that such privileges would be protected in a federal court
proceeding applying Texas law.
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ARTICLE XII
MISCELLANEOUS
Section 12.01 Taxes. The Physician Parties will pay all transfer taxes,
sales and other taxes and charges, if any, which may become payable in
connection with the transactions contemplated by the Transaction Documents.
Section 12.02 Remedies Not Exclusive. No remedy conferred by any of the
specific provisions of this Purchase Agreement or any other Transaction Document
is intended to be exclusive of any other remedy, and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by any party hereto shall not constitute a
waiver of the right to pursue other available remedies.
Section 12.03 Parties Bound. Except to the extent otherwise expressly
provided herein, this Purchase Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
Section 12.04 Notices. All notices, reports, records or other
communications that are required or permitted to be given to the parties under
this Purchase Agreement shall be sufficient in all respects if given in writing
and delivered in person, by telecopy, by overnight courier or by registered or
certified mail, postage prepaid, return receipt requested, to the receiving
party at the following address:
If to the AOR Parties, addressed to:
American Oncology Resources, Inc.
16825 Northchase Drive, Suite 1300
Houston, Texas 77060
Attention: R. Dale Ross
Telecopy: 713-873-7762
With copies to:
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002
Attention: Diana M. Hudson
Telecopy: 713-225-7047
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If to the Physician Parties, addressed to:
Central Texas Radiation Oncology Physicians, P.A.
1305 W. 34th Street, Suite 210
Austin, Texas 78705
Attention: President
With copies to:
Haynes & Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: Lewis Lefco, Esq.
Telecopy: 214-651-5940
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 12.04. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery or
refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
SECTION 12.05 CHOICE OF LAW. THIS PURCHASE AGREEMENT SHALL BE CONSTRUED,
INTERPRETED, AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS EXCEPT WITH RESPECT TO MATTERS OF LAW CONCERNING THE
INTERNAL AFFAIRS OF ANY CORPORATE OR PARTNERSHIP ENTITY WHICH IS A PARTY TO OR
THE SUBJECT OF THIS PURCHASE AGREEMENT, AND AS TO THOSE MATTERS THE LAW OF THE
STATE OF INCORPORATION OR ORGANIZATION OF THE RESPECTIVE ENTITY SHALL GOVERN.
THE PARTIES AGREE THAT IF A CONTROVERSY OR CLAIM BETWEEN OR AMONG THEM ARISES
OUT OF OR IN RELATION TO THIS PURCHASE AGREEMENT AND RESULTS IN LITIGATION, THE
COURTS OF TRAVIS COUNTY, TEXAS OR THE COURTS OF THE UNITED STATES OF AMERICA
LOCATED IN TRAVIS COUNTY, TEXAS SHALL HAVE JURISDICTION TO HEAR AND DECIDE SUCH
MATTER, AND THE PARTIES HEREBY SUBMIT TO JURISDICTION TO SUCH COURTS.
Section 12.06 Entire Agreement; Amendments and Waivers. This Purchase
Agreement, together with the other Transaction Documents and all Exhibits and
Schedules hereto and thereto, constitutes the entire agreement between the
parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof. No supplement, modification or waiver of this Purchase
Agreement shall be binding unless it shall be specifically designated to be a
supplement, modification or waiver of this Purchase Agreement and shall be
executed in writing by the Party to be bound thereby. No waiver of any of the
provisions of this Purchase Agreement shall be binding unless executed in
writing by the Party to be bound thereby. No waiver of any of the provisions of
this Purchase Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether
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or not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
Section 12.07 Confidentiality Agreements. The provisions of the
Confidentiality Agreements, and the provisions of the Letter of Intent between
AOR and the Physicians shall terminate and cease to be of any force or effect at
and upon the Closing.
Section 12.08 Reformation Clause. It is the intention of the parties
hereto to conform strictly to applicable laws regarding the practice and
regulation of medicine, whether such laws are now or hereafter in effect,
including the laws of the United States of America, the State of Texas or any
other applicable jurisdiction, and including any subsequent revisions to, or
judicial interpretations of, those laws, in each case to the extent they are
applicable to this Purchase Agreement (the "Applicable Laws"). Accordingly, if
the transfer of any Nonmedical Assets by TROG to AOR Management violates any
Applicable Law, then the parties hereto agree as follows: (a) the provisions of
this Section 12.08 shall govern and control; (b) if neither of the parties
hereto is materially economically disadvantaged, then any Nonmedical Asset, the
transfer of which violates any Applicable Law, shall be deemed to have never
been transferred to AOR Management; (c) if one or more of the parties hereto is
materially economically disadvantaged, then the parties hereto agree to
negotiate in good faith such changes to the structure and terms of the
transactions provided for in this Purchase Agreement as may be necessary to make
these transactions, as restructured, lawful under applicable laws and
regulations, without materially disadvantaging either party; (d) this Purchase
Agreement shall be deemed reformed; and (e) the parties to this Purchase
Agreement shall execute and deliver all documents or instruments necessary to
effect or evidence the provisions of this Section 12.08.
Section 12.09 Assignment. The Purchase Agreement may not be assigned by
operation of law or otherwise except that AOR shall have the right to assign
this Purchase Agreement, at any time, to any direct or indirect wholly owned
subsidiary of AOR. No such assignment shall relieve AOR of its obligations
hereunder.
Section 12.10 Attorneys' Fees. Except as otherwise specifically provided
herein, if any action or proceeding is brought by any party with respect to this
Purchase Agreement or the other Transaction Documents, or with respect to the
interpretation, enforcement or breach hereof, the prevailing party in such
action shall be entitled to an award of all reasonable costs of litigation or
arbitration, including, without limitation, attorneys' fees, to be paid by the
losing party, in such amounts as may be determined by the court having
jurisdiction of such action or proceeding or by the arbitrators deciding such
action or proceeding.
Section 12.11 Further Assurances. From time to time hereafter and without
further consideration, each of the parties hereto shall execute and deliver such
additional or further instruments of conveyance, assignment and transfer and
take such actions as any of the other parties hereto may reasonably request in
order to more effectively consummate the transactions contemplated by the
Transaction Documents or as shall be reasonably necessary or appropriate
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in connection with the carrying out of the parties' respective obligations
hereunder or the purposes of this Agreement.
Section 12.12 Announcements and Press Releases. Any press releases or any
other public announcements concerning this Purchase Agreement or the other
Transaction Documents shall be approved by both AOR and CTROP; provided,
however, that if any party reasonably believes that it has a legal obligation to
make a press release and the consent of the other party cannot be obtained, then
the release may be made without such approval.
Section 12.13 Antidilution.
(a) The existence of AOR's obligation to issue shares of AOR Common
Stock pursuant to Section 2.02(c) hereof shall not affect in any way the
right or power of AOR or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in AOR's
capital structure or its business, or any merger or consolidation of AOR,
or any issue of bonds, debentures, preferred or prior preference stock
ahead of, or affecting the AOR Common Stock, or the rights thereof, as the
dissolution or liquidation of AOR, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of similar character or otherwise.
(b) If AOR effects a subdivision or consolidation of shares of AOR
Common Stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares of AOR
Common Stock outstanding, without receiving compensation therefor in money,
services or property, then the number of shares of AOR Common Stock subject
to issuance pursuant to Section 2.02(c) hereunder shall be appropriately
adjusted in such a manner to entitle the Physicians to receive the same
total number and class of shares as it would have received had it received
shares of AOR Common Stock immediately prior to the event requiring the
readjustment. In the event of any capital reorganization or
reclassification of the capital stock of AOR, any consolidation or merger
of AOR with or into another corporation, or any sale, lease or disposition
of all or substantially all of the assets of AOR that is effected in such a
manner that holders of shares of AOR are entitled to receive additional
shares, other securities and/or property (including cash) with respect to
or in exchange for shares of AOR Common Stock, AOR shall, as a condition
precedent to such transaction, cause effective provision to be made so that
the Physicians shall thereafter have the right to receive the kind and
amount of additional shares, other securities and/or other property
receivable upon such event as it would have received had it received the
shares of AOR Common Stock immediately prior to the event.
Section 12.14 No Tax Representations. Each party acknowledges that it is
relying solely on its advisors to determine the tax consequences of the
transactions contemplated hereunder and that no representation or warranty has
been made by any party as to the tax consequences of such transactions.
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Section 12.15 No Rights as Stockholder. No Physician shall have any
rights as a stockholder with respect to any shares of AOR Common Stock until the
issuance of a stock certificate for such shares. Except as otherwise provided
in Section 12.13, no adjustment shall be made for dividends or distributions or
other rights for which the record date is prior to such date any such stock
certificate is issued.
Section 12.16 Multiple Counterparts. This Purchase Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
Section 12.17 Headings. The headings of the several Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Purchase Agreement.
Section 12.18 Severability. Each article, section, subsection and lesser
section of this Purchase Agreement constitutes a separate and distinct
undertaking, covenant or provision hereof. In the event that any provision of
this Purchase Agreement shall finally be determined to be unlawful, such
provision shall be deemed severed from this Purchase Agreement, but every other
provision of this Purchase Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties have caused this Purchase Agreement to be
duly executed as of April 25, 1997.
AMERICAN ONCOLOGY RESOURCES, INC.,
a Delaware corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP, a Texas
limited partnership
By: AOR Management Company of Texas, Inc.,
its General Partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
--------------------------------------------
SHANNON D. COX, M.D.
--------------------------------------------
JOHN H. WILBANKS, M.D.
--------------------------------------------
GEORGE R. BROWN, M.D.
--------------------------------------------
BRUCE M. TURNER, M.D.
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TEXAS RADIATION ONCOLOGY GROUP, LLP,
a Texas limited liability partnership
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.C.,
a Texas professional association
By:
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Name:
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Title:
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AUSTIN CANCER CENTER, LIMITED,
a Texas limited partnership
By: GP Austin Cancer Center, Inc., Its General
Partner
By:
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Name:
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Title:
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AUSTIN CANCER CENTER II, LIMITED,
a Texas limited partnership
By: GP Austin Cancer Center, Inc., Its General
Partner
By:
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Name:
----------------------------------
Title:
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48
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Certain information in this exhibit is subject to a request for
confidential treatment. In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended, such information has been omitted and filed
separately with the Securities and Exchange Commission. The location of omitted
information is indicated with an asterisk [*].
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
AMERICAN ONCOLOGY RESOURCES, INC.
A DELAWARE CORPORATION
AND
CENTRAL TEXAS ONCOLOGY ASSOCIATES, P.A.
A TEXAS PROFESSIONAL ASSOCIATION
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TABLE OF CONTENTS
Page No.
ARTICLE I. DEFINITIONS................................................... 2
Section 1.1 Adjusted Gross Revenue.................................... 2
Section 1.2 Adjustments............................................... 2
Section 1.3 Ancillary Revenue......................................... 2
Section 1.4 Base Management Fee....................................... 2
Section 1.5 Budget.................................................... 2
Section 1.6 Business Manager.......................................... 2
Section 1.7 Business Manager Consent.................................. 2
Section 1.8 Business Manager Expense.................................. 3
Section 1.9 Capitation/Case Rate Revenues............................. 3
Section 1.10 Confidential Information.................................. 3
Section 1.11 GAAP...................................................... 4
Section 1.12 Management Fee............................................ 4
Section 1.13 Management Services....................................... 4
Section 1.14 Management Services Agreement............................. 4
Section 1.15 Master Transaction Agreement.............................. 4
Section 1.16 Medical Services.......................................... 4
Section 1.17 New PA.................................................... 4
Section 1.18 New PA Account............................................ 4
Section 1.19 New PA Consent............................................ 4
Section 1.20 New PA Expense............................................ 5
Section 1.21 Office.................................................... 5
Section 1.22 Office Expense............................................ 5
Section 1.23 Performance Fee........................................... 6
Section 1.24 Physician................................................. 6
Section 1.25 Policy Board.............................................. 6
Section 1.26 Practice Territory........................................ 6
Section 1.27 Professional Services Revenues............................ 6
Section 1.28 Representatives........................................... 7
Section 1.29 State..................................................... 7
Section 1.30 Subcontractor Costs....................................... 7
Section 1.31 Term...................................................... 7
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER................ 7
Section 2.1 Appointment............................................... 7
Section 2.2 Authority................................................. 7
Section 2.3 Patient Referrals......................................... 7
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Section 2.4 Internal Management of New PA............................. 8
Section 2.5 Practice of Medicine...................................... 8
ARTICLE III. RESPONSIBILITIES OF THE POLICY BOARD........................ 8
Section 3.1 Formation and Operation of the Policy Board............... 8
Section 3.2 Duties and Responsibilities of the Policy Board........... 8
Section 3.3 Medical Decisions......................................... 9
Section 3.4 Formation of Texas Oncology Associates.................... 9
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER........... 10
Section 4.1 Office and Equipment...................................... 10
Section 4.2 Medical Supplies.......................................... 11
Section 4.3 Support Services.......................................... 11
Section 4.4 Quality Assurance, Risk Management, and Utilization Review 11
Section 4.5 Licenses and Permits...................................... 11
Section 4.6 Personnel................................................. 11
Section 4.7 Contract.................................................. 12
Section 4.8 Billing and Collection.................................... 12
Section 4.9 New PA Account............................................ 13
Section 4.10 Fiscal Matters............................................ 14
Section 4.11 Reports and Records....................................... 16
Section 4.12 Recruitment of New PA Physicians.......................... 17
Section 4.13 Confidential and Proprietary Information.................. 17
Section 4.14 Business Manager's Insurance.............................. 18
Section 4.15 No Warranty............................................... 18
Section 4.16 Noncompetition Covenant from Business Manager............. 18
ARTICLE V. COVENANTS AND RESPONSIBILITIES OF NEW PA...................... 18
Section 5.1 Organization and Operation................................ 18
Section 5.2 New PA Personnel.......................................... 19
Section 5.3 Professional Standards.................................... 19
Section 5.4 Medical Services.......................................... 20
Section 5.5 Code of Business Conduct.................................. 20
Section 5.6 Peer Review/Quality Assurance............................. 20
Section 5.7 New PA's Insurance........................................ 20
Section 5.8 Confidential and Proprietary Information.................. 21
Section 5.9 Noncompetition............................................ 21
Section 5.10 Name, Trademark........................................... 23
Section 5.11 Peer Review............................................... 23
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ARTICLE VI. FINANCIAL ARRANGEMENT........................................ 23
Section 6.1 Definitions............................................... 23
Section 6.2 Management Fee............................................ 23
Section 6.3 Adjustments............................................... 24
Section 6.4 Reasonable Value.......................................... 24
Section 6.5 Payment of Management Fee................................. 25
Section 6.6 Accounts Receivable....................................... 25
Section 6.7 Disputes Regarding Fees................................... 25
ARTICLE VII. TERM AND TERMINATION........................................ 26
Section 7.1 Initial and Renewal Term.................................. 26
Section 7.2 Termination............................................... 26
Section 7.3 Effects of Termination.................................... 27
Section 7.4 Repurchase Obligation..................................... 28
Section 7.5 Repurchase Option......................................... 29
Section 7.6 Closing of Repurchase..................................... 29
ARTICLE VIII. MISCELLANEOUS.............................................. 30
Section 8.1 Administrative Services Only.............................. 30
Section 8.2 Status of Contractor...................................... 30
Section 8.3 Notices................................................... 30
Section 8.4 Governing Law............................................. 31
Section 8.5 Assignment................................................ 31
Section 8.5A PRN Assignment............................................ 32
Section 8.6 Arbitration............................................... 33
Section 8.7 Waiver of Breach.......................................... 33
Section 8.8 Enforcement............................................... 33
Section 8.9 Gender and Number......................................... 33
Section 8.10 Additional Assurances..................................... 33
Section 8.11 Consents, Approvals, and Exercise of Discretion........... 33
Section 8.12 Force Majeure............................................. 34
Section 8.13 Severability.............................................. 34
Section 8.14 Divisions and Headings.................................... 34
Section 8.15 Amendments and Management Services Agreement Execution.... 34
Section 8.16 Entire Management Services Agreement...................... 34
EXHIBIT 4.8 POWER OF ATTORNEY
EXHIBIT 5.1 EMPLOYMENT AGREEMENT (SHAREHOLDERS)
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EXHIBIT 5.1A LIST OF SHAREHOLDERS
EXHIBIT 5.1B BUY-SELL AGREEMENT
EXHIBIT 5.2(a) EMPLOYMENT AGREEMENT (NONSHAREHOLDERS)
EXHIBIT 5.5 CODE OF BUSINESS CONDUCT
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MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made and entered into effective as of
September 1, 1996, by and between American Oncology Resources, Inc., a Delaware
corporation ("Business Manager"), and Central Texas Oncology Associates, P.A., a
Texas professional association ("New PA").
RECITALS
This Management Services Agreement is made with reference to the following
facts:
A. New PA is a validly existing Texas professional association, formed
for and engaged in the conduct of a medical practice and the provision of
medical services to the general public in and around the Austin, Texas
metropolitan areas through individual physicians who are licensed to practice
medicine in the State of Texas and who are employed or otherwise retained by New
PA.
B. Business Manager is a validly existing Delaware corporation which is
in the business of managing medical practices.
C. New PA desires to focus its energies, expertise and time on the
practice of medicine and on the delivery of medical services to patients, and to
accomplish this goal it desires to delegate the increasingly more complex
business functions of its medical practice to persons with business expertise.
D. New PA wishes to engage Business Manager to provide such management,
administrative and business services as are necessary and appropriate for the
day-to-day administration of the nonmedical aspects of New PA's medical practice
in the Practice Territory (as defined below), and Business Manager desires to
provide such services all upon the terms and conditions hereinafter set forth.
E. New PA and Business Manager have determined a fair market value for
the services to be rendered by Business Manager, and based on this fair market
value, have developed a formula for compensation for Business Manager that will
allow the parties to establish a relationship permitting each party to devote
its skills and expertise to the appropriate responsibilities and functions.
F. Business Manager is willing to commit significant resources to New PA
based upon the representations and warranties of New PA that the current
shareholders of New PA will continue
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to practice medicine for New PA in the Practice Territory for five (5) years
from the effective date of this Management Services Agreement.
G. For accounting purposes, it is expressly recognized that for the
purpose of assessing Business Manager's performance of its management,
consulting, supervisory and other obligations under this Agreement and
determining Business Manager's compensation therefor, all Office Expenses,
whether such expenses are paid or incurred by New PA or Business Manager as
defined herein, shall be considered costs of the Business Manager due to
Business Manager's care, custody, and control over such expenses with respect to
its management, supervisory, and related responsibilities, all as required by
law and regulation.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions
hereinabove and hereinafter set forth, the parties agree as follows:
ARTICLE I. DEFINITIONS
For the purposes of this Management Services Agreement, the following terms
shall have the following meanings ascribed thereto, unless otherwise clearly
required by the context in which such term is used.
Section 1.1 Adjusted Gross Revenue. The term "Adjusted Gross Revenue"
shall mean the sum of Professional Services Revenue and Ancillary Revenue.
Section 1.2 Adjustments. The term "Adjustments" shall mean any
adjustments on an accrual basis for uncollectible accounts, Medicare, Medicaid
and other payor contractual adjustments, discounts, workers' compensation
adjustments, professional courtesies, and other reductions in collectible
revenue that result from activities that do not result in collectible charges.
Section 1.3 Ancillary Revenue. The term "Ancillary Revenue" shall mean
all other revenue actually recorded each month (net of Adjustments) that is not
Professional Services Revenues or Subcontractor Capitation Revenues, and shall
include (a) any amounts received by New PA as liquidated damages under Section
4.2 or Section 4.3 of any Physician's employment agreement and (b) any amounts
paid to New PA under any Physician's Notes (as defined in the Master Transaction
Agreement) that have been assigned or have been deemed to have been assigned to
New PA under the terms of Section 2.02(b) of the Purchase Agreement.
Section 1.4 Base Management Fee. The term "Base Management Fee" shall
mean the amount set forth in Section 6.1.
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Section 1.5 Budget. The term "Budget" shall mean an operating budget
and capital expenditure budget for each fiscal year as prepared by Business
Manager and adopted by New PA.
Section 1.6 Business Manager. The term "Business Manager" shall mean
American Oncology Resources, Inc., a Delaware corporation or any entity that
succeeds to the interests of American Oncology Resources, Inc., a Delaware
corporation and to whom the obligations of Business Manager are assigned and
transferred.
Section 1.7 Business Manager Consent. The term "Business Manager
Consent" shall mean the consent granted by Business Manager's representatives
(or either representative) to the Policy Board created pursuant to Article III
herein. When any provision of this Management Services Agreement requires
Business Manager Consent, Business Manager Consent shall not be unreasonably
withheld and shall be binding on Business Manager.
Section 1.8 Business Manager Expense. The term "Business Manager
Expense" shall mean an expense or cost incurred by the Business Manager and for
which the Business Manager, and not New PA, is financially liable. Business
Manager Expense shall specifically include the costs of American Oncology
Resources, Inc. ("AOR") corporate personnel and the travel costs of such
corporate personnel.
Section 1.9 Capitation/Case Rate Revenues. The term "Capitation/Case
Rate Revenues" shall mean all revenues from managed care organizations, third
party payors, or employers where such payment is made based on a per member,
case rate, or other similar basis (i.e., all payments which are not made based
on a fee for service reimbursement methodology) for the partial or total medical
needs of a subscribing patient. Capitation/Case Rate Revenues shall include any
associated plan payments received such as patient co-payments, incentive
bonuses, or incentive fund penalties. All Capitation/Case Rate Revenues shall be
allocated in good faith on an actuarial basis as follows:
(a) Professional Services Capitation: the portion or payments designated
for physician services currently performed by New PA (e.g., office and hospital
visits, chemotherapy administration, pharmaceuticals, laboratory, radiation,
etc.). Professional Services Capitation shall be Professional Services
Revenues; and
(b) Subcontractor Capitation Revenues: the portion of payments designated
for physician or other medical services that will be Subcontractor Costs (e.g.,
reinsurance, hospitalization, surgical procedures, stem cell harvesting,
radiation therapy, etc.), including incentive bonuses or penalties, will first
be allocated to cover subcontractor services, including an estimate for incurred
but not reported claims. Subcontractor Capitation Revenues shall not be
Professional Services Revenues, but shall be revenues of New PA.
The final allocation methodology is subject to approval by the Policy Board or
Joint Policy Board.
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Section 1.10 Confidential Information. The term "Confidential
Information" shall mean any information of Business Manager or New PA, as
appropriate (whether written or oral), including all notes, studies, patient
lists, information, forms, business or management methods, marketing data, fee
schedules, or trade secrets of the Business Manager or of New PA, as applicable,
whether or not such Confidential Information is disclosed or otherwise made
available to one party by the other party pursuant to this Management Services
Agreement. Confidential Information shall also include the terms and provisions
of this Management Services Agreement and any transaction or document executed
by the parties pursuant to this Management Services Agreement. Confidential
Information does not include any information that (i) is or becomes generally
available to and known by the public (other than as a result of an unpermitted
disclosure directly or indirectly by the receiving party or its affiliates,
advisors, or Representatives); (ii) is or becomes available to the receiving
party on a nonconfidential basis from a source other than the furnishing party
or its affiliates, advisors, or Representatives, provided that such source is
not and was not bound by a confidentiality agreement with or other obligation of
secrecy to the furnishing party of which the receiving party has knowledge at
the time of such disclosure; or (iii) has already been or is hereafter
independently acquired or developed by the receiving party without violating any
confidentiality agreement with or other obligation of secrecy to the furnishing
party.
Section 1.11 GAAP. The term "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 the determination. For purposes of this Management Services Agreement, GAAP
shall be applied on an accrual basis in a manner consistent with the historic
practices of the person to which the term applies.
Section 1.12 Management Fee. The term "Management Fee" shall mean
Business Manager's compensation established as described in Article VI hereof.
Section 1.13 Management Services. The term "Management Services" shall
mean the business, administrative, and management services to be provided for
New PA, including without limitation the provision of equipment, supplies,
support services, nonmedical personnel, office space, management,
administration, financial recordkeeping and reporting, and other business office
services.
Section 1.14 Management Services Agreement. The term "Management
Services Agreement" shall mean this Management Services Agreement by and between
New PA and Business Manager and any amendments hereto as may be adopted as
provided in this Management Services Agreement.
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Section 1.15 Master Transaction Agreement. The term "Master Transaction
Agreement" shall mean the agreement effective as of September 1, 1996, by and
between American Oncology Resources, Inc. ("AOR"), AOR of Texas Management
Limited Partnership, Central Texas Diagnostic Center, a professional
association, New PA, and John D. Doty, M.D., Richard E. Helmer, M.D., Brenda L.
Towell, M.D., Dennis A. Tweedy, M.D., J. Dudley Youman, M.D., Robert O. Kerr,
M.D., Demetrius F. Loukas, M.D., Thomas B. Tucker, M.D., John J. Whitaker, M.D,
Gregory B. Smith, M.D., Ellen B. Smith, M.D., and Mark A. Crozier, M.D.
Section 1.16 Medical Services. The term "Medical Services" shall mean
medical care and services, including but not limited to the practice of
hematology and oncology and all related health care services provided by New PA
through New PA's Physicians and other health care providers that are retained by
or professionally affiliated with New PA.
Section 1.17 New PA. The term "New PA" shall mean Central Texas Oncology
Associates, P.A., a Texas professional association.
Section 1.18 New PA Account. The term "New PA Account" shall mean the
bank account of New PA established as described in Sections 4.8 and 4.9.
Section 1.19 New PA Consent. The term "New PA Consent" shall mean the
consent granted by New PA's representatives (or either representative) to the
Policy Board created pursuant to Article III herein. When any provision of this
Management Services Agreement requires New PA Consent, New PA Consent shall not
be unreasonably withheld and shall be binding on New PA.
Section 1.20 New PA Expense. The term "New PA Expense" shall mean an
expense incurred by the Business Manager or New PA and for which New PA, and not
the Business Manager, is financially liable. New PA Expense shall include such
items as salaries for Physicians, physician assistants, and other physician
"extenders," benefits, and other direct costs (including professional dues,
subscriptions, continuing medical education expenses, and travel costs for
continuing medical education or other business travel but excluding business
travel requested by Business Manager which shall be an Office Expense). In the
event New PA incurs consulting, accounting or legal fees without coordinating
such engagement through Business Manager, all fees and expenses so incurred
shall be New PA Expenses.
Section 1.21 Office. The term "Office" shall mean any office space,
clinic, facility, including satellite facilities, that Business Manager shall
own or lease or otherwise procure for the exclusive use of New PA.
Section 1.22 Office Expense. The term "Office Expense" shall mean all
operating and non-operating expenses incurred by the Business Manager or New PA
in the provision of services to New PA. Office Expense shall not include any
State or federal income tax, any Medical Assets (as defined in the Master
Transaction Agreement), any payment by AOR on the Note (as defined in
5
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Article I of the Master Transaction Agreement), or any other expense that is a
New PA Expense or a Business Manager Expense. Without limitation, Office Expense
shall include:
(a) the salaries, benefits, and other direct costs of all employees of
Business Manager at the Office and the salaries, benefits, and other direct
costs of the nonphysician employees of New PA (including those of any Business
Manager managed care/payor contracting developer or New PA's pro rata share of
such costs if such developer's services are not dedicated solely to New PA but
is otherwise approved as an Office Expense in the Budget) but not the salaries,
benefits, or other direct costs of the Physicians (which are New PA Expenses
pursuant to Section 1.20 above);
(b) the direct cost of any employee or consultant that provides services at
or in connection with the Office for improved clinic performance, such as
management, billing and collections, business office consultation, accounting
and legal services, but only when such services are coordinated by Business
Manager;
(c) reasonable recruitment costs and out-of-pocket expenses of Business
Manager or New PA associated with the recruitment of additional physician
employees of New PA;
(d) malpractice insurance expenses for Physicians, Business Manager
employees, and nonphysician employees; comprehensive and general liability and
vicarious liability insurance covering the Office and employees of New PA and
Business Manager at the Office; and key person life and disability insurance on
any shareholder or physician employee of New PA in amounts, if any, as
determined reasonable and sufficient by Business Manager; proceeds from which
shall not be Professional Services Revenues but shall be revenues of New PA.
(e) the expense of using, leasing, purchasing or otherwise procuring the
Office and related equipment, including depreciation but not including monies
paid by third parties;
(f) the cost of capital (whether as actual interest on indebtedness
incurred on behalf of New PA or as reasonable imputed interest on capital
advanced by Business Manager) to finance or refinance obligations of New PA,
purchase medical or nonmedical equipment, or finance new ventures of New PA;
(g) the Base Management Fee;
(h) direct costs related to obtaining and maintaining Capitation/Case Rate
Revenues contracts for professional medical services or health care service
contracts with medical or health care providers not associated with New PA;
(i) the reasonable travel expenses (except for the corporate staff of AOR)
associated with attending meetings, conferences, or seminars to benefit New PA;
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(j) the cost of medical supplies (including but not limited to drugs,
pharmaceuticals, products, substances, items, or medical devices), office
supplies, inventory, and utilities other than those medical supplies or medical
inventory owned by New PA on the date of this Management Services Agreement; and
(k) any state sales tax, assessed on those certain enumerated services in
Article IV that have been determined to be taxable services by the state.
Section 1.23 Performance Fee. The term "Performance Fee" shall mean the
amount payable to the Business Manager, if any, determined under Section 6.2, as
a Management Fee based upon the Business Manager assisting New PA to achieve
certain pre-determined performance criteria.
Section 1.24 Physician. The term "Physician" shall mean each
individually licensed professional who is employed or otherwise retained by or
associated with New PA, each of whom shall meet at all times the qualifications
described in Section 5.2 and Section 5.3.
Section 1.25 Policy Board. The term "Policy Board" shall refer to the
body responsible for developing and implementing management and administrative
policies for the overall operation of New PA's facilities. If New PA becomes a
partner in Texas Oncology Associates, the term "Policy Board" may, as
applicable, instead refer to the Joint Policy Board formed pursuant to the
Affiliation Agreement (as defined by the Master Transaction Agreement).
Section 1.26 Practice Territory. The term "Practice Territory" shall
mean the geographic area within a radius of thirty (30) miles of any current or
future facility from which New PA provides Medical Services in Texas,
representing the geographic boundaries of the medical practice conducted by New
PA.
Section 1.27 Professional Services Revenues. The term "Professional
Services Revenues" shall mean the sum of (i) all professional fees actually
recorded each month on an accrual basis under GAAP (net of Adjustments) as a
result of professional medical services and related health care services
rendered by the Physicians whether rendered in an outpatient or inpatient
setting, and (ii) Professional Services Capitation allocated to Professional
Services Revenues. Professional Services Revenues shall not include those
monies specifically excluded from Professional Fees pursuant to Section 1.2 of
the separate Physician Employment Agreement executed by Physicians, liquidated
damages and applicable insurance proceeds.
Section 1.28 Representatives. The term "Representatives" shall mean a
party's officers, directors, employees, or other agents or representatives.
Section 1.29 State. The term "State" shall mean the State of Texas.
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Section 1.30 Subcontractor Costs. The term "Subcontractor Costs" shall
mean the amounts due third parties for providing medical services pursuant to
Capitation/Case Rate Revenues.
Section 1.31 Term. The term "Term" shall mean the initial and any
renewal periods of duration of this Management Services Agreement as described
in Section 7.1.
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
Section 2.1 Appointment. New PA hereby appoints Business Manager as its
sole and exclusive agent for the management, and administration of the business
functions and business affairs of New PA, and Business Manager hereby accepts
such appointment, subject at all times to the provisions of this Management
Services Agreement.
Section 2.2 Authority. Consistent with the provisions of this
Management Services Agreement, Business Manager shall have the responsibility
and commensurate authority to provide Management Services for New PA. Subject
to the terms and conditions of this Management Services Agreement, Business
Manager is hereby expressly authorized to provide the Management Services in any
reasonable manner Business Manager deems appropriate to meet the day-to-day
requirements of the business functions of New PA. Business Manager is also
expressly authorized to negotiate and execute on behalf of New PA contracts that
do not relate to the provision of Medical Services, provided that such contracts
shall be consistent with the Budget. New PA shall give Business Manager thirty
(30) days prior notice of New PA's intent to execute any agreement obligating
New PA to perform Medical Services or otherwise creating a binding legal
obligation on New PA. Unless an expense is expressly designated as a Business
Manager Expense in this Management Services Agreement, all expenses incurred by
Business Manager in providing services pursuant to this Management Services
Agreement shall be an Office Expense. The parties acknowledge and agree that
New PA, through its Physicians, shall be responsible for and shall have complete
authority, responsibility, supervision, and control over the provision of all
Medical Services and other professional health care services performed for
patients, and that all diagnoses, treatments, procedures, and other professional
health care services shall be provided and performed exclusively by or under the
supervision of Physicians as such Physicians, in their sole discretion, deem
appropriate. Business Manager shall have and exercise absolutely no control or
supervision over the provision of Medical Services.
Section 2.3 Patient Referrals. Business Manager and New PA agree that
the benefits to New PA hereunder do not require, are not payment for, and are
not in any way contingent upon the referral, admission, or any other arrangement
for the provision of any item or service offered by Business Manager to patients
of New PA in any facility, laboratory, infusion center, or health care operation
controlled, managed, or operated by Business Manager.
Section 2.4 Internal Management of New PA. Matters involving the
internal management, control, or finances of New PA, including specifically the
allocation of professional
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income among the shareholders and Physician employees of New PA, tax planning,
and investment planning, shall remain the responsibility of New PA and the
shareholders of New PA.
Section 2.5 Practice of Medicine. The parties acknowledge that Business
Manager is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of medicine. To the extent any
act or service herein required by Business Manager should be construed by a
court of competent jurisdiction or by the Texas State Board of Medical Examiners
constitute the practice of medicine, the requirement to perform that act or
service by Business Manager shall be deemed waived and unenforceable.
ARTICLE III RESPONSIBILITIES OF THE POLICY BOARD
Section 3.1 Formation and Operation of the Policy Board. The parties
hereby establish a Policy Board which shall be responsible for developing and
implementing management and administrative policies for the overall operation of
New PA's facilities. The Policy Board shall consist of six (6) members.
Business Manager shall designate, in its sole discretion, two (2) members of the
Policy Board. The members of New PA Executive Committee shall be the four (4)
New PA members of the Policy Board. The Policy Board members selected by New PA
shall be full-time physician employees of New PA practicing in the Practice
Territory. Each party's representatives to the Policy Board shall have the
authority to make decisions on behalf of the respective party. Except as may
otherwise be provided, the number of total votes the members shall be authorized
to cast shall be equal as between Business Manager and New PA and a majority
vote of the members of the Policy Board shall be the act of the Policy Board.
Section 3.2 Duties and Responsibilities of the Policy Board. The Policy
Board, except as otherwise limited by Section 3.3, shall have the following
duties, obligations, and authority:
(a) Capital Improvements and Expansion. Any renovation and expansion plans
and capital equipment expenditures with respect to New PA's facilities shall be
reviewed and approved by the Policy Board and shall be based upon economic
feasibility, physician support, productivity and then current market conditions.
(b) Marketing and Advertising. All marketing and other advertising of the
services performed at New PA's facilities shall be subject to the prior review
and approval of the Policy Board.
(c) Patient Fees; Collection Policies. As a part of the annual operating
budget, in consultation with New PA and Business Manager, the Policy Board shall
review and approve the fee schedule and collection policies for all physician
and ancillary services rendered by New PA.
(d) Ancillary Services. The Policy Board shall approve New PA-provided
ancillary services based upon the pricing, access to and quality of such
services.
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(e) Provider and Payor Relationships. Decisions regarding the
establishment or maintenance of relationships with institutional health care
providers and third party payors shall be approved by the Policy Board in
consultation with New PA. The Policy Board shall review and approve discounted
fee schedules, including capitated fee arrangements, and shall allocate
Capitation/Case Rate Revenues.
(f) Strategic Planning. The Policy Board shall develop long-term strategic
planning objectives.
(g) Capital Expenditures. The Policy Board shall determine the priority of
major capital expenditures.
(h) Physician Hiring. The Policy Board shall recommend to New PA and
confirm or approve New PA's decisions regarding the number and type of
physicians required for the efficient operation of New PA's facilities. The
Policy Board shall review and approve any variations to the restrictive
covenants in any physician employment contract.
(i) Fee Dispute Resolution. Upon submission by New PA of a dispute
concerning a set-off or reduction in Management Fees, the Policy Board shall
consider, develop, and implement a resolution to New PA and Business Manager.
(j) Grievance Referrals. The Policy Board shall consider and make
recommendations to New PA regarding grievances pertaining to matters not
specifically addressed in this Management Services Agreement as referred to it
by New PA's Board of Directors.
Section 3.3 Medical Decisions. Despite the above listing of activities
and areas of interest, all medical decisions will be made solely by physicians,
but nonphysician members of the Policy Board may participate in the discussion
process. The physician members of the Policy Board shall review and resolve
issues relating to:
(a) Types and levels of Medical Services to be provided;
(b) Recruitment of physicians to New PA, including the specific
qualifications and specialties of recruited physicians;
(c) Acquisition of or merger with any other medical practices in the
Practice Territory;
(d) Fee schedules; and
(e) Any other function or decision that the parties agree is medical
related.
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The Policy Board meetings shall be held as mutually agreed, but at least
quarterly, in Texas. Meetings shall be open to any shareholder in New PA.
Section 3.4 Formation of Texas Oncology Associates. If New PA becomes a
partner in Texas Oncology Associates ("Global P") pursuant to Section 2.05 of
the Master Transaction Agreement, the Policy Board shall delegate to the Joint
Policy Board (created pursuant to the Affiliation Agreement as defined in the
Master Transaction Agreement) decision-making authority for those matters
specifically described in the Affiliation Agreement. It is intended that the
Joint Policy Board assume responsibility for only those matters that are
specified in the Affiliation Agreement which have an effect on two or more
parties to the Affiliation Agreement. However, it is intended that
notwithstanding the formation of the Joint Policy Board, the Policy Board shall
continue in effect with its same rights, obligations and duties subject only to
the rights of the Joint Policy Board as described in this Section 3.4. In
addition, New PA agrees that it shall fully cooperate with Business Manager to
obtain a provider number for Global P, that it shall cease to use its provider
number when Global P obtains a provider number, and that it shall begin to use
the provider number of Global P.
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall serve generally in a supervisory
capacity in order to best oversee all aspects of the Management Services
provided hereunder, specifically by arranging and coordinating such Management
Services as Business Manager, in its supervisory capacity, deems necessary and
appropriate to facilitate the day-to-day administration of the business aspects
of New PA's operations, including without limitation those set forth in this
Article IV in accordance with all law, rules, regulations and guidelines
applicable to the provision of Management Services.
Section 4.1 Office and Equipment.
(a) Subject to Section 4.1(b), as necessary and appropriate, taking into
consideration the professional concerns of New PA, Business Manager shall lease,
acquire or otherwise procure an Office in a location or locations reasonably
acceptable to New PA and shall permit New PA to use the Office. Any Office
procured by Business Manager for the use by New PA shall be procured at
commercially reasonable rates. Any move from New PA's present practice
location(s) shall be done only after Business Manager has received New PA's
Consent.
(b) In the event New PA is the lessee of the Office under a lease with an
unrelated and nonaffiliated lessor, Business Manager may require New PA to
assign such lease to Business Manager upon receipt of consent from the lessor.
New PA shall use its best efforts to assist in obtaining the lessor's consent to
the assignment. Upon request, New PA shall execute any instruments and shall
take any acts that Business Manager may deem necessary to accomplish the
assignment of the lease. Any expenses incurred in the assignment shall be Office
Expenses.
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(c) Business Manager shall provide all nonmedical equipment, fixtures,
office supplies, furniture and furnishings deemed reasonably necessary by
Business Manager for the operation of the Office and reasonably necessary for
the provision of Medical Services.
(d) Business Manager shall provide, finance, or cause to be provided or
financed medical related equipment as required by New PA. Subject to economic
feasibility, New PA shall have final authority in all medical equipment
selections, and Business Manager shall have no authority in regard to medical
equipment selection issues. Business Manager may, however, advise New PA on the
relationship between its medical equipment decisions and the overall
administrative and financial operations of the practice. All medical and
nonmedical equipment, other than Physician-owned automobiles, acquired for the
use of New PA shall be owned by Business Manager.
(e) Business Manager shall be responsible for the care, custody, and
control, including repair and maintenance of the Office, consistent with
Business Manager's responsibilities under the terms of any lease or other use
arrangement, and for the repair, maintenance, and replacement of all equipment
other than such repairs, maintenance and replacement necessitated by the
negligence or willful misconduct of New PA, its Physicians or other personnel
employed by New PA, the repair or replacement of which shall be a New PA Expense
and not an Office Expense.
Section 4.2 Medical Supplies. Business Manager shall order, procure,
purchase and provide on behalf of and as agent for New PA all reasonable medical
supplies unless otherwise prohibited by federal and/or State law. Furthermore,
Business Manager shall ensure that the Office is at all times adequately stocked
with the medical supplies that are necessary and appropriate for the operation
of New PA and required for the provision of Medical Services. The ultimate
oversight, supervision and ownership for all medical supplies is and shall
remain the sole responsibility of New PA. As used in this provision the term
"medical supplies" shall mean all drugs, pharmaceuticals, products, substances,
items or devices whose purchase, possession, maintenance, administration,
prescription or security requires the authorization or order of a licensed
health care provider or requires a permit, registration, certification or other
governmental authorization held by a licensed health care provider as specified
under any federal and/or State law.
Section 4.3 Support Services. Business Manager shall coordinate,
supervise, or otherwise arrange for all printing, stationery, forms, postage,
duplication or photocopying services, and other support services as are
reasonably necessary and appropriate for the operation of the Office and the
provision of Medical Services therein.
Section 4.4 Quality Assurance, Risk Management, and Utilization Review.
Business Manager shall assist New PA in New PA's establishment and
implementation of procedures to ensure the consistency, quality,
appropriateness, and medical necessity of Medical Services provided by New PA,
and shall arrange for administrative support for New PA's overall quality
assurance, risk management, and utilization review programs. Business Manager
shall perform these tasks in a
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manner to ensure the confidentiality and nondiscoverability of these program
actions to the fullest extent allowable under State and federal law.
Section 4.5 Licenses and Permits. Business Manager shall, on behalf of
and in the name of New PA, coordinate all development and planning processes,
and apply for and use reasonable efforts to obtain and maintain all federal,
State, and local licenses and regulatory permits required for or in connection
with the operation of New PA and equipment (existing and future) located at the
Office, other than those relating to the practice of medicine or the
administration of drugs by Physicians retained by or associated with New PA.
Section 4.6 Personnel. Except as specifically provided in Section
5.2(b) of this Management Services Agreement, Business Manager shall, consistent
with the Budget, coordinate and supervise New PA's retention of and shall
oversee the selection, hiring, training, supervision and termination of all
management, administrative, clerical, secretarial, bookkeeping, accounting,
payroll, billing and collection and other nonprofessional personnel of New PA to
enable Business Manager to perform its duties and obligations under this
Management Services Agreement. The Business Manager personnel required
hereunder shall include, but not be limited to, an executive director, a
practice administrator, a controller, an assistant controller, a managed
care/payor contracting developer, and a business office manager, as applicable,
the majority of whose time shall be devoted to performing supervisory and
managerial functions on behalf of Business Manager, and each of whom shall
maintain time records to reflect the appropriate allocation between supervision
versus performance of such duties. Business Manager shall have sole
responsibility for determining the salaries and providing such fringe benefits,
and for withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law
or governmental requirement.
Section 4.7 Contract Negotiations. Upon the request of New PA, Business
Manager shall advise New PA with respect to and negotiate, either directly or on
New PA's behalf, as appropriate, all contractual arrangements with third parties
as are reasonably necessary and appropriate for New PA's provision of Medical
Services, including, without limitation, negotiated price agreements with third
party payors, alternative delivery systems, or other purchasers of group health
care services. No contract or arrangement regarding the provision of Medical
Services shall be entered into without New PA Consent.
Section 4.8 Billing and Collection. On behalf of and for the account of
New PA, Business Manager shall assist New PA in New PA's establishment and
maintenance of credit and billing and collection policies and procedures, and
shall coordinate and supervise New PA personnel to ensure the timely billing and
collection of all professional and other fees for all billable Medical Services
provided by New PA or Physicians. Business Manager shall advise and consult
with New PA regarding the fees for Medical Services provided by New PA; it being
understood, however, that New PA shall establish the fees to be charged for
Medical Services and that Business Manager shall have no authority whatsoever
with respect to the establishment of such fees. In connection with the
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billing and collection services to be provided hereunder, and throughout the
Term (and thereafter as provided in Section 7.3), New PA hereby grants to
Business Manager an exclusive special power of attorney and appoints Business
Manager as New PA's exclusive true and lawful agent and attorney-in-fact, and
Business Manager hereby accepts such special power of attorney and appointment,
for the following purposes:
(a) To supervise and coordinate the billing of New PA's patients, in the
name of Global P and on behalf of New PA or Global P, as applicable, for all
billable Medical Services provided by New PA to patients.
(b) To supervise and coordinate the billing in Global P's name and on New
PA's or Global P's behalf, as applicable, all claims for reimbursement or
indemnification from Blue Shield/Blue Cross, insurance companies, Medicare,
Medicaid, and all other third party payors or fiscal intermediaries for all
covered billable Medical Services provided by New PA to patients.
(c) To ensure the collection and receipt in Business Manager's name and for
Business Manager's account all accounts receivable of New PA purchased by
Business Manager, and to deposit such collections in an account selected by
Business Manager and maintained in Business Manager's name.
(d) To ensure the collection and receipt in Global P's name and on New PA's
or Global P's behalf, as applicable, all accounts receivable generated by such
billings and claims for reim bursement that have not been purchased by Business
Manager, to administer such accounts including, but not limited to, (i)
extending the time of payment of any such accounts for cash, credit or
otherwise; (ii) discharging or releasing the obligors of any such accounts;
(iii) with the consent of the Policy Board, suing, assigning or selling at a
discount such accounts to collection agencies; or (iv) with the consent of the
Policy Board, taking other measures to require the payment of any such ac
counts.
(e) To deposit all amounts collected in Global P's name and on behalf of
New PA or Global P, as applicable, into New PA Account which shall be and at all
times remain in New PA's name. New PA covenants to transfer and deliver to
Business Manager for deposit into New PA Account or itself to make such deposit
of all funds received by New PA from patients or third party payors for Medical
Services. Upon receipt by Business Manager of any funds from patients or third
party payors or from New PA pursuant hereto for Medical Services, Business
Manager shall immedi ately deposit same into the New PA Account. Business
Manager shall disburse such deposited funds to creditors and other persons on
behalf of New PA, maintaining records of such receipt and disbursement of funds
as directed by New PA.
(f) To take possession of, endorse in the name of New PA or Global P, as
appropriate, and deposit into the New PA Account any notes, checks, money
orders, insurance payments, and any other instruments received in payment for
Medical Services.
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(g) To sign checks, drafts, bank notes or other instruments on behalf of
New PA or Global P, as appropriate, and to make withdrawals from the New PA
Account for payments specified in this Management Services Agreement and as
requested from time to time by New PA.
Upon request of Business Manager, New PA shall execute and deliver to the
financial institution wherein the New PA Account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
and limited power of attorney granted to Business Manager by New PA pursuant to
this Section 4.8 or pursuant to Section 4.9 of this Management Services
Agreement. The special and limited power of attorney granted herein shall be
coupled with an interest and shall be irrevocable except with Business Manager's
written consent. The irrevocable power of attorney shall expire on the later of
when this Management Services Agreement has been terminated, when all accounts
receivable purchased by Business Manager have been collected or when all
Management Fees due to Business Manager have been paid. If Business Manager
assigns this Management Services Agreement in accordance with its terms, then
New PA shall execute a power of attorney in favor of the assignee and in the
form of Exhibit 4.8 attached hereto.
Section 4.9 New PA Account.
(a) Power of Attorney. Business Manager shall have access to the New PA
Account solely for the purposes stated herein. In connection herewith and
throughout the Term (and thereafter as provided in Section 7.3), New PA hereby
grants to Business Manager an exclusive special power of attorney for the
purposes herein and appoints Business Manager as New PA's exclusive true and
lawful agent and attorney-in-fact, and Business Manager hereby accepts such
special power of attorney and appointment, to deposit into the New PA Account
all funds, fees, and revenues generated from the New PA's provision of Medical
Services and collected by Business Manager, and to make withdrawals from New PA
Account for payments specified in this Management Services Agreement and as
requested from time-to-time by New PA. Notwithstanding the exclusive special
power of attorney granted to Business Manager hereunder, New PA may, upon
reasonable advance notice to Business Manager, draw checks on the New PA
Account; provided, however, that New PA shall neither draw checks on the New PA
Account nor request Business Manager to do so if the balance remaining in the
New PA Account after such withdrawal would be insufficient to enable Business
Manager to pay on behalf of New PA any Office Expense attributable to the
operations of New PA or to the provision of Medical Services, and/or any other
obligations of New PA. Disbursements made without prior New PA Consent shall be
consistent with the type and amount of expenditures authorized by the Budget.
Limits on authority to sign checks and purchase orders shall be mutually agreed
upon by Business Manager and New PA's representatives to the Policy Board (or
Joint Policy Board).
(b) Priority of Payments. Each month Business Manager shall apply funds
that are in the New PA Account in the following order of priority:
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(1)
(2)
(3) [*]
(4)
(5)
Section 4.10 Fiscal Matters.
(a) Annual Budget.
(1) Initial Budget. The initial Budget shall be agreed upon by the
parties before the execution of this Management Services Agreement. To
assure that New PA receives the full amount of the charges for the
provision of Medical Services by Physician, physician assistants and all
other "physician extenders" who can bill for their own services, such
amounts shall be set forth in the initial Budget and shall be increased or
decreased as set forth in the Budget and mutually agreed upon by Business
Manager and New PA. The initial Budget shall also set forth the criteria
under which Business Manager shall be entitled to receive the Performance
Fee and the Budget shall also set forth the amount of the Performance Fee.
(2) Process for Succeeding Budgets. Annually and at least thirty (30)
days prior to the commencement of each fiscal year of New PA, Business
Manager, in consultation with New PA's representatives to the Policy Board
(or Joint Policy Board), shall prepare and deliver to New PA for New PA's
approval a proposed Budget, setting forth an estimate of New PA's revenues
and expenses for the upcoming fiscal year (including, without limitation,
the Management Fee and Performance Fee associated with the services
provided by Business Manager hereunder). New PA shall review the proposed
Budget and either approve the proposed Budget or request any changes within
twenty-one (21) days after receiving the proposed Budget. Upon the
Budget's adoption by New PA after reasonable review and comment, the Budget
may be revised or modified only after consultation with the Business
- -----------------
*This information has been omitted from this exhibit and is subject to a request
for confidential treatment. In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended, such information has been filed separately
with the Securities and Exchange Commission.
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Manager. If New PA does not adopt the proposed Budget, the Budget process
shall be governed by Section 4.10(a)(4).
(3) Succeeding Budgets; Special Rates. In each succeeding Budget,
unless the parties otherwise mutually agree, New PA shall continue to
retain for New PA Expenses the full amount of the charges for the provision
of Medical Services, as adjusted as provided for in paragraph 4.10(a)(1)
above. In each succeeding Budget, unless the parties otherwise mutually
agree, the criteria for the Performance Fee and Business Manager's right to
receive the Performance Fee shall be continued on the same basis. If the
option is exercised pursuant to that certain Option Agreement of even date
herewith between the shareholder of New PA and the Optionee (as defined in
the Option Agreement) such that the Optionee becomes the controlling
shareholder of New PA, the amount of the Performance Fee and method of
determining the Performance Fee for all succeeding years shall not be
changed and shall be determined exactly as specified in the last Budget
approved before the exercise of the option, and New PA shall continue to
retain the full amount of the charges for professional services, as
adjusted as provided in paragraph 4.10(a)(1) above for New PA Expense
through the Term.
(4) Deadlock. In the event the parties are unable to agree on a
Budget by the beginning of the fiscal year, until an agreement is reached,
the Budget (including the performance criteria set forth therein) for the
prior year (as adjusted in accordance with Section 4.10(a)(1)) shall be
deemed to be adopted as the Budget for the current year, with each line
item in the Budget (with the exception of the Base Management Fee)
increased or decreased by (i) the percentage by which the Adjusted Gross
Revenue in the current year, excluding any liquidated damages paid or
payable by any Physician, has increased or decreased compared to the
corresponding period of the prior year; (ii) the increase or decrease from
the prior year in the Consumer Price Index - Health Medical Services,
Austin Texas area; and (iii) the proportionate increase or decrease in
mutually agreed upon personnel costs as measured by the increase or
decrease in full-time equivalent personnel.
(5) Obligation of Business Manager. Business Manager shall use
commercially reasonable efforts to manage and administer the operations of
New PA as herein provided so that the actual revenues, costs and expenses
of the operation and maintenance of New PA during any applicable period of
New PA's fiscal year shall be consistent with the Budget.
(b) Accounting and Financial Records. Business Manager shall establish and
administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of administrative or financial records and books of
account relating to the business and financial affairs of New PA and the
provision of Medical Services all of which shall be prepared and maintained in
accordance with GAAP and applicable laws and regulations. Business Manager
shall prepare and deliver to New PA, within ninety (90) days of the end of each
calendar year, a balance sheet and a profit and loss statement reflecting the
financial status of New PA as of the end of such calendar
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year, all of which shall be prepared in accordance with GAAP consistently
applied. In addition, Business Manager shall prepare and deliver such other
financial statements or records as New PA may reasonably request.
(c) Review of Expenditures. Either one of New PA's representatives to the
Policy Board shall review all expenditures related to the operation of New PA,
but neither shall have the power to prohibit or invalidate any expenditure that
is consistent with the Budget. Business Manager shall not make any expenditures
not consistent with the Budget without New PA Consent.
(d) Tax Matters.
(1) In General. Business Manager shall prepare or arrange for the
preparation by an accountant approved in advance by New PA (which approval
shall not be unreasonably withheld) of all appropriate tax returns and
reports required of New PA.
(2) Sales, Franchise, Use or Other Taxes. Business Manager and New PA
acknowledge and agree that although Business Manager generally acts in a
supervisory and consultative capacity hereunder by coordinating, overseeing
and otherwise facilitating the provision of services, there are certain
services provided by Business Manager hereunder that may be subject to
State sales, franchise, use or other taxes and for which Business Manager
may have a legal obligation to collect such taxes and to remit same to the
appropriate tax collection authorities. New PA agrees to the payment of
such taxes as an Office Expense.
Section 4.11 Reports and Records.
(a) Medical Records. Business Manager shall establish, monitor, and
maintain procedures and policies for the timely creation, preparation, filing
and retrieval of all medical records generated by New PA in connection with New
PA's provision of Medical Services; and, subject to applicable law, shall ensure
that medical records are promptly available to Physicians and any other
appropriate persons. All such medical records shall be retained and maintained
in accordance with all applicable State and federal laws relating to the
confidentiality and retention thereof. All medical records shall be and remain
the property of New PA.
(b) Other Reports and Records. Business Manager shall timely create,
prepare, and file such additional reports and records as are reasonably
necessary and appropriate for New PA's provision of Medical Services, and shall
be prepared to analyze and interpret such reports and records upon the request
of New PA.
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Section 4.12 Recruitment of New PA Physicians. Upon New PA's request,
Business Manager shall coordinate, supervise or perform all administrative
services reasonably necessary and appropriate to recruit potential physician
personnel to become employees of New PA. Business Manager shall provide New PA
with model agreements to document New PA's employment, retention or other
service arrangements with such individuals. It will be and remain the sole and
complete responsibility of New PA to interview, select, contract with,
supervise, control and terminate all Physicians performing Medical Services or
other professional services, and Business Manager shall have no authority
whatsoever with respect to such activities.
Section 4.13 Confidential and Proprietary Information.
(a) Business Manager will not disclose any Confidential Information of New
PA to other persons without New PA's express written authorization, such
Confidential Information will not be used in any way directly or indirectly
detrimental to New PA, and Business Manager will keep such Confidential
Information confidential and will ensure that its affiliates and advisors who
have access to such Confidential Information comply with these nondisclosure
obligations; provided, however, that Business Manager may disclose Confidential
Information to those of its Representatives who need to know Confidential
Information for the purposes of this Management Services Agreement, it being
understood and agreed to by Business Manager that such Representatives will be
informed of the confidential nature of the Confidential Information, will agree
to be bound by this Section, and will be directed by Business Manager not to
disclose to any other person any Confidential Information. Business Manager
agrees to be responsible for any breach of this Section by its affiliates,
advisors, or Representatives. If Business Manager is requested or required (by
oral questions, interrogatories, requests for information or documents,
subpoenas, civil investigative demands, or similar processes) to disclose or
produce any Confidential Information furnished in the course of its dealings
with New PA or its affiliates, advisors, or Representatives, Business Manager
will (i) provide New PA with prompt notice thereof and copies, if possible, and,
if not, a description, of the Confidential Information requested or required to
be produced so that New PA may seek an appropriate protective order or waive
compliance with the provisions of this Section and (ii) consult with New PA as
to the advisability of New PA's taking of legally available steps to resist or
narrow such request. Business Manager further agrees that, if in the absence of
a protective order or the receipt of a waiver hereunder Business Manager is
nonetheless, in the written opinion of its legal counsel, compelled to disclose
or produce Confidential Information concerning New PA to any tribunal legally
authorized to request and entitled to receive such Confidential Information or
to stand liable for contempt or suffer other censure or penalty, Business
Manager may disclose or produce such Confidential Information to such tribunal
without liability hereunder; provided, however, that Business Manager shall give
New PA written notice of the Confidential Information to be so disclosed or
produced as far in advance of its disclosure or production as is practicable and
shall use its best efforts to obtain, to the greatest extent practicable, an
order or other reliable assurance that confidential treatment will be accorded
to such Confidential Information so required to be disclosed or produced.
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(b) Notwithstanding clause (a) above, Business Manager may share, subject
to the restrictions of this section, with other professional corporations,
associations, medical practices, or health care delivery entities the practice
statistics of New PA, including utilization review data, quality assurance data,
cost data, outcomes data, or other practice data. The practice statistics may
be disclosed within New PA, to AOR or AOR's management, to other medical groups
with whom Business Manager has a management relationship, to managed care
providers or other third party payors for the purpose of obtaining or
maintaining third party payor contracts, or to financial analysts and
underwriters; provided that any disclosure outside of New PA or AOR for any
purpose not related to managed care contracting shall not identify any Physician
by name without New PA Consent. In addition, Business Manager may disclose all
practice-related information necessary or desirable in connection with any
public or private offering of any AOR security, or in accordance with its
reporting requirements under the Securities Exchange Act of 1934, but no such
data will disclose or divulge patient identifying information.
Section 4.14 Business Manager's Insurance. Throughout the Term, Business
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof, appropriate
workers' compensation coverage for Business Manager's employed personnel
provided pursuant to this Management Services Agreement, and professional,
casualty and comprehensive general and vicarious liability insurance covering
Business Manager, Business Manager's personnel, and all of Business Manager's
equipment in such amounts, on such basis and upon such terms and conditions as
Business Manager deems appropriate. Upon the request of New PA, Business
Manager shall provide New PA with a certificate evidencing such insurance
coverage. Business Manager may also carry, as an Office Expense, key person life
and disability insurance on any shareholder or Physician employee of New PA in
amounts determined reasonable and sufficient by Business Manager. Business
Manager shall be the owner and beneficiary of any such insurance.
Section 4.15 No Warranty. New PA acknowledges that Business Manager has
not made and will not make any express or implied warranties or representations
that the services provided by Business Manager will result in any particular
amount or level of medical practice or income to New PA.
Section 4.16 Noncompetition Covenant from Business Manager. Business
Manager represents, warrants and covenants that during the Term, neither
Business Manager nor any person or entity affiliated directly or indirectly with
Business Manager will, anywhere in the Practice Territory, enter into a direct
or indirect relationship similar to the relationship between New PA and Business
Manager with, or acquire the nonmedical assets of, any medical oncology practice
group without approval of the Policy Board.
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ARTICLE V. COVENANTS AND RESPONSIBILITIES OF NEW PA
Section 5.1 Organization and Operation. New PA, as a continuing
condition of Business Manager's obligations under this Management Services
Agreement, shall at all times during the Term be and remain legally organized
and operated to provide Medical Services in a manner consistent with all State
and federal laws. New PA shall operate and maintain within the Practice
Territory a full time practice of medicine specializing in the provision of
oncology Medical Services, and for the first five (5) years of the Term of this
Management Services Agreement, New PA shall maintain and enforce employment
agreements in the form of Exhibit 5.1 with the shareholders of New PA specified
in Exhibit 5.1A. New PA shall also maintain and enforce employment agreements
in the form of Exhibit 5.2(a) with any nonshareholder Physician employees, as
applicable, of New PA. New PA shall not amend the employment agreements in any
manner which would cause the employment agreement to be in breach of the terms
of this Management Services Agreement. Recognizing that Business Manager would
not have entered into this Management Services Agreement but for New PA's
covenant to maintain employment agreements with its original shareholders, New
PA agrees that any damages, compensation, payment, or settlement received by New
PA as liquidated damages from a Physician who terminates the employment
agreement without cause or whose employment agreement is terminated by New PA
for cause shall be treated as Ancillary Revenue under this Agreement. Throughout
the term of this Management Services Agreement, New PA shall maintain and
enforce written Buy-Sell Agreements in the form of Exhibit 5.1B with the
shareholders of New PA specified in Exhibit 5.1A, and shall cause all new
shareholders of New PA to execute such agreements prior to becoming a
shareholder in New PA. New PA shall not amend the Buy-Sell Agreement or waive
any rights thereunder without the prior written consent of Business Manager.
Section 5.2 New PA Personnel.
(a) Physician Personnel. New PA shall retain, as a New PA Expense and not
as an Office Expense, that number of Physicians, as are reasonably necessary and
appropriate in the sole discretion of New PA for the provision of Medical
Services. Each Physician shall hold and maintain a valid and unrestricted
license to practice medicine in the State, and shall be competent in the
practice of oncology, including such subspecialties as medical infusion,
radiation therapy or other subspecialties that such Physician will practice on
behalf of New PA. New PA shall enter into and maintain with each such retained
Physician a written employment agreement substantially in the form of either
Exhibit 5.1 for shareholders of New PA or consistent with Exhibit 5.2(a) for
nonshareholders and will not commit and permit to remain outstanding any breach
of such employment agreement that would allow the Physician to terminate for
cause. New PA shall be responsible for paying the compensation and benefits as
applicable, for all Physicians and any other physician personnel or other
contracted or affiliated physicians, and for withholding, as required by law,
any sums for income tax, unemployment insurance, social security, or any other
withholding required by applicable law. Business Manager may, on behalf of New
PA, establish and administer
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the compensation program with respect to such individuals in accordance with the
written agreement between New PA and each Physician. Business Manager shall
neither control nor direct any Physician in the performance of Medical Services
for patients.
(b) Nonphysician Health Care Personnel. All nonphysician health care
personnel who provide patient care services in the diagnostic areas shall be
employed by or retained by New PA as an Office Expense and shall be under New
PA's control, supervision and direction in the performance of Medical Services
for patients; however, supervision and direction of such personnel's daily
performance of all other responsibilities shall be Business Manager's as set
forth in Section 4.6 of this Management Services Agreement.
Section 5.3 Professional Standards. As a continuing condition of
Business Manager's obligations hereunder, each Physician and any other physician
personnel retained by New PA to provide Medical Services must (i) comply with,
be controlled and governed by and otherwise provide Medical Services in
accordance with the Code of Business Conduct referenced in Section 5.5 and all
applicable federal, State and municipal laws, rules, regulations, ordinances and
orders, and the ethics and standard of care of the medical community wherein the
principal office of each Physician is located and (ii) obtain and retain
appropriate medical staff membership with appropriate clinical privileges at any
hospital or health care facility at which Medical Services are to be provided.
Procurement of temporary staff privileges pending the completion of the medical
staff approval process shall satisfy this provision, provided the Physician
actively pursues full appointment and actually receives full appointment within
a reasonable time.
Section 5.4 Medical Services. New PA shall ensure that Physicians and
nonphysician health care personnel are available to provide Medical Services to
patients. In the event that Physicians employed by, or shareholders of, New PA
are not available to provide Medical Services coverage, New PA shall assure
consistent and continuous coverage, which shall include New PA's engagement and
retention of locum tenens coverage as necessary and appropriate. Physicians
retained on a locum tenens basis shall meet all of the requirements of Section
5.3, and the cost of providing locum tenens coverage shall be a New PA Expense.
With the assistance of the Business Manager, New PA and the Physicians shall be
responsible for scheduling Physician and nonphysician health care personnel
coverage of all medical procedures. New PA shall cause all Physicians to
develop and promote New PA.
Section 5.5 Code of Business Conduct. New PA shall adopt by resolution
the American Oncology Resources, Inc. Code of Business Conduct ("Code") in
substantially the form of Exhibit 5.5, and shall require the compliance of all
New PA shareholders and employees with such Code.
Section 5.6 Peer Review/Quality Assurance. New PA shall adopt a peer
review/quality assurance program to monitor and evaluate the quality and cost-
effectiveness of Medical Services provided by physician personnel of New PA.
Upon request of New PA, Business Manager shall pro vide administrative
assistance to New PA in performing its peer review/quality assurance activities,
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but only if such assistance can be provided consistent with maintaining the
confidentiality and nondiscoverability of the processes and actions of the peer
review/quality assurance process of New PA.
Section 5.7 New PA's Insurance. New PA shall, as an Office Expense,
obtain and maintain with commercial carriers reasonably acceptable to Business
Manager appropriate worker's compensation coverage for New PA's employed
personnel, if any, and professional and comprehensive general liability and
vicarious liability insurance covering New PA and each of the Physicians New PA
retains or employs to provide Medical Services. The comprehensive general
liability and vicarious liability coverage shall be in the minimum amount of Two
Million Dollars ($2,000,000); and professional liability coverage shall be in
the minimum amount of Two Million Dollars ($2,000,000) for each occurrence and
Four Million Dollars ($4,000,000) annual aggregate. The insurance policy or
policies shall provide for at least thirty (30) days advance written notice to
New PA from the insurer as to any alteration of coverage, cancellation, or
proposed cancellation for any cause. New PA shall cause to be issued to
Business Manager by such insurer or insurers a certificate reflecting such
coverage and shall provide written notice to Business Manager promptly upon
receipt of notice given to Physician of the cancellation or proposed
cancellation of such insurance for any cause. Upon the termination of this
Management Services Agreement for any reason, New PA shall obtain and maintain
as a New PA Expense "tail" professional liability coverage, in the amounts
specified in this section for the reporting period or extended reporting period
that is standard in the industry or as may otherwise be required by law, and New
PA shall be responsible for paying all premiums for "tail" insurance coverage.
In no event shall the professional liability insurance carrier be replaced or
changed without New PA Consent.
Section 5.8 Confidential and Proprietary Information. New PA will not
disclose any Confidential Information of Business Manager without Business
Manager's express written authorization, such Confidential Information will not
be used in any way directly or indirectly detrimental to Business Manager, and
New PA will keep such Confidential Information confidential and will ensure that
its affiliates and advisors who have access to such Confidential Information
comply with these nondisclosure obligations; provided, however, that New PA may
disclose Confidential Information to those of its Representatives who need to
know Confidential Information for the purposes of this Management Services
Agreement, it being understood and agreed to by New PA that such Representatives
will be informed of the confidential nature of the Confidential Information,
will agree to be bound by this Section, and will be directed by New PA not to
disclose to any other person any Confidential Information. New PA agrees to be
responsible for any breach of this Section by its affiliates, advisors, or
Representatives. If New PA is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demands, or similar processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Business
Manager or its affiliates, advisors, or Representatives, New PA will (i) provide
Business Manager with prompt notice thereof and copies, if possible, and, if
not, a description, of the Confidential Information requested or required to be
produced so that Business Manager may seek an appropriate protective order or
waive compliance with the provisions of this
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Section and (ii) consult with Business Manager as to the advisability of
Business Manager's taking of legally available steps to resist or narrow such
request. New PA further agrees that, if in the absence of a protective order or
the receipt of a waiver hereunder New PA is nonetheless, in the written opinion
of its legal counsel, compelled to disclose or produce Confidential Information
concerning Business Manager to any tribunal legally authorized to request and
entitled to receive such Confidential Information or to stand liable for
contempt or suffer other censure or penalty, New PA may disclose or produce such
Confidential Information to such tribunal without liability hereunder; provided,
however, that New PA shall give Business Manager written notice of the
Confidential Information to be so disclosed or produced as far in advance of its
disclosure or production as is practicable and shall use its best efforts to
obtain, to the greatest extent practicable, an order or other reliable assurance
that confidential treatment will be accorded to such Confidential Information so
required to be disclosed or produced.
Section 5.9 Noncompetition. New PA hereby recognizes and acknowledges
that Business Manager will incur substantial costs in providing the equipment,
support services, personnel, management, administration, and other items and
services that are the subject matter of this Management Services Agreement and
that in the process of providing services under this Management Services
Agreement, New PA will be privy to financial and Confidential Information, to
which New PA would not otherwise be exposed. The parties also recognize that
the services to be provided by Business Manager will be feasible only if New PA
operates an active practice to which the Physicians associated with New PA
devote their full professional time and attention. New PA agrees and
acknowledges that the noncompetition covenants described hereunder are necessary
for the protection of Business Manager, and that Business Manager would not have
entered into this Management Services Agreement without the following covenants.
(a) During the Term of this Management Services Agreement and except for
its obligations pursuant to this Management Services Agreement, New PA shall not
establish, operate, or provide Medical Services at a medical office, clinic or
other health care facility anywhere within the Practice Territory.
(b) Except as specifically agreed to by Business Manager in writing, New PA
covenants and agrees that during the Term of this Management Services Agreement
and for a period of five (5) years from the date this Management Services
Agreement is terminated, New PA shall not directly or indirectly own (excluding
ownership of less than five percent (5%) of the equity of any publicly traded
entity), manage, operate, control, or be otherwise associated with, lend funds
to, lend its name to, or maintain any interest whatsoever in any enterprise (i)
having to do with the provision, distribution, promotion, or advertising of any
type of management or administrative services or products to third parties in
competition with Business Manager, in the Practice Territory; and/or (ii)
offering any type of service(s) or product(s) to third parties similar to those
offered by Business Manager to New PA in the Practice Territory.
Notwithstanding the above restriction, nothing herein shall prohibit New PA or
any of its shareholders from providing management and administrative
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services to its or their own medical practices after the termination of this
Management Services Agreement.
(c) The written employment agreements described in Section 5.1 shall
contain covenants of the shareholder employees pursuant to which the
shareholders agree not to compete with New PA within the Practice Territory for
one (1) year after termination of the employment agreement.
(d) New PA shall obtain and enforce formal written agreements from its
nonshareholder physician employees in the form of Exhibit 5.2(a), pursuant to
which the employees agree not to compete with New PA within the Practice
Territory for one (1) year after termination of the employment agreement.
(e) New PA understands and acknowledges that the foregoing provisions in
Section 5.8 and Section 5.9 are designed to preserve the goodwill of Business
Manager and the goodwill of the individual Physicians of New PA. Accordingly,
if New PA breaches any obligation of Section 5.8 or Section 5.9, in addition to
any other remedies available under this Management Services Agreement, at law or
in equity, Business Manager shall be entitled to enforce this Management
Services Agreement by injunctive relief and by specific performance of the
Management Services Agreement, such relief to be without the necessity of
posting a bond, cash or otherwise. Additionally, nothing in this paragraph
shall limit Business Manager's right to recover any other damages to which it is
entitled as result of New PA's breach. If any provision of the covenants is
held by a court of competent jurisdiction to be unenforceable due to an
excessive time period, geographic area, or restricted activity, the covenant
shall be reformed to comply with such time period, geographic area, or
restricted activity that would be held enforceable.
Section 5.10 Name, Trademark. New PA represents and warrants that until
New PA becomes a partner in Global P, New PA shall conduct its professional
practice under the name of, and only under the name of "Central Texas Oncology
Associates, P.A." and that such name is the name of New PA under State law, and
that New PA is the sole and absolute owner of the name. New PA covenants and
promises that, without the prior written consent of the Business Manager, New PA
will not:
(a) take any action or omit to take any action that is reasonably likely to
result in the change or loss of the name;
(b) license, sell, give, or otherwise transfer the name or the right to use
the name to any medical practice, physician, professional corporation,
professional association, or any other entity; or
(c) cease conducting the professional practice of New PA under the name.
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New PA covenants and promises that, when New PA becomes a partner in Global P
pursuant to Section 1.1 of the Partnership Agreement of Global P, New PA shall
cease conducting the professional practice of New PA under the name and shall
begin conducting the professional practice of New PA under the name of Global P.
Section 5.11 Peer Review. New PA shall designate a committee of
Physicians to function as a medical peer review committee to review credentials
of potential recruits, perform quality assurance functions, and otherwise
resolve medical competence issues. The medical peer review committee shall
function pursuant to formal written policies and procedures.
ARTICLE VI. FINANCIAL ARRANGEMENT
Section 6.1 Definitions. For purposes of this Article VI, capitalized
terms used herein shall have the meanings ascribed as follows:
(a) Monthly Fee. The Monthly Fee shall be [*]
(b) Fee Amount. The Fee Amount shall be [*]
(c) Base Management Fee. The Base Management Fee shall be [*]
Section 6.2 Management Fee. New PA and Business Manager agree to the
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable. Each month, in the priority established by
Section 4.9(b), Business Manager shall cause the following to be paid:
(i) the amount of all Office Expenses (other than the Base
Management Fee) paid on behalf of New PA.
(ii) the Base Management Fee.
(iii) the Performance Fee if the pre-established criteria for payment
of the Performance Fee set forth in the Budget have been met.
Section 6.3 Adjustments. Adjustments to the Management Fee calculation
shall be made as follows:
- ----------------
*This information has been omitted from this exhibit and is subject to a request
for confidential treatment. In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended, such information has been filed separately
with the Securities and Exchange Commission.
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(a) Upon termination of this Management Services Agreement, a liability for
the Management Fee shall be established in an amount equal to the difference, if
any, between
[*]
(b) After the fifth anniversary of this Management Services Agreement, the
Monthly Fee shall
[*]
(c) If there are not sufficient funds to pay the Performance Fee, unpaid
amounts shall accumulate and carry over from month to month until paid. No
amounts carried over shall earn interest. Furthermore, the amount of the
Performance Fee paid will be monitored and reconciled consistent with the Budget
period and any overpayments of the Performance Fee shall be promptly refunded by
the Business Manager.
Section 6.4 Reasonable Value. Payment of the Base Management Fee or
Performance Fee is not intended to be and shall not be interpreted or applied as
permitting Business Manager to share in New PA's fees for Medical Services or
any other services. Rather, such payment is acknowledged as the parties'
negotiated agreement as to the reasonable fair market value of the management
expertise, strategic planning, capital access, resource retention, equipment,
contract analysis and support, purchasing, office space, and other management
and administrative oversight services supervised, coordinated, arranged for or
otherwise facilitated by Business Manager pursuant to this Management Services
Agreement, as more specifically set forth in Article IV herein, as well as for
the personnel services Business Manager provides under Section 4.6 hereof,
considering the nature and extent of the services required and the risks assumed
by Business Manager.
Section 6.5 Payment of Management Fee. To facilitate the payment of the
Management Fee as provided in Section 6.2 hereof, New PA hereby expressly
authorizes Business Manager to make withdrawals of the Management Fee from the
New PA Account as such fee becomes due and payable during the Term and
thereafter as provided in Section 7.3.
Section 6.6 Accounts Receivable. To assure that New PA receives the
entire amount of professional fees for its services and to assist New PA in
maintaining reasonable cash flow for the payment of Office Expenses, Business
Manager may purchase, with recourse to New PA for the amount of the purchase,
the accounts receivable of New PA arising during the previous month by
transferring the amount set forth below into the New PA Account. The
consideration for the
- ----------------
*This information has been omitted from this exhibit and is subject to a request
for confidential treatment. In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended, such information has been filed separately
with the Securities and Exchange Commission.
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purchase shall be an amount equal to the Adjusted Gross Revenue recorded each
month (according to GAAP on an accrual basis net of Adjustments) less the Office
Expenses due to Business Manager under Section 6.2 above. Although it is the
intention of the parties that Business Manager purchase and thereby become the
owner of the accounts receivable of New PA, in the event such purchase shall be
ineffective for any reason, New PA is concurrently herewith granting to Business
Manager a security interest in the accounts receivable, and New PA shall
cooperate with Business Manager and execute all documents in connection with the
pledge of such accounts receivable to Business Manager. All collections in
respect to such accounts receivable purchased by Business Manager shall be
received by Business Manager as the agent of New PA and shall be endorsed to
Business Manager and deposited in a bank account at a bank designated by
Business Manager. To the extent New PA comes into possession of any payments in
respect of such accounts receivable, New PA shall direct such payments to
Business Manager for deposit in bank accounts designated by Business Manager.
Section 6.7 Disputes Regarding Fees.
(a) It is the parties' intent that any disputes regarding performance
standards of the Business Manager be resolved to the extent possible by good
faith negotiation. To that end, the parties agree that if New PA in good faith
believes that Business Manager has failed to perform its obligations, and that
as a result of such failure, New PA is entitled to a set-off or reduction in its
Management Fees, New PA shall give Business Manager notice of the perceived
failure and request in the notice a set-off or reduction in Management Fees.
Business Manager and New PA shall then negotiate the dispute in good faith, and
if an agreement is reached, the parties shall implement the resolution without
further action.
(b) If the parties cannot reach a resolution within a reasonable time, New
PA shall, at its option, submit the dispute to mediation. Mediation shall be
conducted in Austin, Texas in accordance with the rules of the National Health
Lawyers Association Alternative Dispute Resolution Service, and if the amount in
dispute is $25,000 or less, the mediation shall be binding.
(c) If the amount in dispute is greater than $25,000, or if the mediation
process fails to resolve the dispute, the dispute shall be submitted by either
party to binding arbitration as described by Article XI of the Purchase
Agreement (as defined by the Master Transaction Agreement).
ARTICLE VII TERM AND TERMINATION
Section 7.1 Initial and Renewal Term. The Term of this Management
Services Agreement will be for an initial period of forty (40) years after the
effective date, and shall be automatically renewed for successive five (5) year
periods thereafter, provided that neither Business Manager nor New PA shall have
given notice of termination of this Management Services Agreement at least one
hundred twenty (120) days before the end of the initial term or any renewal
term, or unless otherwise terminated as provided in Section 7.2 of this
Management Services Agreement.
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Section 7.2 Termination.
(a) Termination By Business Manager. Business Manager may terminate this
Management Services Agreement upon the occurrence of any one of the following
events which shall be deemed to be "for cause":
(i) The revocation, suspension, cancellation or restriction of any
New PA shareholder Physician's license to practice medicine in
the State if, in the reasonable discretion of the Business
Manager, New PA will not be financially viable after such
revocation, suspension, cancellation, or restriction;
(ii) New PA's loss or suspension of its Medicare or Medicaid provider
number, and/or New PA's restriction from treating beneficiaries
of the Medicare or Medicaid programs, except as effected in
connection with the formation and operation of Global P;
(iii) The dissolution of New PA or the filing of a petition in
voluntary bankruptcy, an assignment for the benefit of creditors,
or other action taken voluntarily or involuntarily under any
State or federal statute for the protection of debtors;
(iv) New PA materially defaults in the performance of any of its
material duties or obligations hereunder, and such default
continues for sixty (60) days after New PA receives notice of the
default.
(b) Termination By New PA. New PA may terminate this Management Services
Agreement upon any of the following occurrences which shall be deemed to be "for
cause":
(i) In the event that Business Manager materially defaults in the
performance of any of its material obligations hereunder and such
default continues for sixty (60) days after Business Manager
receives notice of the default;
(ii) In the event that an arbitrator pursuant to Section 8.6 makes a
final determination that Business Manager has materially failed
to perform its obligations to New PA hereunder, New PA may
terminate this Management Services Agreement upon ten (10) days
written notice to Business Manager;
(iii) In the event Business Manager in two (2) separate instances
over a five (5) year period, intentionally and in bad faith
misappropriates or misapplies New PA's funds in amounts exceeding
one hundred thousand dollars
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($100,000) in each such instance, and after the parties agree,
(or an arbitrator determines the appropriate amount of such
misappropriation or misapplication if the parties cannot agree)
and Business Manager fails to correct such misappropriation or
inappropriate application within thirty (30) days of agreement by
the parties or decision of the arbitrator that describes with
reasonable particularity the misappropriation or misapplication;
(iv) If there is payment Event of Default under any Note or under any
Short-Term Note (each as defined in the Master Transaction
Agreement) or Business Manager breaches its delivery obligation
for the shares of AOR Common Stock and if such payment Event of
Default or failure to deliver the shares of AOR Common Stock
continues for ten (10) days after notice has been given to
Business Manager, New PA may terminate this Management Services
Agreement not less than thirty (30) days after Business Manager's
receipt of such notice; or
(v) In the event there is a dissolution of Business Manager.
Termination by New PA hereunder shall require the affirmative vote of three-
fourths of the outstanding voting shares of the common shareholders of New PA
entitled to vote.
(c) Termination by Agreement. In the event New PA and Business Manager
shall mutually agree in writing, this Management Services Agreement may be
terminated on the date specified in such written agreement.
(d) Legislative, Regulatory or Administrative Change. In the event there
shall be a change in the Medicare or Medicaid statutes, State statutes, case
laws, regulations or general instructions, the interpretation of any of the
foregoing, the adoption of new federal or State legislation, or a change in any
third party reimbursement system, any of which are reasonably likely to
materially and adversely affect the manner in which either party may perform or
be compensated for its services under this Management Services Agreement or
which shall make this Management Services Agreement unlawful, the parties shall
immediately enter into good faith negotiations regarding a new service
arrangement or basis for compensation for the services furnished pursuant to
this Management Services Agreement that complies with the law, regulation, or
policy and that approximates as closely as possible the economic position of the
parties prior to the change. If good faith negotiations cannot resolve the
matter, it shall be submitted to arbitration as referenced in Section 8.6.
Section 7.3 Effects of Termination. Upon termination of this Management
Services Agreement, as hereinabove provided, neither party shall have any
further obligations hereunder except for (i) obligations accruing prior to the
date of termination, including, without limitation, payment of the Management
Fees and New PA Expenses relating to services provided prior to the termination
of this Management Services Agreement, (ii) obligations, promises, or covenants
set
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forth herein that are expressly made to extend beyond the Term, including,
without limitation, indemnities and noncompetition provisions, which provisions
shall survive the expiration or termination of this Management Services
Agreement by Business Manager for cause, and (iii) the obligations of New PA and
Business Manager described in Section 7.4. In effectuating the provisions of
this Section 7.3, New PA specifically acknowledges and agrees that Business
Manager shall continue to collect and receive on behalf of New PA all cash
collections from accounts receivable in existence at the time this Management
Services Agreement is terminated, it being understood that such cash collections
will represent, in part, compensation to Business Manager for management
services already rendered and compensation on accounts receivable purchased by
Business Manager. Upon the expiration or termination of this Management Services
Agreement for any reason or cause whatsoever, Business Manager shall immediately
surrender to New PA all books and records pertaining to New PA's medical
practice.
Section 7.4 Repurchase Obligation. Upon termination of this Management
Services Agreement by Business Manager for cause or by New PA without cause, New
PA shall:
(a) Purchase from Business Manager at book value the intangible assets,
deferred charges, and all other amounts on the books of the Business Manager
relating to the Management Services Agreement as adjusted through the last day
of the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect amortization or depreciation of the intangible
assets, deferred charges, or covenants;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the greater of the appraised fair market value
thereof or the then book value thereof. In the event of any repurchase of real
property, the appraised value shall be determined by Business Manager and New
PA, each selecting a duly qualified appraiser, who in turn will agree on a third
appraiser. This agreed-upon appraiser shall perform the appraisal which shall
be binding on both parties. In the event either party fails to select an
appraiser within fifteen (15) days of the selection of an appraiser by the other
party, the appraiser selected by the other party shall make the selection of the
third party appraiser;
(c) Purchase at book value all improvements, additions, or leasehold
improvements that have been made by Business Manager at any Office and that
relate solely to the performance of Business Manager's obligations under this
Management Services Agreement;
(d) Assume all debt, and all contracts, payables, and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased hereunder by Business Manager; and
(e) Purchase from Business Manager at book value all of the equipment
listed as set forth in the Master Transaction Agreement or an exhibit thereto,
including all replacements and additions
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thereto made by Business Manager pursuant to the performance of its obligations
under this Management Services Agreement, and all other assets, including
inventory and supplies, tangibles and intangibles, set forth on the books of the
Business Manager as adjusted through the last day of the month most recently
ended prior to the date of such termination in accordance with GAAP to reflect
operations of the Office, depreciation, amortization, and other adjustments of
assets shown on the books of the Business Manager.
New PA acknowledges that certain assets listed above have been pledged as
collateral pursuant to that certain Loan Agreement dated December 5, 1994
between AOR, as borrower, and First Union National Bank of North Carolina, as
agent for various lenders.
Section 7.5 Repurchase Option. Upon termination of this Management
Services Agreement by New PA for cause or Business Manager without cause, New PA
shall have the option but not the obligation to do all or none of the following:
(a) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the greater of the appraised fair market value
thereof or the then book value thereof. In the event of any repurchase of real
property, the appraised value shall be determined by Business Manager and New
PA, each selecting a duly qualified appraiser, who in turn will agree on a third
appraiser. This agreed-upon appraiser shall perform the appraisal which shall
be binding on both parties. In the event either party fails to select an
appraiser within fifteen (15) days of the selection of an appraiser by the other
party, the appraiser selected by the other party shall make the selection of the
third party appraiser;
(b) Purchase at book value all improvements, additions, or leasehold
improvements that have been made by Business Manager at any Office and that
relate solely to the performance of Business Manager's obligations under this
Management Services Agreement;
(c) Assume all debt, and all contracts, payables, and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased by Business Manager; and
(d) Purchase from Business Manager at book value all of the equipment
listed as set forth in the Master Transaction Agreement or an exhibit thereto,
including all replacements and additions thereto made by Business Manager
pursuant to the performance of its obligations under this Management Services
Agreement, and all other tangible assets, including inventory and supplies, set
forth on the books of the Business Manager as adjusted through the last day of
the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect operations of the Office, depreciation,
amortization, and other adjustments of assets shown on the books of the Business
Manager.
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New PA acknowledges that certain assets listed above have been pledged as
collateral pursuant to that certain Loan Agreement dated December 5, 1994
between AOR, as borrower, and First Union National Bank of North Carolina, as
agent for various lenders.
Section 7.6 Closing of Repurchase. New PA shall pay cash for the
repurchased assets. The amount of the purchase price shall be reduced by the
amount of debt and liabilities of Business Manager, if any, assumed by New PA.
New PA and any Physician associated with New PA shall execute such documents as
may be required to assume the liabilities set forth in Section 7.4(d) or Section
7.5(c) and to remove Business Manager from any liability with respect to such
repurchased asset and with respect to any property leased or subleased by
Business Manager. The closing date for the repurchase shall be determined by
Business Manager but shall in no event occur sooner than sixty (60) days or
later than one hundred eighty (180) days from the date of the notice of
termination. The termination of this Management Services Agreement shall become
effective upon the closing of the sale of the assets under Section 7.4 or the
delivery of assets (or the date upon which New PA is prepared to receive the
assets) under Section 7.5 and all parties shall be released from any restrictive
covenants provided for in Section 4.16 or Section 5.9 on the closing date. From
and after any termination, each party shall provide the other party with
reasonable access of the books and records then owned by it to permit such
requesting party to satisfy reporting and contractual obligations that may be
required of it.
ARTICLE VIII MISCELLANEOUS
Section 8.1 Administrative Services Only. Nothing in this Management
Services Agreement is intended or shall be construed to allow Business Manager
to exercise control or direction over the manner or method by which New PA and
its Physicians perform Medical Services or other professional health care
services. The rendition of all Medical Services, including, but not limited to,
infusion therapy and the prescription or administration of medicine and drugs
shall be the sole responsibility of New PA and its Physicians, and Business
Manager shall not interfere in any manner or to any extent therewith. Nothing
contained in this Management Services Agreement shall be construed to permit
Business Manager to engage in the practice of medicine, it being the sole
intention of the parties hereto that the services to be rendered to New PA by
Business Manager are solely for the purpose of providing nonmedical management
and administrative services to New PA so as to enable New PA to devote its full
time and energies to the professional conduct of its medical practice and
provision of Medical Services to its patients and not to administration, or
practice management.
Section 8.2 Status of Contractor. It is expressly acknowledged that the
parties hereto are "independent contractors," and nothing in this Management
Services Agreement is intended and nothing shall be construed to create an
employer/employee, partnership, or joint venture relationship, or to allow
either to exercise control or direction over the manner or method by which the
other performs the services that are the subject matter of this Management
Services Agreement; provided always that the services to be provided hereunder
shall be furnished in a manner consistent with the
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standards governing such services and the provisions of this Management Services
Agreement. Each party understands and agrees that (i) the other will not be
treated as an employee for federal tax purposes, (ii) neither will withhold on
behalf of the other any sums for income tax, unemployment insurance, social
security, or any other withholding pursuant to any law or requirement of any
governmental body or make available any of the benefits afforded to its
employees, (iii) all of such payments, withholdings, and benefits, if any, are
the sole responsibility of the party incurring the liability, and (iv) each will
indemnify and hold the other harmless from any and all loss or liability arising
with respect to such payments, withholdings, and benefits, if any.
Section 8.3 Notices. Any notice, demand, or communication required,
permitted, or desired to be given hereunder shall be in writing and shall be
served on the parties at the following respective addresses:
New PA: Central Texas Oncology Associates, P.A.
711 West 38th Street, Suite B-1
Austin, Texas 78705
Attn: President
with a copy to: Cox & Smith Incorporated
112 East Pecan Street, Suite 1800
San Antonio, Texas 78205
Attn: David L. Butler
Business Manager: American Oncology Resources, Inc.
16825 Northchase Drive, Suite 1300
Houston, Texas 77060
with a copy to: American Oncology Resources, Inc.
16825 Northchase Dr., Suite 1300
Houston, Texas 77060
Attn: Dale Ross
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted, or desired to be given hereunder shall be
sent either (a) by hand delivery, in which case notice shall be deemed received
when actually delivered, (b) by prepaid certified or registered mail, return
receipt requested, in which case notice shall be deemed received five calendar
days after deposit, postage prepaid in the United States Mail, or (c) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after deposit with such courier.
Section 8.4 Governing Law. This Management Services Agreement shall be
governed by the laws of the State of Texas applicable to agreements to be
performed wholly within the State.
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Texas law was chosen by the parties after negotiation to govern interpretation
of this Management Services Agreement because Harris County, Texas is the seat
of management for Business Manager. The federal and State courts of Travis
County, Texas shall be the exclusive venue for any litigation, special
proceeding, or other proceeding between the parties that may arise out of, or be
brought in connection with or by reason of, this Management Services Agreement.
Section 8.5 Assignment. Except as may be herein specifically provided
to the contrary, this Management Services Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that New PA may not
assign this Management Services Agreement without the prior written consent of
Business Manager, which consent may be withheld. The sale, transfer, pledge, or
assignment of any of the common shares held by any shareholder of New PA or the
issuance by New PA of common or other voting shares to any other person, or any
combination of such transactions within a period of one (1) year, such that the
existing shareholders in New PA fail to maintain a majority of the voting
interests in New PA shall be deemed an attempted assignment by New PA, and shall
be null and void unless consented to in writing by Business Manager prior to any
such transfer or issuance. Any breach of this provision, whether or not void or
voidable, shall constitute a material breach of this Management Services
Agreement, and in the event of such breach, Business Manager may terminate this
Management Services Agreement upon twenty-four (24) hours notice to New PA. The
parties agree that American Oncology Resources, Inc. ("AOR") shall assign and
deliver all of its rights and obligations hereunder to its wholly-owned
subsidiary, AOR of Texas Management Limited Partnership ("AOR Management"). AOR
Management shall then become the Business Manager under this Management Services
Agreement. In addition, Business Manager or the transferee shall have the right
to (i) assign all (but not less than all) its rights and obligations hereunder
to any third party, and (ii) collaterally assign its interest in this Management
Services Agreement and its right to collect Management Fees hereunder to any
financial institution or other third party in a bonafide financing transaction
without the consent of New PA. New PA acknowledges that Business Manager's
interest in this Management Services Agreement and Business Manager's right to
collect Management Fees under this Management Services Agreement have been
collaterally assigned pursuant to that certain Loan Agreement dated December 5,
1994 between AOR, as borrower, and First Union National Bank of North Carolina,
as agent for various lenders.
Section 8.5A PRN Assignment.
(a) If Business Manager assigns all of its rights, benefits and privileges
in and under this Management Services Agreement to Physician Reliance Network,
Inc., to any direct or indirect subsidiaries of Physician Reliance Network, Inc.
or to any entity that Physician Reliance Network, Inc. directly or indirectly
controls (collectively, "PRN"), and if PRN assumes all of Business Manager's
liabilities and obligations under this Management Services Agreement, then,
Business Manager shall immediately give written notice to New PA and for a
period of thirty (30) days after receipt of such notice of such assignment to,
and assumption by, PRN of this Management Services
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Agreement, New PA shall have the right to terminate this Management Services
Agreement by paying in cash to PRN the net aggregate amount of consideration
that PRN paid to Business Manager for such assignment and assumption. Business
Manager shall not be entitled to assign less than all of its rights, benefits
and privileges in and under this Management Services Agreement to PRN, nor to
permit the assignment of less than all of Business Manager's liabilities and
obligations hereunder.
(b) If there is a Change of Control (as defined below), then, for a period
of thirty (30) days after the Change of Control Purchase Price (as defined
below) is determined, New PA shall have the right to terminate this Management
Services Agreement by paying in cash to PRN the Change of Control Purchase
Price.
(c) In the event that New PA terminates this Management Services Agreement
pursuant to this Section 8.5A, then, other than Section 8.6 hereof, no provision
of this Management Services Agreement shall have any force or effect whatsoever,
including without limitation Section 5.9 or Section 7.4 hereof.
(d) For purposes of this Section 8.5A, "Change of Control" shall mean the
occurrence of any one or more of the following: (i) the Business Manager (or any
entity or entities that control(s) the Business Manager) shall merge or
consolidate with or into PRN with the effect that those persons who were the
shareholders of PRN immediately prior to the effective date of such merger or
consolidation hold more than 50% of the combined voting power of the outstanding
securities of the surviving corporation of such merger or the corporation
resulting from such consolidation ordinarily having the right to vote in the
election of directors or (ii) PRN shall, directly or indirectly, as a result of
a tender or exchange offer, open market purchase(s), privately negotiated
purchase(s) or otherwise have become the "beneficial owner" (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
securities of the Business Manager (or any entity or entities that control(s)
Business Manager) representing 50% or more of the combined voting power of the
then outstanding securities of the Business Manager (or such entity or entities
that control(s) Business Manager) having the right to vote in the election of
directors.
(e) For purposes of this Section 8.5A, "Change of Control Purchase Price"
shall mean the fair market value of Business Manger's rights, benefits, and
privileges and liabilities and obligations under this Management Services
Agreement, and shall be determined as follows. Within thirty days after a
Change of Control, PRN shall notify New PA in writing of such Change of Control.
Within thirty (30) days after receipt of such notice, PRN shall select an
independent accounting firm or valuation firm (the costs of which are to be
borne by PRN), and New PA shall select an independent accounting firm or
valuation firm (the costs of which are to be borne by New PA). The two (2)
firms so selected shall then select a nationally recognized independent
accounting firm or valuation firm (the costs of which are to be borne equally by
PRN and New PA). Such three firms shall determine such fair market value.
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Section 8.6 Arbitration. The parties shall use good faith negotiation
to resolve any controversy, dispute or disagreement arising out of or relating
to this Management Services Agreement or the breach of this Management Services
Agreement. Any matter not resolved by negotiation shall be submitted to binding
arbitration and such arbitration shall be governed by the terms of Article XI of
the Purchase Agreement, which, as it applies to the parties hereto, is
incorporated herein by reference in its entirety.
Section 8.7 Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Management Services Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
Section 8.8 Enforcement. In the event either party resorts to legal
action to enforce or interpret any provision of this Management Services
Agreement, the prevailing party shall be entitled to recover the costs and
expenses of such action so incurred, including, without limitation, reasonable
attorneys' fees.
Section 8.9 Gender and Number. Whenever the context of this Management
Services Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
Section 8.10 Additional Assurances. Except as may be herein specifically
provided to the contrary, the provisions of this Management Services Agreement
shall be self-operative and shall not require further agreement by the parties;
provided, however, at the request of either party, the other party shall execute
such additional instruments and take such additional acts as are reasonable and
as the requesting party may deem necessary to effectuate this Management
Services Agreement.
Section 8.11 Consents, Approvals, and Exercise of Discretion. Whenever
this Management Services Agreement requires any consent or approval to be given
by either party, or either party must or may exercise discretion, and except
where specifically set forth to the contrary, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and that such
discretion shall be reasonably exercised.
Section 8.12 Force Majeure. Neither party shall be liable or deemed to
be in default for any delay or failure in performance under this Management
Services Agreement or other interruption of service deemed to result, directly
or indirectly, from acts of God, civil or military authority, acts of public
enemy, war, accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either party's employees,
or any other similar cause beyond the reasonable control of either party unless
such delay or failure in performance is expressly addressed elsewhere in this
Management Services Agreement.
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Section 8.13 Severability. The parties hereto have negotiated and
prepared the terms of this Management Services Agreement in good faith with the
intent that each and every one of the terms, covenants and conditions herein be
binding upon and inure to the benefit of the respective parties. Accordingly, if
any one or more of the terms, provisions, promises, covenants or conditions of
this Management Services Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be as narrowly construed as possible,
and each and all of the remaining terms, provisions, promises, covenants and
conditions of this Management Services Agreement or their application to other
persons or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this
Management Services Agreement is in violation of applicable law, then the
parties agree to negotiate in good faith to amend the Management Services
Agreement, to the extent possible consistent with its purposes, to conform to
law.
Section 8.14 Divisions and Headings. The divisions of this Management
Services Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith is solely for convenience and
shall not affect in any way the meaning or interpretation of this Management
Services Agreement.
Section 8.15 Amendments and Management Services Agreement Execution.
This Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of New PA by its President, and on behalf
of Business Manager by a duly designated officer. Each multiple copy shall be
deemed an original, but all multiple copies together shall con stitute one and
the same instrument.
Section 8.16 Entire Management Services Agreement. With respect to the
subject matter of this Management Services Agreement, this Management Services
Agreement supersedes all previous contracts and constitutes the entire agreement
between the parties. Neither party shall be entitled to benefits other than
those specified herein. No prior oral statements or contemporaneous
negotiations or understandings or prior written material not specifically
incorporated herein shall be of any force and effect, and no changes in or
additions to this Management Services Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to become
effective on the date stipulated in such amendment(s). The parties specifically
acknowledge that, in entering into and executing this Management Services
Agreement, the parties rely solely upon the representations and agreements
contained in this Management Services Agreement and no others.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, New PA and Business Manager have caused this Management
Services Agreement to be executed by their duly authorized representatives, all
as of the day and year first above written.
NEW PA: Central Texas Oncology Associates, P.A.
a Texas professional association
By:
-------------------------------------
Name: Demetrius F. Loukas, M.D.
Title: President
BUSINESS MANAGER: AMERICAN ONCOLOGY RESOURCES, INC.
a Delaware corporation
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
39
<PAGE>
AMENDMENT TO
MANAGEMENT SERVICES AGREEMENT
This Amendment to Management Services Agreement (the "Amendment"), dated
and effective as of April 25, 1997 is by and between AOR of Texas Management
Limited Partnership, a Texas limited partnership ("Business Manager"), Central
Texas Oncology Associates, P.A., a Texas professional corporation, ("CTOA") and
Central Texas Radiation Oncology Physicians, P.A. ("New PA").
R E C I T A L S
1. CTOA and American Oncology Resources, a Delaware corporation
(whose rights and obligations thereunder were assigned to Business Manager)
executed and delivered that certain Management Services Agreement,
effective as of September 1, 1996 (the "Management Services Agreement").
2. New PA and CTOA have executed and delivered a Merger Agreement,
pursuant to which New PA merged with and into CTOA with the latter being
the surviving corporation.
3. The parties hereto desire to amend certain terms and provisions of
the Management Services Agreement.
NOW THEREFORE in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Section 1.6 of the Management Services Agreement shall be amended
in its entirety to read as follows:
Section 1.6 Business Manager. The term "Business Manager"
shall mean American Oncology Resources, Inc., a Delaware corporation
or any entity that succeeds to the interests of American Oncology
Resources, Inc., a Delaware corporation and to whom the obligations of
Business Manager are assigned and transferred, subject to Section
8.5A.
2. Section 1.27 of the Management Services Agreement shall be amended
in its entirety to read as follows:
Section 1.27 Professional Services Revenues. The term
"Professional Services Revenues" shall mean the sum of (i) all
professional fees actually recorded each month on an annual accrual
basis under GAAP (Net of Adjustment)
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as a result of professional medical services and related health care
services rendered by the Physicians whether rendered in an outpatient
or inpatient setting, and (iii) Professional Services Capitation
allocated to Professional Services Revenues. Professional Services
Revenues shall not include those monies specifically excluded from
Professional Fees pursuant to Section 1.2 of the separate Physician
Employment Agreement executed by Physicians, liquidated damages,
applicable insurance proceeds, and those fees for technical services,
e.g., those services billed under the 77000 series of the American
Medical Associations Physicians Current Professional Terminology 197
(CPT code).
3. Section 2.2 of the Management Services Agreement shall be amended
in its entirety to read as follows:
Section 2.2 Authority. Consistent with the provisions of this
Management Services Agreement, Business Manager shall have the
responsibility and commensurate authority to provide Management
Services for New PA. Subject to the terms and conditions of this
Management Services Agreement, Business Manager is hereby expressly
authorized to provide the Management Services in any reasonable manner
Business Manager deems appropriate to meet the day-to-day requirements
of the business functions of New PA. Business Manager is also
expressly authorized to negotiate and execute on behalf of New PA
contacts that do not relate to the provision of Medical Services,
provided that such contracts shall be consistent with the Budget. Any
non-medical contracts inconsistent with the Budget shall be referred
to the Policy Board for its review. New PA shall give Business
Manager thirty (30) days prior notice of New PAs intent to execute any
agreement obligating New PA to perform Medical Services or otherwise
creating a binding legal obligation on New PA. Unless an expense is
expressly designated as a Business Manager Expense in this Management
Services Agreement, all expenses incurred by Business Manager in
providing services pursuant to this Management Services Agreement
shall be an Office Expense. The parties acknowledge and agree that
New PA, through its Physicians, shall be responsible for and shall
have complete authority, responsibility, supervision, and control over
the provision of all Medical Services and other professional health
care services performed for patients, and that all diagnoses,
treatments, procedures, and other professional health care services
shall be provided and performed exclusively by or under the
supervision of Physicians as such Physicians, in their sole
discretion, deem appropriate. Business Manager shall have and
exercise absolutely no control or supervision over the provision of
Medical Services.
4. Section 3.2 of the Management Services Agreement shall be amended
to add a new subsection (k) as follows:
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(k) Non-Medical Contracts. The Policy Board shall consider and
make recommendations to Business Manager on non-medical contracts
which are not consistent with the Budget.
5. Section 4.10 of the Management Services Agreement is amended to add
a new subsection 9(d) as follows, and to reorder the existing subsection
(d), Tax Matters, to be subsection (e):
(d) Disputes Regarding Billing. It is the parties intent that
any issues regarding financial penalties related to billing assessed
by government programs or any other third party payor shall be
resolved to the extent possible by good faith negotiation. To that
end, if New PA and Business Manager in good faith agree that any such
financial penalty is the result of or attributable to the acts of New
PA or Physicians, then all penalty monies assessed and paid shall be
New PA Expense. Alternatively, if New PA and Business Manager in good
faith agree that any such financial penalty is the result of or
attributable to the acts of Business Manager, then all penalty monies
assessed and paid shall be Business Manager Expense. If the parties
cannot agree which is responsible or if responsibility may be
allocable between the parties and they cannot in good faith agree on
their respective share of such penalty, then either party may submit
the dispute to binding arbitration as governed by Article VI of the
Master Transaction Agreement.
6. Section 4.16 of the Management Services Agreement shall be amended
to include the words "or radiation oncology" directly following "medical
oncology."
7. Section 5.9(b) of the Management Services Agreement shall be
amended to add the following final sentence:
This Section 5.9(b) shall be null and void upon the termination
of this Management Services Agreement for cause by New PA or without
cause by Business Manager.
8. Section 6.1(a) of the Management Services Agreement shall be
amended in its entirety to read as follows:
The Monthly Fee shall be [*]
9. The final sentence of Section 6.3(b) of the Management Services
Agreement shall be amended in its entirety to read as follows:
- ----------------
*This information has been omitted from this exhibit and is subject to a
request for confidential treatment. In accordance with Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, such information has been filed
separately with the Securities and Exchange Commission.
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[*]
10. Sections 7.4 and 7.5 of the Management Services Agreement shall
be amended to add the following final sentence to the end of the last
paragraph in each section:
Business Manager shall transfer such assets free and clear of any and
all encumbrances upon payment of the purchase price.
11. Effect. This Amendment shall be effective only for the specific
purposes set forth herein, and, except as modified by this Amendment, the
terms, covenants and provisions of the Management Services Agreement are
hereby ratified and confirmed and shall continue in full force and effect.
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
- ----------------
*This information has been omitted from this exhibit and is subject to a
request for confidential treatment. In accordance with Rule 24b-2 under the
Securities Exchange Act of 1934, as amended, such information has been filed
separately with the Securities and Exchange Commission.
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IN WITNESS WHEREOF the parties have executed this Amendment effective
as of the day and year first above written.
"BUSINESS MANAGER"
AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
"CTOA"
CENTRAL TEXAS ONCOLOGY ASSOCIATES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
"NEW PA"
CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
44
