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Exhibit 99.2
CONFIDENTIAL TREATMENT REQUESTED BY RESPONSE ONCOLOGY, INC.
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SERVICE AGREEMENT
BY AND AMONG
RESPONSE ONCOLOGY OF FT. LAUDERDALE, INC.
SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP, P.A.
AND
STOCKHOLDERS OF SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY ASSOCIATES, P.A.
July 1, 1996
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SERVICE AGREEMENT
THIS SERVICE AGREEMENT dated as of July 1, 1996 by and among RESPONSE
ONCOLOGY OF FT. LAUDERDALE, INC., a Florida corporation ("Response"), SOUTHEAST
FLORIDA HEMATOLOGY ONCOLOGY GROUP, P.A., a Florida professional association
(the "Provider") and THE STOCKHOLDERS OF SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY
ASSOCIATES, P.A. (the "Stockholders").
RECITALS:
WHEREAS, Response is in the business of owning certain assets of and
managing and operating medical clinics, and providing support services to and
furnishing medical practices with the necessary facilities, equipment,
personnel, supplies and support staff to operate a medical practice;
WHEREAS, the Provider desires to retain Response to perform the
practice management functions described herein in order to permit the Provider
and its employees to devote substantially full time and efforts on a
concentrated and continuous basis to the rendering of medical services to
patients;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, effective July 1, 1996, the
Provider, the Stockholders and Response agree to the terms and conditions
provided in this Agreement.
ARTICLE 1.
RELATIONSHIP OF THE PARTIES
1.1. Independent Relationship. The Provider and Response intend to
act and perform as independent contractors, and the provisions hereof are not
intended to create any partnership, joint venture, agency or employment
relationship between the parties. Notwithstanding the authority granted to
Response herein, Response and the Provider agree that the Provider shall retain
the authority to direct the medical, professional, and ethical aspects of its
medical practice. The Provider shall have absolute control over all matters
pertaining to physician compensation, benefits, vacation, leave time, office
hours, call schedules and other physician-related matters. Each party shall be
solely responsible for and shall comply with all state and federal laws
pertaining to employment taxes, income withholding, unemployment compensation
contributions and other employment related statutes applicable to that party.
1.2. Responsibilities of the Parties. As more specifically set forth
herein, Response shall provide the Provider with offices and facilities,
equipment, supplies, support personnel, and management and financial advisory
services. As more specifically set forth herein, the Provider shall be
responsible for the recruitment and hiring of Physicians and all issues related
to medical practice patterns and documentation thereof. Notwithstanding
anything herein to the contrary, no "designated health service" as defined in
42 U.S.C. Section 1395nn, including any amendments or successors thereto, shall
be provided by Response under this Agreement.
1.3. Provider's Matters. Matters involving the internal agreements
and finances of the Provider, including the distribution of professional fee
income among individual Physician Stockholders (as hereinafter defined), tax
planning, and pension and investment planning (and expenses relating solely to
these internal business matters), and hiring, firing and licensing of
Non-Physician Employees (hereinafter defined) shall remain the sole
responsibility of the Provider and the individual Physician Stockholders.
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1.4. Patient Referrals. The parties agree that the benefits to the
Provider hereunder do not require, are not payment for, and are not in any way
contingent upon the admission, referral or any other arrangement for the
provision of any item or service offered by Response to any of the Provider's
patients in any facility or laboratory controlled, managed or operated by
Response.
1.5. Professional Judgment. Each of the parties acknowledges and
agrees that the terms and conditions of this agreement pertain to and control
the business and financial relationship between and among the parties but do
not pertain to and do not control the professional and clinical relationship
between and among the Provider, the Provider's employees, and the Provider's
patients. Nothing in this Agreement shall be construed to alter or in any way
affect the legal, ethical and professional relationship between and among the
Provider and the Provider's patients, nor shall anything contained in this
Agreement abrogate any right, privilege, or obligation arising out of or
applicable to the physician-patient relationship.
ARTICLE 2.
DEFINITIONS
2.1. Definitions. For the purposes of this Agreement, the following
definitions shall apply:
Financial and Accounting Definitions:
(a) "Account Debtor" shall mean an account debtor or any other
Person obligated in respect of an Account Receivable.
(b) "Accounts Receivable" shall mean, with respect to the
Provider, all accounts and any and all rights to payment of money or
other forms of consideration of any kind now owned or hereafter
acquired (whether classified under the Uniform Commercial Code as
accounts, chattel paper, general intangibles, or otherwise) for goods
sold or leased or for services rendered by the Provider, including, but
not limited to, accounts receivable, proceeds of any letters of credit
naming the Provider as beneficiary, chattel paper, insurance proceeds,
contract rights, notes, drafts, instruments, documents, acceptances,
and all other debts, obligations and liabilities in whatever form from
any other Person, provided that cash, checks and credit card purchases
are not included in the definition of Accounts Receivable.
(c) References to "amounts recorded" shall mean all amounts
recorded or recordable in accordance with GAAP (hereinafter defined),
including, without limitation, all billed Physician Services Revenue
hereinafter defined and Non-Physician Revenue hereinafter defined,
earned Capitation Revenue hereinafter defined and all expenses that
are subject to accrual under GAAP.
(d) "Ancillary Clinic Expenses" shall mean all amounts
recorded comprising items described in the definition of Clinic
Expenses below that are directly attributable to the delivery of
Ancillary Services (hereinbelow defined), including interest on
indebtedness incurred by Reponse to finance the delivery of such
Ancillary Services.
(e) "Ancillary Net Operating Income" shall mean the excess
(if any) of Ancillary Revenue over Ancillary Clinic Expenses.
(f) "Ancillary Revenue" shall mean all amounts recorded as
Practice Revenue that are directly attributable to the delivery of
Ancillary Services.
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(g) "Annual Surplus" shall mean (A) Practice Revenue
(hereinafter defined) less Ancillary Revenue, reduced by (B) the sum
of Clinic Expenses (except Ancillary Clinic Expenses), Practice
Retainage and the Base Portion of the Base Service Fee
(h) "Bad Debt Allowance" shall mean, with respect to Accounts
Receivable, an allowance for uncollectible Accounts Receivable
determined based on a methodology approved by the Oversight Committee.
(i) "Base Service Fee" shall mean the Base Service Fee as set
forth on Schedule A hereto.
(j) "Base Portion" of the Fixed Portion of the Service Fee
shall have the meaning set forth on Schedule A hereto.
(k) "Capitation Revenue" shall mean amounts recorded
consisting of revenue from managed care organizations, where payment
is made periodically on a per member basis, administration payments,
co-payments and all other payments by managed care organizations,
including, without limitation, managed care variable expense bonuses,
hospital expense bonuses or any other bonus or payment which rewards
the Provider for its medical performance under any managed care
arrangement.
(l) "Clinic Expenses" shall mean all amounts recorded
comprising the expenses incurred in the operation of any Clinic,
including, without limitation:
(A) Non-Physician Employee Compensation (hereinafter
defined), regardless of by whom paid, salaries, benefits and
other direct costs of any Executive Director employed pursuant
to Section 5.6 below and all personnel employed by Response at
a Clinic;
(B) obligations of Response under leases or
subleases of facilities and personal property utilized by the
Provider, including, without limitation, Clinics and medical
offices, medical, laboratory and other equipment utilized by
the Provider;
(C) personal property and intangible taxes assessed
against properties and assets utilized by the Provider or
otherwise deployed in any Clinic commencing on the date of
this Agreement; and
(D) other ordinary, necessary and reasonable
expenses incurred by Response in carrying out its obligations
under this Agreement, including, without limitation,
depreciation on equipment utilized in the Clinics, interest on
secured loans incurred to purchase Clinic equipment,
insurance (except professional liability of physicians, which
will remain a physician expense), laundry, supplies, cost of
goods sold from inventory, utilities, telephone service,
printing, stationery, advertising, postage, medical
transcribing and waste disposal.
All Clinic Expenses shall be computed in accordance with GAAP.
To the extent expenses incurred benefit multiple clinics, such Clinic
Expenses shall be allocated among such Clinics benefiting from such
expenditure as Response shall reasonably determine with the approval
of the Oversight Committee. Clinic Expenses shall not include (i)
Physician Expense, (ii) any corporate overhead charges of Response
(which shall include amortization of any intangible asset related to
this Service Agreement), (iii) any capital expenditures incurred by
Response pursuant hereto, except to the extent provided herein, (iv)
any federal or state income taxes, and (v) any expenses which are
expressly designated herein as expenses or responsibilities of and are
paid by the Provider.
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(m) "Clinic Expense Portion" of the Service Fee shall have
the meaning set forth in Section 8.1 below.
(n) "Fee Adjustment" shall mean any adjustment for any
discount, non-allowed contractual or other adjustment under Medicare,
Medicaid, any preferred provider plan, workers' compensation plan,
employee/dependent health care benefit program or other contractual
arrangement between the Provider and any Third Party Payor, and any
professional courtesy or other reasonable and customary discount that
results in fee revenue not being collected.
(o) "GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other
entity or other practices and procedures as may be approved by a
significant segment of the accounting profession or prescribed by the
Securities and Exchange Commission, which are applicable to the
circumstances as of the date of determination. For purposes of this
Agreement, GAAP shall be applied in a manner consistent with the
historic practices used by Response.
(p) "Governmental Receivables" shall mean an Account
Receivable of the Provider which (i) arises in the ordinary course of
business of the Provider, (ii) has as its Third Party Payor the United
States of America or any state or any agency or instrumentality of the
United States of America or any state which makes any payments with
respect to Medicare or Medicaid or with respect to any other program
(including CHAMPUS) established by federal or state law, and (iii) is
required by federal or state law to be paid or to be made to the
Provider as a health care provider. Governmental Receivables shall
not, however, refer to amounts payable by private insurers under
contract to provide benefits under the Federal Employee Health Benefit
Program.
(q) "Non-Physician Employee Compensation" shall mean all
amounts recorded as salaries, wages (including overtime), benefits,
payroll taxes and other compensation expense by the Provider in
respect of Non-Physician Employees (hereinafter defined), which shall
be a Clinic Expense regardless of who shall pay same.
(r) "Percentage Portion" of the Fixed Portion of the Service
Fee shall have the meaning set forth in Schedule A below.
(s) "Performance Fee" shall mean an amount payable to
Response on a calendar-year basis as computed pursuant to the formula
set forth in Schedule A hereto.
(t) "Physician Expense" shall mean the sum of (i) salaries,
bonuses and other compensatory payments to Physicians (hereinafter
defined) employed by or otherwise performing services for the
Provider, including Physician Stockholders; (ii) perquisites and
benefits provided to such persons; (iii) travel and entertainment
expense, continuing education expense, professional liability expense
and other expenses and payments that primarily benefit such persons;
provided, however, that any such expense incurred at the direction of
Response shall not be a Physician Expense and shall instead be a
Clinic Expense; and (iv) payroll taxes in respect of any of the
foregoing.
(u) "Physician Services Revenue" shall mean all amounts
recorded as fees and revenue (net of Fee Adjustments and Bad Debt
Allowance) by or on behalf of the Provider or received directly by
Physicians as a result of professional medical services furnished to
patients by Physicians and Non-Physician Employees, whether rendered
in an inpatient or outpatient setting, and excluding any items
approved pursuant to Section 4.2(c) below, and specifically including
amounts paid directly to the Physicians by North Broward Hospital and
VITAS.
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(v) "Practice Retainage" shall mean an amount equal to the
percentage of Practice Revenue (less Ancillary Revenue) set forth on
Schedule A hereto.
(w) "Practice Revenue" shall mean the sum of all amounts
recorded by the Provider as Physician Services Revenue and Capitation
Revenue and other revenue (including chemotherapy and other drug
revenue) attributable to the conduct of the Provider's medical
practice, but shall specifically exclude profits from any investment
of the Provider in any partnership, joint venture, corporation,
professional association and any other revenue not derived from the
providing of services by employees of the Provider or Response.
(x) "Service Fee" shall mean the sum of the Base Service Fee
and the Performance Fee (if any).
Other Definitions:
(y) An "Affiliate" of a corporation shall mean (a) any person
or entity directly or indirectly controlled by such corporation, (b)
any person or entity directly or indirectly controlling such
corporation, (c) any subsidiary of such corporation if the corporation
has a fifty percent (50%) or greater ownership interest in the
subsidiary, or (d) such corporation's parent corporation if the parent
has a fifty percent (50%) or greater ownership interest in the
corporation. For purposes of this Section 2.1(u), the Provider is not
an affiliate of Response.
(z) "Ancillary Services" shall mean diagnostic, treatment or
other medical services that may from time to time be offered by
Provider after the effective date hereof, which were not offered by
the Provider or Response on the effective date hereof, and which are
delivered by the Provider utilizing equipment and other capitalized
assets acquired by Response at a cost in excess of $100,000.
(aa) "Applicable Law" shall mean all applicable provisions of
constitutions, statutes, rules, regulations, ordinances and orders of
all Governmental Authorities and all orders and decrees of all courts,
tribunals and arbitrators, and shall include, without limitation,
Health Care Law.
(ab) "CHAMPUS" shall mean the Civilian Health and Medical
Program of the Uniformed Services.
(ac) "Clinic" shall mean the practice facility currently
utilized by the Provider, and any facility, related business and all
medical group business operations which the Provider and Response may,
in the future, mutually agree to characterize as a Clinic.
(ad) "Employment Agreement" shall mean an employment agreement
between each physician now or hereinafter employed by the Provider and
the Provider pursuant to which the physician shall be employed by the
Provider to provide medical services on behalf of the Provider, which
Employment Agreement shall be substantially in the form set forth as
Exhibit 7.1 hereof.
(ae) "Governmental Authority" shall mean any national, state
or local government (whether domestic or foreign), any political
subdivision thereof or any other governmental, quasi-governmental,
judicial, public or statutory instrumentality, authority, board, body,
agency, bureau or entity or any arbitrator with authority to bind a
party at law.
(af) "Health Care Law" shall mean any Applicable Law
regulating the acquisition, construction, operation, maintenance or
management of a health care practice, facility, provider or payor,
including without limitation 42 U.S.C. Section 1395nn and 42 U.S.C.
Section 1320a-7b.
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(ag) "Liquidated Damages Amount" shall mean an amount equal
to the Liquidated Damages Amount set forth on Schedule A hereto.
(ah) "Medicaid" shall mean any state program pursuant to
which health care providers are paid or reimbursed for care given or
goods afforded to indigent persons and administered pursuant to a plan
approved by the Health Care Financing Administration under Title XIX
of the Social Security Act.
(ai) "Medicare" shall mean any medical program established
under Title VIII of the Social Security Act and administered by the
Health Care Financing Administration.
(aj) "Necessary Authorization" shall mean with respect to the
Provider all Medicare/Medicaid Provider Numbers, certificates of need,
authorization, certifications, consents, approvals, permits, licenses,
notices, accreditations and exemptions, filings and registrations, and
reports required by Applicable Law, including, without limitation,
Health Care Law, which are required, necessary or reasonably useful to
the lawful ownership and operation of the Provider's business.
(ak) "Oversight Committee" shall mean a five (5) member
committee established pursuant to Section 4.1. Except as otherwise
provided, the act of a majority of the votes by members of the
Oversight Committee shall be the act of the Oversight Committee. In
the event that one or more of the Provider designees on the Oversight
Committee shall have a conflict with respect to the matter to be voted
on by the Oversight Committee, then the remaining Provider designees
shall have the right to cast the vote of such designee on the matter
under consideration.
(al) "Person" shall mean an individual, corporation,
partnership, joint venture, trust, association, or unincorporated
organization, or a government or any agency or political subdivision
thereof including, without limitation, a Third Party Payor.
(am) "Physician" shall mean any medical doctor employed by
the Provider or with whom the Provider has entered into independent
contractor or other non-employee relationships.
(an) "Non-Physician Employees" shall mean all persons other
than Physicians who deliver billable medical or health care services
under the direction of the Provider and its Physicians or are
otherwise under contract with the Provider to provide professional
services to Clinic patients and, in each case, who are duly licensed
to provide professional medical services in the State of Florida.
(ao) "Physician Extender Personnel" shall mean employees of
Response who deliver patient care services to the Provider, including
without limitation nurse anesthetists, physician assistants,
registered and licensed practical nurses, nurse practitioners,
psychologists, and other such persons except Physicians and
Non-Physician Employees.
(ap) "Physician Stockholders" shall mean those Physicians who
are from time to time hereafter members of the Provider.
(aq) "Practice Assets" shall have the meaning ascribed to
that term in Section 11.5 of this Agreement.
(ar) "Provider" shall have the meaning set forth in the
initial paragraph hereof.
(as) "Provider Event of Default" shall have the meaning
ascribed to such term in Section 11.4 hereof.
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(at) "Purchase Agreement" shall mean that certain Purchase
Agreement dated as of July 1, 1996 by and among Responseand the
Stockholders.
(au) "Remaining Physician Stockholder" shall mean any
Physician Stockholder who shall have been a Stockholder at the
effective time of this Agreement and who, at any time within one (1)
year prior to the occurrence of a Provider Event of Default shall have
been a Physician Stockholder; provided, however, that such term shall
not include any Stockholder who shall have, within such one year
period, ceased to be a Physician Stockholder by reason of death, total
disability (as defined in the Physician Stockholder's Employment
Agreement), or retirement at age 55 or with the consent of the
Oversight Committee.
(av) "Response" shall mean Response Oncology of Ft.
Lauderdale, Inc., a Florida corporation.
(aw) "Response Event of Default" shall have the meaning
ascribed to such term in Section 11.3 of this Agreement.
(ax) "Stockholder" shall mean each Stockholder of the
Provider as of the date hereof.
(ay) "Third Party Payor" shall mean each Person which makes
payment under a Third Party Payor Program, and each Person which
administers a Third Party Payor Program.
(az) "Third Party Payor Program" shall mean Medicare,
Medicaid, CHAMPUS, insurance provided by Blue Cross and/or Blue
Shield, managed care plans, and any other private health care
insurance programs and employee assistance programs as well as any
future similar programs.
ARTICLE 3.
FACILITIES TO BE PROVIDED BY RESPONSE
3.1. Facilities. Response shall provide and make available to the
Provider for its use in its group medical practice the offices and facilities
more fully described in Exhibit 3.1 hereto, the furnishings, fixtures and
equipment located thereupon, and shall pay as hereinafter provided all costs
(all of which shall be Clinic Expense) of repairs, maintenance and
improvements, utility (telephone, electric, gas, water) expenses, normal
janitorial services, refuse disposal and all other costs and expenses
reasonably incurred in conducting the operations contemplated by this Agreement
in each Clinic during the term of this Agreement, including, without
limitation, related real or personal property lease cost payments and expenses,
taxes and insurance. Response shall comply with all terms and provisions of
any lease or other agreement with respect to such facility and shall maintain
such facility and equipment used by the Provider in updated, fully operational
condition, ordinary wear and tear excepted. Response shall consult with the
Provider regarding the condition, use and needs for the offices, facilities and
improvements, and any purchase, lease or improvement of any offices, facilities
or equipment, or change in any of the foregoing, shall be as directed and/or
approved by a majority of the Oversight Committee. Response shall follow all
directions of the Oversight Committee in respect of improvements to the
offices, facilities and equipment to be used by the Provider. The Provider
shall not amend, modify or terminate any sub-lease agreements without the prior
written consent of Response.
3.2 Use of Facilities. The Provider shall not use or occupy any
facility or equipment owned or leased by Response for any purpose which is
prohibited by any Applicable Law, this Agreement, or the terms of any lease or
other arrangement with respect to the use or occupancy of such facility, or
which may be dangerous to life, limb, or property (except medical services
provided in the ordinary course of business), or which would increase the fire
or extended coverage insurance rate on such facility.
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ARTICLE 4.
DUTIES OF THE OVERSIGHT COMMITTEE
4.1. Formation and Operation of the Oversight Committee. The parties
shall establish an Oversight Committee which shall be responsible for
developing management and administrative policies for the overall operation of
each Clinic. The Oversight Committee shall consist of five (5) members.
Response shall designate, and shall have the right to remove and replace, in
its sole discretion, two (2) members of the Oversight Committee. The Provider
shall designate, and shall have the right to remove and replace, in its sole
discretion, three (3) members of the Oversight Committee. The Oversight
Committee shall have the authority to adopt bylaws (which shall include the
fixing of a quorum for the conduct of business by the Oversight Committee),
establish regular meeting times and places, call special meetings for any
purpose and elect a chairman and a secretary who shall preside over and record,
respectively, the proceedings at any meeting of the Oversight Committee.
Except as otherwise provided herein, the affirmative vote of a majority of the
members of the Oversight Committee shall be required for approval of any action
taken thereby.
4.2. Duties and Responsibilities of the Oversight Committee. The
Oversight Committee shall have the following duties and obligations:
(a) Capital Improvements and Expansion. Any renovation and
expansion plans and capital equipment expenditures with respect to any
Clinic shall be reviewed and approved by the Oversight Committee and
shall be based upon economic feasibility, physician support,
productivity and then current market conditions.
(b) Annual Budgets. All annual capital and operating budgets
prepared by Response, as set forth in Section 5.2, shall be subject to
the review and approval of the Oversight Committee, which shall have
the authority to reject individual items in the budget and to fix such
amounts so rejected; provided, however, that in the event the
Oversight Committee exercises such authority and increases any budget
amount by more than ten (10%) percent of the amount proposed by
Response and does not propose a commensurate reduction in other budget
items reasonably acceptable to Response, then such modification shall
be approved by a vote of four-fifths (4/5) of the Oversight Committee.
(c) Exceptions to Inclusion in the Physician Services
Calculation. The exclusion of any revenue from Practice Revenue,
whether now or in the future, shall be subject to the approval by a
vote of four-fifths (4/5) of the Oversight Committee. Current
approved exceptions are listed in the attached Exhibit 4.2(c).
(d) Advertising. All advertising and other marketing of the
services performed at any Clinic shall be subject to the prior review
and approval of the Oversight Committee.
(e) Patient Fees; Collection Policies. As a part of the
annual operating budget, in consultation with the Provider and
Response, to the extent allowed by Applicable Law, the Oversight
Committee shall review and advise the Provider as to an appropriate
fee schedule for all physician and ancillary services rendered by the
Provider, which fee schedule shall ultimately be determined by the
Provider in its sole discretion. In addition, the Oversight Committee
shall approve the credit collection policies of any Clinic.
(f) Retirement of Stockholders. The Oversight Committee
shall determine and act upon the request of any Stockholder to retire
before attaining age 55.
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(g) Provider and Payor Relationships. Decisions regarding
the establishment or maintenance of relationships with managed care
organizations, institutional health care providers and Third Party
Payors shall be made by the Oversight Committee in consultation with
Response and the Provider.
(h) Strategic Planning. The Oversight Committee shall
develop long-term strategic planning objectives.
(i) Capital Expenditures. The Oversight Committee shall
determine the priority of major capital expenditures benefiting the
Clinics.
(j) Physician Hiring. Except as provided in Section 15.9
below, the Oversight Committee shall determine the number and type of
physicians required for the efficient operation of each Clinic. The
approval of the Oversight Committee shall be required for any
variations to the restrictive covenants in any physician employment
contract.
(k) Executive Director. The selection and retention of any
Executive Director pursuant to Section 5.6 and the salary and cash
fringe benefits of each Executive Director shall be pursuant to the
direction and control of the Oversight Committee. If the Provider is
dissatisfied with the services provided by any Executive Director, the
Provider shall refer the matter to the Oversight Committee. The
Oversight Committee shall, in good faith, determine whether the
performance of such Executive Director could be brought to acceptable
levels through counsel and assistance, or whether the Executive
Director's employment should be terminated. Lisa Fox shall initially
be retained as Executive Director.
ARTICLE 5.
ADMINISTRATIVE SERVICES TO BE PROVIDED BY RESPONSE
5.1. Performance of Management Functions. Response shall provide or
arrange for the services set forth in this Article 5, the cost of all of which
shall be paid by Response in accordance with this Agreement and included in
Clinic Expenses. Response is hereby expressly authorized to perform its
services hereunder in whatever manner it deems reasonably appropriate to meet
the day-to-day requirements of Clinic operations in accordance with the general
standards approved by the Oversight Committee, including, without limitation,
performance of some of the business office functions at locations other than a
Clinic. The Provider will not act in a manner which would prevent Response
from efficiently managing the day-to-day operations of each Clinic in a
business-like manner.
5.2. Financial Planning and Goals. Response shall prepare annual
capital and operating budgets reflecting in reasonable detail anticipated
revenue and expenses, sources and uses of capital for growth in the Provider's
practice and medical services rendered at each Clinic. Response shall
determine the amount and form of capital to be invested annually in each Clinic
and shall specify the targeted profit margin for each Clinic which shall be
reflected in the overall budget. Response realizes that a Clinic may realize
opportunities to provide new services and utilize new technologies that will
require capital expenditures and anticipates that such opportunities may
include outpatient treatment centers, renovations to Clinic facilities, the
addition of satellite locations and new and replacement equipment pursuant to
Section 3.1, and new services, including, without limitation, radiation
therapy, radiology and stem cell supported high dose chemotherapy. Upon the
direction of the Oversight Committee, Response agrees to provide funds to allow
the Clinic to provide such new services and to utilize such new technologies.
Such budgets shall be presented to the Oversight Committee at least sixty (60)
days prior to the end of the preceding calendar year. The Oversight Committee
shall us its best efforts to agree upon a budget at least thirty (30) days
prior to the end of such preceding Calendar year as provided in Section 4.2(b),
and, once approved in such manner, shall be binding upon Response and the
Provider unless modified or revised in like manner by the Oversight Committee.
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5.3. Financial Statements. Response shall prepare monthly,
quarterly and annual financial statements on an accrual basis reflecting the
results of operations of the Provider. If the Provider desires an audit of any
financial statement, the Provider may obtain such an audit at its own expense.
Response shall prepare monthly unaudited financial statements containing a
combined balance sheet and statements of operations for the Clinics, which
shall be delivered to the Provider within thirty (30) days after the close of
each calendar month. Notwithstanding the foregoing, Response shall be under no
obligation to keep multiple sets of books for cash basis and accrual basis
methods of accounting, but shall be entitled to keep one set of books
maintained on an accrual basis method of accounting, which shall be converted
by workpaper-only entries to the cash basis method of accounting for purposes
of tax reporting.
5.4. Inventory and Supplies. Response shall order and purchase
reasonable and requested medical and office inventory, pharmaceuticals and
supplies required by the Provider in the day-to-day operations of its medical
practice.
5.5. Management Services and Administration.
(a) The Provider hereby appoints Response as its sole and
exclusive manager and administrator of all day-to-day business
functions connected with its group medical practice. The Provider
agrees that the purpose and intent of this Service Agreement is to
relieve the Provider, the Physicians and Non-Physician Employees, to
the maximum extent possible, of the administrative, accounting,
payroll, accounts payable, personnel and business aspects of its
practice, with Response assuming responsibility for and being given
all necessary authority to perform these functions. Response agrees
that the Provider, and only the Provider, will perform the medical
functions of its practice. Response will have no authority, directly
or indirectly, to perform, and will not perform, any medical function.
Response may, however, advise the Provider as to the relationship
between its performance of medical functions and the overall
administrative and business functioning of its practice. To the
extent that they assist the Provider in performing medical functions,
all Physician Extender Personnel performing patient care services
obtained and provided by Response shall be subject to the professional
direction and supervision of the Provider and, in the performance of
such medical functions, shall not be subject to any direction or
control by, or liability to, Response, except as may be specifically
authorized by the Provider.
(b) Response shall, on behalf of the Provider and under the
Provider's provider number, bill patients and Third Party Payors, and
shall collect the professional fees for medical services rendered by
the Provider in each Clinic, for services performed outside a Clinic
for the Provider's hospitalized patients, and for all other
professional and Clinic services. Response's billing and collection
practice shall be consistent with those of comparable, nationally
recognized, well managed group medical practices. The Provider hereby
appoints Response for the term hereof to be its true and lawful
attorney-in-fact, for the following purposes: (i) to bill patients
in the Provider's name and on its behalf; (ii) to collect Accounts
Receivable resulting from such billing in the Provider's name and on
its behalf; (iii) to receive payments from insurance companies,
prepayments from health care plans, and payments from all other Third
Party Payors; (iv) to take possession of and endorse in the name of
the Provider (and/or in the name of an individual Physician, such
payment intended for purpose of payment of a Physician's bill) any
notes, checks, money orders, insurance payments and other instruments
received in payment of Accounts Receivable; and (v) with the advance
consent of the Oversight Committee, to initiate collection
proceedings in the name of the Provider or any Physician to collect
any accounts and monies owed to the Provider, Clinic or any Physician,
to enforce the rights of the Provider or any Physician as a creditor
under any contract or in connection with the rendering of any service,
and to contest adjustments and denials by any Governmental Authority
(or its fiscal intermediaries) as Third Party Payors. All adjustments
made for uncollectible accounts, professional courtesies and other
activities that do not generate a collectible fee shall be done in a
reasonable and consistent manner.
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(c) Response shall design, supervise and maintain custody of
all files and records relating to the operation of each Clinic,
including but not limited to accounting, billing, patient medical
records, and collection records. Patient medical records shall at all
times be and remain the property of the Provider and shall be located
at Clinic facilities so that they are readily accessible for patient
care. The Physicians shall have the obligation to oversee the
preparation and maintenance of patient medical records, and to provide
such medical information as shall be necessary and appropriate to the
clinical function of such records, and to maintain such records so as
to ensure the availability of Third-party Payor reimbursement for
services rendered. The management of all files and records shall
comply with applicable state and federal statutes. Response shall use
its best efforts to preserve the confidentiality of patient medical
records and use information contained in such records only for the
limited purpose necessary to perform the services set forth herein;
provided, however, in no event shall a breach of said confidentiality
be deemed a default under this Agreement. Response shall indemnify
and hold the Provider harmless from and against any monetary loss
suffered by the Provider on account of Response's breach of the
foregoing confidentiality provisions.
(d) Response shall supply to the Provider necessary clerical,
accounting, payroll, bookkeeping and computer services, laundry,
linen, uniforms, printing, stationary, advertising, postage and
duplication services, medical transcribing services and any other
ordinary, necessary or appropriate item or service for the operation
of a Clinic, the cost of all of which shall be Clinic Expense.
(e) Subject to the provisions of Section 4.2(d), Response
shall design and implement adequate and appropriate public relations
programs on behalf of the Provider, with appropriate emphasis on
public awareness of the availability of services at the Provider's
Clinics. Any public relations program shall be conducted in
compliance with applicable laws and regulations governing advertising
by medical professionals and applicable canons or principles of
professional ethics governing the Provider and its physicians.
(f) Response shall provide the data necessary for the
Provider to prepare its annual income tax returns and financial
statements, and shall provide payroll and related services for
Physicians and Non-Physician Employees. Response shall have no
responsibility for the filing of such tax returns, the payment of such
income taxes or the cost of preparation of income tax returns or
financial statements on behalf of the Provider or any Physician
employed thereby.
(g) Response shall assist the Provider in recruiting
additional Physicians and Non-Physician Employees, carrying out such
administrative functions as may be appropriate such as advertising for
and identifying potential candidates, checking credentials, and
arranging interviews; provided, however, the Provider shall interview
and make the ultimate decision as to the suitability of any Physician
or Non-Physician Employee to become associated with a Clinic. All
Physicians recruited by Response and accepted by the Provider shall be
the sole employees of the Provider, to the extent such Physicians are
hired as employees. Subject to the provisions of Section 6.4, any
expenses incurred in the recruitment of Physicians or Non-Physician
Employees, including, but not limited to, employment agency fees,
relocation and interviewing expenses, shall be Clinic Expenses.
(h) Subject to the provisions of Section 4.2(g), Response
shall negotiate and administer all managed care contracts on behalf of
the Provider.
(i) Response shall provide for the proper cleanliness of the
physical premises occupied and/or utilized by the Provider, and
maintenance and cleanliness of the equipment, furniture and furnishings
located upon such premises.
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5.6. Executive Director. Subject to the provisions of Section
4.2(k), Response shall recruit, hire and appoint an Executive Director to
manage and administer all of the day-to-day business functions of each Clinic
(it being understood and agreed that, if reasonable, a single Executive
Director may have responsibility for multiple Clinics). Subject to Oversight
Committee approval, Response shall determine the salary, bonuses (if any) and
fringe benefits of each Executive Director, which salary, bonuses (which may be
payable in Response common stock or by issuance of options on Response common
stock) and benefits shall, to the extent the same are current expenses under
GAAP, be Clinic Expenses. At the direction, supervision and control of
Response, the Executive Director, subject to the terms of this Agreement, shall
implement the policies established by the Oversight Committee and shall
generally perform the duties and have the responsibilities of an administrator.
The Executive Director shall be responsible for organizing the agenda for the
meetings of the Oversight Committee referred to in Article 4.
5.7. Personnel. Response shall provide Physician Extender Personnel
and other non-physician professional support (other than persons who are
required to be Non-Physician Employees) and administrative personnel, clerical,
secretarial, bookkeeping and collection personnel reasonably necessary for the
conduct of operations at each clinic. Response shall determine and cause to be
paid the salaries and fringe benefits of all such personnel, which shall be
Clinic Expenses. Such personnel shall be under the direction, supervision and
control of Response, with those personnel performing billable patient care
services remaining employees of and being subject to the professional
supervision of the Provider. If the Provider is dissatisfied with the services
of any person, the Provider shall consult with Response. Response shall in
good faith determine whether the performance of that employee could be brought
to acceptable levels through counsel and assistance, or whether such employee's
employment should be terminated. All of Response's obligations regarding staff
shall be governed by the overriding principle and goal of providing the optimal
quality of medical care consistent with the efficient operation of the Clinic.
Employee assignments shall be made to assure consistent and continued rendering
of the optimal quality medical support services consistent with the efficient
operation of the Clinic and to ensure prompt availability and accessibility of
individual medical support personnel to Physicians in order to develop
constant, familiar and routine working relationships between individual
Physicians and individual members of the medical support personnel. Response
shall maintain established working relationships wherever possible and Response
shall make every reasonable effort consistent with sound business practices to
honor the specific requests of the Provider with regard to the assignment of
its employees.
In addition to the foregoing, Response shall advance to the Provider
from time to time the amount of any operating deficiency with respect to any
new physician who is an employee but not a shareholder of the Provider ("Junior
Physician"). Operating deficiency with respect to a Junior Physician is hereby
defined as the excess of the amount payable to such Junior Physician pursuant
to any salary guarantee over the amount of salary payable to such Junior
Physician under the Provider's normal and customary compensation system, as the
same may be modified from time to time by the Provider. Upon the earliest to
occur of (i) the Junior Physician becoming a shareholder of the Provider, or
(ii) the Junior Physician recognizing billings in excess of his cost (as
determined by the Oversight Committee, a "Surplus"), the Provider shall begin
repaying the amounts theretofore advanced in respect of such Junior Physician.
Such advanced amounts shall be repaid in full within thirty (30) days after the
occurrence of the event enumerated (i) above, and, in the event item (ii) above
shall occur, shall be repaid as Surplus is recognized, in quarterly amounts
equal to such surplus for each quarter, within sixty (60) days after the end of
each such quarter; provided, however, that all such advances shall be payable
in full by the Provider no later than the third anniversary of the employment
date of such Junior Physician.
5.8. Events Excusing Performance. Response shall not be liable to
the Provider for failure to perform any of the services required herein in the
event of strikes, lock-outs, calamities, acts of God, unavailability of
supplies or other events over which Response has no control for so long as such
events continue, and for a reasonable period of time thereafter.
5.9. Compliance with Applicable Laws. Response shall comply with all
Applicable Law, in the conduct of its obligations under this Agreement.
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5.10. Quality Assurance. Response shall assist the Provider in
fulfilling its obligations to its patients to maintain the optimal quality of
medical and professional services consistent with the efficient operation of
the Clinic.
5.11. Provider Bank Accounts. The Provider agrees to establish and
maintain two (2) separate bank accounts. One such account, which shall be
referred to as the Provider Receipts Account, will be under the sole direct
control of the Provider and will be utilized only as a depository for Practice
Revenue. Such account shall be subject to, and the Provider agrees to execute
and deliver to an appropriate commercial bank, a Lockbox Operating Procedural
Agreement, and, pursuant thereto, shall instruct such bank to transfer
automatically all amounts deposited in the Provider Receipts Account to the
Provider Operating Account. The second account shall be referred to as the
Provider Operating Account, and shall be maintained for the purpose of (a)
depositing amounts swept from the Provider Receipts Account and advances from
the Receivables Line (defined below) pursuant to Section 5.12 and (b) paying
(i) all expenses which are solely the obligation of the Provider, including,
without limitation, Physician Expense, up to the amount of Practice Retainage,
which shall be paid to a separate bank account under the Provider's sole
control, (ii) Clinic Expenses payable directly by the Provider (including,
without limitation, Non-physician Employee Compensation), (iii) the Clinic
Expense Portion of the Base Service Fee owed pursuant to Section 8.1 of this
Agreement, (iv) the Fixed Portion of the Base Service Fee owed pursuant to
Section 8.1 of this Agreement, and (v) other distributions to the Provider, and
the distributions shall be made in that order of payment. To the extent
Practice Revenue of the Provider is insufficient to pay all amounts set forth
above, then any shortage shall be applied in reverse order to the order
provided above, with the Practice Retainage being the last item to be reduced
by such shortage. Provider hereby designates, constitutes and appoints
Response, through its duly authorized officers and employees as approved by the
Oversight Committee, as a signatory on the Provider Operating Account, with
full power and authority to sign checks and cause drafts and other debits to be
made on the Provider Operating Account in the name of the Provider and to
otherwise manage the cash resources and flow of the Provider. After the
payment of all items described in clauses (b)(i) through (iv) above, the
Provider may withdraw amounts for distributions to Physician Members.
5.12. Credit Line. Response shall from time to time, but no less
frequent than monthly, during the term of this Agreement advance to Provider,
in readily available United State funds, by wire transfer, intrabank transfer
or other electronic means, to be deposited into the Provider Operating Account,
an amount (the "Receivables Line") equal to 100% of Accounts Receivable, net of
any Bad Debt Allowance and all Fee Adjustments with respect thereto. Amounts
advanced by Response under the Receivables Line will not bear interest except
after payment shall have become due hereunder, in which event such advanced
amounts shall bear interest at the maximum rate permitted to be lawfully
charged. Amounts advanced by Response pursuant to this Section 5.12 shall be
payable by Provider upon termination of this Agreement or occurrence of a
Provider Event of Default. Response shall have the authority from time to time
pursuant to Section 5.11 above to make principal payments on the Receivables
Line. Advances on the Receivables Line will be secured by a security interest
in and to Accounts Receivable granted pursuant to Section 15.7 below.
5.13. Ancillary Services. Response shall assist this Provider in
adding and operating such ancillary services, including Ancillary Services as
defined in Section 2.1(z) of this Service Agreement, as approved by the
Oversight Committee.
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ARTICLE 6.
OBLIGATIONS OF THE PROVIDER
6.1. Professional Services. The Provider shall provide professional
services to patients in compliance at all times with ethical standards, laws
and regulations applying to the medical profession, in a manner and to an
extent consistent with that established by the Provider prior to effectiveness
of this Agreement. The Provider shall also make all reports and inquiries to
the National Practitioners Data Bank and/or any state medical licensing board
required by Applicable Law. The Provider shall use its best efforts to ensure
that each Non-Physician Employee and Technical Employee associated with the
Provider to provide medical care to patients of the Provider is licensed by the
State of Florida to the extent required. The Provider shall promptly notify
Response in writing, citing the underlying circumstances, in the event the
Provider or any Physician or Non-Physician Employee associated therewith (i)
shall be or become the subject of any investigation into or proceeding with
respect to allegations of professional misconduct or incompetence; (ii) shall
be or become the subject of any investigation by any Federal or state
regulatory agency with respect to any possible violation of any Federal or
state law regulating the providing of health care services; (iii) shall be
named party to any proceeding alleging violation of any law relating to such
person's professional activities or seeking to revoke or suspend such person's
professional license or privileges to practice in any hospital or medical
center; or (iv) shall become the subject of any proceeding to exclude such
person from any Federal or state reimbursement program or shall suffer the
revocation or suspension of such person's Medicare provider number, DEA permit,
professional license or privileges to practice in any hospital or medical
center. In the event that any disciplinary action or medical malpractice
actions is initiated against any Physician or other person assisting in the
providing of medical services, the Provider shall immediately inform the
Executive Director and/or Response of such action and the underlying facts and
circumstances. The Provider shall develop a program to monitor the quality of
medical care practiced at each Clinic. In that regard, the Provider shall at
all times supervise and assume primary professional responsibility for the
delivery of all medical or other services to patients by Physician Extender
Personnel and any other employee of Response.
6.2. Medical Practice. The Provider shall use and occupy each Clinic
exclusively for the practice of medicine, and shall comply with all Applicable
Law and all standards of medical care. It is expressly acknowledged by the
parties that the medical practice or practices conducted at a Clinic shall be
conducted solely by Physicians associated with the Provider, and no other
physician or medical practitioner shall be permitted to use or occupy a Clinic
without the prior written consent of Response and the Provider.
6.3. Employment of Physicians. The Provider shall have complete
control of and responsibility for the hiring, compensation, supervision,
evaluation and termination of its Physicians , although at the request of the
Provider, Response shall consult with the Provider respecting such matters.
The Provider shall be responsible for the payment of all Physician Expense and
Non-Physician Employee Compensation now or hereafter applicable to Physicians
and Non-Physician Employees; provided, however, that Response shall provide the
payroll service for computing, accounting for and disbursing or paying all
salaries and benefits of the Provider employees, all of whom may be paid out of
the Provider Operating Account. With respect to Physicians, the Provider shall
only employ and contract with licensed Physicians meeting applicable
credentialling guidelines established by the Provider.
6.4. Licensing Fees, Professional Dues and Education Expenses.
Except as provided in Section 5.5(g), the Provider and Physicians shall be
solely responsible for payment of the cost of professional licenses and dues
for membership in professional associations and continuing professional
education costs. The Provider shall ensure that each of its Physicians and
Non-Physician Employees participates in such continuing medical education as is
necessary for such person to maintain current practical and academic knowledge
of the field of medicine and health care in which the Provider is engaged.
6.5. Professional Insurance Eligibility. The Provider and
Responseshall collaborate in obtaining and retaining of professional liability
insurance by assuring that all Physicians and Non-Physician Employees are
insurable, and participating in an ongoing risk management program.
Professional liability insurance with respect
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to Physicians shall be paid for by the Provider or its Physicians and shall not
be Clinic Expense. Professional liability insurance with respect to
Non-Physician Employees shall be paid for by Response and shall be Clinic
Expense.
6.6. Events Excusing Performance. The Provider shall not be liable
to Response for failure to perform any of the services required herein in the
event of strikes, lock-outs calamities, acts of God, unavailability of supplies
or other events over which the Provider has no control for so long as such
events continue, and for a reasonable period of time thereafter.
6.7. Fees for Professional Services. The Provider shall be solely
responsible for legal, accounting and other professional service fees incurred
by the Provider, except as set forth in Section 5.5(i) herein.
6.8. Peer Review; Clinical Trials. At Response's request, the
Provider agrees to participate in Response's clinical trials program or any
data collection and analysis program maintained by Response from time to time.
The Provider agrees to cooperate with Response in establishing a system of peer
review as necessary to obtain provider contracts. In connection therewith, the
Provider agrees to assist in the formulation of oncology and cancer care
provider guidelines for each treatment or surgical modality, and agrees to
abide by said guidelines, and further agrees to submit to periodic reviews by a
third party to monitor compliance with said guidelines. The Provider
acknowledges that the establishment of provider guidelines may be necessary to
obtain PPO, HMO, IPA and other similar provider contracts, both private and
government funded. To the extent that said provider guidelines must be filed
or registered with any Third Party Payor, the Provider agrees to cooperate with
Response in making such filings or registrations. It is agreed and
acknowledged that all such peer review guidelines shall be established and
monitored by medical personnel on the staff of the Provider and other practices
that are part of the peer review process, and shall not be promulgated,
established or enforced independently by Response. To the extent possible, all
information obtained through the peer review process shall remain confidential
and the parties shall take all steps reasonably necessary to assure that all
privileges and immunities provided by Applicable Law remain intact.
6.9 Provider Employee Benefit Plans.
(a) The Provider shall not enter into any new "employee pension
benefit plan" (as defined in Section 3(3) of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA") without the consent of Response
(which will not be unreasonably withheld).
(b) Response shall have the sole and exclusive authority to adopt,
amend or terminate any employee benefit plan for the benefit of its employees,
regardless of whether such employees are leased employees, unless such actions
would require the amendment, freeze or termination of any tax qualified
retirement plan of the Provider to avoid disqualification of any such plan, in
which case any such action would be subject to the express prior written
consent of the Oversight Committee. Response shall have the sole and exclusive
authority to appoint the trustee, custodian and administrator of any such plan.
(c) In the event that any "employee welfare benefit plan" (as defined
in ERISA Section 3(l)) maintained or sponsored by the Provider must be amended,
terminated, modified or changed as a result of the Provider or Response being
deemed to be a part of an affiliated service group, the Oversight Committee
will replace such plan or plans with a plan or plans that provides those
benefits approved by the Oversight Committee. It shall be the goal of the
Oversight Committee in such event to provide substantially similar or
comparable benefits if the same can be provided at a substantially similar cost
to the replaced plan.
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ARTICLE 7.
EMPLOYMENT AGREEMENTS, RESTRICTIVE COVENANTS AND REMEDIES
The parties recognize that the services to be provided by
Response shall be feasible only if the Provider operates an active medical
practice to which the Physicians associated with the Provider devote their full
time and attention. To that end:
7.1. Employment Agreements with Physicians. As a condition to
Response's continuing obligations hereunder, the Provider and each Physician
now or hereinafter employed thereby shall execute and deliver to each other an
Employment Agreement.
7.2. Restrictive Covenants by Provider and Physicians. As a material
inducement to Response to consummate the Purchase Agreement and execute,
deliver and perform this Service Agreement, the Provider and each Physician
Stockholder shall not engage in the practice of oncology or hematology,
including providing or supervising the provision of chemotherapy, radiation
treatment or other cancer therapies, within Broward County, Florida (the
"Practice Territory") during the term of this Agreement and for a period of
five (5) years after any termination of this Agreement or cessation of a
Physician's employment with the Provider. Notwithstanding the foregoing, (A)
any such restrictive covenant shall not restrict such Physician from (i)
delivering physician services that are unrelated to the fields of hematology or
oncology, including the practice of internal medicine, (ii) teaching hematology
and/or oncology or (iii) assuming directorships of hospices following
termination of any such employment relationship with the Provider; and (B) such
restrictive covenant shall not apply to any Stockholder if such Stockholder
pays any Liquidated Damages to Response pursuant to Section 11.6 hereunder.
7.3. Restrictive Covenants of Response. During the term of this
Agreement, neither Response nor any Affiliate, officer, director or employee of
Response or any Affiliate shall, without the consent of the Provider, purchase
or otherwise acquire any oncology or hematology practice within the Practice
Territory or establish, operate or enter into a service agreement with, or
provide services similar to those provided under this Agreement to, any medical
group or physician engaged in the practice of oncology or hematology within the
Practice Territory. In that regard, the Provider and the Stockholders hereby
consent to Response acquiring the practices of and entering into management
services agreements with Drs. Rosenberg & Kalman and Drs. Weisberg, Weiss and
Weinreb in Tamarac, Florida.
7.4. Enforcement. Response, the Provider and the Stockholders
acknowledge and agree that since a remedy at law for any breach or attempted
breach of the provisions of this Article 7 shall be inadequate, either party
shall be entitled to specific performance and injunctive or other equitable
relief in case of any such breach or attempted breach, in addition to whatever
other remedies may exist by law. All parties hereto also waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such injunctive or other equitable relief. If any provision of Article 7
relating to the restrictive period, scope of activity restricted and/or the
territory described therein shall be declared by a court of competent
jurisdiction to exceed the maximum time period, scope of activity restricted or
geographical area such court deems reasonable and enforceable under applicable
law, the time period, scope of activity restricted and/or area of restriction
held reasonable and enforceable by the court shall thereafter be the
restrictive period, scope of activity restricted and/or the territory
applicable to the restrictive covenant provisions in this Article 7. The
invalidity or non-enforceability of this Article 7 in any respect shall not
affect the validity or enforceability of the remainder of this Article 7 or of
any other provision of this Agreement.
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ARTICLE 8.
FINANCIAL ARRANGEMENTS
8.1. Service Fees. Subject to the terms of Section 5.11, in
consideration for its services hereunder, Response shall receive the Base
Service Fee and Performance Fee, computed pursuant to Schedule A hereto, as
compensation for its services hereunder. The Service Fees shall be determined
on an annual basis, based on annual financial statements prepared pursuant to
Section 5.3 above. The Base Service Fee shall be payable by means of the
procedure set forth in Section 8.2 below. Notwithstanding the foregoing or any
other provision in this Service Agreement, in the event the sum of the Base
Service Fee, Non-physician Employee Compensation and Practice Retainage, based
on the annual financial statements, shall exceed the aggregate Practice Revenue
of the Provider (a "deficiency"), then (i) first, the Fixed Portion of the Base
Service Fee shall be reduced by the amount of such deficiency and Response
shall reimburse the Provider for the amount of such deficiency, to the extent
the same shall have been retained by Response pursuant to Section 8.2 below,
and (ii) to the extent such deficiency is greater than the Fixed Portion, such
remaining deficiency will be reimbursed by Response to the Provider. Any
reimbursement pursuant to this Section 8.1 shall be made by Response no later
than the 15th day of March following the year in which such deficiency arose.
In the event that Response is required to fund any deficiency pursuant to this
Section 8.1, then in any future year in which an Annual Surplus exists, such
Annual Surplus will first be paid to Response to the extent of any cumulative
deficiency funded by Response.
8.2. Base Service Fee. The Clinic Expense Portion of the Base
Service Fee shall be payable by the Provider to Response out of the Provider
Operating Account as Clinic Expenses are incurred by Response, subject to
ordinary, reasonable and customary payment terms on invoices for goods and
services, and subject to Section 5.11 and the adjustments as set forth in
Section 8.1 above. The Fixed Portion of the Base Service Fee shall be payable
by the Provider to Response out of the Provider Operating Account on a monthly
basis based on monthly financial statements prepared pursuant to Section 5.6
above, provided that Response shall have made all advances pursuant to the
Receivables Line pursuant to Section 5.12 above, and, provided, further, that
if at any time there shall be insufficient funds in the Provider Operating
Account to pay all or any part of the Fixed Portion, then such unpaid Fixed
Portion (if any) shall be accrued. The Performance Fee will be computed as of
the end of each calendar year based on amounts recorded during the calendar
year.
8.3 Interim Closing. At the election of either party, given to the
other in writing no later than June 15 of each year, Response shall, not later
than July 20 of such year, make an interim computation of the Service Fee
earned, and/or deficiency, as the case may be, pursuant to Section 8.1 above,
which computation shall be effective as of June 30 of such year. Response and
the Provider shall settle, in cash, the computed Service Fee or deficiency, as
the case may be, resulting from such interim closing.
ARTICLE 9.
RECORDS
9.1. Patient Records. Upon termination of this Agreement, the
Provider shall retain all patient medical records maintained by the Provider or
Response in the name of the Provider. Response shall, at its option, and if
allowed under Applicable Law be entitled to have reasonable access during
normal business hours to the Provider's patient medical records applicable to
the period of Response's performance under this Agreement. Moreover, the
Provider shall, at its option, be entitled to retain copies of financial and
accounting records relating to all services performed by the Provider or
Response under this Agreement. All parties agree to maintain the
confidentiality of patient identifying information and not to disclose such
information except as may be required or permitted by Applicable Law.
9.2. Records Owned by Response. All records relating in any way to
the operation of a Clinic which are not the property of the Provider under the
provisions of Section 9.1 above, shall at all times be the property of
Response.
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9.3. Access to Records. During the term of this Agreement and
thereafter, the Provider or its designee shall have reasonable access during
normal business hours in Ft. Lauderdale, Florida to the Provider's and
Response's financial and accounting records, including, but not limited to,
records of collections, expenses and disbursements, as kept by Response in
performing Response's obligations under this Agreement, and the Provider may
copy any and or all such records.
9.4. Government Access to Records. To the extent required by Section
1861(v)(1)(I) of the Social Security Act, each party shall, upon proper
request, allow the United States Department of Health and Human Services, the
Comptroller General of the United States, and their duly authorized
representatives access to this Agreement and to all books, documents, and
records necessary to verify the nature and extent of the costs of services
provided by either party under this Agreement, at any time during the term of
this Agreement and for an additional period of four (4) years following the
last date services are furnished under this Agreement. If either party carries
out any of its duties under this Agreement through an agreement between it and
an individual or organization related to it or through a subcontract with an
unrelated party, that party to this Agreement shall require that a clause be
included in such agreement (the value of which is in excess of $10,000.00) to
the effect that until the expiration of four (4) years after the furnishing of
services pursuant to such agreement, the related organization shall make
available, upon request by the United States Department of Health and Human
Services, the Comptroller General of the United States, or any of their duly
authorized representatives, all agreements, books, documents, and records of
such related organization that are necessary to verify the nature and extent of
the costs of services provided under that agreement.
ARTICLE 10.
INSURANCE AND INDEMNITY
10.1. Insurance to be Maintained by the Provider. Throughout the
term of this Agreement, each Physician shall maintain comprehensive
professional liability insurance with limits of not less than $500,000 per
claim and with aggregate policy limits of not less than $1,000,000 per
physician. The Provider shall be responsible for all liabilities in excess of
the limits of such policies. Response shall have the option, with Oversight
Committee approval, of providing such professional liability insurance through
an alternative program, provided such program meets the requirements of the
Insurance Commissioner of the State of Florida. Response shall reimburse the
Provider for any unearned professional liability insurance premiums paid by the
Provider to the extent not reimbursed or reimbursable by the Provider's
insurance carrier if the Provider's existing professional liability insurance
program is canceled and replaced by a comparable professional liability
insurance program initiated by Response.
10.2. Insurance to be Maintained by Response. Throughout the term of
this Agreement, Response shall provide and/or maintain comprehensive
professional liability insurance for all Non-Physician Employees and Physician
Extender Employees, the cost of which shall be a Clinic Expense, with limits as
determined reasonable by Response in its national program, and comprehensive
general liability and property insurance covering each Clinic premises and
operations.
10.3. Additional Insureds. The Provider and Response each agrees to
use its best efforts to have the other named as an additional insured on the
their respective professional liability insurance programs.
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ARTICLE 11.
TERM AND TERMINATION
11.1. Term of Agreement. This Service Agreement shall be effective
immediately preceding the closing of the Purchase Agreement and shall expire on
June 30, 2036, unless earlier terminated pursuant to the terms hereof.
11.2. Extended Term. Unless earlier terminated as provided for in
this Agreement, the term of this Agreement shall be automatically extended for
additional terms of five (5) years each, unless either party delivers to the
other party, not less than one hundred eighty (180) days prior to the
expiration of the preceding term, written notice of such party's intention not
to extend the term of this Agreement.
11.3. Response Event of Default. The occurrence of any of the
following events shall constitute a default by Response (a "Response Event of
Default") under this Agreement, giving the Provider the right to the remedies
set forth in Section 11.5 below:
(a) the filing by Response of a petition in voluntary
bankruptcy or an assignment by Response for the benefit of creditors,
or upon other action taken or suffered, voluntarily or involuntarily,
under any federal or state law for the benefit of debtors by Response,
except for the filing of a petition in involuntary bankruptcy against
Response which is dismissed within one hundred twenty (120) days
thereafter.
(b) any material default by Response in the performance of
any of its duties or obligations under this Agreement , and such
default or breach shall continue for a period of sixty (60) days
(fifteen (15) days in the case of Response's failure to provide
required advances under the Receivables Line) after written notice
thereof has been given to Response by the Provider.
(c) in the event Response shall, intentionally or in bad
faith, misapply funds or assets of the Provider or commit a similar
act which cause material harm to the Provider.
Notwithstanding the foregoing, if a particular default listed above is
subject to cure, the occurrence of such default more than twice in any twelve
month period extending from July 1 to June 30 of the next succeeding year shall
not carry the curative right provided above.
11.4. Provider Event of Default. The occurrence of any of the
following events shall constitute a default by the Provider (an "Provider Event
of Default") under this Agreement, giving Response the right to the remedies
set forth in Section 11.6 below:
(a) the filing by the Provider of a petition in voluntary
bankruptcy or an assignment by the Provider for the benefit of
creditors, or upon other action taken or suffered, voluntarily or
involuntarily, under any federal or state law for the benefit of
debtors by the Provider, except for the filing of a petition in
involuntary bankruptcy against the Provider which is dismissed within
one hundred twenty (120) days thereafter; provided, further, that if
the Physicians comprising the Provider are lawfully able, within 120
days after the occurrence of such event, to reorganize the practice or
transfer its assets, patients, goodwill and going concern value to a
newly-formed entity and continue such practice, and if such new entity
and its principal stockholders or owners assumes all of the
obligations of the Provider under the Service Agreement or enter into
a new Service Agreement with Response for the remaining term and
containing substantially the same terms and conditions as the original
Service Agreement, then Response will not terminate the original
Service Agreement.
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(b) any material default by the Provider in the performance
of any of its duties or obligations under this Agreement, and such
default or breach shall continue for a period of sixty (60) days after
written notice thereof has been given to the Provider by Response.
(c) the termination or suspension of the Provider's Medicare
Provider Number as a result of the action or inaction of physicians,
and such termination or suspension shall continue for ninety (90)
days, or if any Physician employed by the Provider shall have his
license to practice medicine or DEA license revoked or suspended and
the affected physician or the Provider, as the case may be, shall not,
within 90 days, either gain reinstatement of such license or otherwise
find a suitable replacement for such physician (which replacement may
be the shifting of case load to an existing physician employee of the
Provider), unless the Provider shall at that time be acting in good
faith (and shall provide reasonable evidence of the action being
taken) to reverse such termination or suspension. Notwithstanding any
good faith effort on the part of Oncology to reverse such termination
or suspension, if such termination or suspension shall not be reversed
within ninety (90) days after occurrence, an event of default shall be
deemed to have occurred.
Notwithstanding the foregoing, if a particular default listed above is
subject to cure, the occurrence of such default more than once in any twelve
month period extending from July 1 to June 30 of the next succeeding year shall
not carry the curative right provided above.
11.5. Remedies upon Response Event of Default. Upon the occurrence
of a Response Event of Default, the Provider shall have the right to terminate
this Agreement by written notice to Response without any further obligation to
Response for the Service Fee after the giving of such notice. In such event
the Provider shall have the option to purchase from Response, and upon proper
exercise of such option by the Provider in the manner hereinbelow provided,
Response shall sell to the Provider, all assets and properties, tangible and
intangible (which intangible assets shall not include any intangible asset
related to this Service Agreement), owned by Response and used by the Provider
in its medical practice ("Practice Assets") for a price, payable in cash, equal
to the book value of the Practice Assets. The Provider shall exercise such
option by giving written notice to Response within sixty (60) days after the
occurrence of the Response Event of Default.
11.6. Remedies upon Provider Event of Default. Upon the occurrence
of a Provider Event of Default, Response shall have the right (and, during the
initial two (2) years hereof, the obligation) to terminate this Agreement by
written notice to the Provider, and the Provider shall have no further
obligation to Response for the Service Fee after the date such notice is
received. In such event, the Provider shall be obligated to pay to Response
the Liquidated Damages Amount in complete satisfaction of any and all damages
suffered by Response hereunder. Such Liquidated Damages Amount shall be
payable by the Provider in cash within sixty (60) days after occurrence of the
Provider Event of Default. Each Stockholder hereby severally, and not jointly,
guarantees the foregoing obligation of the Provider and agrees to pay to
Response his pro rata share of the Liquidated Damages Amount provided that and
to the extent he is a Remaining Physician Stockholder for purposes of this
Agreement, with the pro rata share being equal to the Liquidated Damages
Amount times (x) such Remaining Physician Stockholder's proportionate interest
in the Provider as of the date hereof, less (v) the amount of the Liquidated
Damages Amount paid by the Provider times such Remaining Physician
Stockholder's proportionate interest in the Provider as of the date of such
payment by the Provider; provided, however, that if a Stockholder is not a
Remaining Physician Stockholder at the time of a Provider Event of Default
because of his permissive retirement before age 55 with consent of the
Oversight Committee, then the Remaining Physician Stockholders' pro rata share
of the foregoing guaranteed amount shall be increased by their respective pro
rata shares of the obligation that such retiring Stockholder would have had had
he not retired. Moreover, in such event the Provider shall have the obligation
to purchase from Response, and Response shall sell to the Provider, (i) all
Practice Assets for a price equal to the book value of the Practice Assets as
of the date of the Provider Event of Default, and (ii) any intangible asset
then carried on Response's books for a price equal to its then book value.
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11.7. Closing of Repurchase by the Provider and Effective
Date of Termination. The Provider shall pay cash for Practice Assets and
intangible assets repurchased hereunder. The amount of the purchase price
shall be reduced by the amount of debt and liabilities of Response assumed by
the Provider, by the amount of Liquidated Damages received by Response from the
Provider or any Physician Stockholder pursuant to Section 11.6 above, and by
any payment Response has failed to make under this Agreement, provided that
such payments or obligations are not otherwise accounted for in the liabilities
assumed by the Provider in connection with the repurchase described herein.
The closing date for the repurchase shall be determined by the Provider, but
shall in no event occur later than 90 days from the date of the notice of
termination. In the event of such repurchase, each party shall use its best
efforts to obtain such consents and authorizations to such transaction as may
be required by Applicable Law or otherwise. In such event, Response shall
execute and deliver to the Provider such assignments to leases and other
contracts and such bills of sale and other transfer or closing documents
necessary to effect such transaction. The Provider shall execute and deliver
to Response such officers' certificates, assumption agreements and other
closing documents necessary to close such transaction. Between the date of
termination and the closing of the repurchase the Provider shall be entitled
to use all Practice Assets, and Response hereby grants the Provider a license
to use the Practice Assets in such event. In consideration of the foregoing
license, the Provider will pay to Response an amount equal to any rental
payments by Response to any third party vendor in respect of all Practice
Assets.
ARTICLE 12
DAMAGE AND LOSS; CONDEMNATION
12.1. Use of Insurance Proceeds. All insurance or condemnation
proceeds payable by reason of any physical loss of any of the improvements
comprising the facilities or the furniture, fixtures and equipment used by the
Clinics, shall be available for the reconstruction, repair or replacement, as
the case may be, of any damage, destruction or loss. The Oversight Committee,
in consultation with the Provider, shall review and approve such
reconstruction, repair or replacement.
12.2. Temporary Space. In the event of substantial damage to or the
condemnation of a significant portion of the facilities, Response shall use its
best efforts to provide temporary facilities until such time as the facilities
can be restored or replaced.
ARTICLE 13
REPRESENTATIONS AND WARRANTIES OF THE PROVIDER
The Provider represents, warrants, covenants and agrees with Response
that:
13.1. Validity. The Provider is a professional association duly
organized, validly existing and in good standing under the laws of the State of
Florida. The Provider has the full power and authority to own its property, to
carry on its business as presently being conducted, to enter into this
Agreement, and to consummate the transactions contemplated hereby.
13.2. Permits. The Provider and all physicians and other health care
professionals associated with or employed by the Provider have all permits and
licenses and other Necessary Authorizations required by all Applicable Laws,
except where failure to secure such licenses, permits and other Necessary
Authorizations does not have a material adverse effect; have made all
regulatory filings necessary for the conduct of the Provider's business; and
are not in violation of any of said permitting or licensing requirements.
13.3. Authority. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action, and this Agreement is a valid and binding Agreement of
the Provider, enforceable in accordance with its terms. The Provider has
obtained all third-party consents necessary to enter into and consummate the
transaction contemplated by this Agreement. Neither the execution and delivery
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of this Agreement, the consummation of the transactions contemplated hereby,
nor compliance by the Provider with any of the provisions hereof, will:
(a) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or
result in the creation of, any lien, security interest, charge or
encumbrance upon any of the assets of the Corporation to be acquired
pursuant to the Purchase Agreement, the Provider's charter or bylaws
or any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, agreement or other
instrument or obligation to which the Provider is a party, or by which
either the Provider or any of the assets to be conveyed hereunder is
bound; or
(b) violate any order, writ, injunction, decree, statute,
rule or regulation applicable either to the Provider or any of the
assets to be conveyed hereunder.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES OF RESPONSE
Response represents, warrants, covenants and agrees with the Provider
as follows:
14.2. Authority. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action, and this Agreement is a valid and binding Agreement of
Response enforceable in accordance with its terms. Response has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement, as well as the consummation of the transactions contemplated hereby.
The execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated hereby will not, violate any provisions of the
charter or the bylaws of Response or any indenture, mortgage, deed of trust,
lien, lease, agreement, arrangement, contract, instrument, license, order,
judgment or decree or result in the acceleration of any obligation thereunder
to which Response is a party or by which it is bound.
14.4. Permits. Response has all permits and licenses and other
Necessary Authorizations required by all Applicable Laws, except where failure
to secure such licenses, permits and other Necessary Authorizations does not
have a material adverse effect; have made all regulatory filings necessary for
the conduct of Response's business; and are not in violation of any of said
permitting or licensing requirements.
ARTICLE 15
COVENANTS OF THE PROVIDER
15.1. Merger, Consolidation and Other Arrangements. The Provider
shall not incorporate, merge or consolidate with any other entity or individual
or liquidate or practice at any location other than the Clinics or dissolve or
wind-up the Provider's affairs or enter into any partnerships, joint ventures
or sale-leaseback transactions or purchase or otherwise acquire (in one or a
series of related transactions) any part of the property or assets (other than
purchases or other acquisitions of inventory, materials and equipment in the
ordinary course of business) of any other person or entity without first
obtaining the prior written consent of Response; provided, however, that no
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such consent shall be required in respect of any incorporation, merger,
consolidation, partnership, joint venture or acquisition transaction that (i)
results in the continued, unimpaired operation of the Clinics; and (ii) results
in the Physician Stockholders maintaining at least a fifty percent (50%) voting
and equity interest in the Clinics. The Provider acknowledges and agrees that
such consent may be withheld if Response and the Provider cannot mutually agree
upon the terms and conditions of a new Service Agreement with the Provider.
15.2. Necessary Authorizations/Assignment of Licenses and Permits.
The Provider shall maintain all licenses, permits, certifications, or other
Necessary Authorizations and shall not assign or transfer any interest in any
license, permit, certificate or other Necessary Authorization granted to it by
any Governmental Authority, nor shall the Provider assign, transfer, or remove
or permit any other individual or entity to assign, transfer or remove any
records of the Provider, including without limitation, patient records, medical
and clinical records (except for removal of such patient records as directed in
writing by the patients owning such records or as otherwise required under any
Applicable Law).
15.3. Transaction with Affiliates. The Provider shall not enter into
any transaction or series of transactions, whether or not related or in the
ordinary course of business, with any Affiliate of Response, other than on
terms and conditions substantially as favorable to the Provider as would be
obtainable by the Provider at the time in a comparable arms-length transaction
with a person not an Affiliate of Response.
15.4. Compliance with All Laws. The Provider shall comply with all
laws and regulations relating to the Provider's practice and the operation of
any cancer care facility, including, but not limited to, all state, federal and
local laws relating to the acquisition or operation of a health care practice.
Furthermore, the Provider shall not violate any Applicable Laws.
15.5. Third Party Payor Programs. The Provider shall maintain the
Provider's compliance with the requirements of all Third Party Payor Programs
in which the Provider is currently participating or authorized to participate.
15.6. Change in Business or Credit and Collection Policy. The
Provider shall not make any change in the character of the Provider's business
or in the credit and collection policy, which change would, in either case,
impair the collectibility of any Accounts Receivable or otherwise modify, amend
or extend the terms of any such account other than in the ordinary course of
business.
15.7. Security Interest. The Provider shall, effective as of the
date hereof, be deemed to have granted (and the Provider does hereby grant) to
Response a first priority security interest in and to any and all of the
Accounts Receivable (except Governmental Receivables) and the proceeds thereof
(including the proceeds, after deposit into the Provider Operating Account,
from the collection of Governmental Receivables) to secure the repayment of all
amounts advanced to the Provider under the Receivables Line and all accrued
interest thereon, and this Agreement shall be deemed to be a security
agreement. The Provider agrees that five (5) days shall be reasonable prior
notice of the date of any public or private sale or other disposition of all or
part of such pledged Receivables. Upon a default by the Provider in the
payment of amounts due under the Receivables Line, Response may at its option
exercise from time to time any and all rights and remedies available to it
under the UCC or otherwise. The Provider represents and warrants that the
location of the Provider's principal place of business, and all locations where
the Provider maintains records with respect to its Accounts Receivables are set
forth under its name in Section 16.5 hereof. The Provider agrees to notify
Response in writing thirty (30) days prior to any change in any such location.
The exact name of the Provider is as set forth at the beginning of this
Agreement. The Provider is a new professional association, and the medical
practice conducted by the Provider was formerly conducted under the name
"Rymer, Zaravinos & Faig, M.D., P.A.," a Florida professional association. The
Provider shall notify Response in writing thirty (30) days prior to any change
in any such name.
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15.8. Representations and Warranties. The Provider agrees to notify
Response in the event that any representation or warranty contained in Article
13 of this Agreement becomes untrue in any material respect.
ARTICLE 16.
GENERAL PROVISIONS
16.1. Assignment. Response shall have the right to assign its rights
hereunder to any person, firm or corporation under common control with Response
and to any lending institution, for security purposes or as collateral, from
which Response obtains financing. Except as set forth above, neither Response
nor the Provider shall have the right to assign their respective rights and
obligations hereunder without the written consent of the other party.
16.2. No Practice of Medicine. The parties acknowledge that Response
is not authorized or qualified to engage in any activity which may be construed
or deemed to constitute the practice of medicine. To the extent any act or
service required of Response in this Agreement should be construed or deemed by
any Governmental Authority or court to constitute the practice of medicine, the
performance of said act or service by Response shall be deemed waived and
forever unenforceable.
16.3. Whole Agreement; Modification. This Agreement supersedes all
prior agreements between the parties, and there are no other agreements or
understandings, written or oral, between the parties regarding this Agreement,
the Exhibits and the Schedules, other than as set forth herein. This Agreement
shall not be modified or amended except by a written document executed by both
parties to this Agreement, and such written modification(s) shall be attached
hereto.
16.4. Arbitration of Disputes; Legal Fees. Any dispute arising under
this Service Agreement shall be submitted by the parties to binding arbitration
pursuant to the Florida Uniform Arbitration Act, with any such arbitration
proceeding being conducted in Ft. Lauderdale, Florida in accordance with the
rules of the American Arbitration Association. Any arbitration panel presiding
over any arbitration proceeding hereunder is hereby empowered to render a
decision in respect of such dispute, to award costs and expenses (including
reasonable attorney fees) as it shall deem equitable and to enter its award in
any court of competent jurisdiction.
16.5. Notices. All notices required or permitted by this Agreement
shall be in writing and shall be addressed as follows:
To Response: Response Oncology, Inc.
1775 Moriah Woods Blvd.
Memphis, Tennessee 38117
Attn: Joseph T. Clark, CEO
With copies to: John A. Good, Esq.
Executive Vice-President -- General Counsel
Response Oncology, Inc.
1775 Moriah Woods Blvd.
Memphis, Tennessee 38117
To Provider: Southeast Florida Hematology Oncology Group, P.A.
Attn: William Rymer, M.D.
5700 N. Federal Highway
Suite 5
Ft. Lauderdale, Florida 33308
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With copies to: Stanley H. Kuperstein, Esq.
Geiger, Kasdin, Heller & Kuperstein, P.A.
1428 Brickell Avenue, 6th Floor
Miami, Florida 33131
or to such other addresses as either party shall notify the other.
16.6. Binding on Successors. Subject to Section 16.1, this Agreement
shall be binding upon the parties hereto, and their successors, assigns, heirs
and beneficiaries.
16.7. Waiver of Provisions. Any waiver of any terms and conditions
hereof must be in writing, and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a
waiver of any other terms and conditions hereof.
16.8. Governing Law. The validity, interpretation and performance of
this Agreement shall be governed by and construed in accordance with the laws
of the State of Florida. The parties acknowledge that Response is not
authorized or qualified to engage in any activity which may be construed or
deemed to constitute the practice of medicine. To the extent any act or
service required of Response in this Agreement should be construed or deemed,
by any governmental authority, agency or court to constitute the practice of
medicine, the performance of said act or service by Response shall be deemed
waived and forever unenforceable.
16.9. Severability. The provisions of this Agreement shall be deemed
severable and if any portion shall be held invalid, illegal or unenforceable
for any reason, the remainder of this Agreement shall be effective and binding
upon the parties.
16.10. Additional Documents. Each of the parties hereto agrees to
execute any document or documents that may be requested from time to time by
the other party to implement or complete such party's obligations pursuant to
this Agreement.
16.11. Time is of the Essence. Time is hereby expressly declared to
be of the essence in this Agreement.
16.12. Confidentiality. Except for disclosure to its bankers,
underwriters or lenders, or as necessary or desirable for conduct of business,
including negotiations with other acquisition candidates, neither party hereto
shall disseminate or release to any third party any information regarding any
provisions of this Agreement, or any financial information regarding the other
(past, present or future) that was obtained by the other in the course of the
negotiations of this Agreement or in the course of the performance of this
Agreement, without the other party's written approval; provided, however, the
foregoing shall not apply to information which (i) is generally available to
the public other than as a result of a breach of confidentiality provisions;
(ii) becomes available on a non-confidential basis from a source other than the
other party or its affiliates or agents, which source was not itself bound by a
confidentiality agreement, or (iii) which is required to be disclosed by law or
pursuant to court order.
16.13. Contract Modifications for Prospective Legal Events. In the
event any state or federal laws or regulations, now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decisions, a regulatory agency or legal counsel in such a manner as to
indicate that the structure of this Agreement may be in violation of such laws
or regulations, the Provider and Response shall amend this Agreement as
necessary. To the maximum extent possible, any such amendment shall preserve
the underlying economic and financial arrangements between the Provider and
Response.
16.14. Remedies Cumulative. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party shall be considered exclusive
of any other remedy available to any party, but the same shall be
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distinct, separate and cumulative and may be exercised from time to time as
often as occasion may arise or as may be deemed expedient.
16.15. Language Construction. The language in all parts of this
Agreement shall be construed, in all cases, according to its fair meaning, and
not for or against either party hereto. The parties acknowledge that each
party and its counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
16.16. No Obligation to Third Parties; Nonrecourse Obligation. None
of the obligations and duties of Response or the Provider under this Agreement
shall in any way or in any manner be deemed to create any obligation of
Response or of the Provider to, or any rights, in, any person or entity not a
party to this Agreement. The Stockholders, their heirs, legatees, successors
and assigns shall have no individual obligation for the performance of the
provisions hereof except as expressly provided herein
16.17. Communications. The Provider and Response agree that good
communication between the parties is essential to the successful performance of
this Agreement, and each pledges to communicate fully and clearly with the
other on mattes relating to the successful operation of the Provider's practice
at a Clinic.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
SOUTHEAST FLORIDA HEMATOLOGY ONCOLOGY GROUP, P.A.
By:
-------------------------------------------------
Title:
----------------------------------------------
RESPONSE ONCOLOGY OF FT. LAUDERDALE, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
STOCKHOLDERS:
------------------------------------------
William Rymer, M.D.
------------------------------------------
Theodore Zaravinos, M.D.
------------------------------------------
Douglas Faig, M.D.
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RESPONSE ONCOLOGY OF FT. LAUDERDALE, INC.
SERVICE AGREEMENT
SCHEDULE A
BASE SERVICE FEE
The Base Service Fee shall be equal to the sum of (i) amounts recorded
as Clinic Expenses (the "Clinic Expense Portion") plus (ii) the sum of (A) ***
of the difference of Practice Revenue minus Ancillary Revenue (the "Base
Portion"); plus (B) *** of Ancillary Net Operating Income (if any, the
Percentage Portion) (the Base Portion and Percentage Portion, collectively the
"Fixed Portion").
PERFORMANCE FEE
During the entire term of the Service Agreement, including any
extended term, a Performance Fee in an amount equal to *** of any Annual
Surplus shall be paid to Response.
Performance Fees shall be computed on the basis of Annual Surplus
computed for each calendar year. For any period during the term of the Service
Agreement that does not encompass an entire calendar year, the Performance Fees
for such partial period shall be computed as follows:
a) For any partial period that commences with the execution and
delivery of the Service Agreement, the Clinic Expenses (less
Ancillary Clinic Expenses) and Practice Revenue (less Ancillary
Revenue) from such commencement date until the end of the calendar
year of commencement shall be determined. The sum of Clinic Expenses
(less Ancillary Clinic Expenses), Practice Retainage and the Base
Portion of the Fixed Portion of the Service Fee (both computed on
Practice Revenue, less Ancillary Revenue, for such period) will be
subtracted from Practice Revenue, less Ancillary Revenue for such
period, with the difference then being divided by the number of days
in such period, and the quotient multiplied by 365. The computation
formula set forth above will be applied to the annualized Annual
Surplus to compute an annualized Performance Fee, which shall then be
divided by 365 and multiplied by the number of days in the partial
period to yield the Performance Fee payable with respect to such short
period.
b) For any partial period that commences on the first day of a
calendar year and ends prior to the last day thereof, Annual Surplus
for the full year will be computed based on the definition thereof,
which result shall then be divided by 365 and multiplied by the number
of days during the partial period to yield the Performance Fees
payable with respect to such short period.
LIQUIDATED DAMAGES AMOUNT
The amount of *** until ***, at which time such amount shall
be *** per Remaining Physician Stockholder for the duration of this Agreement.
*** MATERIAL REDACTED PURSUANT TO CLAIM FOR CONFIDENTIAL TREATMENT
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PRACTICE RETAINAGE
For purposes of this Agreement, the Practice Retainage shall equal
*** of Practice Revenue, and amounts received directly by Physicians as
salary from sources other than Provider (unless covered by Schedule 4.2(c))
shall be charged against this number.
*** MATERIAL REDACTED PURSUANT TO CLAIM FOR CONFIDENTIAL TREATMENT
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