-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PqsKgi3joHy+qpOLdmR+vECf610zil9JZKNgBTj4Ip+49Gig10nMVbwGyLfrAKM0 YGU3CqLZVuUblUKyIgRvjw== 0000950144-96-000161.txt : 19960123 0000950144-96-000161.hdr.sgml : 19960123 ACCESSION NUMBER: 0000950144-96-000161 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960117 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960122 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEAFIELD CAPITAL CORP CENTRAL INDEX KEY: 0000830158 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 431039532 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-16946 FILM NUMBER: 96505735 BUSINESS ADDRESS: STREET 1: 2600 GRAND AVE STE 500 STREET 2: P O BOX 410949 CITY: KANSAS CITY STATE: MO ZIP: 64141 BUSINESS PHONE: 8168427000 MAIL ADDRESS: STREET 1: P.O. BOX 410949 STREET 2: 2600 GRAND AVENUE, SUITE 500 CITY: KANSAS CITY STATE: MO ZIP: 64141 FORMER COMPANY: FORMER CONFORMED NAME: BMA CORP /MO/ DATE OF NAME CHANGE: 19910520 FORMER COMPANY: FORMER CONFORMED NAME: SEAFIELD CAPTIAL CORP DATE OF NAME CHANGE: 19910520 FORMER COMPANY: FORMER CONFORMED NAME: BMA PROPERTIES INC DATE OF NAME CHANGE: 19880411 8-K/A 1 SEAFIELD CAPITAL CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report: JANUARY 17, 1996 SEAFIELD CAPITAL CORPORATION (Exact name of registrant as specified in its charter) MISSOURI (State or other jurisdiction of incorporation) 0-16946 43-1039532 (Commission File Number) (I.R.S. Employer Identification No.) 2600 GRAND AVE. SUITE 500 P.O. BOX 410949 KANSAS CITY, MO 64141 (Address of principal executive offices, including Zip Code) (816) 842-7000 (Registrant's telephone number, including Area Code) 2 ITEM 5. OTHER EVENTS On January 2, 1996, the Registrant's 59% owned subsidiary, Response Oncology, Inc. ("Response") acquired (the "Transaction") from unaffiliated individual sellers (the "Sellers") 100% of the issued and outstanding common stock (the "Acquired Stock") of Oncology Hematology Group of South Florida, Inc., a Florida corporation (the "Acquired Business"). The total consideration (the "Purchase Price") for the Acquired Stock was approximately $12.1 million, approximately $5.3 million of which was paid in cash, approximately $5.0 million paid in the form of Response's long-term unsecured interest-bearing amortizing promissory note (the "Long-Term Note") and the balance being paid over 16 calendar quarters at the rate of $50,000 per quarter. The quarterly payments of interest and principal under the Long-Term Note may, at the election of the Sellers, acting through a duly-appointed attorney-in-fact, be paid in shares of common stock of Response (the "Common Stock") based on a conversion price in excess of the current market price of Response's common stock. The delivery of the Long-Term Note and Response's Common Stock potentially issuable by Response in full or partial satisfaction of the Long-Term Note have not been registered under the Securities Act of 1933 in reliance upon an exemption from such registration. The Acquired Stock was purchased by Response directly from the Sellers, who constituted all of the stockholders of the Acquired Business. Upon consummation of the Transaction, the Acquired Business became a wholly owned subsidiary of Response, the assets of which include medical equipment, accounts receivable, office furnishings and fixtures, rights under a certain sublease for certain office space, employee base and expertise, know-how in respect of management of a medical practice in the oncology and hematology specialty, computer systems, accounting books and records and other intangible assets. Such assets were historically used in the conduct by the Acquired Business of a group medical practice in the oncology and hematology specialty. Simultaneous with the consummation of the Transaction, a newly-formed professional association wholly owned by the Sellers and formed to continue the group medical practice theretofore conducted by the Sellers (the "New PC") entered into a long-term management services agreement (the "Service Agreement") with the New PC providing for the management by Response of the non-medical aspects of the practice thereafter conducted by the New PC. Pursuant to the Service Agreement, Response will manage the non-medical aspects fo the New PC's business and will permit the New PC to use office space, equipment and other assets owned or leased by Response in exchange for an agreed-upon management fee. The cash portion of the Purchase Price was provided from working capital of Response. Response announced on January 2, 1996 the appointment of Leonard A. Kalman, M.D. to Response's Board of Directors. Dr. Kalman, a co-medical director of the Baptist Hospital of Miami Regional Cancer Center, is a practicing oncologist with the Oncology Hematology Group of South Florida. Dr. Kalman is a graduate of Wesleyan University, and the Duke University School of Medicine. Among his other appointments, Dr. Kalman was a fellow in medical oncology at the Memorial Sloan Kettering Cancer Center in New York. He has been in private practice in Miami, Florida since 1982. Additionally, Response announced that Joseph T. Clark has been named as Chief Executive Officer of Response in addition to his duties as President. This will allow Response's Chairman, William H. West, M.D., to concentrate on medical and scientific affairs of Response, particularly in connection with refining disease management capabilities to support managed care marketing. Mr. Clark has served as President of Response since 1993. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements: none (b) Pro Forma Financial Information: none (c) Exhibits: Form of agreement filed with Response's current report on Form 8-K of: 99.1. Stock Purchase Agreement by and among Response Oncology, Inc., Stockholders of Oncology Hematology Group of South Florida, P.A. and South Florida Oncology Hematology Associates, P.A. dated December 28, 1995. 99.2. Service Agreement between Response Oncology, Inc. and Oncology Hematology Group of South Florida, P.A. dated January 2, 1996. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SEAFIELD CAPITAL CORPORATION Dated: January 19, 1996 By:/s/ Steven K. Fitzwater ----------------------------------------- Steven K. Fitzwater Vice President, Chief Accounting Officer and Secretary EX-99.1 2 STOCK PURCHASE AGREEMENT 1 Exhibit 99.1 STOCK PURCHASE AGREEMENT BY AND AMONG RESPONSE ONCOLOGY, INC., STOCKHOLDERS OF ONCOLOGY HEMATOLOGY GROUP OF SOUTH FLORIDA, P.A. AND SOUTH FLORIDA ONCOLOGY HEMATOLOGY ASSOCIATES, P.A. DECEMBER 20, 1995 2 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT, dated as of December 20, 1995, by and among RESPONSE ONCOLOGY, INC, a Tennessee corporation (the "Purchaser"), each of the STOCKHOLDERS OF ONCOLOGY HEMATOLOGY GROUP OF SOUTH FLORIDA, P.A., acting by and through Leonard Kalman, M.D., their duly-appointed attorney-in-fact (collectively, the "Sellers" and, individually, a "Seller") and SOUTH FLORIDA ONCOLOGY HEMATOLOGY ASSOCIATES, P.A., a Florida professional association (the "Group"). W I T N E S S E T H: WHEREAS, the Sellers own in the aggregate eighty (80) shares (the "Shares") of the common stock, par value $1.00 per share, of Oncology Hematology Group of South Florida, P.A., a Florida professional association engaged in the practice of medicine (the "Association"); and WHEREAS, the Sellers desire to sell and Purchaser desires to purchase the Shares on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. The following terms, as used herein, have the following meanings: "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court costs and attorneys' fees and expenses which, in the aggregate, would have a material adverse effect on the financial condition or results of operations of the Purchaser. "Affiliate" has the meaning set forth in Rule 12-2 of the regulations promulgated under the Securities Exchange Act. "Affiliated Group" means any affiliated group within the meaning of Code Section 1504 or any similar group defined under a similar provision of state, local or foreign law. "Agreement among Sellers" means an agreement, effective as of a time prior to the execution and delivery of this Agreement, pursuant to which the Sellers appoint an attorney-in-fact to execute and deliver this Agreement, collect the cash portion of the Purchase Price, take delivery of the Long-term Note and the Warrants, receive payments under the Long-Term Note, exercise Warrants and otherwise act on behalf of the Sellers for all purposes connected with the performance of this Agreement. "Applicable Rate" means the corporate base rate of interest announced from time to time by First Tennessee Bank National Association, Memphis, Tennessee plus two percent (2%). "Association" has the meaning set forth in the first recital above. "Base Purchase Price" has the meaning set forth in Section 2(a) below. 1 3 "Basis" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction of which any Seller has Knowledge that forms or could form the basis for any specified consequence. "Closing" has the meaning set forth in Section 2(c) below. "Closing Date" has the meaning set forth in Section 2(c) below. "Code" means the Internal Revenue Code of 1986, as amended. "Controlled Group of Corporations" has the meaning set forth in Code Section 1563. "Deferred Intercompany Transaction" has the meaning set forth in Treasury Regulation Section 1.1502-13. "Deferred Purchase Price" has the meaning set forth in Section 2(b) below. "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit plan or program. "Employee Pension Benefit Plan" has the meaning set forth in ERISA Section 3(2). "Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section 3(1). "Environmental, Health, and Safety Laws" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the Occupational Safety and Health Act of 1970, the Medical Waste Tracking Act of 1988, the U. S. Public Vessel Medical Waste Anti-Dumping Act of 1988, the Marine Protection, Research and Sanctuaries Act and Human Services, National Institute for Occupational Safety and Health, Infections Waste Disposal Guidelines, Publication No. 88-119, each as amended, together with all other laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof) concerning pollution or protection of the environment, public health and safety, or employee health and safety, including laws relating to emissions, discharges, releases, or threatened releases of medical wastes, pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Excess Loss Account" has the meaning set forth in Treasury Regulation Section 1.1502-19. "Extremely Hazardous Substance" has the meaning set forth in Section 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as amended. "Fiduciary" has the meaning set forth in ERISA Sec. 3(21). "Financial Statement" has the meaning set forth in Section 4(g) below. 2 4 "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Group" has the meaning set forth in the initial paragraph of this Stock Purchase Agreement. "Knowledge" means actual knowledge after reasonable investigation. "Liability" means any liability (whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due), including any liability for Taxes. "Long-Term Note" means the promissory note of the Purchaser payable to the order of the Sellers in the form set forth as Exhibit 2(b)(i). "Most Recent Balance Sheet" means the balance sheet contained within the Most Recent Financial Statements. "Most Recent Financial Statements" has the meaning set forth in Section 4(f) below. "Most Recent Fiscal Month End" has the meaning set forth in Section 4(f) below. "Most Recent Fiscal Year End" has the meaning set forth in Section 4(f) below. "Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37). "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice. "Party" means the Purchaser or any Seller. "PBGC" means the Pension Benefit Guaranty Corporation. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and Code Sec. 4975. "Pro Rata" means, with respect to the Sellers, their proportionate ownership interests in the Association. "Purchaser" has the meaning set forth in the initial paragraph of this Stock Purchase Agreement and, after Closing (and as relates to Section 9(b) regarding indemnification), shall mean Response Oncology, Inc. and any subsidiary or affiliate thereof. "Purchaser's Disclosure Letter" has the meaning set forth in Section 3(b) below. "Receivables" means the face amount, in dollars, of the Association's accounts receivable as of the close of business on the day prior to the Closing Date. "Reportable Event" has the meaning set forth in ERISA Sec. 4043. 3 5 "Response Stock" means the common stock of the Purchaser, $.01 par value per share. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Security Interest" means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic's, materialmen's, and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. "Seller" has the meaning set forth in the preface above. "Sellers' Disclosure Letter" has the meaning set forth in Section 3(a) below. "Service Agreement" means the Service Agreement between the Purchaser and the Group to be executed and delivered by the Purchaser and the Group, and which will become effective, at the time of Closing. "Shares" means all of the issued and outstanding shares of the Common Stock, par value $1.00 per share, of the Association. "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Third Party Claim" has the meaning set forth in Section 9(d) below. "Warrant" means a warrant to purchase 20,000 shares of Response Stock at $12.50 per share, issuable to a Seller at Closing in the form set forth as Exhibit 2(b)(ii). 2. PURCHASE AND SALE OF SHARES. (a) Basic Transaction. On and subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase from the Sellers, and the Sellers agree to sell to the Purchaser, all of the Shares for the sum of (i) the aggregate base price (the "Base Purchase Price") equal to the sum of Ten Million Three Hundred Three Thousand Seven Hundred Twenty-Two Dollars ($10,303,722.00), plus the Net Realizable Value of Receivables, and (ii) the deferred price (the "Deferred Purchase Price") equal to Fifty Thousand Dollars ($50,000.00) per calendar quarter for each quarter, or portion thereof, that the Service Agreement remains if effect, up to a maximum of Eight Hundred Thousand Dollars ($800,000). In the event of termination of the Service Agreement on any day which is not the last day of a calendar quarter, then the Deferred Purchase Price shall be pro rated through the last day of the calendar month of termination as if such termination occurred on that day. In addition to the foregoing, the Purchaser shall issue to each Seller, at such Seller's election, either (i) a Warrant to purchase 20,000 shares Response Stock, (ii) options to purchase 20,000 shares 4 6 of Response Stock at a price of $12.50 per share, which options shall be issued pursuant to the Purchaser's Non- Qualified Stock Option Plan, or (iii) any combination of Warrants and options. At the time of such issuance, any options issued to any Seller pursuant to said plan shall be immediately vested and exercisable. (b) Payment of Purchase Price. The Purchaser shall pay or satisfy the Base Purchase Price in the following manner: (i) Five Million Two Hundred Thousand ($5,343,750) Dollars in cash to the Sellers, pro rata according to their ownership of Shares, at Closing (hereinafter defined), (ii) Five Million Nine Hundred Fifty-Nine Thousand Nine Hundred Seventy-Two ($5,959,972) Dollars by issuance and delivery of the Long-Term Note to the Sellers; and (iii) issuance and delivery of the Warrants and/or option to the Sellers in accordance with Section 2(a) above. The Deferred Purchase Price shall be paid to the Sellers, pro rata according to their ownership of Shares, by the Purchaser Fifty Thousand Dollars (or such portion thereof as may be computed in accordance with Section 2(a) in the event of termination of the Service Agreement) in arrears on the last day of each calendar quarter, commencing March 31, 1996 (which date is subject to change in the event the Closing occurs later than January 2, 1996), with the last such payment being due and payable on the earlier of the last day of the quarter during which the Service Agreement is terminated or December 31, 1999. In addition to the foregoing, the Purchaser shall pay to the Sellers, pro rata according to their ownership of Shares, as additional Purchase Price, on a monthly basis during the period after Closing, the amount of Receivables collected by Response in excess of $1,200,000.00. Such obligation shall terminate on the first anniversary of the Closing. In that regard, during such one year period, the Purchaser shall make monthly accountings to the Sellers with respect to the collection of Receivables, and the Sellers may, at their option and sole expense, assist in the collection of any Receivable. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Baker, Donelson, Bearman & Caldwell, 165 Madison Avenue, 21st Floor, Memphis, Tennessee 38103 commencing at 9:00 a.m. local time on January 2, 1996, or such other date as the Purchaser and the Sellers may mutually determine (the "Closing Date"). (d) Deliveries at the Closing. At the Closing, (i) the Purchaser will deliver to the Sellers the various certificates, instruments, and documents referred to in Section 8(a) below, (ii) the Sellers will deliver to the Purchaser the various certificates, instruments, and documents referred to in Section 8(b) below. 3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION. (a) Representations and Warranties of the Sellers. The Sellers jointly and severally represent and warrant to the Purchaser that the statements contained in this Section 3(a) are correct and complete as of the date of this Agreement with respect to the Sellers, except as set forth in the disclosure letter executed and delivered by the Sellers and the Group contemporaneous with this Agreement (the "Sellers' Disclosure Letter""). The Sellers' Disclosure Letter shall be satisfactory to the Purchaser and its counsel and will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 3(a) and Section 4. (i) Authorization of Transaction. Each Seller has the requisite legal capacity and has full power and authority to execute and deliver this Agreement and to perform his obligations hereunder. This Agreement constitutes the valid and legally binding obligation of each Seller, enforceable in accordance with its terms and conditions. Each Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. This Agreement constitutes the valid and legally binding obligation of each Seller, enforceable in accordance with its terms, subject to applicable bankruptcy, moratorium, insolvency and other laws affecting the rights of creditors and general equity principles. 5 7 (ii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which any Seller is subject or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which any Seller is a party or by which he is bound or to which any of his assets is subject. (iii) Brokers' Fees. The Sellers have no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Purchaser could become liable or obligated. (iv) Shares. Each Seller holds of record and owns beneficially all of the Shares free and clear of any restrictions on transfer (other than any restrictions under the Securities Act and state securities laws), Taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. No Seller is a party to any option, warrant, purchase right, or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of any capital stock of the Association (other than this Agreement). No Seller is a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any Shares. (v) Agreement among Sellers. The Agreement among Sellers has been duly executed by each Seller and constitutes the valid and legally binding obligation of each Seller, enforceable according to its terms. (b) Representations and Warranties of the Purchaser. The Purchaser represents and warrants to each Seller that the statements contained in this Section 3(b) are correct and complete as of the date of this Agreement except as set forth in the disclosure letter executed and delivered by the Purchaser contemporaneous with this Agreement (the "Purchaser's Disclosure Letter"). (i) Organization of the Purchaser. The Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Tennessee. (ii) Authorization of Transaction. The Purchaser has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, subject to applicable bankruptcy, moratorium, insolvency and other laws affecting the rights of creditors and general equity principles. The Purchaser need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Purchaser is subject or any provision of its charter or bylaws or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Purchaser is a party or by which it is bound or to which any of its assets is subject. 6 8 (iv) Brokers' Fees. The Purchaser has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated. (v) Investment. The Purchaser is not acquiring the Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. 4. REPRESENTATIONS AND WARRANTIES CONCERNING THE ASSOCIATION. The Sellers and the Group, jointly and severally, represent and warrant to the Purchaser that the statements contained in this Section 4 are true, correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4), except as set forth in the Sellers' Disclosure Letter. Nothing in the Sellers' Disclosure Letter shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Sellers' Disclosure Letter identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. The Sellers' Disclosure Letter will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 4. (a) Organization, Qualification, and Corporate Power. The Association is a corporation duly organized, validly existing, and in good standing under the laws of the State of Florida. The Association is duly authorized to conduct business and are in good standing under the laws of each jurisdiction where such qualification is required. The Association has full corporate power and authority and all licenses, permits, and authorizations necessary to carry on the business in which it is engaged and to own and use its properties. Paragraph 4(a) of the Sellers' Disclosure Letter lists the directors and officers of the Association. The Sellers have delivered to the Purchaser correct and complete copies of the charter and bylaws of the Association (as amended to date). The minute book (containing the records of meetings of the stockholders, the board of directors, and any committees of the board of directors), the stock certificate book, and the stock record book of the Association are correct and complete. The Association is not in default under or in violation of any provision of its charter or bylaws. (b) Capitalization. The entire authorized capital stock of the Association consists of 5,000 Shares, of which 80 Shares are issued and outstanding. All of the issued and outstanding Shares have been duly authorized, are validly issued, fully paid, and nonassessable, and are held of record by the Sellers. There are no outstanding or authorized options, warrants, purchase rights, preemptive rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Association to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Association. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of the Association. (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Association is subject or any provision of the charter or bylaws of the Association or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Association is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Security Interest upon any of its assets). The Association is not required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement. 7 9 (d) Brokers' Fees. The Association has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. (e) Title to Assets. The Association has good and marketable title to, or a valid leasehold interest in, all of its properties and assets, free and clear of all Security Interests, and has not sold, transferred, exchanged or conveyed any of its properties and assets since the date of the Most Recent Balance Sheet except for properties and assets disposed of in the Ordinary Course of Business since the date of the Most Recent Balance Sheet. (f) Financial Statements. Attached as collective Paragraph 4(f) to the Sellers' Disclosure Letter are the following financial statements (collectively the "Financial Statements"): (i) unaudited balance sheet and statement of income, changes in stockholders' equity, and cash flow as of and for the fiscal years ended December 31, 1994 (the "Most Recent Fiscal Year End") for the Association; and (ii) unaudited balance sheet and statement of income, changes in stockholders' equity, and cash flow (the "Most Recent Financial Statements") as of and for the six (6) months ended June 30, 1995 (the "Most Recent Fiscal Month End") for the Association. The Financial Statements (including the notes thereto) have been prepared on a consistent basis throughout the periods covered thereby, present fairly the financial condition of the Association as of such dates and the results of operations of the Association and its subsidiaries for such periods on a cash basis method of accounting, are correct and complete, and are consistent with the books and records of the Association. (g) Events Subsequent to Most Recent Fiscal Year End. Since the Most Recent Fiscal Year End, there has not been any material adverse change in the business, financial condition, operations, results of operations, or future prospects of the Association. Without limiting the generality of the foregoing, since that date: (i) the Association has not sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the Ordinary Course of Business; (ii) the Association has not entered into any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) either involving more than $25,000.00 or outside the Ordinary Course of Business; (iii) no party (including the Association) has accelerated, terminated, modified, or cancelled any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) involving more than $25,000.00 to which the Association is a party or by which the Association or its properties are bound; (iv) the Association has not created, suffered or permitted to attach or be imposed any Security Interest upon any of its assets, tangible or intangible; (v) the Association has not made any capital expenditure (or series of related capital expenditures) either involving more than $25,000.00 or outside the Ordinary Course of Business; (vi) the Association has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions) either involving more than $25,000.00 or outside the Ordinary Course of Business; (vii) the Association has not issued any note, bond, or other debt instrument or security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation; 8 10 (viii) the Association has not delayed or postponed the payment of accounts payable and other Liabilities outside the Ordinary Course of Business; (ix) the Association has not cancelled, compromised, waived, or released any right or claim (or series of related rights and claims) either involving more than $25,000.00 or outside the Ordinary Course of Business; (x) the Association has not granted any license or sublicense of any rights under or with respect to any Intellectual Property; (xi) there has been no change made or authorized in the charter or bylaws of the Association; (xii) the Association has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; (xiii) the Association has not declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; (xiv) the Association has not experienced any damage, destruction, or loss (whether or not covered by insurance) to its property; (xv) the Association has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees outside the Ordinary Course of Business; (xvi) the Association has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; (xvii) the Association has not granted any increase in the base compensation of any of its directors, officers, and employees outside the Ordinary Course of Business; (xviii) the Association has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Employee Benefit Plan); (xix) the Association has not made any other change in employment terms for any of its directors, officers, and employees outside the Ordinary Course of Business; (xx) the Association has not made or pledged to make any charitable or other capital contribution outside the Ordinary Course of Business; (xxi) there has not been any other occurrence, event, incident, action, failure to act, or transaction outside the Ordinary Course of Business involving the Association; and (xxii) the Association has not committed to any of the foregoing. (h) Undisclosed Liabilities. The Association has no Liability (and there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Association that may result in any Liability), except for (i) Liabilities set forth on the face of the Most Recent 9 11 Balance Sheet (rather than in any notes thereto); (ii) Liabilities which have arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business and (iii) Liabilities described with particularity in Paragraph 4(h) of the Sellers' Disclosure Letter (and, with respect to each Liability described in items (i) through (iii) immediately above, none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, malpractice, infringement, or violation of law). (i) Legal Compliance. The Association and its respective predecessors and Affiliates have complied with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply. (j) Tax Matters. (i) The Association has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all respects. All Taxes owed by the Association (whether or not shown on any Tax Return) have been paid or accrued in the Financial Statements. The Association is not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Association does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Security Interests on any of the assets of either the Association that arose in connection with any failure (or alleged failure) to pay any Tax. (ii) The Association has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. (iii) Neither the Sellers nor any director or officer (or employee responsible for Tax matters) of the Association expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax Liability of the Association either (A) claimed or raised by any authority in writing or (B) as to which the Sellers or the directors and officers (and employees responsible for Tax matters) of the Association have Knowledge. Paragraph 4(j) of the Sellers' Disclosure Letter lists all federal, state, local, and foreign income Tax Returns filed with respect to the Association for taxable periods ended on or after December 31, 1992, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Sellers have delivered to the Purchaser correct and complete copies of all examination reports and statements of deficiencies assessed against or agreed to by the Association since December 31, 1991. (iv) The Association has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (v) The Association has not filed a consent under Code Section 341(f) concerning collapsible corporations. The Association has not made any payment, is not obligated to make any payment, or is not a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Section 280G. The Association has not been a United States real property holding corporation within the meaning of Code Sec. 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). The Association has not disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662. The Association is not a party to any Tax allocation or sharing agreement. The Association (A) has not been a member 10 12 of an Affiliated Group filing a consolidated federal income Tax Return or (B) has no Liability for the Taxes of any Person (other than of the Association under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. (vi) Paragraph 4(j) of the Sellers' Disclosure Letter sets forth the following information with respect to the Association as of the most recent practicable date: (A) the basis of the Association in its assets; and (B) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution. (k) Real Property. The Association does not own any real property and has not executed and delivered or otherwise entered into any contract to purchase any real property. Paragraph 4(k) of the Sellers' Disclosure Letter lists and describes briefly all real property leased or subleased to the Association. The Sellers have delivered to the Purchaser correct and complete copies of the leases and subleases listed in Paragraph 4(k) of the Sellers' Disclosure Letter (as amended to date). With respect to each lease and sublease listed in Paragraph 4(k) of the Sellers' Disclosure Letter, except as otherwise set forth in such Paragraph 4(k) of the Sellers' Disclosure Letter: (i) the lease or sublease is legal, valid, binding, enforceable, and in full force and effect; (ii) the lease or sublease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (iii) the Association, and, to the best of Sellers' Knowledge, no other party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder; (iv) the Association, and, to the best of Sellers' Knowledge, no party to the lease or sublease has repudiated any provision thereof; (v) to the best of Sellers' Knowledge, there are no disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; (vi) with respect to each sublease, the representations and warranties set forth in subsections (i) through (v) above are true and correct with respect to the underlying lease; (vii) the Association has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold; (viii) all facilities leased or subleased thereunder have received all approvals of governmental authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained in accordance with applicable laws, rules, and regulations; (ix) all facilities leased or subleased thereunder are supplied with utilities and other services necessary for the operation of said facilities; and (x) to the best of Sellers' Knowledge, the owner of the facility leased or subleased has good and marketable title to the parcel of real property, free and clear of any Security Interest, easement, covenant, or other restriction, except for installments of special easements not yet 11 13 delinquent and recorded easements, covenants, and other restrictions which do not impair the current use, occupancy, or value, or the marketability of title, of the property subject thereto. (l) Tangible Assets. The Association owns or leases all buildings, machinery, equipment, and other tangible assets necessary for the conduct of its business as presently conducted. (m) Inventory. The inventory of the Association consists of medical supplies, all of which is merchantable and fit for the purpose for which it was procured or manufactured, and none of which is slow-moving, obsolete, damaged, or defective, subject only to the reserve for inventory writedown set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Association. (n) Contracts. Paragraph 4(n) of the Sellers' Disclosure Letter lists the following contracts and other agreements to which the Association is a party: (i) any agreement (or group of related agreements) for the lease of personal property to or from any Person providing for lease payments in excess of $25,000.00 per annum; (ii) any agreement (or group of related agreements) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year, result in a loss to the Association, or involve consideration in excess of $25,000.00; (iii) any agreement concerning a partnership or joint venture; (iv) any agreement (or group of related agreements) under which the Association has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of $25,000.00 or under which it has imposed a Security Interest on any of its assets, tangible or intangible; (v) any agreement concerning confidentiality or noncompetition; (vi) any agreement with either the Sellers or their Affiliates (other than the Association); (vii) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of its current or former directors, officers, and employees; (viii) any collective bargaining agreement; (ix) any agreement for the employment of any individual on a full-time, part-time, consulting, or other basis providing annual compensation in excess of $25,000.00 or providing severance benefits; (x) any agreement under which the Association has advanced or loaned any amount to any of its directors, officers, and employees outside the Ordinary Course of Business; (xi) any agreement under which the consequences of a default or termination could have an adverse effect on the business, financial condition, operations, results of operations, or future prospects of the Association; or 12 14 (xii) any other agreement (or group of related agreements) the performance of which involves consideration in excess of $25,000.00. The Sellers has delivered to the Purchaser a correct and complete copy of each written agreement listed in Paragraph 4(n) of the Sellers' Disclosure Letter (as amended to date) and a written summary setting forth the terms and conditions of each oral agreement referred to in Paragraph 4(n) of the Sellers' Disclosure Letter. With respect to each such agreement: (1) the agreement is legal, valid, binding, enforceable, and in full force and effect; (2) the agreement will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (3) no party is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under the agreement; and (4) no party has repudiated any provision of the agreement. (o) Notes and Accounts Receivable. All notes and accounts receivable of the Association are reflected properly on its books and records, are valid receivables subject to no setoffs or counterclaims, are current and collectible, and will be collected in accordance with their terms at their recorded amounts, subject only to the reserve for bad debts as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Association. (p) Powers of Attorney. There are no outstanding powers of attorney executed on behalf of the Association. (q) Insurance. Paragraph 4(q) of the Sellers' Disclosure Letter sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, medical malpractice, and workers' compensation coverage and bond and surety arrangements) to which the Association has been a party, a named insured, or otherwise the beneficiary of coverage at any time within the past five (5) years: (i) the name, address, and telephone number of the agent; (ii) the name of the insurer, the name of the policyholder, and the name of each covered insured; (iii) the policy number and the period of coverage; (iv) the scope (including an indication of whether the coverage was on a claims made, occurrence, or other basis) and amount (including a description of how deductibles and ceilings are calculated and operate) of coverage; and (v) a description of any retroactive premium adjustments or other loss-sharing arrangements. With respect to each such insurance policy: (A) the policy is legal, valid, binding, enforceable, and in full force and effect; (B) the policy will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (C) neither the Association nor any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination, modification, or acceleration, under the policy; and (D) no party to the policy has repudiated any provision thereof. The Association has been covered during the past five (5) years by insurance in scope and amount customary and reasonable for the businesses in which it has engaged during the aforementioned period. Paragraph 4(q) of the Sellers' Disclosure Letter describes any self-insurance arrangements affecting the Association. 13 15 (r) Litigation. Paragraph 4(r) of the Sellers' Disclosure Letter sets forth each instance in which either the Association (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party or is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. None of the actions, suits, proceedings, hearings, and investigations set forth in Paragraph 4(r) of the Sellers' Disclosure Letter could result in any material adverse change in the business, financial condition, operations, results of operations, or future prospects of either the Association or the Group. Neither the Sellers nor the directors and officers (and employees with responsibility for litigation matters) of the Association and the Group has any reason to believe that any such action, suit, proceeding, hearing, or investigation may be brought or threatened against the Association or the Group. (s) Employees. To the best of the Sellers' Knowledge, no physician, executive, key employee, or group of employees has any plans to terminate employment with the Association or, after the Closing, with the Group. The Association is not a party to or bound by any collective bargaining agreement, nor has it experienced any strikes, grievances filed pursuant to any work rules of any organized labor organization, claims of unfair labor practices, or other collective bargaining disputes. To the best of the Sellers' Knowledge, the Association has not committed any unfair labor practice. To the best of the Sellers' Knowledge, no organizational effort is presently being made or threatened by or on behalf of any labor union with respect to employees of the Association. (t) Employee Benefits. (i) Paragraph 4(t) of the Sellers' Disclosure Letter lists each Employee Benefit Plan that the Association maintains or to which the Association contributes. (A) Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in form and in operation in all respects with the applicable requirements of ERISA, the Code, and other applicable laws. (B) All required reports and descriptions (including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions) have been filed or distributed appropriately with respect to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Sec. 4980B have been met with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. (C) All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to each such Employee Benefit Plan which is an Employee Pension Benefit Plan and all contributions for any period ending on or before the Closing Date which are not yet due have been paid to each such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of the Association. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. (D) Each such Employee Benefit Plan which is an Employee Pension Benefit Plan meets the requirements of a "qualified plan" under Code Sec. 401(a) and has received, within the last two years, a favorable determination letter from the Internal Revenue Service. (E) The market value of assets under each such Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or exceeds the present value of all vested and nonvested Liabilities thereunder determined in accordance 14 16 with PBGC methods, factors, and assumptions applicable to an Employee Pension Benefit Plan terminating on the date for determination. (F) The Sellers have delivered to the Purchaser correct and complete copies of the plan documents and summary plan descriptions, the most recent determination letter received from the Internal Revenue Service, the most recent Form 5500 Annual Report, and all related trust agreements, insurance contracts, and other funding agreements which implement each such Employee Benefit Plan. (ii) With respect to each Employee Benefit Plan that the Association maintains or ever has maintained or to which it contributes, ever has contributed, or ever has been required to contribute: (A) No such Employee Benefit Plan which is in Employee Pension Benefit Plan (other than any Multiemployer Plan) has been completely or partially terminated or been the subject of a Reportable Event as to which notices would be required to be filed with the PBGC. No proceeding by the PBGC to terminate any such Employee Pension Benefit Plan (other than any Multiemployer Plan) has been instituted or threatened. (B) There have been no Prohibited Transactions with respect to any such Employee Benefit Plan. No Fiduciary has any Liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any such Employee Benefit Plan (other than routine claims for benefits) is pending or threatened. Neither the Sellers nor the directors and officers (and employees with responsibility for employee benefits matters) of the Association has any Knowledge of any Basis for any such action, suit, proceeding, hearing, or investigation. (C) The Association has not incurred, and neither the Sellers nor the directors and officers (and employees with responsibility for employee benefits matters) of the Association has any reason to expect that the Association will incur, any Liability to the PBGC (other than PBGC premium payments) or otherwise under Title IV of ERISA (including any withdrawal Liability) or under the Code with respect to any such Employee Benefit Plan which is an Employee Pension Benefit Plan. (iii) The Association does not contribute to, has never contributed to, and has not been required to contribute to any Multiemployer Plan or has any Liability (including withdrawal Liability) under any Multiemployer Plan. (iv) The Association does not maintain, has never maintained, has never contributed, and has not been required to contribute to any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type benefits for current or future retired or terminated employees, their spouses, or their dependents (other than in accordance with Code Sec. 4980B). (u) Guaranties. The Association is not a guarantor or is not otherwise liable for any Liability or obligation (including indebtedness) of any other Person. (v) Environment, Health, and Safety. (i) Each of the Sellers, the Association and their respective Affiliates has complied with all Environmental, Health, and Safety Laws, and no action, suit, proceeding, hearing, investigation, 15 17 charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply. Without limiting the generality of the preceding sentence, each of the Sellers, the Association and their respective Affiliates has obtained and been in compliance with all of the terms and conditions of all permits, licenses, and other authorizations which are required under, and has complied with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables which are contained in, all Environmental, Health, and Safety Laws. (ii) The Association has no Liability (and none of the Sellers, the Association and their respective Affiliates has handled or disposed of any substance, arranged for the disposal of any substance, exposed any employee or other individual to any substance or condition, or owned or operated any property or facility in any manner that could form the Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Association giving rise to any Liability) for damage to any site, location, or body of water (surface or subsurface), for any illness of or personal injury to any employee or other individual, or for any reason under any Environmental, Health, and Safety Law. (iii) All properties and equipment used in the business of the Sellers, the Association and their respective Affiliates have been free of asbestos, PCB's, methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous Substances. (w) Healthcare Compliance. Neither the Association nor any physician associated with or employed by the Association has received payment or any remuneration whatsoever to induce or encourage the referral of patients or the purchase of goods and/or services as prohibited under 42 U.S.C. Section 1320a-7b(b), or otherwise perpetrated any Medicare or Medicaid fraud or abuse nor has any fraud or abuse been alleged within the last five (5) years by any government agency. The Association and/or each physician employed thereby is participating in or otherwise authorized to receive reimbursement from or is a party to Medicare, Medicaid, and other third-party payor programs, and, after the execution and delivery hereof and of the Service Agreement, the foregoing representation shall be true with respect to the Group and all physicians employed thereby. All necessary certifications and contracts required for participation in such programs are in full force and effect and have not been amended or otherwise modified, rescinded, revoked or assigned and, to the best of the Sellers' Knowledge, no condition exists or event has occurred which in itself or with the giving of notice or the lapse of time or both would result in the suspension, revocation, impairment, forfeiture or non-renewal of any such third party payor program. The Association is and, after the execution and delivery hereof and of the Service Agreement, the Group will be, in full compliance with the requirements of all such third party payor programs applicable thereto. (x) Fraud and Abuse. The Association and persons and entities providing professional services for the Association have not engaged in any activities which are prohibited under 42 U.S.C. Section 1320a-7b, or the regulations promulgated thereunder pursuant to such statutes, or related state or local statutes or regulations, or which are prohibited by rules of professional conduct, including but not limited to the following: (i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (ii) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (iii) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with intent to fraudulently secure such benefit or payment; and 16 18 (iv) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay or receive such remuneration (A) in return for referring an individual to a person for the furnishing or arranging for the furnishing or any item or service for which payment may be made in whole or in part by Medicare or Medicaid, or (B) in return for purchasing, leasing, or ordering or arranging for or recommending purchasing, leasing, or ordering any good, facility, service or item for which payment may be made in whole or in part by Medicare or Medicaid. (y) Facility Compliance. The Association is duly licensed, and the Association and its clinics, offices and facilities are lawfully operated in accordance with the requirements of all applicable law and has all necessary authorizations for their use and operation, all of which are in full force and effect. There are no outstanding notices of deficiencies relating to the Association or any physician employed thereby issued by any governmental authority or third party payor requiring conformity or compliance with any applicable law or condition for participation of such governmental authority or third party payor, and after reasonable and independent inquiry and due diligence and investigation, the Association has no Knowledge or reason to believe that such necessary authorizations may be revoked or not renewed in the ordinary course. (z) Rates and Reimbursement Policies. The jurisdiction in which the Association is located does not currently impose any restrictions or limitations on rates which may be charged to private pay patients receiving services provided by the Association. The Association has no rate appeal currently pending before any governmental authority or any administrator of any third party payor program. The Association has no Knowledge of any applicable law, which has been enacted, promulgated or issued within the eighteen (18) months preceding the date of this Agreement or any such legal requirement proposed or currently pending in the jurisdiction in which the Association is located which could have a material adverse effect on the Association or may result in the imposition of additional Medicaid, Medicare, charity, free care, welfare, or other discounted or government assisted patients at the Association or require the Association to obtain any necessary authorization which the Association does not currently possess. (aa) Disclosure. The representations and warranties contained in this Section 4 and in the Sellers' Disclosure Letter do not contain any untrue or misleading statement of a fact. 5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing. (a) General. Each of the Parties will use his or its best efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction of the closing conditions set forth in Section 7 below). (b) Notices and Consents. The Sellers will cause the Association to give any notices to third parties, and will cause the Association to use its best efforts to obtain any third-party consents, that may be required by law or the terms of any contract to which the Sellers may be subject or that the Purchaser may request in connection with the transaction contemplated by this Agreement. Each of the Parties will (and the Sellers will cause the Association to) give any notices to, make any filings with, and use its best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies required to consummate the transaction contemplated by this Agreement. (c) Operation of Business. The Sellers will not cause or permit the Association or the Group to engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business. Without limiting the generality of the foregoing, the Sellers will not cause or permit the Association to (i) declare, set aside, or pay any dividend or make any distribution with respect to its capital stock or redeem, 17 19 purchase, or otherwise acquire any of its capital stock or (ii) otherwise engage in any practice, take any action, or enter into any transaction of the sort described in Section 4(g) above. (d) Preservation of Business. The Sellers will cause the Association to keep its business and properties substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors, licensors, suppliers, patients, and employees. (e) Full Access. The Sellers will permit, and the Sellers will cause the Association to permit, representatives of the Purchaser to have full access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Association, to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to the Association. (f) Notice of Developments. The Sellers will give prompt written notice to the Purchaser of any material adverse development of which any of them learns which would constitute or otherwise cause a breach of any of the representations and warranties in Section 4 above. Each Party will give prompt written notice to the others of any material adverse development causing a breach of any of his or its own representations and warranties in Section 3 above. No disclosure by any Party pursuant to this Section 5(f), however, shall be deemed to amend or supplement the Sellers' Disclosure Letter or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant. (g) Exclusivity. For so long as this Stock Purchase Agreement shall remain in effect, the Sellers will not (and the Sellers will not cause or permit the Association to) (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to the acquisition of any capital stock or other voting securities, or any substantial portion of the assets of, the Association (including any acquisition structured as a merger, consolidation, or share exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing. The Sellers will not vote their Shares in favor of any such acquisition structured as a merger, consolidation, or share exchange. The Sellers will notify the Purchaser immediately if any Person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing. (h) Release from Personal Guaranties. The Purchaser shall use its best efforts to obtain the release of each Seller from any personal guarantee of any obligation of the Association. Failure of the Purchaser to obtain any such release shall not be a breach of this Agreement or otherwise, without the existence of a separate breach hereof, excuse any Seller from performance hereunder. In that regard, the Purchaser hereby agrees to indemnify and hold each Seller harmless from and against any claim made by such Seller in respect of any such personal guarantee. 6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the period following the Closing. (a) General. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party may reasonably request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Section 9 below). The Sellers acknowledge and agree that from and after the Closing the Purchaser will be entitled to possession of all documents, books, records (including Tax records), agreements, and financial data of any sort relating to the Association. (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection 18 20 with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Association or any Seller, each of the other Parties will cooperate with him or it and his or its counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Section 9 below). (c) Transition. The Sellers will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of the Association from maintaining the same business relationships with the Association or the Group after the Closing as it maintained with the Association prior to the Closing. The Sellers will refer all inquiries relating to the businesses of the Association to the Purchaser from and after the Closing. (d) Name Change. At the time of Closing, the Purchaser shall cause the name of the Association to be changed to something distinguishable, within the meaning of the corporation statutes of the state of Florida, from the name of the Association and shall execute, deliver and/or cause to be filed such documents or instruments that may be necessary to permit the Group to change its name to and to do business under the name "Oncology Hematology Group of South Florida, P.A." (e) Medical Director Arrangement. From and after Closing, the Parties will continue to negotiate in good faith and establish consistent with past practice all fees related to the performance by some or all of the Sellers of services as medical directors of the Purchaser's IMPACT Center in Miami, Florida. 7. CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE. (a) Conditions to Obligation of the Purchaser. The obligation of the Purchaser to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(a) and Section 4 above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Sellers shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) the Sellers shall have caused the Association to procure all of the third party consents specified in Section 5(b) above; (iv) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (C) affect adversely the right of the Purchaser to own the Shares and to control the Association, or (D) affect adversely the right of the Association to own its assets and to operate its businesses (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (v) the Sellers and the Group shall have delivered to the Purchaser a certificate to the effect that each of the conditions specified above in Section 7(a)(i)-(iv) is satisfied in all respects; 19 21 (vi) the Purchaser shall have received the resignations, effective as of the Closing, of each director and officer of the Association other than those whom the Purchaser shall have specified in writing at least five business days prior to the Closing; (vii) the Purchaser shall have received from Cohen, Chase, Hoffman & Trautman, P.A., counsel to the Sellers and the Association, an opinion as to matters customarily addressed in opinions of counsel in transactions such as that described herein, which opinion shall be in form and substance reasonably acceptable to the Purchaser and its counsel; (viii) the Group shall have executed and delivered the Service Agreement to the Purchaser; (ix) the President of the Association shall have executed and delivered to Baker, Donelson, Bearman & Caldwell, a professional corporation, and any state healthcare counsel engaged to render the opinion described in subparagraph (x) below, the Certificate of Fact in substantially the form set forth as Exhibit 7(a)(ix) hereto (x) the Purchaser shall have received an opinion from Florida counsel reasonably satisfactory to the Purchaser that the Service Agreement is the legal, valid and binding obligation of the Group, enforceable according to its terms (subject to standard bankruptcy, insolvency and principles of equity exceptions) and that the performance of the Service Agreement by the Purchaser and the Group will not violate any statute, regulation, official interpretation, order, decree or other law of the state of Florida; (xi) the Purchaser shall have received an opinion from Baker, Donelson, Bearman & Caldwell that the performance of the Service Agreement by the Purchaser and the Group will not violate any statute, regulation, official interpretation, order, decree or other law of the United States of America; (xii) each Seller shall have executed an employment contract with the Group in substantially the form required by the Service Agreement; and (xiii) all actions to be taken by the Sellers in connection with consummation of the transactions contemplated hereby and all certificates, opinion, instruments, and other documents required to effect the transactions contemplated hereby will be satisfactory in form and substance to the Purchaser. The Purchaser may waive any condition specified in this Section 7(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Sellers. The obligation of the Sellers to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(b) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Purchaser shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any 20 22 arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (iv) the Purchaser shall have delivered to the Sellers a certificate to the effect that each of the conditions specified above in Section 7(b)(i)-(iii) is satisfied in all respects; (v) all actions to be taken by the Purchaser in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Sellers. (vi) the Sellers shall have received an opinion from Baker, Donelson, Bearman & Caldwell, in form and substance satisfactory to the Sellers and their counsel with respect to the enforceability of the Long-Term Note and the legality of the rate of interest thereupon. (vii) the Sellers shall have received an opinion from Florida counsel reasonably satisfactory to the Sellers that the Service Agreement is the legal, valid and binding obligation of the Purchaser, enforceable according to its terms (subject to standard bankruptcy, insolvency and principles of equity exceptions) and that the performance of the Service Agreement by the Purchaser and the Group will not violate any statute, regulation, official interpretation, order, decree or other law of the state of Florida. (viii) the Sellers shall have received an opinion from Baker, Donelson, Bearman & Caldwell that the performance of the Service Agreement by the Purchaser and the Group will not violate any statute, regulation, official interpretation, order, decree or other law of the United States of America; The Sellers may waive any condition specified in this Section 7(b) if they execute a writing so stating at or prior to the Closing. 8. DELIVERIES AT CLOSING. (a) Documents to be Delivered by the Purchaser. At the Closing, the Purchaser shall deliver the following instruments and documents to the Sellers or other appropriate party: (i) the amount described in Section 2(b)(i) above; (ii) the Long-Term Note, payable to the order of the Sellers; (iii) the Warrants; (iv) the certificate described in Section 7(b)(iv) above; (v) the opinions of counsel, in a form reasonably satisfactory to the Sellers' counsel, required pursuant to Sections 7(b)(vi) through (viii) above; and (vi) such other documents as the Sellers may reasonably request to affect the transactions contemplated by this Agreement. 21 23 (b) Documents to be Delivered by the Seller. At the Closing, the Sellers shall deliver the following instruments and documents to the Purchaser: (i) stock certificates representing all of the Shares, endorsed in blank or accompanied by duly executed assignment documents; (ii) a certificate of existence from the Florida Secretary of State evidencing the existence and good standing of the Association, dated not more than five (5) days prior to the Closing Date; (iii) all consents necessary regarding the transaction contemplated by this Agreement; (iv) the opinion of counsel to the Sellers, in a form reasonably satisfactory to the Purchaser's counsel, required by Section 7(a)(vii) above; (v) the opinion, in a form reasonably acceptable to the Purchaser's counsel, required by Section 7(a)(ix) above; (vi) the Certificate described in Section 7(a)(v) above; (vii) the Service Agreement, duly executed by the Group; and (viii) such other documents as the Purchaser may reasonably request to affect the transactions contemplated by this Agreement. 9. REMEDIES FOR BREACHES OF THIS AGREEMENT. (a) Survival of Representations and Warranties. All of the representations and warranties of the Parties contained in this Agreement shall survive the Closing hereunder (even if the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations). (b) Indemnification Provisions for Benefit of the Purchaser . In the event any of the Sellers breaches (or in the event any third party alleges facts that, if true, would mean the Seller has breached), in a manner which has a material adverse effect on the Purchaser, any of such Seller's representations, warranties, and covenants contained herein and, provided that the Purchaser makes a written claim for indemnification against the Seller pursuant to Section 9(c)(i) below, then the Sellers and the Group, jointly and severally, agree to indemnify the Purchaser from and against the entirety of any Adverse Consequences the Purchaser may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Purchaser may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach). or otherwise. (c) Matters Involving Third Parties. (i) If any third party shall notify the Purchaser with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification under this Section 9, then the Purchaser shall promptly notify the Sellers thereof in writing; provided, however, that no delay on the part of the Purchaser in notifying the Sellers shall relieve the indemnitor from any obligation hereunder unless (and then solely to the extent) the indemnitor thereby are prejudiced. (ii) The Sellers and the Group will have the right to defend the Purchaser against the Third Party Claim with counsel of its choice satisfactory to the Purchaser so long as (A) they notify the 22 24 Purchaser in writing within 15 days after the Purchaser has given notice of the Third Party Claim that the Sellers will indemnify the Purchaser from and against the entirety of any Adverse Consequences the Purchaser may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the Sellers and the Group provides the Purchaser with evidence acceptable to the Purchaser that the Sellers and the Group will have the financial resources to defend against the Third Party Claim and fulfill his indemnification obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Purchaser, likely to establish a precedential custom or practice adverse to the continuing business interests of the Purchaser, and (E) the Sellers and the Group conduct the defense of the Third Party Claim actively and diligently. (iii) So long as the Sellers and the Group are conducting the defense of the Third Party Claim in accordance with Section 9(c)(ii) above, (A) the Purchaser may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Purchaser will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Sellers and the Group (not to be withheld unreasonably), and (C) the Sellers and the Group will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Purchaser. (iv) In the event any of the conditions in Section 9(c)(ii) above is or becomes unsatisfied, however, (A) the Purchaser may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it may deem appropriate (and the Purchaser need not consult with, or obtain any consent from, the Seller in connection therewith), (B) the Sellers and the Group will reimburse the Purchaser promptly and periodically for the costs of defending against the Third Party Claim (including attorneys' fees and expenses), and (C) the Sellers and the Group will remain responsible for any Adverse Consequences the Purchaser may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 9. (d) Determination of Adverse Consequences. The Parties shall take into account the time cost of money (using the Applicable Rate as the discount rate) in determining Adverse Consequences for purposes of this Section 9. All indemnification payments under this Section 9 shall be deemed adjustments to the Purchase Price. (e) Recoupment Under the Long-Term Note. In the event that the Purchaser shall suffer Adverse Consequences for which indemnification pursuant to the foregoing provisions shall be payable by the Sellers and the Sellers shall not make any such indemnification payment within sixty (60) days after such indemnity amount shall become payable, the Purchaser shall have the option of recouping all or any part of any Adverse Consequences it may suffer by notifying the Sellers that the Purchaser is offsetting the amount of such Adverse Consequences against the principal amount outstanding under the Long-Term Note. An offset pursuant to this subsection shall affect the timing and amount of payments required under the Long-Term Note in the same manner as if the Purchaser had made a permitted prepayment (without premium or penalty) thereunder. (f) Other Indemnification Provisions. The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy any Party may have for breach of representation, warranty, or covenant. The Sellers hereby agree that they will not make any claim for indemnification against the Association by reason of the fact that they were directors, officers, employees, or agents of the Association or were serving at the request thereof as a partner, trustee, director, officer, employee, or agent of another entity (whether such claim is for judgments, damages, penalties, fines, costs, 23 25 amounts paid in settlement, losses, expenses, or otherwise and whether such claim is pursuant to any statute, charter document, bylaw, agreement, or otherwise) with respect to any action, suit, proceeding, complaint, claim, or demand brought by the Purchaser against the Sellers (whether such action, suit, proceeding, complaint, claim, or demand is pursuant to this Agreement, applicable law, or otherwise). 10. TERMINATION. (a) Termination of Agreement. Certain of the Parties may terminate this Agreement as provided below: (i) the Purchaser and the Sellers may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Purchaser may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing in the event any of the Sellers has breached or failed to satisfy in any material respect any representation, warranty, covenant or condition contained in this Agreement, the Purchaser has notified the Seller of the breach or failure, and the breach or failure has continued without cure for a period of 10 days after the notice of breach or failure; (iii) the Sellers may terminate this Agreement by giving written notice to the Purchaser at any time prior to the Closing in the event the Purchaser has breached or failed to satisfy in any material respect any representation, warranty, covenant or condition contained in this Agreement, any of the Sellers has notified the Purchaser of the breach or failure, and the breach or failure has continued without cure for a period of 10 days after the notice of breach or failure; and (iv) if the Closing shall not have occurred on or before February 29, 1996 (unless the failure to close is primarily attributable to the breach of or failure to satisfy any representation, warranty, covenant or condition contained in this Agreement by the Party seeking to terminate this Agreement). (b) Effect of Termination. If any Party terminates this Agreement pursuant to Section 10(a) above, all rights and obligations of the Parties hereunder shall terminate without any Liability of any Party to any other Party (except for any Liability of any Party then in breach). 11. MISCELLANEOUS. (a) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the Purchaser and the Seller; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its best efforts to advise the other Parties prior to making the disclosure). (b) Arbitration of Disputes; Legal Fees. Any dispute arising under this Stock Purchase Agreement shall be submitted by the parties to binding arbitration pursuant to the Tennessee Uniform Arbitration Act, with any such arbitration proceeding being conducted 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. Each of the Parties submits to the jurisdiction of any state or federal court sitting in Memphis, Shelby County, Tennessee for purposes of enforcement of any arbitration award hereunder. Each Party also agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the Parties 24 26 waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. (c) Liquidated Damages. In the event that the Sellers shall be willing, ready and able to close on the Closing Date and the Purchaser shall fail to close on such date, the Purchaser shall pay to the Sellers, as liquidated damages and in complete satisfaction of all claims that Sellers may have against the Purchaser on account of said failure, the amount of $250,000.00, which shall be payable within ten (10) business days after such failure shall occur, and such reasonable attorneys' fees as shall have been incurred by the Sellers or the Group in connection with this Agreement. (d) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (e) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter hereof. (f) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the Purchaser and the Seller; provided, however, that the Purchaser may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Purchaser nonetheless shall remain responsible for the performance of all of its obligations hereunder). (g) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (h) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (i) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Seller: Copy to: Leonard Kalman, M.D. Alan R. Chase, Esq. Oncology Hematology Group of South Florida, P.A. Cohen, Chase, Hoffman & Trautman, P.A. 8940 N. Kendall Dr., Suite 300-E East Tower Suite 600, 9400 South Dadeland Blvd. Miami, Florida 33176 Miami, Florida 33156 If to the Purchaser: Copy to: Daryl P. Johnson John A. Good, Esq. Response Oncology, Inc. Baker, Donelson, Bearman & Caldwell 1775 Moriah Woods Blvd. 200 First Tennessee Building Memphis, Tennessee 38117 Memphis, Tennessee 38103
25 27 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (j) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Tennessee without giving effect to any choice or conflict of law provision or rule (whether of the State of Tennessee or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Tennessee. (k) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Purchaser and the Sellers. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (l) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (m) Expenses. Each of the Parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Sellers agree that neither the Association has not borne or will not bear any of the Sellers' costs and expenses (including any of their legal fees and expenses) in connection with this Agreement or any of the transactions contemplated hereby. (n) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. (o) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (p) Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action 26 28 instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on [as of] the date first above written. PURCHASER: Response Oncology, Inc. By:_____________________________________________ Title:__________________________________________ GROUP: South Florida Oncology Hematology Associates, P.A. By:_______________________________________________ Title:____________________________________________ SELLERS: __________________________________________________ Dr. Leonard Kalman, individually and as duly-authorized attorney-in-fact 27 29 Exhibit 2(b)(i) to Stock Purchase Agreement NON-NEGOTIABLE PROMISSORY NOTE $5,959,972.00 Miami, Florida January 2, 1996 FOR VALUE RECEIVED, the undersigned, RESPONSE ONCOLOGY, INC., a Tennessee corporation (the "Maker"), promises to pay to the order of DR. LEONARD KALMAN, a resident of the State of Florida, individually and acting as attorney-in-fact for all Selling Shareholders pursuant to that certain Agreement among Selling Shareholders of even date herewith (the "Lender"), the principal sum of FIVE MILLION NINE HUNDRED FIFTY-NINE THOUSAND NINE HUNDRED SEVENTY-TWO DOLLARS ($5,959,972.00), together with interest from date until maturity at the rate of nine (9%) percent per annum from date until Maturity (hereinafter defined), said principal and interest being payable in fifty nine (59) consecutive, equal, quarterly amortized installments of ONE HUNDRED EIGHTY-TWO THOUSAND SEVEN HUNDRED THIRTEEN AND FIFTY-FOUR ONE HUNDREDTHS DOLLARS ($182,713.54), commencing April 1, 1996, and on the first day of each calendar quarter thereafter. The entire remaining unpaid balance of principal, and any accrued interest thereon, shall be due and payable on January 1, 2011. This Note may be prepaid in whole or in part prior to Maturity only with the advance written consent of the Lender. Any partial prepayment of principal shall, however, not have the effect of suspending or deferring the payments provided for herein, but the same shall continue to be due and payable on each due date subsequent to any such partial prepayment of the principal and shall operate to effect full payment of the principal at an earlier date. At the option of the Lender, exercisable not later than ten (10) days prior to any payment of principal or interest on this Note, such payment shall be paid in whole or in part in shares of common stock of the Maker, $.01 par value per share (the "Shares"). For purposes of this paragraph, the number of Shares to which the Lender shall be entitled upon exercise of the option provided hereunder shall be determined by dividing the amount of principal and interest to be paid in Shares by the Maker by $17.50, which price shall be adjusted for stock splits, stock dividends, reverse stock splits, recapitalizations, reorganizations and other changes in the capital structure of the Maker affecting the value of the Shares. Any amounts not paid when due hereunder (whether by acceleration or otherwise) shall bear interest after maturity at the lesser of (a) eighteen percent (18%) per annum or (b) the maximum effective contract rate which may be charged by the Lender under applicable law from time to time in effect. In the event that the foregoing provisions should be construed by a court of competent jurisdiction not to constitute a valid, enforceable designation of a rate of interest or method of determining same, the indebtedness hereby evidenced shall bear interest at the maximum effective contract rate which may be charged by the Lender under applicable law from time to time in effect. This Note is non-negotiable. Notwithstanding anything to the contrary, the payments required pursuant to this Note are subject to a right of offset, setoff, and recoupment as a result of any indemnification required pursuant to the provisions of that certain Stock Purchase Agreement by and between Lender and Maker dated as of December ___, 1995. 2(b)(i)-1 30 All installments of interest, and the principal hereof, are payable by Maker's corporate check at ______________________________ or at such other place as the holder may designate in writing, in lawful money of the United States of America, which shall be legal tender in payment of all debts and dues, public and private, at the time of payment. If the Maker shall fail to make payment of any installment of principal and interest, as above provided, and such failure shall continue unremedied for a period of thirty (30) days following written notice thereof, or upon the dissolution of the Maker or any endorser, and (if there is a cure period applicable thereto) such default is not cured within such applicable cure period, then and in any such event, the entire unpaid principal balance of the indebtedness evidenced hereby, together with all interest then accrued, shall, at the absolute option of the holder hereof, at once become due and payable, without demand or notice, the same being hereby expressly waived. If this Note is placed in the hands of an attorney for collection, by suit or otherwise, the Maker shall pay on demand all costs of collection and litigation (including court costs), together with a reasonable attorney's fee if Lender is successful in the litigation. It is the intention of the Lender and the Maker to comply strictly with applicable usury laws; and, accordingly, in no event and upon no contingency shall the holder hereof ever be entitled to receive, collect, or apply as interest any interest, fees, charges or other payments equivalent to interest, in excess of the maximum effective contract rate which the Lender may lawfully charge under applicable statutes and laws from time to time in effect; and in the event that the holder hereof ever receives, collects, or applies as interest any such excess, such amount which, but for this provision, would be excessive interest, shall be applied to the reduction of the principal amount of the indebtedness hereby evidenced; and if the principal amount of the indebtedness evidenced hereby, all lawful interest thereon and all lawful fees and charges in connection therewith, are paid in full, any remaining excess shall forthwith be paid to the Maker, or other party lawfully entitled thereto. All interest paid or agreed to be paid by the Maker shall, to the maximum extent permitted under applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal so that the interest hereon for such full period shall not exceed the maximum amount permitted by applicable law. Any provision hereof, or of any other agreement between the holder hereof and the Maker, that operates to bind, obligate, or compel the Maker to pay interest in excess of such maximum effective contract rate shall be construed to require the payment of the maximum rate only. The provisions 2(b)(i)-2 31 of this paragraph shall be given precedence over any other provision contained herein or in any other agreement between the holder hereof and the Maker that is in conflict with the provisions of this paragraph. Neither Lender, nor any subsequent holder of this Note, shall have any right to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder (except to the Maker, or to ONCOLOGY HEMATOLOGY GROUP OF SOUTH FLORIDA, P.A. [the "P.A."]), which payments and the rights thereto are hereby expressly declared: (i) to be nonassignable and non-transferrable (except to the Maker or to the P.A.), and (ii) not liable for or subject to the debts, liabilities, or obligations or the Lender or the P.A. (except for those debts, obligations and liabilities of the P.A. to Maker which are secured by the security interest in this Note granted to Maker pursuant to a security agreement of even date herewith; and, in the event of any attempted assignment or transfer (except to the Maker or to the P.A.), the Maker shall have no further liability under this Note. This Note shall be governed and construed according to the statutes and laws of the State of Tennessee from time to time in effect. RESPONSE ONCOLOGY, INC. By:_____________________________________ Title:__________________________________ 2(b)(i)-3 EX-99.2 3 SERVICE AGREEMENT 1 Exhibit 99.2 SERVICE AGREEMENT BY AND BETWEEN RESPONSE ONCOLOGY, INC. AND ONCOLOGY HEMATOLOGY GROUP OF SOUTH FLORIDA, P.A. JANUARY 2, 1996 2 SERVICE AGREEMENT THIS SERVICE AGREEMENT dated as of January 2, 1996 by and between RESPONSE ONCOLOGY, INC., a Tennessee corporation (together with the Acquired Corporation (hereinafter defined), "Response") and ONCOLOGY HEMATOLOGY GROUP OF SOUTH FLORIDA, P.A., a Florida professional association ("Oncology"). RECITALS: WHEREAS, Response is in the business of owning certain assets of and managing and operating medical clinics, and providing support services to and furnishing medical practices with the necessary facilities, equipment, personnel, supplies and support staff to operate a medical practice; WHEREAS, effective January 2, 1996, Response will acquire (the "Stock Purchase") from the stockholders of the Acquired Corporation (the "Stockholders") all of the outstanding common stock of Response Oncology of South Florida, Inc. (the "Acquired Corporation"), which has heretofore and contemporaneous with the formation of Oncology, converted to a Florida business corporation form of organization in contemplation of the Stock Purchase and changed its name from Oncology Hematology Group of South Florida, P.A. to its current name; WHEREAS, the Stockholders have heretofore discontinued practicing medicine in the name of the Acquired Corporation and have begun conducting their respective medical practices as members of Oncology, which is a group medical practice in Florida providing comprehensive oncology and hematology medical care to the general public; and WHEREAS, Oncology desires to retain Response to perform the practice management functions described herein in order to permit Oncology and its Stockholders to devote substantially full time and efforts on a concentrated and continuous basis to the rendering of medical services to patients; NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, effective January 2, 1996, Oncology and Response agree to the terms and conditions provided in this Agreement. ARTICLE 1. RELATIONSHIP OF THE PARTIES 1.1. Independent Relationship. Oncology 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 Oncology agree that Oncology shall retain the authority to direct the medical, professional, and ethical aspects of its medical practice. Each party shall be solely responsible for and shall comply with all state and federal laws pertaining to employment taxes, income withholding, unemployment compensation contributions and other employment related statutes applicable to that party. 1.2. Responsibilities of the Parties. As more specifically set forth herein, Response shall provide Oncology with offices and facilities, equipment, supplies, support personnel, and management and financial advisory services. As more specifically set forth herein, Oncology 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. -2- 3 1.3. Oncology's Matters. Matters involving the internal agreements and finances of Oncology, including the distribution of professional fee income among the individual Physician Stockholders (as hereinafter defined), tax planning, and pension and investment planning (and expenses relating solely to these internal business matters), hiring, firing and licensing of Physician Employees (hereinafter defined) shall remain the sole responsibility of Oncology and the individual Physician Stockholders. 1.4. Patient Referrals. The parties agree that the benefits to Oncology 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 Oncology'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 Oncology, Oncology's Employees, and Oncology'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 Oncology and oncology'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 Oncology, 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 Oncology, including, but not limited to, accounts receivable, proceeds of any letters of credit naming Oncology as beneficiary, chattel paper, insurance proceeds, contract rights, notes, drafts, instruments, documents, acceptances, and all other debts, obligations and liabilities in whatever form from any other Person, provided that cash, checks and credit card purchases are not included in the definition of Accounts Receivable. (c) References to "amounts recorded" shall mean all amounts recorded or recordable in accordance with GAAP (hereinafter defined), including, without limitation, all billed Physician Services Revenue hereinafter defined and Non-Physician Revenue hereinafter defined, earned Capitation Revenue hereinafter defined and all expenses that are subject to accrual under GAAP. (d) "Annual Surplus" shall mean Practice Revenue (hereinafter defined) less the sum of the Clinic Expense Portion of the Base Service Fee (hereinafter defined), Practice Retainage (hereinafter defined) and Physician Employee Compensation (hereinafter defined). -3- 4 (e) "Bad Debt Allowance" shall mean, with respect to Accounts Receivable, an allowance for uncollectible Accounts Receivable determined based on a methodology approved by the Oversight Committee. (f) "Base Service Fee" shall mean the base fee set forth on Schedule A hereto. The Base Service Fee will consist of the Clinic Expense Portion and the Fixed Portion, both defined on Schedule A. (g) "Base Draw" shall mean an amount payable monthly to Response by Oncology equal to the Fixed Portion of the Base Service Fee set forth on Schedule A . (h) "Base Draw Excess" shall mean the excess (if any) of the aggregate Base Draw over the Service Fees for a calendar year, which shall be recorded as an advance payable by Response to Oncology pursuant to Section 8.2 below. (i) "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 Oncology for its medical performance under any managed care arrangement. (j) "Clinic Expenses" shall mean all amounts recorded comprising the expenses incurred in the operation of any Clinic, including, without limitation: (A) salaries, benefits and other direct costs (except Physician Employee Compensation) 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 Oncology, including, without limitation, Clinics and medical offices, medical, laboratory and other equipment utilized by Oncology; (C) personal property and intangible taxes assessed against properties and assets utilized by Oncology or otherwise deployed in any Clinic commencing on the date of this Agreement; and (D) other ordinary, necessary and reasonable expenses incurred by Response in carrying out its obligations under this Agreement, including, without limitation, depreciation on equipment utilized in the Clinics, interest on secured loans (other than notes payable by Response to any Stockholder or his/her assigns arising out of the Stock Purchase) 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 deposal. 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 benefitting from such expenditure as Response shall reasonably determine with the approval of the Oversight Committee. Clinic Expenses shall not include (i) any corporate overhead charges of Response, (ii) the cost of any capital expenditures incurred by Response pursuant hereto, except to the extent of depreciation, amortization (except amortization of the Service Agreement Intangible -4- 5 (hereinafter defined) which shall not be a Clinic Expense), interest and other period charges under GAAP in respect of such capital expenditures, (iii) any federal or state income taxes, (iv) base rental payments under any sub-lease arrangement and (v) any expenses which are expressly designated herein as expenses or responsibilities of and are paid by Oncology. (k) "Fee Adjustment" shall mean any adjustment for any discount, non-allowed contractual or other adjustment under Medicare, Medicaid, any preferred provider plan, workers' compensation plan, employee/dependent health care benefit program or other contractual arrangement between Oncology and any Third Party Payor, and any professional courtesy or other reasonable and customary discount that results in fee revenue not being collected. (l) "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. (m) "Governmental Receivables" shall mean an Account Receivable of Oncology which (i) arises in the ordinary course of business of Oncology, (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 Oncology 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. (n) "Non-Physician Revenue" shall mean all amounts recorded as fees (net of Fee Adjustments and Bad Debt Allowance) by or on behalf of either Oncology or Response which are not Physician Services Revenue or Capitation Revenue, but excluding any interest, investment, rental or similar payments or income made or payable to Oncology or Response that are unrelated to the provision of medical services or products. (o) "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. (p) "Physician Employee Compensation" shall mean all amounts recorded as salaries, wages (including overtime), benefits, payroll taxes and other compensation expense by Oncology in respect of Physician Extender Personnel (hereinafter defined) and Technical Employees (hereinafter defined) who are Physician Employees (hereinafter defined), to the extent such amounts are required to be paid by Oncology under Applicable Law or the reimbursement policies of any Third Party Payor. (q) "Physician Services Revenue" shall mean (a) all amounts recorded as fees (net of Fee Adjustments and Bad Debt Allowance) by or on behalf of Oncology as a result of professional medical services furnished to patients by Physician Employees and Physician Extender Personnel, whether rendered in an inpatient or outpatient setting plus (b) Capitation Revenue, and excluding any items approved pursuant to Section 4.2(c) below. -5- 6 (r) "Practice Retainage" shall mean an amount equal to the percentage] of Practice Revenue set forth on Schedule A hereto. (s) "Practice Revenue" shall mean the sum of all amounts recorded by Oncology as Physician Services Revenue, Non-Physician Revenue, Capitation Revenue and other revenue attributable to the conduct of Oncology's medical practice, but shall specifically exclude profits from any investment of Oncology in any partnership, joint venture, corporation, limited liability company and any other revenue not derived from the providing of services by employees of Oncology or Response. (t) "Service Fees" shall mean the sum of the Base Service Fee and the Performance Fee (if any). Other Definitions: (u) 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), Oncology is not an affiliate of Response. (v) "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. (w) "Acquired Corporation" shall mean Response Oncology of South Florida, Inc., a Florida corporation which, prior hereto, was a Florida professional association named Oncology Hematology Group of South Florida, P.A. through which the Stockholders conducted their medical practice prior to forming Oncology. (x) "Acquisition Agreement" shall mean that certain Stock Purchase Agreement dated as of December 20, 1995; by and among Response, the Acquired Corporation and the Stockholders. (y) "CHAMPUS" shall mean the Civilian Health and Medical Program of the Uniformed Services. (z) "Clinic" shall mean the practice facility currently utilized by Oncology, and any facility, related business and all medical group business operations which Oncology and Response may, in the future, mutually agree to characterize as a Clinic. (aa) "Employment Agreement" shall mean an employment agreement between each physician now or hereinafter employed by Oncology and Oncology pursuant to which the physician shall be employed by Oncology to provide medical services on behalf of Oncology, which Employment Agreement shall be substantially in the form set forth as Exhibit 2.1(aa) hereto. (ab) "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. -6- 7 (ac) "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 1395 nn and 42 U.S.C. Section 1320a-7b. (ad) "Liquidated Damages Amount" shall mean the difference obtained pursuant to the following formula: [(4,000,000 x A/8) - ((B/180) x C)]; wherein (i) A equals the number of Remaining Physician Stockholders at the time of occurrence of an Oncology Event of Default; (ii) B equals 4,000,000 x A/8; and (iii) C equals the number of full calendar months between the effective date of this Agreement and the date of the occurrence of the Oncology Event of Default. (ae) "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. (af) "Medicare" shall mean any medical program established under Title VIII of the Social Security Act and administered by the Health Care Financing Administration. (ag) "Necessary Authorization" shall mean with respect to Oncology all certificates of need, authorization, certifications, consents, approvals, permits, licenses, notices, accreditations and exemptions, filings and registrations, and reports required by Applicable Law, including, without limitation, Health Care Law, which are required, necessary or reasonably useful to the lawful ownership and operation of Oncology's business. (ah) "Oncology" shall mean Oncology Hematology Group of South Florida, P.A., a Florida professional association recently formed by the Stockholders to continue the operation of their group medical practice. (ai) "Oncology Event of Default" shall have the meaning ascribed to such term in Section 11.4 hereof. (aj) "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 members of the Oversight Committee shall be the act of the Oversight Committee. (ak) "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. (al) "Physician Employees" shall mean all physicians employed by Oncology or with whom Oncology has entered into a practice management agreement, and all other persons who deliver billable medical or health care services under the direction of Oncology and its physicians or are otherwise under contract with Oncology 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 and all Technical Employees. Such definition shall include both Physician Stockholders and other physicians employed by Oncology, including Junior Physician Employees, and may include Physician Extender Personnel to the extent such Physician Extender Personnel are required by Applicable Law or reimbursement policies of any Third Party Payor to be employed by Oncology. (am) "Physician Extender Personnel" shall mean employees of Response who deliver services to Oncology, including without limitation nurse anesthetists, physician assistants, registered and -7- 8 licensed practical nurses, nurse practitioners, psychologists, and other such persons, other than physicians, who are not Physician Employees. (an) "Physician Stockholders" shall mean those physicians who are stockholders of Oncology. (ao) "Practice Assets" shall have the meaning ascribed to that term in Section 11.5 of this Agreement. (ap) "Remaining Physician Stockholder" shall mean any Physician Stockholder who shall have been a Stockholder at the effective time of this Agreement and who, at any time within one (1) year prior to the occurrence of an Oncology Event of Default shall have been a Physician Stockholder; provided, however, that such term shall not include any Stockholder who shall have, within such one year period, ceased to be a Physician Stockholder by reason of death, disability or retirement at normal retirement age. (aq) "Response" shall mean Response Oncology, Inc., a Tennessee corporation incorporated on June 26, 1984 under the name Biotherapeutics Incorporated, whose name was changed to Response Technologies, Inc. by Charter amendment on October 30, 1989, and subsequently to Response Oncology, Inc. by Charter amendment on November 1, 1995, and its wholly owned subsidiaries, including the Group. (ar) "Response Event of Default" shall have the meaning ascribed to such term in Section 11.3 of this Agreement. (as) "Stockholder" shall mean the Stockholders of the Acquired Corporation. (at) "Technical Employees" shall mean technicians who provide services in the diagnostic areas of Oncology's practice, such as employees of any Clinic laboratory, radiology technicians and cardiology technicians. All Technical Employees shall be Physician Employees. (au) "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. (av) "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 to Oncology 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 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. Oncology shall comply with all terms and provisions of any lease or other agreement with respect to such facility. Response shall consult with Oncology regarding the condition, use and needs for the offices, facilities and improvements, and any purchase, lease or improvement of any offices, facilities or improvements, or change in any of the foregoing, shall be approved -8- 9 by a majority of the Oversight Committee. Oncology shall not amend, modify or terminate any sub-lease agreements without the prior written consent of Response. 3.2 Use of Facilities. Oncology shall not use or occupy any facility owned or leased by Response for any purpose which is prohibited by any Applicable Law, this Agreement, or the terms of any lease or other arrangement with respect to the use or occupancy of such facility, or which may be dangerous to life, limb, or property (except medical services provided in the ordinary course of business), or which would increase the fire or extended coverage insurance rate on such facility. ARTICLE 4. DUTIES OF THE OVERSIGHT COMMITTEE 4.1. Formation and Operation of the Oversight Committee. The parties shall establish an Oversight Committee which shall be responsible for developing management and administrative policies for the overall operation of each Clinic. The Oversight Committee shall consist of 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. Oncology 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, 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 Oncology and Response, to the extent allowed by Applicable Law, the Oversight Committee shall review and advise Oncology as to an appropriate fee schedule for all physician and ancillary services rendered by Oncology, which fee schedule shall ultimately be determined by -9- 10 Oncology in its sole discretion. In addition, the Oversight Committee shall approve the credit collection policies of any Clinic. (f) Non-Physician Services. The Oversight Committee shall establish Clinic-provided non-physician services based upon the pricing, access to and quality of such services. (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 Oncology. (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 benefitting the Clinics. (j) Physician Hiring. The Oversight Committee shall determine the number and type of physicians required for the efficient operation of each Clinic. The approval of the Oversight Committee shall be required for any variations to the restrictive covenants in any physician employment contract. (k) Executive Director. The selection and retention by Response of any Executive Director pursuant to Section 5.6 and the salary and cash fringe benefits of each Executive Director shall be subject to the reasonable approval of the Oversight Committee. If Oncology is dissatisfied with the services provided by any Executive Director, Oncology shall refer the matter to the Oversight Committee. Response and the Oversight Committee shall each 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. (l) Grievance Referrals. The Oversight Committee shall consider and make final decisions regarding grievances pertaining to matters not specifically addressed in this Agreement as referred to it by Oncology's Board of Directors. 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 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. Oncology 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 Oncology'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 -10- 11 such opportunities may include ambulatory surgery centers, renovations to Clinic facilities, the addition of satellite locations and new and replacement equipment as may be economically justified. Such budgets shall be presented to the Oversight Committee at least sixty (60) days prior to the end of the preceding calendar year. The budget shall be agreed upon by the Oversight Committee 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 Oncology unless modified or revised in like manner by the Oversight Committee. 5.3. Financial Statements. Response shall prepare annual financial statements on a cash basis for the separate operations of each Clinic and shall prepare an annual pro-forma, accrual basis combined income statement for all Clinics for purposes of determining the Annual Surplus. If Oncology desires an audit of any financial statement, Oncology 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 Oncology 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 preparing the cash basis financial statements described above. 5.4. Inventory and Supplies. Response shall order and purchase reasonable and requested medical and office inventory and supplies required by Oncology to provide quality services in the day-to-day operations of its medical practice. 5.5. Management Services and Administration. (a) Oncology hereby appoints Response as its sole and exclusive manager and administrator of all day-to-day business functions connected with its group medical practice. Oncology agrees that the purpose and intent of this Service Agreement is to relieve Oncology, the Physician Stockholders and 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 Oncology, and only Oncology, 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 Oncology 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 Oncology in performing medical functions, all clinical personnel performing patient care services obtained and provided by Response shall be subject to the professional direction and supervision of Oncology 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 Oncology. Oncology hereby indemnifies and holds Response, its officers, directors, shareholders, agents and affiliates, their successors and assigns ("Indemnified Persons") harmless, and shall reimburse the Indemnified Persons for, from and against each claim, loss, liability, cost and expense (including, without limitation, interest, penalties, costs of preparation and investigation, and the reasonable fees and disbursement expenses of attorneys and other professional advisors) directly or indirectly relating to, resulting from or arising out of any medical function performed, or which should have been performed, under the supervision of Oncology or Physician Employees. (b) Response shall, on behalf of Oncology, bill patients and Third Party Payors, and shall collect the professional fees for medical services rendered by Oncology in each Clinic, for services performed outside a Clinic for Oncology'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. Oncology hereby appoints -11- 12 Response for the term hereof to be its true and lawful attorney-in-fact, for the following purposes: (i) to bill patients in Oncology's name and on its behalf; (ii) to collect Accounts Receivable resulting from such billing in Oncology'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 Oncology (and/or in the name of an individual physician, such payment intended for purpose of payment of a physician's bill) any notes, checks, money orders, insurance payments and other instruments received in payment of Accounts Receivable; and (v) with the advance consent of the Oversight Committee, to initiate legal proceedings in the name of Oncology or any Physician Employee to collect any accounts and monies owed to Oncology, Clinic or any Physician Employee, to enforce the rights of Oncology or any Physician Employee as a creditor under any contract or in connection with the rendering of any service, and to contest adjustments and denials by any Governmental Authority (or its fiscal intermediaries) as Third Party Payors. All adjustments made for uncollectible accounts, professional courtesies and other activities that do not generate a collectible fee shall be done in a reasonable and consistent manner. (c) Response shall design, supervise and maintain custody of all files and records relating to the operation of each Clinic, including but not limited to accounting, billing, patient medical records, and collection records. Patient medical records shall at all times be and remain the property of Oncology and shall be located at Clinic facilities so that they are readily accessible for patient care. The Physician Employees 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. (d) Response shall supply to Oncology 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 marketing and public relations programs on behalf of Oncology, with appropriate emphasis on public awareness of the availability of services at Oncology's Clinics. Any marketing or public relations program shall be conducted in compliance with applicable laws and regulations governing advertising by medical professionals. (f) Response shall provide the data necessary for Oncology to prepare its annual income tax returns and financial statements, and shall provide payroll and related services for 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 Oncology or any physician employed thereby. (g) Response shall assist Oncology in recruiting additional physicians, carrying out such administrative functions as may be appropriate such as advertising for and identifying potential candidates, checking credentials, and arranging interviews; provided, however, Oncology shall interview and make the ultimate decision as to the suitability of any physician to become associated with a Clinic. All physicians recruited by Response and accepted by Oncology shall be the sole employees of Oncology, to the extent such physicians are hired as employees. Subject to the provisions of -12- 13 Section 6.4, any expenses incurred in the recruitment of physicians, 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 Oncology. (i) Subject to the provisions of Sections 5.3 and 5.5(f), Response shall arrange for legal and accounting services related to Clinic operations incurred traditionally in the ordinary course of business, including the cost of enforcing any physician contract containing restrictive covenants, provided such services shall be approved in advance by the Executive Director. (j) Response shall provide for the proper cleanliness of the physical premises occupied and/or utilized by Oncology, and maintenance and cleanliness of the equipment, furniture and furnishings located upon such premises. 5.6. Executive Director. Subject to the provisions of Section 4.2(k), Response shall recruit, hire and appoint an Executive Director to manage and administer all of the day-to-day business functions of each Clinic (it being understood and agreed that, if reasonable, a single Executive Director may have responsibility for multiple Clinics). Subject to Oversight Committee approval, Response shall determine the salary, bonuses (if any) and fringe benefits of each Executive Director, which salary, bonuses (which may be payable in Response common stock or by issuance of options on Response common stock) and benefits shall, to the extent the same are current expenses under GAAP, be Clinic Expenses. At the direction, supervision and control of Response, the Executive Director, subject to the terms of this Agreement, shall implement the policies established by the Oversight Committee and shall generally perform the duties and have the responsibilities of an administrator. The Executive Director shall be responsible for organizing the agenda for the meetings of the Oversight Committee referred to in Article 4. 5.7. Personnel. Response shall provide Physician Extender Personnel and other non-physician professional support (other than Technical Employees and other persons who are required to be 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 Oncology. If Oncology is dissatisfied with the services of any person, Oncology 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 high quality medical care. Employee assignments shall be made to assure consistent and continued rendering of high quality medical support services 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 effort consistent with sound business practices to honor the specific requests of Oncology with regard to the assignment of its employees. In addition to the foregoing, Response shall advance to Oncology 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 Oncology ("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 Oncology's normal and customary compensation system, as the same may be modified from time to time by Oncology. Upon the earliest to occur of (i) the Junior Physician becoming a shareholder of Oncology, or (ii) the Junior Physician recognizing billings in excess of -13- 14 his cost (as determined by the Oversight Committee, a "Surplus"), Oncology 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 Oncology 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 Oncology for failure to perform any of the services required herein in the event of strikes, lock-outs, calamities, acts of God, unavailability of supplies or other events over which Response has no control for so long as such events continue, and for a reasonable period of time thereafter. 5.9. Compliance with Applicable Laws. Response shall comply with all Applicable Law, in the conduct of its obligations under this Agreement. 5.10. Quality Assurance. Response shall assist Oncology in fulfilling its obligations to its patients to maintain a high quality of medical and professional services. 5.11. Oncology Operating Account. Oncology agrees to establish and maintain a bank account, which shall be referred to as the Oncology Operating Account, for the purpose of (a) depositing Practice Revenue and advances from the Receivables Line (defined below) pursuant to Section 5.12 and (b) paying (i) the Clinic Expense Portion of Service Fees owed pursuant to Section 8.1 of this Agreement, (ii) expenses which are solely the obligation of Oncology, including, without limitation, Physician Employee Compensation, (iii) the Fixed Portion of Service Fees owed pursuant to Section 8.1 of this Agreement, and (iv) distributions to Oncology, and the distributions shall be made in that order of payment. Oncology hereby designates, constitutes and appoints the Chief Financial Officer and Treasurer of Response as a signatory on the Oncology Operating Account, with full power and authority to sign checks and cause drafts and other debits to be made on the Oncology Operating Account in the name of Oncology and to otherwise manage the cash resources and flow of Oncology. After the payment of all Service Fees and expenses hereinabove described, Oncology may withdraw amounts for distributions to Physician Stockholders; provided, however, that Oncology agrees to maintain an adequate balance in the Oncology Operating Account to pay the Clinic Expense Portion of Service Fees as projected in the budget formulated pursuant to this Agreement. 5.12. Credit Line. Response shall from time to time during the term of this Agreement advance to Oncology, in readily available United State funds, by wire transfer, intrabank transfer or other electronic means, to be deposited into the Oncology 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 bear interest at a rate equal to the prime or base lending rate quoted from time to time by First Tennessee Bank National Association, plus one-half percent (.5%). Amounts advanced by Response pursuant to this Section 5.12 shall be payable by Oncology upon demand, and if no demand be made, upon termination of this Agreement. Response shall have the authority from time to time pursuant to Section 5.11 above to make principal payments on the Receivables Line. Interest on the outstanding Receivables Line will be computed on a daily basis based on the total unpaid and outstanding advances on the Receivables Line. Interest shall be payable to Response no later than the fifth day of each month, in arrears. Advances on the Receivables Line will be secured by a security interest in and to Accounts Receivable granted pursuant to Section 15.8 below. So long as an Oncology Event of Default has not occurred, advances on the Receivables Line shall be made by Response as required to provide funds in the Oncology Operating Account sufficient to pay, in the following order (i) the Clinic Expense Portion of the Base Service Fee, (ii) Physician Employee -14- 15 Compensation, (iii) other practice expenses which are not Clinic Expenses up to an amount equal to the Physician Retainage, less the Base Draw, and (iv) the Base Draw. 5.13. Ancillary Services. Response shall operate such ancillary services as approved by the Oversight Committee. ARTICLE 6. OBLIGATIONS OF ONCOLOGY 6.1. Professional Services. Oncology 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 Oncology prior to effectiveness of this Agreement. Oncology shall also make all reports and inquiries to the National Practitioners Data Bank and/or any state data bank required by Applicable Law. Oncology shall ensure that each Physician Employee and Technical Employee associated with Oncology to provide medical care to patients of Oncology is licensed by the State of Florida to the extent required. 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, Oncology shall immediately inform the Executive Director of such action and the underlying facts and circumstances. Oncology shall develop a program to monitor the quality of medical care practiced at each Clinic. In that regard, Oncology 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. Oncology 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 Oncology, and no other physician or medical practitioner shall be permitted to use or occupy a Clinic without the prior written consent of Response and Oncology. 6.3. Employment of Physician Employees. Oncology shall have complete control of and responsibility for the hiring, compensation, supervision, evaluation and termination of its Physician Employees, although at the request of Oncology, Response shall consult with Oncology respecting such matters. Oncology shall be responsible for the payment of all Physician Employee Compensation now or hereafter applicable to Physician Employees; provided, however, that Response shall provide the payroll service for computing, accounting for and disbursing or paying all salaries and benefits of Oncology employees, all of whom may be paid out of the Oncology Operating Account. With respect to physicians, Oncology shall only employ and contract with licensed physicians meeting applicable credentialling guidelines established by Oncology. To the extent permissible under the Employee Retirement and Income Security Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as amended (the "Code"), and applicable Health Care Law and to the extent such practice does not violate Applicable Law or jeopardize reimbursement for medical related services provided by any person associated with a Clinic, Response shall pay any overtime or other non-salary compensation of and shall provide employee benefits to Physician Employees, notwithstanding their employment by Oncology. The cost of such items shall be Clinic Expense. Response shall not provide any benefit to such persons to the extent Oncology is required to provide same under ERISA, the Code or any other statute or regulation. 6.4. Licensing Fees, Professional Dues and Education Expenses. Except as provided in Section 5.5(g), Oncology and its Physician Employees shall be solely responsible for payment of the cost of professional licenses and dues for membership in professional associations and continuing professional education costs. Oncology shall ensure that each of its Physician Employees participates in such continuing medical education as is necessary for such physician to remain current. -15- 16 6.5. Professional Insurance Eligibility. Oncology shall be primarily responsible, with assistance from Response, if requested, for obtaining and retaining of professional liability insurance by assuring that its Physician Employees are insurable, and participating in an on-going risk management program. Professional liability insurance shall be paid for by Oncology or its Physician Employees and shall not be Clinic Expense. 6.6. Events Excusing Performance. Oncology 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 Oncology has no control for so long as such events continue, and for a reasonable period of time thereafter. 6.7. Fees for Professional Services. Oncology shall be solely responsible for legal, accounting and other professional service fees incurred by Oncology, except as set forth in Section 5.5(i) herein. 6.8. Peer Review. Oncology agrees to cooperate with Response in establishing a system of peer review as necessary to obtain provider contracts. In connection therewith, Oncology 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. Oncology 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, Oncology 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 Oncology 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. ARTICLE 7. EMPLOYMENT AGREEMENTS, RESTRICTIVE COVENANTS AND REMEDIES The parties recognize that the services to be provided by Response shall be feasible only if Oncology operates an active medical practice to which the physicians associated with Oncology devote their full time and attention. To that end: 7.1. Employment Agreements with Physicians. As a condition to Response's continuing obligations hereunder, Oncology and each physician now or hereinafter employed thereby shall execute and deliver to each other an employment contract substantially in the form set forth as Exhibit 2.1(aa) hereto ("Employment Agreement"). 7.2. Restrictive Covenants by Physicians. Oncology shall obtain in each Employment Agreement and use its best efforts to enforce (subject to Response's obligations under Section 5.5 of this Agreement) formal agreements from each physician pursuant to which the physician agrees not to establish, operate or provide physician services at any medical office, clinic or outpatient and/or ambulatory treatment or diagnostic facility providing services substantially similar to those provided by Oncology pursuant to this Agreement within Dade and Monroe Counties in Florida (the "Practice Territory") during the term of the Employment Agreement and for a period of five (5) years after any termination of employment with Oncology. Notwithstanding the foregoing, 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 Oncology. -16- 17 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 Oncology, 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 service 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. 7.4. Enforcement. Response and Oncology 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 provisions of this Agreement. ARTICLE 8. FINANCIAL ARRANGEMENTS 8.1. Service Fees. 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, payable by means of the Base Draw procedure set forth in Section 8.2 below. 8.2. Base Draw. The Clinic Expense Portion of the Base Service Fee shall be payable by Oncology to Response out of the Oncology Operating Account as Clinic Expenses are incurred by Response, subject to ordinary, reasonable and customary payment terms on invoices for goods and services. The Base Draw shall be payable by Oncology to Response out of the Oncology Operating Account on a monthly basis for the purpose of paying the Fixed Portion of the Base Service Fee and providing Response with an advance on its annual Performance Fee (if any). The Base Fee and the Performance Fee will be computed as of the end of each calendar year based on amounts recorded as Practice Revenue and during the calendar year. In the event that it shall be finally determined that the sum of the Base Service Fee and the Performance Fee are less than the Base Draw paid by Oncology for such year, then such excess shall be deemed an advance by Oncology, shall be recorded and reflected as a current account payable by Response and an Excess Base Draw receivable by Oncology and shall be settled by cash payment from Response to Oncology no later than the 15th day of March of the next succeeding calendar year, or by such other settlement method as may be mutually agreed upon. ARTICLE 9. RECORDS 9.1. Patient Records. Upon termination of this Agreement, Oncology shall retain all patient medical records maintained by Oncology or Response in the name of Oncology. Response shall, at its option, and if allowed under Applicable Law be entitled to have reasonable access during normal business hours to Oncology's patient medical records applicable to the period of Response's performance under this Agreement. Moreover, Oncology shall, at its option, be entitled to retain copies of financial and accounting records -17- 18 relating to all services performed by Oncology 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 Oncology under the provisions of Section 9.1 above, shall at all times be the property of Response. 9.3. Access to Records. During the term of this Agreement, and thereafter, Oncology or its designee shall have reasonable access during normal business hours to Oncology's and Response's financial records, including, but not limited to, records of collections, expenses and disbursements as key by Response in performing Response's obligations under this Agreement, and Oncology 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 Oncology. Throughout the term of this Agreement, Oncology shall maintain comprehensive professional liability insurance with limits of not less than $500,000 per claim and with aggregate policy limits of not less than $1,000,000 per physician and a separate limit for Oncology. Oncology 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 Oncology for any unearned professional liability insurance premiums paid by Oncology to the extent not reimbursed or reimbursable by Oncology's insurance carrier if Oncology's existing professional liability insurance program is cancelled 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 make available, provide and/or maintain comprehensive professional liability insurance for all Physician Employees who are not physicians and all professional employees of Response, 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. Oncology 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. -18- 19 10.4. Indemnification Matters Involving Third Parties. Oncology and Response ("Indemnitor") shall indemnify, hold harmless and defend the other ("Indemnitee") from and against any and all liability, loss, damage, claim, causes of action, and expenses (including reasonable attorneys' fees, except to the extent limited below), whether or not covered by insurance, caused or asserted to have been caused, directly or indirectly, by or as a result of the acts (intentional or negligent) or omissions by, in the case of Oncology, by any Physician Stockholder or other person acting under the supervision and control thereof, or, in the case of Response, by any employee thereof who is not acting under the supervision and control of a Physician Stockholder of Oncology. (a) If any third party shall notify an Indemnitee with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification under this Section 10.4, then the Indemnitee shall promptly notify the Indemnitor in writing; provided, however, that no delay on the part of the Indemnitee in notifying the Indemnitor shall relieve the Indemnitor from any obligation hereunder unless (and then solely to the extent) the Indemnitor is prejudiced by such delay. (b) The Indemnitor will have the right to defend the Indemnitee against the Third Party Claim with counsel of its choice satisfactory to the Indemnitee so long as (A) the Indemnitor notifies the Indemnitee in writing within 15 days after the Indemnitee has given notice of the Third Party Claim that the Indemnitor will indemnify the Indemnitee from and against the entirety of any Adverse Consequences (hereinbelow defined) the Indemnitee may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the Indemnitor provides the Indemnitee with evidence acceptable to the Indemnitee that the Indemnitor will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnitee, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnitee, and (E) the Indemnitor conducts the defense of the Third Party Claim actively and diligently. (c) So long as the Indemnitor is conducting the defense of the Third Party Claim in accordance with Section 10.4(b) above, (A) the Indemnitee may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnitee will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnitor (not to be withheld unreasonably), and (C) the Indemnitor will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnitee. (d) In the event any of the conditions in Section 10.4(b) above is or becomes unsatisfied, however, (A) the Indemnitee may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it may deem appropriate (and the Indemnitee need not consult with, or obtain any consent from, the Indemnitor in connection therewith), (B) the Indemnitor will reimburse the Indemnitee promptly and periodically for the costs of defending against the Third Party Claim (including attorneys' fees and expenses), and (C) the Indemnitor will remain responsible for any Adverse Consequences the Indemnitee may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 10.4. 10.5. Determination of Adverse Consequences. The parties hereto shall take into account the time cost of money (using the Applicable Rate as the discount rate) in determining Adverse Consequences for purposes of this Section 10. -19- 20 10.6. Other Indemnification Provisions. The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy any party may have for breach of representation, warranty, or covenant. ARTICLE 11. TERM AND TERMINATION 11.1. Term of Agreement. This Service Agreement shall be effective as of the closing of the Stock Purchase and shall expire on December 31, 2035 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 Oncology 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 thirty (30) days thereafter. (b) any material default by Response in the performance of any of its duties or obligations under this Agreement and such default 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 Oncology. (c) in the event Response shall, intentionally or in bad faith, misapply funds or assets of Oncology or commit a similar act which cause material harm to Oncology. 11.4. Oncology Event of Default. The occurrence of any of the following events shall constitute a default by Oncology (an "Oncology Event of Default") under this Agreement, giving Response the right to the remedies set forth in Section 11.6 below: (a) the filing by Oncology of a petition in voluntary bankruptcy or an assignment by Oncology 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 Oncology, except for the filing of a petition in involuntary bankruptcy against Oncology which is dismissed within thirty (30) days thereafter. (b) any material default by Oncology in the performance of any of its duties or obligations under this Agreement and such default shall continue for a period of ninety (90) days after written notice thereof has been given to Oncology by Response. (c) the termination or suspension of Oncology's Medicare or Medicaid Provider Number as a result of the action or inaction of physicians, and such termination or suspension shall continue for ninety (90) days, unless Oncology 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. -20- 21 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. (d) the termination or suspension of the Medicare or Medicaid Provider Numbers of a majority of the physicians employed by Oncology, and such termination or suspension shall continue for sixty (60) days, unless such physicians shall 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 any physicians to reverse such termination or suspension, if such termination or suspension with respect to that number of physicians required to cause a majority of such physicians to retain their Medicare or Medicaid Provider Numbers shall not be reversed within one hundred fifty (150) days after occurrence, an event of default shall be deemed to have occurred. 11.5. Remedies upon Response Event of Default. Upon the occurrence of a Response Event of Default, Oncology shall have the right to terminate this Agreement by written notice to Response without any further obligation to Response for Service Fees after the giving of such notice. Upon termination of this Agreement by Oncology, Response's obligations under that certain long-term promissory note given by Response to the Stockholders in connection with the Stock Purchase will terminate. In addition to the foregoing, in such event Oncology shall have the option to purchase from Response, and upon proper exercise of such option by Oncology in the manner hereinbelow provided, Response shall sell to Oncology, all assets and properties, tangible and intangible (except that intangible assets shall not include any intangible asset related to this Service Agreement), owned by Response and used by Oncology in its medical practice ("Practice Assets") for a price, payable in cash, equal to the fair market value of the Practice Assets. Oncology shall exercise such option by giving written notice to Response within sixty (60) days after the occurrence of the Response Event of Default. Upon delivery of such exercise, Response and Oncology shall negotiate in good faith the fair market value of the assets to be acquired. In the event that, after at least fifteen (15) days of good faith negotiation, Response and Oncology shall not have agreed upon the fair market value of the Practice Assets, each party shall select an appraiser who shall provide an evaluation report with respect to the fair market value of the Practice Assets. If the valuations of the appraisers are within $25,000.00 of each other, then the lowest appraisal shall be deemed the fair market value of the Practice Assets, and Oncology shall purchase the Practice Assets for such value. If the valuation of the appraisers are more than $25,000.00 different, then the two appraisers shall agree upon a third appraiser, and the average value set forth in the three appraisals shall be deemed the fair market value of the Practice Assets, and Oncology shall purchase the Practice Assets for such value. 11.6. Remedies upon Oncology Event of Default. Upon the occurrence of an Oncology Event of Default, Response shall have the right to terminate this Agreement by written notice to Oncology, and Oncology shall have no further obligation to Response for Service Fees after the date such notice is received. In such event, Response's obligations under that certain long-term promissory note given by Response to the Stockholders in connection with the Stock Purchase shall terminate. In addition, in such event, Oncology 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 Oncology in cash within sixty (60) days after occurrence of the Oncology Event of Default. Each Stockholder hereby severally, and not jointly, guarantees the foregoing obligation of Oncology 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 portion of the Liquidated Damages Amount not paid by Oncology divided by the number of Remaining Physician Stockholders as of the date of occurrence of an Oncology Event of Default. Moreover, in such event Oncology shall have the option to purchase from Response, and upon proper exercise of such option by Oncology in the manner hereinbelow provided, Response shall sell to Oncology, all Practice Assets for a price, payable in cash, equal to the fair market value of the Practice Assets. Oncology shall exercise such option by giving -21- 22 written notice to Response within sixty (60) days after the occurrence of the Response Event of Default. Upon delivery of such exercise, Response and Oncology shall negotiate in good faith the fair market value of the assets to be acquired. In the event that, after at least fifteen (15) days of good faith negotiation, Response and Oncology shall not have agreed upon the fair market value of the Practice Assets, each party shall select an appraiser who shall provide an evaluation report with respect to the fair market value of the Practice Assets. If the valuations of the appraisers are within $25,000.00 of each other, then the lowest appraisal shall be deemed the fair market value of the Practice Assets, and Oncology shall purchase the Practice Assets for such value. If the valuation of the appraisers are more than $25,000.00 different, then the two appraisers shall agree upon a third appraiser, and the average value set forth in the three appraisals shall be deemed the fair market value of the Practice Assets, and Oncology shall purchase the Practice Assets for such value. 11.7. Closing of Repurchase by Oncology and Effective Date of Termination. Oncology shall pay cash for Practice Assets repurchased hereunder. The amount of the purchase price shall be reduced by the amount of debt and liabilities of Response assumed by Oncology and shall also be reduced 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 Oncology in connection with the repurchase described herein. The closing date for the repurchase shall be determined by Oncology, but shall in no event occur later than 180 days from the date of the notice of termination. In the event of exercise of such option, 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 Oncology such assignments to leases and other contracts and such bills of sale and other transfer or closing documents necessary to effect such transaction. Oncology shall execute and deliver to Response such officers' certificates, assumption agreements and other closing documents necessary to close such transaction. 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 Oncology, 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 ONCOLOGY Oncology represents, warrants, covenants and agrees with Response that: 13.1. Validity. Oncology is a professional association duly organized, validly existing and in good standing under the laws of the State of Florida. Oncology 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. Litigation. There is no suit, action, proceeding at law or in equity, arbitration, administrative proceeding or other proceeding pending, or threatened against, or affecting Oncology, or any of the assets to be conveyed hereunder, or to the best of Oncology's knowledge, any hematology or oncology provider or other health care professional associated with or employed by Oncology as pertains to any claim involving the -22- 23 providing of health care related services, and to the best of Oncology's knowledge there is no basis for any of the foregoing. 13.3. Permits. Oncology and all physicians and other health care professionals associated with or employed by Oncology 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 Oncology's business; and are not in violation of any of said permitting or licensing requirements. 13.4. 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 Oncology, enforceable in accordance with its terms. Oncology has obtained all third-party consents necessary to enter into and consummate the transaction contemplated by this Agreement. Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor compliance by Oncology 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 to be conveyed hereunder, Oncology'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 Oncology is a party, or by which either Oncology 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 Oncology or any of the assets to be conveyed hereunder. 13.5. Compliance with Applicable Laws. To the best of Oncology's knowledge and belief, Oncology has operated in compliance with all federal, state, county and municipal laws, ordinances and regulations applicable thereto and neither Oncology nor any physician or other Person associated with or employed by Oncology has received payment or any remuneration whatsoever to induce or encourage the referral of patients or the purchase of goods and/or services as prohibited under 42 U.S.C. Section 1320a-7b(b), or otherwise perpetrated any Medicare or Medicaid fraud or abuse, nor has any fraud or abuse been alleged within the last five (5) years by any Governmental Authority, a carrier or a Third Party Payor. 13.6. Health Care Compliance. Oncology is presently participating in or otherwise authorized to receive reimbursement from or is a party to Medicare, Medicaid, and other Third-Party Payor Programs. All necessary certifications and contracts required for participation in such programs are in full force and effect and have not been amended or otherwise modified, rescinded, revoked or assigned as of the date hereof, and no condition exists or event has occurred which in itself or with the giving of notice or the lapse of time or both would result in the suspension, revocation, impairment, forfeiture or non-renewal of any such Third Party Payor Program. Oncology is in full compliance with the requirements of all such Third Party Payor Programs applicable thereto. 13.7. Fraud and Abuse. Oncology and persons and entities providing professional services for Oncology, have not, to the knowledge of Oncology, after due inquiry, engaged in any activities which are prohibited by or are in violation of the rules, regulations, policies, contracts or laws pertaining to any Third Party Payor Program, or which are prohibited by rules of professional conduct ("Governmental Rules and Regulations"), including but not limited to the following: (a) knowingly and willfully making or causing to be made a false statement or representation of a material -23- 24 fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment on Oncology's own behalf or on behalf of another, with intent to fraudulently secure such benefit or payment; or (d) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay or receive such remuneration (i) in return for referring an individual to a person for the furnishing or arranging for the furnishing or any item or service for which payment may be made in whole or in part by Medicare or Medicaid, or (ii) in return for purchasing, leasing, or ordering or arranging for or recommending purchasing, leasing, or ordering any good, facility, service or item for which payment may be made in whole or in part by Medicare or Medicaid. 13.8. Oncology Compliance. Oncology has all licenses necessary to operate the Clinic in accordance with the requirements of all Applicable Laws and has all Necessary Authorizations for the use and operation, all of which are in full force and effect. There are no outstanding notices of deficiencies relating to Oncology issued by any Governmental Authority or Third Party Payor requiring conformity or compliance with any Applicable Law or condition for participation of such Governmental Authority or Third Party Payor, and after reasonable and independent inquiry and due diligence and investigation, Oncology has neither received notice nor has any knowledge or reason to believe that such Necessary Authorizations may be revoked or not renewed in the ordinary course. 13.9. Rates and Reimbursement Policies. The jurisdiction in which Oncology is located does not currently impose any restrictions or limitations on rates which may be charged to private pay patients receiving services provided by Oncology. Oncology does not have any rate appeal currently pending before any Governmental Authority or any administrator of any Third Party Payor Program. Oncology has no knowledge of any Applicable Law which has been enacted, promulgated or issued within the eighteen (18) months preceding the date of this Agreement or any such legal requirement proposed or currently pending in the jurisdiction in which Oncology is located which could have a material adverse effect on Oncology or may result in the imposition of additional Medicaid, Medicare, charity, free care, welfare, or other discounted or government assisted patients at Oncology or require Oncology to obtain any necessary authorization which Oncology does not currently possess. 13.10. Full Disclosure. When considered in the context of all information contained herein, no representation or warranty made by Oncology in this Agreement contains or will contain any untrue statement of a material fact. All representatives and warranties contained in this Agreement are true and correct as of the date of their Agreement and shall remain true and correct throughout the term of this Agreement. 13.11. Exhibits. All the facts recited in Exhibits annexed hereby (as updated as of the effective date hereof) shall be deemed to be representations of fact by Oncology as though recited in this Article 13. ARTICLE 14 REPRESENTATIONS AND WARRANTIES OF RESPONSE Response represents, warrants, covenants and agrees with Oncology as follows: 14.1. Organization. Response is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee. Response has the full power to own its property, to carry on its business as presently conducted, to enter into this Agreement and to consummate the transactions contemplated hereby. 14.2. Authority. 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 -24- 25 hereby will not, violate any provisions of the charter or the bylaws of Response or any indenture, mortgage, deed of trust, lien, lease, agreement, arrangement, contract, instrument, license, order, judgment or decree or result in the acceleration of any obligation thereunder to which Response is a party or by which it is bound. 14.3. Absence of Litigation. No action or proceeding by or before any court or other Governmental Authority has been instituted or is, to the best of Response's knowledge, threatened with respect to the transactions contemplated by this Agreement. 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. 14.5. Compliance with Applicable Laws. To the best of Response's knowledge and belief, Response has operated in compliance with all federal, state, county and municipal laws, ordinances and regulations applicable thereto and neither Response nor any other Person associated with or employed by Response has received payment or any remuneration whatsoever to induce or encourage the referral of patients or the purchase of goods and/or services as prohibited under 42 U.S.C. Section 1320a-7b(b), or otherwise perpetrated any Medicare or Medicaid fraud or abuse, nor has any fraud or abuse been alleged within the last five (5) years by any Governmental Authority, a carrier or a Third Party Payor. 14.6. Fraud and Abuse. Response and persons and entities providing professional services for Response, have not, to the knowledge of Response, after due inquiry, engaged in any activities which are prohibited by or are in violation of the rules, regulations, policies, contracts or laws pertaining to any Third Party Payor Program, or which are prohibited by rules of professional conduct ("Governmental Rules and Regulations"), including but not limited to the following: (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment on Response's own behalf or on behalf of another, with intent to fraudulently secure such benefit or payment; or (d) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay or receive such remuneration (i) in return for referring an individual to a person for the furnishing or arranging for the furnishing or any item or service for which payment may be made in whole or in part by Medicare or Medicaid, or (ii) in return for purchasing, leasing, or ordering or arranging for or recommending purchasing, leasing, or ordering any good, facility, service or item for which payment may be made in whole or in part by Medicare or Medicaid. ARTICLE 15 COVENANTS OF ONCOLOGY 15.1. Merger, Consolidation and Other Arrangements. Oncology 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 Oncology'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. Oncology acknowledges and agrees that such consent may be withheld if Response and Oncology cannot mutually agree upon the terms and conditions of a new Service Agreement with Oncology. -25- 26 15.2. Necessary Authorizations/Assignment of Licenses and Permits. Oncology 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 Oncology assign, transfer, or remove or permit any other individual or entity to assign, transfer or remove any records of Oncology, 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. Oncology 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 Oncology as would be obtainable by Oncology at the time in a comparable arms-length transaction with a person not an Affiliate of Response. 15.4. Compliance with All Laws. Oncology shall comply with all laws and regulations relating to Oncology's practice and the operation of any eye 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, Oncology shall not violate any Applicable Laws. 15.5. Third Party Payor Programs. Oncology shall maintain Oncology's compliance with the requirements of all Third Party Payor Programs in which Oncology is currently participating or authorized to participate. 15.6. Change in Business or Credit and Collection Policy. Oncology shall not make any change in the character of Oncology'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. (a) Oncology shall, effective as of the date hereof, be deemed to have granted (and Oncology does hereby grant) to Response a first priority security interest in and to any and all of the Accounts Receivable and the proceeds thereof to secure the repayment of all amounts advanced to Oncology hereunder with accrued interest thereon, and this Agreement shall be deemed to be a security agreement. With respect to such grant of a security interest, Response may at its option exercise from time to time any and all rights and remedies available to it under the UCC or otherwise. Oncology 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 the purchased Accounts Receivable. Oncology represents and warrants that the location of Oncology's principal place of business, and all locations where Oncology maintains records with respect to its Accounts Receivables are set forth under its name in Section 16.5 hereof. Oncology agrees to notify Response in writing thirty (30) days prior to any change in any such location. The exact name of Oncology is as set forth at the beginning of this Agreement, and except as set forth on the signature page hereof, Oncology has not changed its name in the last five (5) years, and during such period Oncology did not use, nor does Oncology now use, any fictitious or trade name. Oncology shall notify Response in writing thirty (30) days prior to any change in any such name. (b) Oncology shall, effective as of the date hereof, be deemed to have granted (and Oncology does hereby grant) to Response a first priority security interest in and to that certain promissory note of even date herewith, and to the proceeds thereof, to secure the payment of the Fixed Portion of the Base Service Fee; and this Agreement shall be deemed to be a security agreement. -26- 27 15.8. Representations and Warranties. Oncology agrees to notify Response in the event that any representation or warranty contained in Article 13 of this Agreement becomes untrue. 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 Oncology 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 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. Each of the parties submits to the jurisdiction of any state or federal court sitting in Miami, Dade County, Florida for purposes of enforcement of any arbitration award hereunder. Each party also agrees not to bring any action or proceeding arising out of or relating to this Service Agreement in any other court. Each of the parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. 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: Daryl P. Johnson, CFO With copies to: Baker, Donelson, Bearman & Caldwell 165 Madison Ave., Suite 2000 Memphis, Tennessee 38103 Attn: John A. Good -27- 28 To Oncology: Oncology Hematology Group of South Florida, P.A. 8940 N. Kendall Drive Suite 300-E, East Tower Miami, Florida 33176 Attn: Leonard Kalman With copies to: Alan R. Chase, Esq. Cohen, Chase, Hoffman & Trautman, P.A. Suite 600, 9400 South Dadeland Blvd. Miami, Florida 33156 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. -28- 29 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, Oncology 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 Oncology and Response. 16.14. Remedies Cumulative. No remedy set forth in this Agreement or otherwise conferred upon or reserved to any party shall be considered exclusive of any other remedy available to any party, but the same shall be distinct, separate and cumulative and may be exercised from time to time as often as occasion may arise or as may be deemed expedient. 16.15. Language Construction. The language in all parts of this Agreement shall be construed, in all cases, according to its fair meaning, and not for or against either party hereto. The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 16.16. No Obligation to Third Parties. None of the obligations and duties of Response or Oncology under this Agreement shall in any way or in any manner be deemed to create any obligation of Response or of Oncology to, or any rights, in, any person or entity not a party to this Agreement. 16.17. Communications. Oncology 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 Oncology's practice at a Clinic. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. ONCOLOGY HEMATOLOGY GROUP OF SOUTH FLORIDA, P.A. By:________________________________________________ Title:_____________________________________________ RESPONSE ONCOLOGY, INC. By:________________________________________________ Title:_____________________________________________ PHYSICIANS: ___________________________________________________ -29- 30 RESPONSE ONCOLOGY, INC. SERVICE AGREEMENT SCHEDULE A THE INFORMATION CONTAINED IN THIS SCHEDULE HAS BEEN OMITTED FROM THIS SCHEDULE AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934. A-1 -----END PRIVACY-ENHANCED MESSAGE-----