EXHIBIT 10(b)
SERVICE AGREEMENT
BY AND AMONG
RESPONSE ONCOLOGY, INC.
ROSENBERG & KALMAN, M.D., P.A.
R&K, M.D., P.A.,
AND
STOCKHOLDERS OF R&K, M.D., P.A.
Dated as of
September 1, 1996
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION PURSUANT TO CLAIM FOR CONFIDENTIAL TREATMENT
SERVICE AGREEMENT
THIS SERVICE AGREEMENT dated as of September 1, 1996 by and among
RESPONSE ONCOLOGY, INC., a Tennessee corporation ("Response"), ROSENBERG &
KALMAN, M.D., P.A., a Florida professional association (the "Corporation"),
R&K, M.D., P.A., a Florida professional association (the "Provider") and
THE STOCKHOLDERS OF R&K, M.D., P.A. (the "Stockholders").
RECITALS:
WHEREAS, Response is in the business of owning certain assets of and
managing and operating medical clinics, and providing support services to
and furnishing medical practices with the necessary facilities, equipment,
personnel, supplies and support staff to operate a medical practice;
WHEREAS, effective September 1, 1996, Response Oncology, Inc. and the
Stockholders will execute a definitive agreement (the "Purchase Agreement")
pursuant to which Response will contract to acquire from the Stockholders
all of their rights, title and interests in and to all of the outstanding
common stock of the Corporation;
WHEREAS, the Stockholders have formed the Provider for the purpose of
continuing their medical practice following consummation of the transaction
contemplated by the Purchase Agreement;
WHEREAS, the Provider and the Stockholders desire to retain Response
to perform the practice management functions described herein in order to
permit the Provider and the Stockholders to devote substantially full time
and efforts on a concentrated and continuous basis to the rendering of
medical services to patients;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, effective September 1, 1996, the
Provider, the Stockholders, the Corporation and Response agree to the terms
and conditions provided in this Agreement.
ARTICLE 1.
RELATIONSHIP OF THE PARTIES
1.1. Independent Relationship. The Provider and Response intend to
act and perform as independent contractors, and the provisions hereof are
not intended to create any partnership, joint venture, agency or employment
relationship between the parties. Notwithstanding the authority granted to
Response herein, Response and the Provider agree that the Provider shall
retain the authority to direct the medical, professional, and ethical
aspects of its medical practice. Each party shall be solely responsible
for and shall comply with all state and federal laws pertaining to
employment taxes, income withholding, unemployment compensation
contributions and other employment related statutes applicable to that
party.
1.2. Responsibilities of the Parties. As more specifically set forth
herein, Response shall provide the Provider with offices and facilities,
equipment, supplies, support personnel, management, practice development
and financial advisory services. As more specifically set forth herein,
the Provider shall be responsible for the recruitment and hiring of
Physicians and all issues related to medical practice patterns and
documentation thereof. Notwithstanding anything herein to the contrary, no
"designated health service" as defined in 42 U.S.C. 1395nn, including any
amendments or successors thereto, shall be provided by Response under this
Agreement.
1.3. Provider's Matters. Matters involving the internal agreements
and finances of the Provider, including the distribution of professional
fee income among individual Physician Stockholders (as hereinafter
defined), tax planning, and pension and investment planning (and expenses
relating solely to these internal business matters), and hiring, firing and
licensing of Non-Physician Employees (hereinafter defined) shall remain the
sole responsibility of the Provider and the individual Physician
Stockholders.
1.4. Patient Referrals. The parties agree that the benefits to the
Provider hereunder do not require, are not payment for, and are not in any
way contingent upon the admission, referral or any other arrangement for
the provision of any item or service offered by Response to any of the
Provider's patients in any facility or laboratory controlled, managed or
operated by Response.
1.5. Professional Judgment. Each of the parties acknowledges and
agrees that the terms and conditions of this agreement pertain to and
control the business and financial relationship between and among the
parties but do not pertain to and do not control the professional and
clinical relationship between and among the Provider, the Provider's
employees, and the Provider's patients. Nothing in this Agreement shall be
construed to alter or in any way affect the legal, ethical and professional
relationship between and among the Provider and the Provider's patients,
nor shall anything contained in this Agreement abrogate any right,
privilege, or obligation arising out of or applicable to the
physician-patient relationship.
ARTICLE 2.
DEFINITIONS
2.1. Definitions. For the purposes of this Agreement, the following
definitions shall apply:
Financial and Accounting Definitions:
(a) "Account Debtor" shall mean an account debtor or any other
Person obligated in respect of an Account Receivable.
(b) "Accounts Receivable" shall mean, with respect to the
Provider, all accounts and any and all rights to payment of money or other
forms of consideration of any kind now owned or hereafter acquired (whether
classified under the Uniform Commercial Code as accounts, chattel paper,
general intangibles, or otherwise) for goods sold or leased or for services
rendered by the Provider, including, but not limited to, accounts
receivable, proceeds of any letters of credit naming the Provider as
beneficiary, chattel paper, insurance proceeds, contract rights, notes,
drafts, instruments, documents, acceptances, and all other debts,
obligations and liabilities in whatever form from any other Person,
provided that cash, checks and credit card purchases are not included in
the definition of Accounts Receivable.
(c) References to "amounts recorded" shall mean all amounts
recorded or recordable in accordance with GAAP (hereinafter defined),
including, without limitation, all billed Physician Services Revenue
hereinafter defined and Non-Physician Revenue hereinafter defined, earned
Capitation Revenue hereinafter defined and all expenses that are subject to
accrual under GAAP.
(d) "Annual Surplus" shall mean Practice Revenue (hereinafter
defined) less the sum of the Base Service Fee (hereinafter defined) and
Practice Retainage (hereinafter defined).
(e) "Bad Debt Allowance" shall mean, with respect to Accounts
Receivable, an allowance for uncollectible Accounts Receivable determined
based on a methodology approved by the Oversight Committee.
(f) "Base Service Fee" shall mean the base fee set forth on
Schedule A hereto
(h) "Capitation Revenue" shall mean amounts recorded consisting
of revenue from managed care organizations, where payment is made
periodically on a per member basis, administration payments, co-payments
and all other payments by managed care organizations, including, without
limitation, managed care variable expense bonuses, hospital expense bonuses
or any other bonus or payment which rewards the Provider for its medical
performance under any managed care arrangement.
(i) "Clinic Expenses" shall mean all amounts recorded comprising
the expenses incurred in the operation of any Clinic, including, without
limitation:
(A) Non-Physician Employee Compensation (hereinbelow defined),
regardless of by whom paid, salaries, benefits and other direct costs of any
Executive Director employed pursuant to Section 5.6 below and all personnel
employed by Response at a Clinic;
(B) obligations of Response under leases or subleases of
facilities and personal property utilized by the Provider, including, without
limitation, Clinics and medical offices, medical, laboratory and other
equipment utilized by the Provider;
(C) personal property and intangible taxes assessed against
properties and assets utilized by the Provider or otherwise deployed in any
Clinic commencing on the date of this Agreement; and
(D) other ordinary, necessary and reasonable expenses
incurred by Response in carrying out its obligations under this Agreement,
including, without limitation, depreciation on equipment utilized in the
Clinics, interest on secured loans (other than notes payable by Response to
any Stockholder or his/her assigns ) incurred to purchase Clinic equipment,
insurance (except professional liability of physicians, which will remain a
Physician Expense), laundry, supplies, cost of goods sold from inventory,
utilities, telephone service, printing, stationery, advertising, postage,
medical transcribing and waste disposal.
All Clinic Expenses shall be computed in accordance with GAAP. To
the extent expenses incurred benefit multiple clinics, such Clinic Expenses
shall be allocated among such Clinics benefiting from such expenditure as
Response shall reasonably determine with the approval of the Oversight
Committee. Clinic Expenses shall not include (i) Physician Expense, (ii) any
corporate overhead charges of Response (which shall include any amortization
of any intangible asset related to this Service Agreement), (iii) the cost
of any capital expenditures excluding interest and other period charges under
GAAP in respect of such capital expenditures incurred by Response pursuant
hereto, except as otherwise provided herein, (iv) any federal or state income
taxes, and (v) any expenses which are expressly designated herein as expenses
or responsibilities of and are paid by the Provider; provided.
(j) "Clinic Expense Portion" of the Service Fee shall have the
meaning set forth in Section 8.1 below.
(k) "Fee Adjustment" shall mean any adjustment for any discount,
non-allowed contractual or other adjustment under Medicare, Medicaid, any
preferred provider plan, workers' compensation plan, employee/dependent
health care benefit program or other contractual arrangement between the
Provider and any Third Party Payor, and any professional courtesy or other
reasonable and customary discount that results in fee revenue not being
collected.
(k) "GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession or prescribed
by the Securities and Exchange Commission, which are applicable to the
circumstances as of the date of determination. For purposes of this
Agreement, GAAP shall be applied in a manner consistent with the historic
practices used by Response.
(l) "Governmental Receivables" shall mean an Account Receivable of
the Provider which (i) arises in the ordinary course of business of the
Provider, (ii) has as its Third Party Payor the United States of America or
any state or any agency or instrumentality of the United States of America or
any state which makes any payments with respect to Medicare or Medicaid or
with respect to any other program (including CHAMPUS) established by federal
or state law, and (iii) is required by federal or state law to be paid or to
be made to the Provider as a health care provider. Governmental Receivables
shall not, however, refer to amounts payable by private insurers under
contract to provide benefits under the Federal Employee Health Benefit
Program.
(m) "Non-Physician Employee Compensation" shall mean all amounts
recorded as salaries, wages (including overtime), benefits, payroll taxes and
other compensation expense by the Provider in respect of Non-Physician
Employees (hereinafter defined), which shall be a Clinic Expense regardless
of who pays the same.
(n) "Performance Fee" shall mean an amount payable to Response
on a calendar-year basis as computed pursuant to the formula set forth in
Schedule A hereto.
(o) "Physician Expense" shall mean the sum of (i) salaries,
bonuses and other compensatory payments to Physicians (hereinafter defined)
employed by or otherwise performing services for the Provider, including
Physician Stockholders; (ii) perquisites and benefits provided to such
persons; (iii) travel and entertainment expense, continuing education
expense, professional liability expense and other expenses and payments
that primarily benefit such persons; provided, however, that any such
expense incurred at the direction of Response shall not be a Physician
Expense and shall instead be a Clinic Expense; and (iv) payroll taxes in
respect of any of the foregoing.
(p) "Physician Services Revenue" shall mean all amounts recorded
as fees and revenue (net of Fee Adjustments and Bad Debt Allowance) by or
on behalf of the Provider as a result of professional medical services
furnished to patients by Physicians and Non-Physician Employees, whether
rendered in an inpatient or outpatient setting, and excluding any items
approved pursuant to Section 4.2(c) below.
(q) "Practice Retainage" shall mean an amount equal to the
percentage of Practice Revenue set forth on Schedule A hereto.
(r) "Practice Revenue" shall mean the sum of all amounts
recorded by the Provider as Physician Services Revenue, Capitation Revenue
and other revenue (including chemotherapy and other drug revenue)
attributable to the conduct of the Provider's medical practice, but shall
specifically exclude profits from any investment of the Provider in any
partnership, joint venture, corporation, professional association and any
other revenue not derived from the providing of services by employees of
the Provider or Response and all items listed as excluded revenue on
Exhibit 4.2(c).
(s) "Service Fee" shall mean the sum of the Base Service Fee and
the Performance Fee (if any).
Other Definitions:
(t) An "Affiliate" of a corporation shall mean (a) any person or
entity directly or indirectly controlled by such corporation, (b) any
person or entity directly or indirectly controlling such corporation, (c)
any subsidiary of such corporation if the corporation has a fifty percent
(50%) or greater ownership interest in the subsidiary, or (d) such
corporation's parent corporation if the parent has a fifty percent (50%) or
greater ownership interest in the corporation. For purposes of this
Section 2.1(u), the Provider is not an affiliate of Response.
(u) "Applicable Law" shall mean all applicable provisions of
constitutions, statutes, rules, regulations, ordinances and orders of all
Governmental Authorities and all orders and decrees of all courts,
tribunals and arbitrators, and shall include, without limitation, Health
Care Law.
(v) "CHAMPUS" shall mean the Civilian Health and Medical Program
of the Uniformed Services.
(w) "Clinic" shall mean the practice facility currently utilized
by the Provider, and any facility, related business and all medical group
business operations which the Provider and Response may, in the future,
mutually agree to characterize as a Clinic.
(x "Corporation" shall have the meaning set forth in the initial
paragraph hereof.
(y) "Employment Agreement" shall mean an employment agreement
between each Physician now or hereinafter employed by the Provider and the
Provider pursuant to which the Physician shall be employed by the Provider
to provide medical services on behalf of the Provider, which Employment
Agreement shall be substantially in the form set forth as Exhibit 7.1
hereof.
(z) "Governmental Authority" shall mean any national, state or
local government (whether domestic or foreign), any political subdivision
thereof or any other governmental, quasi-governmental, judicial, public or
statutory instrumentality, authority, board, body, agency, bureau or entity
or any arbitrator with authority to bind a party at law.
(aa) "Health Care Law" shall mean any Applicable Law regulating
the acquisition, construction, operation, maintenance or management of a
health care practice, facility, provider or payor, including without
limitation 42 U.S.C. Section 1395nn and 42 U.S.C. Section 1320a-7b.
(ab) "Liquidated Damages Amount" shall mean an amount equal to
the Liquidated Damages Amount set forth on Schedule A hereto.
(ac) "Medicaid" shall mean any state program pursuant to which
health care providers are paid or reimbursed for care given or goods
afforded to indigent persons and administered pursuant to a plan approved
by the Health Care Financing Administration under Title XIX of the Social
Security Act.
(ad) "Medicare" shall mean any medical program established under
Title VIII of the Social Security Act and administered by the Health Care
Financing Administration.
(ae) "Necessary Authorization" shall mean with respect to the
Provider all certificates of need, authorization, certifications, consents,
approvals, permits, licenses, notices, accreditations and exemptions,
filings and registrations, and reports required by Applicable Law,
including, without limitation, Health Care Law, which are required,
necessary or reasonably useful to the lawful ownership and operation of the
Provider's business.
(af) "Oversight Committee" shall mean a three (3) member
committee established pursuant to Section 4.1. Except as otherwise
provided, the act of a majority of the members of the Oversight Committee
shall be the act of the Oversight Committee.
(ag) "Person" shall mean an individual, corporation,
partnership, joint venture, trust, association, or unincorporated
organization, or a government or any agency or political subdivision
thereof including, without limitation, a Third Party Payor.
(ah) "Physician" shall mean any medical doctor employed by the
Provider or with whom the Provider has entered into independent contractor
or other non-employee relationships.
(ai) "Non-Physician Employees" shall mean all persons other than
Physicians who deliver billable medical or health care services under the
direction of the Provider and its Physicians or are otherwise under
contract with the Provider to provide professional services to Clinic
patients and, in each case, who are duly licensed to provide professional
medical services in the State of Florida.
(aj) "Physician Extender Personnel" shall mean employees of
Response who deliver services to the Provider, including without
limitation nurse anesthetists, physician assistants, registered and
licensed practical nurses, nurse practitioners, psychologists, and other
such persons except Physicians and Non-Physician Employees.
(ak) "Physician Stockholders" shall mean those Physicians who
are from time to time hereafter stockholders of the Provider.
(al) "Practice Assets" shall have the meaning ascribed to that
term in Section 11.5 of this Agreement.
(am) "Provider" shall have the meaning set forth in the initial
paragraph hereof.
(an) "Provider Event of Default" shall have the meaning ascribed
to such term in Section 11.4 hereof.
(ao) "Purchase Agreement" shall mean that certain Stock Purchase
Agreement dated as of September 1, 1996 by and among Response Oncology,
Inc. and the Stockholders.
(ap) "Remaining Physician Stockholder" shall mean any Physician
Stockholder who shall have been a Stockholder at the effective time of this
Agreement and who, at any time within one (1) year prior to the occurrence
of a Provider Event of Default shall have been a Physician Stockholder;
provided, however, that such term shall not include any Stockholder who
shall have, within such one year period, ceased to be a Physician
Stockholder by reason of death, disability or retirement from employment
with the Provider at or after age 55.
(aq) "Response" shall mean Response Oncology, Inc., a Tennessee
corporation, and its wholly owned subsidiaries, including the Corporation.
(ar) "Response Event of Default" shall have the meaning ascribed
to such term in Section 11.3 of this Agreement.
(as) "Stockholder" shall mean each Stockholder of the Provider
as of the date hereof.
(at) "Third Party Payor" shall mean each Person which makes
payment under a Third Party Payor Program, and each Person which
administers a Third Party Payor Program.
(au) "Third Party Payor Program" shall mean Medicare, Medicaid,
CHAMPUS, insurance provided by Blue Cross and/or Blue Shield, managed care
plans, and any other private health care insurance programs and employee
assistance programs as well as any future similar programs.
ARTICLE 3.
FACILITIES TO BE PROVIDED BY RESPONSE
3.1. Facilities. Response and/or the Corporation shall provide and
make available to the Provider for its use in its group medical practice
the offices and facilities more fully described in Exhibit 3.1 hereto, the
furnishings, fixtures and equipment located thereupon, and shall pay as
hereinafter provided all costs (all of which shall be Clinic Expense) of
repairs, maintenance and improvements, utility (telephone, electric, gas,
water) expenses, normal janitorial services, refuse disposal and all other
costs and expenses reasonably incurred in conducting the operations
contemplated by this Agreement in each Clinic during the term of this
Agreement, including, without limitation, related real or personal property
lease cost payments and expenses, taxes and insurance. Response shall
comply with all terms and provisions of any lease or other agreement with
respect to such facility and shall maintain such facility and equipment
used by the Provider in updated, fully operational condition, ordinary wear
and tear excepted. Response shall consult with the Provider regarding the
condition, use and needs for the offices, facilities and improvements, and
any purchase, lease or improvement of any offices, facilities or equipment,
or change in any of the foregoing, shall be as directed and/or approved by
a majority of the Oversight Committee. Response shall follow all
reasonable directions of the Oversight Committee in respect of improvements
to the offices, facilities and equipment to be used by the Provider. The
Provider shall not amend, modify or terminate any sub-lease agreements
without the prior written consent of Response.
3.2 Use of Facilities. The Provider shall not use or occupy any
facility or equipment owned or leased by Response for any purpose which is
prohibited by any Applicable Law, this Agreement, or the terms of any lease
or other arrangement with respect to the use or occupancy of such facility,
or which may be dangerous to life, limb, or property (except medical
services provided in the ordinary course of business), or which would
increase the fire or extended coverage insurance rate on such facility.
ARTICLE 4.
DUTIES OF THE OVERSIGHT COMMITTEE
4.1. Formation and Operation of the Oversight Committee. The parties
shall establish an Oversight Committee which shall be responsible for
developing management and administrative policies for the overall operation
of each Clinic. The Oversight Committee shall consist of three (3)
members. Response shall designate, and shall have the right to remove and
replace, in its sole discretion, one (1) member of the Oversight Committee.
The Provider shall designate, and shall have the right to remove and
replace, in its sole discretion, two (2) members of the Oversight
Committee. The Oversight Committee shall have the authority to adopt
bylaws (which shall include the fixing of a quorum for the conduct of
business by the Oversight Committee), establish regular meeting times and
places, call special meetings for any purpose and elect a chairman and a
secretary who shall preside over and record, respectively, the proceedings
at any meeting of the Oversight Committee. Except as otherwise provided
herein, the affirmative vote of a majority of the members of the Oversight
Committee shall be required for approval of any action taken thereby.
4.2. Duties and Responsibilities of the Oversight Committee. The
Oversight Committee shall have the following duties and obligations:
(a) Capital Improvements and Expansion. Any renovation and
expansion plans and capital equipment expenditures with respect to any
Clinic shall be reviewed and approved by the Oversight Committee and shall
be based upon economic feasibility, physician support, productivity and
then current market conditions.
(b) Annual Budgets. All annual capital and operating budgets
prepared by Response, as set forth in Section 5.2, shall be subject to the
review and approval of the Oversight Committee, which shall have the
authority to reject individual items in the budget and to fix such amounts
so rejected; provided, however, that in the event the Oversight Committee
exercises such authority and increases any budget amount by more than ten
(10%) percent of the amount proposed by Response and does not propose a
commensurate reduction in other budget items reasonably acceptable to
Response, then such modification shall be approved by a unanimous vote of
the Oversight Committee.
(c) Exceptions to Inclusion in the Physician Services
Calculation. The exclusion of any revenue from Practice Revenue, whether
now or in the future, shall be subject to the approval by a unanimous vote
of the Oversight Committee. Current approved exceptions are listed in the
attached Exhibit 4.2(c).
(d) Advertising. All advertising and other marketing of the
services performed at any Clinic shall be subject to the prior review and
approval of the Oversight Committee.
(e) Patient Fees; Collection Policies. As a part of the annual
operating budget, in consultation with the Provider and Response, to the
extent allowed by Applicable Law, the Oversight Committee shall review and
advise the Provider as to an appropriate fee schedule for all physician and
ancillary services rendered by the Provider, which fee schedule shall
ultimately be determined by the Provider in its sole discretion. In
addition, the Oversight Committee shall approve the credit collection
policies of any Clinic.
(f) Provider and Payor Relationships. Decisions regarding the
establishment or maintenance of relationships with managed care
organizations, institutional health care providers and Third Party Payors
shall be made by the Oversight Committee in consultation with Response and
the Provider.
(g) Strategic Planning. The Oversight Committee shall develop
long-term strategic planning objectives.
(h) Capital Expenditures. The Oversight Committee shall
determine the priority of major capital expenditures benefiting the
Clinics.
(i) Physician Hiring. The Oversight Committee shall determine
the number and type of physicians required for the efficient operation of
each Clinic. The approval of the Oversight Committee shall be required for
any variations to the restrictive covenants in any Physician Employment
Agreement.
(j) Executive Director. The selection and retention of any
Executive Director pursuant to Section 5.6 and the salary and cash fringe
benefits of each Executive Director shall be pursuant to the direction and
control of the Oversight Committee. If the Provider is dissatisfied with
the services provided by any Executive Director, the Provider shall refer
the matter to the Oversight Committee. The Oversight Committee shall, in
good faith, determine whether the performance of such Executive Director
could be brought to acceptable levels through counsel and assistance, or
whether the Executive Director's employment should be terminated.
ARTICLE 5.
ADMINISTRATIVE SERVICES TO BE PROVIDED BY RESPONSE
5.1. Performance of Management Functions. Response shall provide or
arrange for the services set forth in this Article 5, the cost of all of
which shall be paid by Response in accordance with this Agreement and
included in Clinic Expenses. Response is hereby expressly authorized to
perform its services hereunder in whatever manner it deems reasonably
appropriate to meet the day-to-day requirements of Clinic operations in
accordance with the general standards approved by the Oversight Committee,
including, without limitation, performance of some of the business office
functions at locations other than a Clinic. The Provider will not act in a
manner which would prevent Response from efficiently managing the
day-to-day operations of each Clinic in a business-like manner.
5.2. Financial Planning and Goals. Response shall prepare annual
capital and operating budgets reflecting in reasonable detail anticipated
revenue and expenses, sources and uses of capital for growth in the
Provider's practice and medical services rendered at each Clinic. Response
shall determine the amount and form of capital to be invested annually in
each Clinic and shall specify the targeted profit margin for each Clinic
which shall be reflected in the overall budget. Response realizes that a
Clinic may realize opportunities to provide new services and utilize new
technologies that will require capital expenditures and anticipates that
such opportunities may include outpatient treatment centers, renovations to
Clinic facilities, the addition of satellite locations and new and
replacement equipment pursuant to Section 3.1, and new services, including,
without limitation, radiation therapy, radiology and stem cell supported
high dose chemotherapy. Upon the direction of the Oversight Committee,
Response agrees to provide funds to allow the Clinic to provide such new
services and to utilize such new technologies. Such budgets shall be
presented to the Oversight Committee at least sixty (60) days prior to the
end of the preceding calendar year. The Oversight Committee shall us its
best efforts to agree upon a budget at least thirty (30) days prior to the
end of such preceding Calendar year as provided in Section 4.2(b), and,
once approved in such manner, shall be binding upon Response and the
Provider unless modified or revised in like manner by the Oversight
Committee.
5.3. Financial Statements. Response shall prepare annual financial
statements on an accrual basis reflecting the results of operations of the
Provider. If the Provider desires an audit of any financial statement, the
Provider may obtain such an audit at its own expense. Response shall
prepare monthly unaudited financial statements containing a combined
balance sheet and statements of operations for the Clinics, which shall be
delivered to the Provider within thirty (30) days after the close of each
calendar month. Notwithstanding the foregoing, Response shall be under no
obligation to keep multiple sets of books for cash basis and accrual basis
methods of accounting, but shall be entitled to keep one set of books
maintained on an accrual basis method of accounting, which shall be
converted by workpaper-only entries to the cash basis method of accounting
for purposes of tax reporting.
5.4. Inventory and Supplies. Response shall order and purchase
reasonable and requested medical and office inventory, pharmaceuticals and
supplies required by the Provider in the day-to-day operations of its
medical practice.
5.5. Management Services and Administration.
(a) The Provider hereby appoints Response as its sole and
exclusive manager and administrator of all day-to-day business functions
connected with its group medical practice. The Provider agrees that the
purpose and intent of this Service Agreement is to relieve the Provider,
the Physicians and Non-Physician Employees, to the maximum extent possible,
of the administrative, accounting, payroll, accounts payable, personnel and
business aspects of its practice, with Response assuming responsibility for
and being given all necessary authority to perform these functions.
Response agrees that the Provider, and only the Provider, will perform the
medical functions of its practice. Response will have no authority,
directly or indirectly, to perform, and will not perform, any medical
function. Response may, however, advise the Provider as to the
relationship between its performance of medical functions and the overall
administrative and business functioning of its practice. To the extent
that they assist the Provider in performing medical functions, all
Physician Extender Personnel performing patient care services obtained and
provided by Response shall be subject to the professional direction and
supervision of the Provider and, in the performance of such medical
functions, shall not be subject to any direction or control by, or
liability to, Response, except as may be specifically authorized by the
Provider. The Provider hereby indemnifies and holds Response, its
officers, directors, shareholders, agents and affiliates, their successors
and assigns ("Indemnified Persons") harmless, and shall reimburse the
Indemnified Persons for, from and against each claim, loss, liability, cost
and expense (including, without limitation, interest, penalties, costs of
preparation and investigation, and the reasonable fees and disbursement
expenses of attorneys and other professional advisors) directly or
indirectly relating to, resulting from or arising out of any medical
function performed, or which should have been performed, under the
supervision of the Provider or Non-Physician Employees.
(b) Response shall, on behalf of the Provider and under the
Provider's provider number, bill patients and Third Party Payors, and shall
collect the professional fees for medical services rendered by the Provider
in each Clinic, for services performed outside a Clinic for the Provider's
hospitalized patients, and for all other professional and Clinic services.
Response's billing and collection practice shall be consistent with those
of comparable, nationally recognized, well managed group medical practices.
The Provider hereby appoints Response for the term hereof to be its true
and lawful attorney-in-fact, for the following purposes: (i) to bill
patients in the Provider's name and on its behalf; (ii) to collect
Accounts Receivable resulting from such billing in the Provider's name and
on its behalf; (iii) to receive payments from insurance companies,
prepayments from health care plans, and payments from all other Third Party
Payors; (iv) to take possession of and endorse in the name of the Provider
(and/or in the name of an individual Physician, such payment intended for
purpose of payment of a Physician's bill) any notes, checks, money orders,
insurance payments and other instruments received in payment of Accounts
Receivable; and (v) with the advance consent of the Oversight Committee,
to initiate legal proceedings in the name of the Provider or any Physician
to collect any accounts and monies owed to the Provider, Clinic or any
Physician, to enforce the rights of the Provider or any Physician as a
creditor under any contract or in connection with the rendering of any
service, and to contest adjustments and denials by any Governmental
Authority (or its fiscal intermediaries) as Third Party Payors. All
adjustments made for uncollectible accounts, professional courtesies and
other activities that do not generate a collectible fee shall be done in a
reasonable and consistent manner.
(c) Response shall design, supervise and maintain custody of all
files and records relating to the operation of each Clinic, including but
not limited to accounting, billing, patient medical records, and collection
records. Patient medical records shall at all times be and remain the
property of the Provider and shall be located at Clinic facilities so that
they are readily accessible for patient care. The Physicians shall have
the obligation to oversee the preparation and maintenance of patient
medical records, and to provide such medical information as shall be
necessary and appropriate to the clinical function of such records, and to
maintain such records so as to ensure the availability of Third-party Payor
reimbursement for services rendered. The management of all files and
records shall comply with applicable state and federal statutes. Response
shall use its best efforts to preserve the confidentiality of patient
medical records and use information contained in such records only for the
limited purpose necessary to perform the services set forth herein;
provided, however, in no event shall a breach of said confidentiality be
deemed a default under this Agreement. Response shall indemnify and hold
the Provider harmless from and against any monetary loss suffered by the
Provider on account of Response's breach of the foregoing confidentiality
provisions.
(d) Response shall supply to the Provider necessary clerical,
accounting, payroll, bookkeeping and computer services, laundry, linen,
uniforms, printing, stationary, advertising, postage and duplication
services, medical transcribing services and any other ordinary, necessary
or appropriate item or service for the operation of a Clinic, the cost of
all of which shall be Clinic Expense.
(e) Subject to the provisions of Section 4.2(d), Response shall
design and implement adequate and appropriate public relations programs on
behalf of the Provider, with appropriate emphasis on public awareness of
the availability of services at the Provider's Clinics. Any public
relations program shall be conducted in compliance with applicable laws and
regulations governing advertising by medical professionals and applicable
canons or principles of professional ethics governing the Provider and its
physicians.
(f) Response shall provide the data necessary for the Provider
to prepare its annual income tax returns and financial statements, and
shall provide payroll and related services for Physicians and Non-Physician
Employees. Response shall have no responsibility for the filing of such
tax returns, the payment of such income taxes or the cost of preparation of
income tax returns or financial statements on behalf of the Provider or any
Physician employed thereby.
(g) Response shall assist the Provider in recruiting additional
Physicians and Non-Physician Employees, carrying out such administrative
functions as may be appropriate such as advertising for and identifying
potential candidates, checking credentials, and arranging interviews;
provided, however, the Provider shall interview and make the ultimate
decision as to the suitability of any Physician or Non-Physician Employee
to become associated with a Clinic. All Physicians recruited by Response
and accepted by the Provider shall be the sole employees of the Provider,
to the extent such Physicians are hired as employees. Subject to the
provisions of Section 6.4, any expenses incurred in the recruitment of
Physicians or Non-Physician Employees, including, but not limited to,
employment agency fees, relocation and interviewing expenses, shall be
Clinic Expenses.
(h) Subject to the provisions of Section 4.2(g), Response shall
negotiate and administer all managed care contracts on behalf of the
Provider.
(i) Subject to the provisions of Sections 5.3 and 5.5(f),
Response shall arrange for legal and accounting services related to Clinic
operations incurred traditionally in the ordinary course of business,
including the cost of enforcing any physician contract containing
restrictive covenants, provided such services shall be approved in advance
by the Executive Director.
(j) Response shall provide for the proper cleanliness of the
physical premises occupied and/or utilized by the Provider, and maintenance
and cleanliness of the equipment, furniture and furnishings located upon
such premises.
5.6. Executive Director. Subject to the provisions of Section
4.2(k), Response shall recruit, hire and appoint an Executive Director to
manage and administer all of the day-to-day business functions of each
Clinic (it being understood and agreed that, if reasonable, a single
Executive Director may have responsibility for multiple Clinics). Subject
to Oversight Committee approval, Response shall determine the salary,
bonuses (if any) and fringe benefits of each Executive Director, which
salary, bonuses (which may be payable in Response common stock or by
issuance of options on Response common stock) and benefits shall, to the
extent the same are current expenses under GAAP, be Clinic Expenses. At the
direction, supervision and control of Response, the Executive Director,
subject to the terms of this Agreement, shall implement the policies
established by the Oversight Committee and shall generally perform the
duties and have the responsibilities of an administrator. The Executive
Director shall be responsible for organizing the agenda for the meetings of
the Oversight Committee referred to in Article 4.
5.7. Personnel. Response shall provide Physician Extender Personnel
and other non-physician professional support (other than persons who are
required to be Non-Physician Employees) and administrative personnel,
clerical, secretarial, bookkeeping and collection personnel reasonably
necessary for the conduct of operations at each clinic. Response shall
determine and cause to be paid the salaries and fringe benefits of all such
personnel, which shall be Clinic Expenses. Such personnel shall be under
the direction, supervision and control of Response, with those personnel
performing billable patient care services remaining employees of and being
subject to the professional supervision of the Provider. If the Provider
is dissatisfied with the services of any person, the Provider shall consult
with Response. Response shall in good faith determine whether the
performance of that employee could be brought to acceptable levels through
counsel and assistance, or whether such employee's employment should be
terminated. All of Response's obligations regarding staff shall be
governed by the overriding principle and goal of providing the optimal
quality of medical care consistent with the efficient operation of the
Clinic. Employee assignments shall be made to assure consistent and
continued rendering of the optimal quality medical support services
consistent with the efficient operation of the Clinic and to ensure prompt
availability and accessibility of individual medical support personnel to
Physicians in order to develop constant, familiar and routine working
relationships between individual Physicians and individual members of the
medical support personnel. Response shall maintain established working
relationships wherever possible and Response shall make every reasonable
effort consistent with sound business practices to honor the specific
requests of the Provider with regard to the assignment of its employees.
In addition to the foregoing, Response shall advance to the Provider
from time to time the amount of any operating deficiency with respect to
any physician who is an employee but not a Physician Stockholder of the
Provider ("Associate Physician"). Operating deficiency with respect to any
Associate Physician is hereby defined as the excess of the amount payable
to such Associate Physician pursuant to any salary guarantee over an amount
("Associate Physician Net Operating Income") equal to the Associate
Physician's net revenues less direct expenses (excluding any such salary
guarantee), as determined in accordance with GAAP. Any advance pursuant to
this paragraph shall be repaid from time to time out of the excess of
Associate Physician Net Operating Income over such salary guarantee. Such
advances shall be repaid in full within thirty (30) days after the
Associate Physician becoming a Physician Stockholder.
5.8. Events Excusing Performance. Response shall not be liable to
the Provider for failure to perform any of the services required herein in
the event of strikes, lock-outs, calamities, acts of God, unavailability of
supplies or other events over which Response has no control for so long as
such events continue, and for a reasonable period of time thereafter.
5.9. Compliance with Applicable Laws. Response shall comply with all
Applicable Law, in the conduct of its obligations under this Agreement.
5.10. Quality Assurance. Response shall assist the Provider in
fulfilling its obligations to its patients to maintain the optimal quality
of medical and professional services consistent with the efficient
operation of the Clinic.
5.11. Provider Bank Accounts. The Provider agrees to establish and
maintain two (2) separate bank accounts. One such account, which shall be
referred to as the Provider Receipts Account, will be under the sole direct
control of the Provider and will be utilized only as a depository for
Practice Revenue. Such account shall be subject to, and the Provider
agrees to execute and deliver to an appropriate commercial bank, a Lockbox
Operating Procedural Agreement, and, pursuant thereto, shall instruct such
bank to transfer automatically all amounts deposited in the Provider
Receipts Account to the Provider Operating Account. The second account
shall be referred to as the Provider Operating Account, and shall be
maintained for the purpose of (a) depositing amounts swept from the
Provider Receipts Account and advances from the Receivables Line (defined
below) pursuant to Section 5.12 and (b) paying (i) all expenses which are
solely the obligation of the Provider, including, without limitation,
Physician Expense, up to the amount of Practice Retainage, (ii) Clinic
Expenses payable directly by the Provider (including, without limitation,
Non-physician Employee Compensation, (iii) the Clinic Expense Portion of
the Base Service Fee owed pursuant to Section 8.1 of this Agreement, (iv)
the Fixed Portion of the Base Service Fee owed pursuant to Section 8.1 of
this Agreement, and (v) other distributions to the Provider, and the
distributions shall be made in that order of payment. To the extent
Practice Revenue of the Provider is insufficient to pay all amounts set
forth above, then any shortage shall be applied in reverse order to the
order provided above, with the Practice Retainage being the last item to be
reduced by such shortage. Provider hereby designates, constitutes and
appoints Response, through its duly authorized officers and employees as
approved by the Oversight Committee, as a signatory on the Provider
Operating Account, with full power and authority to sign checks and cause
drafts and other debits to be made on the Provider Operating Account in the
name of the Provider and to otherwise manage the cash resources and flow of
the Provider. After the payment of all items described in clauses (b)(i)
through (iv) above, the Provider may withdraw amounts for distributions to
Physician Members. Provided that the Provider shall establish its banking
relationship with the financial institution providing Response with cash
management services, Response shall cause a weekly report of cash receipts
and disbursements to be delivered to the Provider no later than Wednesday
of each week.
5.12. Credit Line. Response shall from time to time during the term
of this Agreement advance to Provider, in readily available United State
funds, by wire transfer, intrabank transfer or other electronic means, to
be deposited into the Provider Operating Account, an amount (the
"Receivables Line") equal to 100% of Accounts Receivable, net of any Bad
Debt Allowance and all Fee Adjustments with respect thereto. Amounts
advanced by Response under the Receivables Line will not bear interest
except after termination of this Agreement, in which event outstanding
advanced amounts shall bear interest at the maximum rate permitted to be
lawfully charged. Amounts advanced by Response pursuant to this Section
5.12 shall be payable by Provider upon termination of this Agreement.
Advances on the Receivables Line will be secured by a security interest in
and to Accounts Receivable granted pursuant to Section 15.7 below.
5.13. Ancillary Services. Response shall operate such ancillary
services as approved by the Oversight Committee.
ARTICLE 6.
OBLIGATIONS OF THE PROVIDER
6.1. Professional Services. The Provider shall provide professional
services to patients in compliance at all times with ethical standards,
laws and regulations applying to the medical profession, in a manner and to
an extent consistent with that established by the Provider prior to
effectiveness of this Agreement. The Provider shall also make all reports
and inquiries to the National Practitioners Data Bank and/or any state
medical licensing board required by Applicable Law. The Provider shall use
its best efforts to ensure that each Non-Physician Employee and Technical
Employee associated with the Provider to provide medical care to patients
of the Provider is licensed by the State of Florida to the extent required.
The Provider shall promptly notify Response in writing, citing the
underlying circumstances, in the event the Provider or any Physician or
Non-Physician Employee associated therewith (i) shall be or become the
subject of any investigation into or proceeding with respect to allegations
of professional misconduct or incompetence; (ii) shall be or become the
subject of any investigation by any Federal or state regulatory agency with
respect to any possible violation of any Federal or state law regulating
the providing of health care services; (iii) shall be named party to any
proceeding alleging violation of any law relating to such person's
professional activities or seeking to revoke or suspend such person's
professional license or privileges to practice in any hospital or medical
center; or (iv) shall become the subject of any proceeding to exclude such
person from any Federal or state reimbursement program or shall suffer the
revocation or suspension of such person's Medicare provider number, DEA
permit, professional license or privileges to practice in any hospital or
medical center. In the event that any disciplinary action or medical
malpractice actions is initiated against any Physician or other person
assisting in the providing of medical services, the Provider shall
immediately inform the Executive Director and/or Response of such action
and the underlying facts and circumstances. The Provider shall develop a
program to monitor the quality of medical care practiced at each Clinic.
In that regard, the Provider shall at all times supervise and assume
primary professional responsibility for the delivery of all medical or
other services to patients by Physician Extender Personnel and any other
employee of Response.
6.2. Medical Practice. The Provider shall use and occupy each Clinic
exclusively for the practice of medicine, and shall comply with all
Applicable Law and all standards of medical care. It is expressly
acknowledged by the parties that the medical practice or practices
conducted at a Clinic shall be conducted solely by Physicians associated
with the Provider, and no other physician or medical practitioner shall be
permitted to use or occupy a Clinic without the prior written consent of
Response and the Provider.
6.3. Employment of Physicians and Non-Physician Employees. The
Provider shall have complete control of and responsibility for the hiring,
compensation, supervision, evaluation and termination of its Physicians and
Non-Physician Employees, although at the request of the Provider, Response
shall consult with the Provider respecting such matters. The Provider
shall be responsible for the payment of all Physician Expense and
Non-Physician Employee Compensation now or hereafter applicable to
Physicians and Non-Physician Employees; provided, however, that Response
shall provide the payroll service for computing, accounting for and
disbursing or paying all salaries and benefits of the Provider employees,
all of whom may be paid out of the Provider Operating Account. With
respect to Physicians, the Provider shall only employ and contract with
licensed Physicians meeting applicable credentialling guidelines
established by the Provider.
To the extent permissible under the Employee Retirement and Income
Security Act of 1974, as amended ("ERISA"), the Internal Revenue Code of
1986, as amended (the "Code"), and applicable Health Care Law and to the
extent such practice does not violate Applicable Law or jeopardize
reimbursement for medical related services provided by any person
associated with a Clinic, Response shall pay any overtime or other
non-salary compensation of and shall provide employee benefits to
Non-Physician Employees, notwithstanding their employment by the Provider.
The cost of such items shall be Clinic Expense. Response shall not provide
any benefit to such persons to the extent the Provider is required to
provide same under ERISA, the Code or any other statute or regulation.
6.4. Licensing Fees, Professional Dues and Education Expenses.
Except as provided in Section 5.5(g), the Provider and Physicians shall be
solely responsible for payment of the cost of professional licenses and
dues for membership in professional associations and continuing
professional education costs. The Provider shall ensure that each of its
Physicians and Non-Physician Employees participates in such continuing
medical education as is necessary for such person to maintain current
practical and academic knowledge of the field of medicine and health care
in which the Provider is engaged.
6.5. Professional Insurance Eligibility. The Provider shall be
primarily responsible, with assistance from Response, if requested, for
obtaining and retaining of professional liability insurance by assuring
that its Physicians and Non-Physician Employees are insurable, and
participating in an ongoing risk management program. Professional
liability insurance with respect to Physicians shall be paid for by the
Provider or its Physicians and shall not be Clinic Expense. Professional
liability insurance with respect to Non-Physician Employees shall be paid
for by Response and shall be Clinic Expense.
6.6. Events Excusing Performance. The Provider shall not be liable
to Response for failure to perform any of the services required herein in
the event of strikes, lock-outs calamities, acts of God, unavailability of
supplies or other events over which the Provider has no control for so long
as such events continue, and for a reasonable period of time thereafter.
6.7. Fees for Professional Services. The Provider shall be solely
responsible for legal, accounting and other professional service fees
incurred by the Provider, except as set forth in Section 5.5(i) herein.
6.8. Peer Review; Clinical Trials. At Response's request, the
Provider agrees to participate in Response's clinical trials program or any
data collection and analysis program maintained by Response from time to
time. The Provider agrees to cooperate with Response in establishing a
system of peer review as necessary to obtain provider contracts. In
connection therewith, the Provider agrees to assist in the formulation of
oncology and cancer care provider guidelines for each treatment or surgical
modality, and agrees to abide by said guidelines, and further agrees to
submit to periodic reviews by a third party to monitor compliance with said
guidelines. The Provider acknowledges that the establishment of provider
guidelines may be necessary to obtain PPO, HMO, IPA and other similar
provider contracts, both private and government funded. To the extent that
said provider guidelines must be filed or registered with any Third Party
Payor, the Provider agrees to cooperate with Response in making such
filings or registrations. It is agreed and acknowledged that all such peer
review guidelines shall be established and monitored by medical personnel
on the staff of the Provider and other practices that are part of the peer
review process, and shall not be promulgated, established or enforced
independently by Response. To the extent possible, all information
obtained through the peer review process shall remain confidential and the
parties shall take all steps reasonably necessary to assure that all
privileges and immunities provided by Applicable Law remain intact.
6.9 Provider Employee Benefit Plans.
(a) Effective as of the date of the closing under the Acquisition
Agreement, the Provider shall amend the tax-qualified retirement plan(s)
described on Exhibit 6.9(a) (the "Provider Plan") to provide that employees
of Response who are classified as "leased employees" (as defined in Code
Section 414(n)) of the Provider shall be treated as the Provider's
employees for purposes described in Code Section 414(n)(3). Not less often
than annually, the Provider and Response shall agree upon and identify in
writing those individuals to be classified as leased employees of the
Provider (the "Designated Leased Employees"). The Provider and Response
shall establish mutually agreeable procedures with respect to the
participation of Designated Leased Employees in the Provider Plan. Such
procedures shall be designed to avoid the tax disqualification of the
Provider Plan, similar plans of practices similarly situated,
(collectively, the "Plans").
(b) If the Oversight Committee determines that the relationship
between Response and the Provider (and other practices similarly situated)
constitutes an "affiliated service group" (as defined in Code
Section 414(m)), Response and the Provider shall take such actions as may
be necessary to avoid the tax disqualification of the Plans. Such actions
may include the amendment, freeze, termination or merger of the Provider
Plan.
(c) The Plans described on Exhibit 6.9(a) attached hereto are
approved by Response. The Provider shall not enter into any new "employee
benefit plan" (as defined in Section 3(3) of the Employment Retirement
Income Security Act of 1974, as amended ("ERISA") without the consent of
Response (which will not be unreasonably withheld). In addition, the
Provider shall not offer any retirement benefits or make any material
retirement payments other than under the Provider Plan to any Stockholder
of the Provider without the express written consent of Response (which will
not be unreasonably withheld). Except as otherwise required by law, the
Provider shall not materially amend, freeze, terminate or merge the
Provider Plan without the express written consent of Response (which will
not be unreasonably withheld). In the event of either of the foregoing,
Response's consent shall not be withheld if such action would not
jeopardize the qualification of any of the Plans. The Provider agrees to
make such changes to the Provider Plan, including the amendment freeze,
termination or merger of the Provider Plan, as may be approved by the
Oversight Committee and Response but only if such changes are necessary to
prevent the disqualification of any of the Plans and do not have a material
adverse impact on Provider.
(d) Expenses incurred in connection with the Provider Plan or other
Provider employee benefit plans, including, without limitation, the
compensation of counsel, accountants, corporate trustees, and other agents
shall be included in Clinic Expenses.
(e) The contribution and administration expenses for the Designated
Leased Employees shall be included in the Provider's operating budget. The
Provider and Response shall not make employee benefit plan contributions or
payments to the Provider for their respective employees in excess of such
budgeted amounts unless required by law or the terms of the Provider Plan.
Response shall make contributions or payments with respect to the Provider
Plan or other Provider employee benefit plans, as a Clinic Expense, on
behalf of eligible Designated Leased Employees, and other eligible Provider
employees. In the event a Provider Plan or other Provider employee benefit
plan is terminated, Response shall be responsible, as a Clinic Expense, for
any funding liabilities related to eligible Designated Leased Employees;
provided, however, Response shall only be responsible for the funding of
any liability accruing after the date of the Acquisition Agreement.
(f) Response shall have the sole and exclusive authority to adopt,
amend or terminate any employee benefit plan for the benefit of its
employees, regardless of whether such employees are Designated Leased
Employees, unless such actions would require the amendment, freeze or
termination of the Provider Plan to avoid disqualification of the Provider
Plan, in which case any such action would be subject to the express prior
written consent of the Oversight Committee. Response shall have the sole
and exclusive authority to appoint the trustee, custodian and administrator
of any such plan.
(g) In the event that any "employee welfare benefit plan" (as defined
in ERISA Section 3(l)) maintained or sponsored by the Provider must be
amended, terminated, modified or changed as a result of the Provider or
Response being deemed to be a part of an affiliated service group, the
Oversight Committee will replace such plan or plans with a plan or plans
that provides those benefits approved by the Oversight Committee. It shall
be the goal of the Oversight Committee in such event to provide
substantially similar or comparable benefits if the same can be provided at
a substantially similar cost to the replaced plan.
ARTICLE 7.
EMPLOYMENT AGREEMENTS, RESTRICTIVE COVENANTS AND REMEDIES
The parties recognize that the services to be provided by
Response shall be feasible only if the Provider operates an active medical
practice to which the Physicians associated with the Provider devote their
full time and attention. To that end:
7.1. Employment Agreements with Physicians. As a condition to
Response's continuing obligations hereunder, the Provider and each
Physician now or hereinafter employed thereby shall execute and deliver to
each other an Employment Agreement.
7.2. Restrictive Covenants by Provider and Physicians. As a material
inducement to Response to consummate the Purchase Agreement and execute,
deliver and perform this Service Agreement, the Provider shall not engage
in the practice of oncology or hematology, including providing or
supervising the provision of chemotherapy, radiation treatment or other
cancer therapies, within Broward County, Florida (the "Practice Territory")
during the term of this Agreement and for a period of five (5) years after
any termination of this Agreement. Each Physician Stockholder shall not
engage in the above-described activities during the term of his employment
by the Provider and for a period of five (5) years after cessation of a
Physician's employment with the Provider. Notwithstanding the foregoing,
(A) any such restrictive covenant shall not restrict such Physician from
(i) delivering physician services that are unrelated to the fields of
hematology or oncology, including the practice of internal medicine, (ii)
teaching hematology and/or oncology, (iii) assuming directorships of
hospices, or (iv) performing such services that render revenue excluded
from Practice Revenue as listed on Schedule 4.2(c) following termination of
any such employment relationship with the Provider; and (B) such
restrictive covenant shall not apply to any Stockholder if this Agreement
shall be terminated by the Provider pursuant to Section 11.5 below upon a
Response Event of Default.
7.3. Restrictive Covenants of Response. During the term of this
Agreement, neither Response nor any Affiliate, officer, director or
employee of Response or any Affiliate shall, without the consent of the
Provider, purchase or otherwise acquire any oncology or hematology practice
within Broward County, Florida or establish, operate or enter into a
service agreement with, or provide services similar to those provided under
this Agreement to, any medical group or physician engaged in the practice
of oncology or hematology within the Practice Territory. In that regard,
the Provider and the Stockholders hereby consent to Response acquiring the
practices of and entering into management services agreements with Drs.
Rymer, Faig and Zaravinos in Fort Lauderdale, Florida, Drs. Weisberg, Weiss
and Weinreb in Tamarac, Florida, and The Center for Hematology-Oncology,
P.A., Boca Raton, Florida (which operates a clinic in North Broward County,
Florida).
7.4. Enforcement. Response, the Provider and the Stockholders
acknowledge and agree that since a remedy at law for any breach or
attempted breach of the provisions of this Article 7 shall be inadequate,
either party shall be entitled to specific performance and injunctive or
other equitable relief in case of any such breach or attempted breach, in
addition to whatever other remedies may exist by law. All parties hereto
also waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such injunctive or other equitable
relief. If any provision of Article 7 relating to the restrictive period,
scope of activity restricted and/or the territory described therein shall
be declared by a court of competent jurisdiction to exceed the maximum time
period, scope of activity restricted or geographical area such court deems
reasonable and enforceable under applicable law, the time period, scope of
activity restricted and/or area of restriction held reasonable and
enforceable by the court shall thereafter be the restrictive period, scope
of activity restricted and/or the territory applicable to the restrictive
covenant provisions in this Article 7. The invalidity or
non-enforceability of this Article 7 in any respect shall not affect the
validity or enforceability of the remainder of this Article 7 or of any
other provision of this Agreement.
ARTICLE 8.
FINANCIAL ARRANGEMENTS
8.1. Service Fees. Subject to the terms of Section 5.11, in
consideration for its services hereunder, Response shall receive the Base
Service Fee and Performance Fee, computed pursuant to Schedule A hereto, as
compensation for its services hereunder. The Service Fees shall be
determined on an annual basis, based on annual financial statements
prepared pursuant to Section 5.3 above. The Base Service Fee shall be
payable by means of the procedure set forth in Section 8.2 below.
Notwithstanding the foregoing or any other provision in this Service
Agreement, in the event the sum of the Base Service Fee, Non-physician
Employee Compensation and Practice Retainage shall exceed the aggregate
Practice Revenue of the Provider, then (i) first, the Fixed Portion of Base
Service Fee shall be reduced by the amount of such excess, and (ii) to the
extent such excess is greater than the Fixed Portion, such remaining excess
will be reimbursed by Response to the Provider. Any reimbursement pursuant
to this Section 8.1 shall be made by Response no later than the 15th day of
March following the year in which such deficiency arose. In the event that
Response is required to fund any deficiency pursuant to this Section 8.1,
then in any future year in which an Annual Surplus exists, such Annual
Surplus will first be paid to Response to the extent of any cumulative
deficiency funded by Response.
8.2. Base Service Fee. The Clinic Expense Portion of the Base
Service Fee shall be payable by the Provider to Response out of the
Provider Operating Account as Clinic Expenses are incurred by Response,
subject to ordinary, reasonable and customary payment terms on invoices for
goods and services, and subject to Section 5.11 and the adjustments as set
forth in Section 8.1 above. The Fixed Portion of the Base Service Fee
shall be payable by the Provider to Response out of the Provider Operating
Account on a monthly basis, based on monthly financial statements prepared
pursuant to Section 5.6 above, provided that Response shall have made all
advances pursuant to the Receivables Line pursuant to Section 5.12 above,
and, provided, further, that if at any time there shall be insufficient
funds in the Provider Operating Account to pay all or any part of the Fixed
Portion, then such unpaid Fixed Portion (if any) shall be accrued. The
Performance Fee will be computed as of the end of each calendar year based
on amounts recorded during the calendar year.
ARTICLE 9.
RECORDS
9.1. Patient Records. Upon termination of this Agreement, the
Provider shall retain all patient medical records maintained by the
Provider or Response in the name of the Provider. Response shall, at its
option, and if allowed under Applicable Law be entitled to have reasonable
access during normal business hours to the Provider's patient medical
records applicable to the period of Response's performance under this
Agreement. Moreover, the Provider shall, at its option, be entitled to
retain copies of financial and accounting records relating to all services
performed by the Provider or Response under this Agreement. All parties
agree to maintain the confidentiality of patient identifying information
and not to disclose such information except as may be required or permitted
by Applicable Law.
9.2. Records Owned by Response. All records relating in any way to
the operation of a Clinic which are not the property of the Provider under
the provisions of Section 9.1 above, shall at all times be the property of
Response.
9.3. Access to Records. During the term of this Agreement and
thereafter, the Provider or its designee shall have reasonable access
during normal business hours in Tamarac, Florida to the Provider's and
Response's financial and accounting records, including, but not limited to,
records of collections, expenses and disbursements, as kept by Response in
performing Response's obligations under this Agreement, and the Provider
may copy any and or all such records.
9.4. Government Access to Records. To the extent required by Section
1861(v)(1)(I) of the Social Security Act, each party shall, upon proper
request, allow the United States Department of Health and Human Services,
the Comptroller General of the United States, and their duly authorized
representatives access to this Agreement and to all books, documents, and
records necessary to verify the nature and extent of the costs of services
provided by either party under this Agreement, at any time during the term
of this Agreement and for an additional period of four (4) years following
the last date services are furnished under this Agreement. If either party
carries out any of its duties under this Agreement through an agreement
between it and an individual or organization related to it or through a
subcontract with an unrelated party, that party to this Agreement shall
require that a clause be included in such agreement (the value of which is
in excess of $10,000.00) to the effect that until the expiration of four
(4) years after the furnishing of services pursuant to such agreement, the
related organization shall make available, upon request by the United
States Department of Health and Human Services, the Comptroller General of
the United States, or any of their duly authorized representatives, all
agreements, books, documents, and records of such related organization that
are necessary to verify the nature and extent of the costs of services
provided under that agreement.
ARTICLE 10.
INSURANCE AND INDEMNITY
10.1. Insurance to be Maintained by the Provider. Throughout the
term of this Agreement, the Provider shall maintain comprehensive
professional liability insurance with limits of not less than $500,000 per
claim and with aggregate policy limits of not less than $1,000,000 per
Physician and a separate limit for the Provider. The Provider shall be
responsible for all liabilities in excess of the limits of such policies.
Response shall have the option, with Oversight Committee approval, of
providing such professional liability insurance through an alternative
program, provided such program meets the requirements of the Insurance
Commissioner of the State of Florida. Response shall reimburse the
Provider for any unearned professional liability insurance premiums paid by
the Provider to the extent not reimbursed or reimbursable by the Provider's
insurance carrier if the Provider's existing professional liability
insurance program is canceled and replaced by a comparable professional
liability insurance program initiated by Response.
10.2. Insurance to be Maintained by Response. Throughout the term of
this Agreement, Response shall provide and/or maintain comprehensive
professional liability insurance for all Non-Physician Employees and
Physician Extender Employees, the cost of which shall be a Clinic Expense,
with limits as determined reasonable by Response in its national program,
and comprehensive general liability and property insurance covering each
Clinic premises and operations. Moreover, Response shall, at its election,
be entitled to acquire a "tail policy" covering potential claims against
the Corporation for which the Corporation might be liable after
consummation of the transaction contemplated by the Purchase Agreement, the
cost of which coverage shall be a Clinic Expense.
10.3. Additional Insureds. The Provider and Response each agrees to
use its best efforts to have the other named as an additional insured on
the their respective professional liability insurance programs.
10.4. Indemnification Matters Involving Third Parties. The Provider
and Response ("Indemnitor") shall indemnify, hold harmless and defend the
other ("Indemnitee") from and against any and all liability, loss, damage,
claim, causes of action, and expenses (including reasonable attorneys'
fees, except to the extent limited below), whether or not covered by
insurance ("Adverse Consequences"), caused or asserted to have been caused,
directly or indirectly, by or as a result of the acts (intentional or
negligent) or omissions by, in the case of the Provider, any Physician
Stockholder or other person acting under the supervision and control
thereof, or, in the case of Response, by any employee, agent, officer,
director or shareholder thereof who is not acting under the supervision and
control of a Physician Stockholder of the Provider.
(a) If any third party shall notify an Indemnitee with respect to
any matter (a "Third Party Claim") which may give rise to a claim for
indemnification under this Section 10.4, then the Indemnitee shall promptly
notify the Indemnitor in writing; provided, however, that no delay on the
part of the Indemnitee in notifying the Indemnitor shall relieve the
Indemnitor from any obligation hereunder unless (and then solely to the
extent) the Indemnitor is prejudiced by such delay.
(b) The Indemnitor will have the right to defend the Indemnitee
against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnitee so long as (A) the Indemnitor notifies the
Indemnitee in writing within 15 days after the Indemnitee has given notice
of the Third Party Claim that the Indemnitor will indemnify the Indemnitee
in accordance with this Article 10, (B) the Indemnitor provides the
Indemnitee with evidence acceptable to the Indemnitee that the Indemnitor
will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not, in
the good faith judgment of the Indemnitee, likely to establish a
precedential custom or practice adverse to the continuing business
interests of the Indemnitee, and (D) the Indemnitor conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnitor is conducting the defense of the
Third Party Claim in accordance with Section 10.4(b) above, (A) the
Indemnitee may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the Indemnitee
will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of
the Indemnitor (not to be withheld unreasonably), and (C) the Indemnitor
will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of
the Indemnitee (not to be unreasonably withheld).
(d) In the event any of the conditions in Section 10.4(b) above
is or becomes unsatisfied, however, (A) the Indemnitee may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnitee need not consult with, or obtain any consent from, the
Indemnitor in connection therewith), (B) the Indemnitor will reimburse the
Indemnitee promptly and periodically for the costs of defending against the
Third Party Claim (including attorneys' fees and expenses), and (C) the
Indemnitor will remain responsible for any Adverse Consequences the
Indemnitee may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 10.4.
10.5. Determination of Adverse Consequences. The parties hereto
shall take into account the time cost of money (using the Applicable Rate
as the discount rate) in determining Adverse Consequences for purposes of
this Section 10.
10.6. Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of,
any statutory, equitable, or common law remedy any party may have for
breach of representation, warranty, or covenant.
ARTICLE 11.
TERM AND TERMINATION
11.1. Term of Agreement. This Service Agreement shall be effective
as of September 1, 1996 and shall expire on July 31, 2036, unless earlier
terminated pursuant to the terms hereof.
11.2. Extended Term. Unless earlier terminated as provided for in
this Agreement, the term of this Agreement shall be automatically extended
for additional terms of five (5) years each, unless either party delivers
to the other party, not less than one hundred eighty (180) days prior to
the expiration of the preceding term, written notice of such party's
intention not to extend the term of this Agreement.
11.3. Response Event of Default. The occurrence of any of the
following events shall constitute a default by Response (a "Response Event
of Default") under this Agreement, giving the Provider the right to the
remedies set forth in Section 11.5 below:
(a) the filing by Response of a petition in voluntary bankruptcy
or an assignment by Response for the benefit of creditors, or upon other
action taken or suffered, voluntarily or involuntarily, under any federal
or state law for the benefit of debtors by Response, except for the filing
of a petition in involuntary bankruptcy against Response which is dismissed
within sixty (60) days thereafter.
(b) any material default by Response in the performance of any
of its duties or obligations under this Agreement or breach of its
representations and warranties as set forth in Article 14, and such default
or breach shall continue for a period of sixty (60) days (fifteen (15) days
in the case of Response's failure to provide required advances under the
Receivables Line) after written notice thereof has been given to Response
by the Provider.
(c) in the event Response shall, intentionally or in bad faith,
misapply funds or assets of the Provider or commit a similar act which
cause material harm to the Provider.
11.4. Provider Event of Default. The occurrence of any of the
following events shall constitute a default by the Provider (an "Provider
Event of Default") under this Agreement, giving Response the right to the
remedies set forth in Section 11.6 below:
(a) the filing by the Provider of a petition in voluntary
bankruptcy or an assignment by the Provider for the benefit of creditors,
or upon other action taken or suffered, voluntarily or involuntarily, under
any federal or state law for the benefit of debtors by the Provider, except
for the filing of a petition in involuntary bankruptcy against the Provider
which is dismissed within sixty (60) days thereafter; provided, further,
that if the Physicians comprising the Provider are lawfully able, within 60
days after the occurrence of such event, to reorganize the practice or form
a new entity to continue the practice, and if such new entity and its
principal stockholders or owners, with the reasonable consent of Response,
assumes all of the obligations of the Provider under the Service Agreement
or enter into a new Service Agreement with Response for the remaining term
and containing substantially the same terms and conditions as the original
Service Agreement, then Response will not terminate the original Service
Agreement.
(b) any material default by the Provider in the performance of
any of its material duties or obligations under Sections 6.1, 6.8, 7.2,
8.1, 8.2 and 15.1 of this Agreement , and such default or breach shall
continue for a period of sixty (60) days after written notice thereof has
been given to the Provider by Response; provided, however, that such
curative period shall be extended for an additional 60 days if the Provider
shall be acting in good faith to cure such default throughout the initial
curative period.
(c) the final determination of termination or suspension of the
Provider's Medicare or Medicaid Provider Number, or the Medicare or
Medicaid Provider Numbers of a majority of the Physicians employed thereby,
and such termination or suspension shall continue for sixty (60) days, or
if any Physician employed by the Provider shall have his license to
practice medicine or DEA license revoked or suspended and the affected
Physician or the Provider, as the case may be, shall not, within 90 days,
either gain reinstatement of such license or otherwise find a suitable
replacement for such Physician (which replacement may be the shifting of
case load to an existing Physician employee of the Provider); provided,
however, that the foregoing curative period shall be extended for an
additional 60 days if the Provider shall be acting in good faith to cure
such default throughout the initial curative period.
11.5. Remedies upon Response Event of Default. Upon the occurrence
of a Response Event of Default, the Provider shall have the right to
terminate this Agreement by written notice to Response without any further
obligation to Response for the Service Fee after the giving of such notice.
In such event the Provider shall have the option to purchase from Response,
and upon proper exercise of such option by the Provider in the manner
hereinbelow provided, Response shall sell to the Provider, all assets and
properties, tangible and intangible (which intangible assets shall not
include any intangible asset related to this Service Agreement), owned by
Response and used by the Provider in its medical practice ("Practice
Assets") for a price, payable in cash, equal to the book value of the
Practice Assets. Moreover, to the extent permissable under the terms of
any lease to which Response is a party, upon the request of the Provider,
Response shall sublease to the Provider any leased real or personal
property utilized in the Provider's practice for a subrent equal to the
rental charged Response pursuant to the underlying lease. The Provider
shall exercise such option by giving written notice to Response within
sixty (60) days after the occurrence of the Response Event of Default.
11.6. Remedies upon Provider Event of Default. Upon the occurrence
of a Provider Event of Default, Response shall have the right to terminate
this Agreement by written notice to the Provider, and the Provider shall
have no further obligation to Response for the Service Fee after the date
such notice is received. In such event, the Provider shall be obligated to
pay to Response the Liquidated Damages Amount in complete satisfaction of
any and all damages suffered by Response hereunder. Such Liquidated
Damages Amount shall be payable by the Provider in cash within sixty (60)
days after occurrence of the Provider Event of Default. Each Stockholder
hereby severally, and not jointly, guarantees the foregoing obligation of
the Provider and agrees to pay to Response, in cash, one-half (1/2) of the
Liquidated Damages Amount not otherwise paid by the Provider, provided that
and to the extent he is a Remaining Physician Stockholder for purposes of
this Agreement. At the election of a Stockholder, such Stockholder's
obligation to pay Liquidated Damages hereunder may be satisfied by delivery
of shares of common stock of Response, valued at the average closing price
of such common stock on the Nasdaq Stock Market for the ten (10) trading
days immediately preceding the date of delivery of such shares and by
cancellation of any promissory note payable by Response to such
Stockholder, with only the difference between the Liquidated Damages
payable by such Stockholder and the sum of the value of common stock and
principal cancellation of any note being payable in cash by such
Stockholder. Moreover, in such event the Provider shall have the
obligation to purchase from Response, and Response shall sell to the
Provider, (i) all Practice Assets for a price equal to the book value of
the Practice Assets as of the date of the Provider Event of Default, and
(ii) any intangible asset then carried on Response's books for a price
equal to its then book value. Moreover, to the extent permissable under
the terms of any lease to which Response is a party, upon the request of
the Provider, Response shall sublease to the Provider any leased real or
personal property utilized in the Provider's practice for a subrent equal
to the rental charged Response pursuant to the underlying lease. The
Provider shall exercise such option by giving written notice to Response
within sixty (60) days after the occurrence of the Response Event of
Default.
11.7. Closing of Repurchase by the Provider and Effective Date of
Termination. The Provider shall pay cash for Practice Assets and
intangible assets repurchased hereunder. The amount of the purchase price
shall be reduced by the amount of debt and liabilities of Response assumed
by the Provider, by the amount of Liquidated Damages received by Response
from the Provider or any Physician Stockholder pursuant to Section 11.6
above, and by any payment Response has failed to make under this
Agreement, provided that such payments or obligations are not otherwise
accounted for in the liabilities assumed by the Provider in connection with
the repurchase described herein. The closing date for the repurchase shall
be determined by the Provider, but shall in no event occur later than 90
days from the date of the notice of termination. In the event of such
repurchase, each party shall use its best efforts to obtain such consents
and authorizations to such transaction as may be required by Applicable Law
or otherwise. In such event, Response shall execute and deliver to the
Provider such assignments to leases and other contracts and such bills of
sale and other transfer or closing documents necessary to effect such
transaction. The Provider shall execute and deliver to Response such
officers' certificates, assumption agreements and other closing documents
necessary to close such transaction. Between the date of termination and
the closing of the repurchase the Provider shall be entitled to use all
Practice Assets, and Response hereby grants the Provider a license to use
the Practice Assets in such event. In consideration of the foregoing
license, the Provider will pay to Response an amount equal to any rental
payments by Response to any third party vendor in respect of all Practice
Assets.
ARTICLE 12
DAMAGE AND LOSS; CONDEMNATION
12.1. Use of Insurance Proceeds. All insurance or condemnation
proceeds payable by reason of any physical loss of any of the improvements
comprising the facilities or the furniture, fixtures and equipment used by
the Clinics, shall be available for the reconstruction, repair or
replacement, as the case may be, of any damage, destruction or loss. The
Oversight Committee, in consultation with the Provider, shall review and
approve such reconstruction, repair or replacement.
12.2. Temporary Space. In the event of substantial damage to or the
condemnation of a significant portion of the facilities, Response shall use
its best efforts to provide temporary facilities until such time as the
facilities can be restored or replaced.
ARTICLE 13
REPRESENTATIONS AND WARRANTIES OF THE PROVIDER
The Provider represents, warrants, covenants and agrees with Response
that:
13.1. Validity. The Provider is a professional association duly
organized, validly existing and in good standing under the laws of the
State of Florida. The Provider has the full power and authority to own its
property, to carry on its business as presently being conducted, to enter
into this Agreement, and to consummate the transactions contemplated
hereby.
13.2. Permits. The Provider and all physicians and other health care
professionals associated with or employed by the Provider have all permits
and licenses and other Necessary Authorizations required by all Applicable
Laws, except where failure to secure such licenses, permits and other
Necessary Authorizations does not have a material adverse effect; have made
all regulatory filings necessary for the conduct of the Provider's
business; and are not in violation of any of said permitting or licensing
requirements.
13.3. Authority. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary action, and this Agreement is a valid and
binding Agreement of the Provider, enforceable in accordance with its
terms. The Provider has obtained all third-party consents necessary to
enter into and consummate the transaction contemplated by this Agreement.
Neither the execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby, nor compliance by the Provider with
any of the provisions hereof, will:
(a) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of, any lien, security interest, charge or encumbrance upon any of
the assets of the Corporation to be acquired pursuant to the Purchase
Agreement, the Provider's charter or bylaws or any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust,
license, agreement or other instrument or obligation to which the Provider
is a party, or by which either the Provider or any of the assets to be
conveyed hereunder is bound; or
(b) violate any order, writ, injunction, decree, statute, rule
or regulation applicable either to the Provider or any of the assets to be
conveyed hereunder.
13.4. Provider Compliance. The Provider has all licenses necessary
to operate each Clinic in accordance with the requirements of all
Applicable Laws and has all Necessary Authorizations for the use and
operation of all assets comprising each Clinic, all of which are in full
force and effect. There are no outstanding notices of deficiencies
relating to the Provider issued by any Governmental Authority or Third
Party Payor requiring conformity or compliance with any Applicable Law or
condition for participation of such Governmental Authority or Third Party
Payor, and after reasonable and independent inquiry and due diligence and
investigation, the Provider has neither received notice nor has any
knowledge or reason to believe that such Necessary Authorizations may be
revoked or not renewed in the ordinary course.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES OF RESPONSE
Response represents, warrants, covenants and agrees with the Provider
as follows:
14.1. Organization. Response is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Tennessee. Response has the full power to own its property, to carry on
its business as presently conducted, to enter into this Agreement and to
consummate the transactions contemplated hereby.
14.2. Authority. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary action, and this Agreement is a valid and
binding Agreement of Response enforceable in accordance with its terms.
Response has taken all necessary action to authorize the execution,
delivery and performance of this Agreement, as well as the consummation of
the transactions contemplated hereby. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated
hereby will not, violate any provisions of the charter or the bylaws of
Response or any indenture, mortgage, deed of trust, lien, lease, agreement,
arrangement, contract, instrument, license, order, judgment or decree or
result in the acceleration of any obligation thereunder to which Response
is a party or by which it is bound.
14.3. Permits. Response has all permits and licenses and other
Necessary Authorizations required by all Applicable Laws, except where
failure to secure such licenses, permits and other Necessary Authorizations
does not have a material adverse effect; have made all regulatory filings
necessary for the conduct of Response's business; and are not in violation
of any of said permitting or licensing requirements.
ARTICLE 15
COVENANTS OF THE PROVIDER
15.1. Merger, Consolidation and Other Arrangements. The Provider
shall not incorporate, merge or consolidate with any other entity or
individual or liquidate or practice at any location other than the Clinics
or dissolve or wind-up the Provider's affairs or enter into any
partnerships, joint ventures or sale-leaseback transactions or purchase or
otherwise acquire (in one or a series of related transactions) any part of
the property or assets (other than purchases or other acquisitions of
inventory, materials and equipment in the ordinary course of business) of
any other person or entity without first obtaining the prior written
consent of Response; provided, however, that no such consent shall be
required in respect of any incorporation, merger, consolidation,
partnership, joint venture or acquisition transaction that (i) results in
the continued, unimpaired operation of the Clinics; and (ii) results in the
Physician Stockholders maintaining at least a fifty percent (50%) voting
and equity interest in the Clinics. The Provider acknowledges and agrees
that such consent may be withheld if Response and the Provider cannot
mutually agree upon the terms and conditions of a new Service Agreement
with the Provider.
15.2. Necessary Authorizations/Assignment of Licenses and Permits.
The Provider shall maintain all licenses, permits, certifications, or other
Necessary Authorizations and shall not assign or transfer any interest in
any license, permit, certificate or other Necessary Authorization granted
to it by any Governmental Authority, nor shall the Provider assign,
transfer, or remove or permit any other individual or entity to assign,
transfer or remove any records of the Provider, including without
limitation, patient records, medical and clinical records (except for
removal of such patient records as directed in writing by the patients
owning such records or as otherwise required under any Applicable Law).
15.3. Transaction with Affiliates. The Provider shall not enter into
any transaction or series of transactions, whether or not related or in the
ordinary course of business, with any Affiliate of Response, other than on
terms and conditions substantially as favorable to the Provider as would be
obtainable by the Provider at the time in a comparable arms-length
transaction with a person not an Affiliate of Response.
15.4. Compliance with All Laws. The Provider shall comply with all
laws and regulations relating to the Provider's practice and the operation
of any cancer care facility, including, but not limited to, all state,
federal and local laws relating to the acquisition or operation of a health
care practice. Furthermore, the Provider shall not violate any Applicable
Laws.
15.5. Third Party Payor Programs. The Provider shall maintain the
Provider's compliance with the requirements of all Third Party Payor
Programs in which the Provider is currently participating or authorized to
participate.
15.6. Change in Business or Credit and Collection Policy. The
Provider shall not make any change in the character of the Provider's
business or in the credit and collection policy, which change would, in
either case, impair the collectibility of any Accounts Receivable or
otherwise modify, amend or extend the terms of any such account other than
in the ordinary course of business.
15.7. Security Interest. The Provider shall, effective as of the
date hereof, be deemed to have granted (and the Provider does hereby grant)
to Response a first priority security interest in and to any and all of the
Accounts Receivable (except Governmental Receivables) and the proceeds
thereof (including the proceeds, after deposit into the Provider Operating
Account, from the collection of Governmental Receivables) to secure the
repayment of all amounts advanced to the Provider under the Receivables
Line and all accrued interest thereon, and this Agreement shall be deemed
to be a security agreement. Upon a default by the Provider in the payment
of amounts due under the Receivables Line, Response may at its option
exercise from time to time any and all rights and remedies available to it
under the UCC or otherwise. The Provider represents and warrants that the
location of the Provider's principal place of business, and all locations
where the Provider maintains records with respect to its Accounts
Receivables are set forth under its name in Section 16.5 hereof. The
Provider agrees to notify Response in writing thirty (30) days prior to any
change in any such location. The exact name of the Provider is as set
forth at the beginning of this Agreement. The Provider is a new
professional association, and the medical practice conducted by the
Provider was formerly conducted under the name "Rosenberg & Kalman, M.D.,
P.A.," a Florida professional association. The Provider shall notify
Response in writing thirty (30) days prior to any change in any such name.
15.8. Representations and Warranties. The Provider agrees to notify
Response in the event that any representation or warranty contained in
Article 13 of this Agreement becomes untrue in any material respect.
ARTICLE 16.
GENERAL PROVISIONS
16.1. Assignment. Response shall have the right to assign its rights
hereunder to any person, firm or corporation under common control with
Response and to any lending institution, for security purposes or as
collateral, from which Response obtains financing. Except as set forth
above, neither Response nor the Provider shall have the right to assign
their respective rights and obligations hereunder without the written
consent of the other party.
16.2. No Practice of Medicine. The parties acknowledge that Response
is not authorized or qualified to engage in any activity which may be
construed or deemed to constitute the practice of medicine. To the extent
any act or service required of Response in this Agreement should be
construed or deemed by any Governmental Authority or court to constitute
the practice of medicine, the performance of said act or service by
Response shall be deemed waived and forever unenforceable.
16.3. Whole Agreement; Modification. This Agreement supersedes all
prior agreements between the parties, and there are no other agreements or
understandings, written or oral, between the parties regarding this
Agreement, the Exhibits and the Schedules, other than as set forth herein.
This Agreement shall not be modified or amended except by a written
document executed by both parties to this Agreement, and such written
modification(s) shall be attached hereto.
16.4. Arbitration of Disputes; Legal Fees. Any dispute arising under
this Service Agreement shall be submitted by the parties to binding
arbitration pursuant to the Florida Uniform Arbitration Act, with any such
arbitration proceeding being conducted in Ft. Lauderdale, Broward County,
Florida in accordance with the rules of the American Arbitration
Association. Any arbitration panel presiding over any arbitration
proceeding hereunder is hereby empowered to render a decision in respect of
such dispute, to award costs and expenses (including reasonable attorney
fees) as it shall deem equitable and to enter its award in any court of
competent jurisdiction.
16.5. Notices. All notices required or permitted by this Agreement
shall be in writing and shall be addressed as follows:
To Response: Response Oncology, Inc.
1775 Moriah Woods Blvd.
Memphis, Tennessee 38117
Attn: Joseph T. Clark, CEO
With copies to: John A. Good, Esq.
Executive Vice-President _ General Counsel
Response Oncology, Inc.
1775 Moriah Woods Blvd.
Memphis, Tennessee 38117
To Provider: Abraham Rosenberg, M.D.
Rosenberg & Kalman, M.D., P.A.
7421 N. University Drive
Tamarac, Florida 33321
With copies to: Steven B. Lapidus, Esq.
Greenberg Taurig
1221 Brickell Ave., 21st Floor
Miami, Florida 33131
or to such other addresses as either party shall notify the other.
16.6. Binding on Successors. Subject to Section 16.1, this Agreement
shall be binding upon the parties hereto, and their successors, assigns,
heirs and beneficiaries.
16.7. Waiver of Provisions. Any waiver of any terms and conditions
hereof must be in writing, and signed by the parties hereto. The waiver of
any of the terms and conditions of this Agreement shall not be construed as
a waiver of any other terms and conditions hereof.
16.8. Governing Law. The validity, interpretation and performance of
this Agreement shall be governed by and construed in accordance with the
laws of the State of Florida. The parties acknowledge that Response is not
authorized or qualified to engage in any activity which may be construed or
deemed to constitute the practice of medicine. To the extent any act or
service required of Response in this Agreement should be construed or
deemed, by any governmental authority, agency or court to constitute the
practice of medicine, the performance of said act or service by Response
shall be deemed waived and forever unenforceable.
16.9. Severability. The provisions of this Agreement shall be deemed
severable and if any portion shall be held invalid, illegal or
unenforceable for any reason, the remainder of this Agreement shall be
effective and binding upon the parties.
16.10. Additional Documents. Each of the parties hereto agrees to
execute any document or documents that may be requested from time to time
by the other party to implement or complete such party's obligations
pursuant to this Agreement.
16.11. Time is of the Essence. Time is hereby expressly declared to
be of the essence in this Agreement.
16.12. Confidentiality. Except for disclosure to its bankers,
underwriters or lenders, or as necessary or desirable for conduct of
business, including negotiations with other acquisition candidates, neither
party hereto shall disseminate or release to any third party any
information regarding any provisions of this Agreement, or any financial
information regarding the other (past, present or future) that was obtained
by the other in the course of the negotiations of this Agreement or in the
course of the performance of this Agreement, without the other party's
written approval; provided, however, the foregoing shall not apply to
information which (i) is generally available to the public other than as a
result of a breach of confidentiality provisions; (ii) becomes available on
a non-confidential basis from a source other than the other party or its
affiliates or agents, which source was not itself bound by a
confidentiality agreement, or (iii) which is required to be disclosed by
law or pursuant to court order.
16.13. Contract Modifications for Prospective Legal Events. In the
event any state or federal laws or regulations, now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decisions, a regulatory agency or legal counsel in such a manner
as to indicate that the structure of this Agreement may be in violation of
such laws or regulations, the Provider and Response shall amend this
Agreement as necessary. To the maximum extent possible, any such amendment
shall preserve the underlying economic and financial arrangements between
the Provider and Response.
16.14. Remedies Cumulative. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party shall be considered
exclusive of any other remedy available to any party, but the same shall be
distinct, separate and cumulative and may be exercised from time to time as
often as occasion may arise or as may be deemed expedient.
16.15. Language Construction. The language in all parts of this
Agreement shall be construed, in all cases, according to its fair meaning,
and not for or against either party hereto. The parties acknowledge that
each party and its counsel have reviewed and revised this Agreement and
that the normal rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
16.16. No Obligation to Third Parties; Nonrecourse Obligation. None
of the obligations and duties of Response or the Provider under this
Agreement shall in any way or in any manner be deemed to create any
obligation of Response or of the Provider to, or any rights, in, any person
or entity not a party to this Agreement. The Stockholders, their heirs,
legatees, successors and assigns shall have no individual obligation for
the performance of the provisions hereof (including any obligation of the
Provider under Section 11.6) except as expressly provided herein
16.17. Communications. The Provider and Response agree that good
communication between the parties is essential to the successful
performance of this Agreement, and each pledges to communicate fully and
clearly with the other on mattes relating to the successful operation of
the Provider's practice at a Clinic.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
R&K, M.D., P.A.
By:
Title:
RESPONSE ONCOLOGY, INC.
By:
Title:
ROSENBERG & KALMAN, M.D., P.A.
By:
Title
STOCKHOLDERS:
Alfred M. Kalman, M.D.
Abraham Rosenberg, M.D.
RESPONSE ONCOLOGY, INC.
SERVICE AGREEMENT
SCHEDULE A
Base Service Fee
The Base Service Fee shall be equal to the sum of (i) amounts recorded
as Clinic Expenses (the "Clinic Expense Portion") plus (ii) ***% of
Practice Revenue (the "Fixed Portion").
Performance Fee
During the entire term of the Service Agreement, including any
extended term, a Performance Fee in an amount equal to 50% of any Annual
Surplus shall be paid to Response.
Performance Fees shall be computed on the basis of Annual Surplus
computed for each calendar year. For any period during the term of the
Service Agreement that does not encompass an entire calendar year, the
Performance Fees for such partial period shall be computed as follows:
a) For any partial period that commences with the execution and
delivery of the Service Agreement, Clinic Expenses, Practice Retainage and
the Fixed Portion of the Base Service Fee (the latter two items being
computed on Practice Revenue for such period) from such commencement date
until the end of the calendar year of commencement shall be determined. The
sum of Clinic Expenses, Practice Retainage and the Fixed Portion of the
Base Service Fee will be subtracted from Practice Revenue, with the
difference then being divided by the number of days in such period, and the
quotient multiplied by 365. The computation formula set forth above will
be applied to the annualized Annual Surplus to compute an annualized
Performance Fee, which shall then be divided by 365 and multiplied by the
number of days in the partial period to yield the Performance Fee payable
with respect to such short period.
b) For any partial period that commences on the first day of a
calendar year and ends prior to the last day thereof, Annual Surplus for
the full year will be computed based on the definition thereof, which
result shall then be divided by 365 and multiplied by the number of days
during the partial period to yield the Performance Fees payable with
respect to such short period.
Liquidated Damages Amount
The amount of $***, decreased by ***% per year until August 31, 2001,
at which time such amount shall be $*** per Remaining Physician Stockholder
for the duration of this Agreement.
Practice Retainage
For purposes of this Agreement, the Practice Retainage shall equal
***% of Practice Revenue.
*** Material redacted pursuant to a claim for confidential treatment.