-----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, ShcQS2OeAyy4a+13+Q3VSNLkztWH9kSAtRdIj+nUZoIo1DoIknFzP2Da77J2tUDU GE25UWZ9JiOCrUGLU+JgBg== 0000899243-97-000892.txt : 19970512 0000899243-97-000892.hdr.sgml : 19970512 ACCESSION NUMBER: 0000899243-97-000892 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970425 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970509 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN ONCOLOGY RESOURCES INC /DE/ CENTRAL INDEX KEY: 0000943061 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 841213501 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26190 FILM NUMBER: 97599311 BUSINESS ADDRESS: STREET 1: 16825 NORTHCHASE DR STREET 2: STE 1300 CITY: HOUSTON STATE: TX ZIP: 77060 BUSINESS PHONE: 7188732674 8-K 1 FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 25, 1997 AMERICAN ONCOLOGY RESOURCES, INC. (Exact name of registrant as specified in its charter) DELAWARE 0-26190 84-1213501 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification Number) 16825 NORTHCHASE DRIVE, SUITE 1300 HOUSTON, TEXAS 77060 (Address of principal executive office) (Zip Code) (281) 873-2674 (Registrant's telephone number, including area code) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On April 25, 1997, American Oncology Resources, Inc., through an indirect wholly owned subsidiary (together, the "Company"), acquired the nonmedical assets of, and entered into a long-term management agreement with, the medical practice conducted through Texas Radiation Oncology Group, L.L.P. (TROG), a four-physician radiation oncology practice located in Austin, Texas comprised of Austin Cancer Center, Ltd. and Austin Cancer Center II, Ltd. as partners. In connection with such transaction, the TROG practice merged with and into Central Texas Oncology Associates, P.A. (CTOA), a medical oncology practice already affiliated with the Company. In exchange, the Company delivered aggregate consideration of approximately $12,065,000 consisting of (i) cash and transaction costs of $5,574,000, (ii) promissory notes of $4,223,000, (iii) an agreement to deliver a specified number of shares of Common Stock at specified future dates, valued at $1,754,000 and (iv) an assumption of liabilities of approximately $514,000. The purchase price was determined after arms-length negotiation between the Company and the TROG practice. The cash component of the purchase price was funded from proceeds from the Company's credit facility. In connection with the TROG practice's merger into CTOA, the Company and CTOA amended their management services agreement, which provides for payment to the Company of a management fee, which includes reimbursement for all practice costs (other than amounts retained by the physicians), a fixed fee and, if certain criteria are satisfied, a performance fee. Each of the TROG practice's physicians also entered into an employment agreement with CTOA. The acquired nonmedical assets include equipment and other tangible personal property. The TROG practice used the nonmedical assets in connection with the operation of its radiation oncology practice, and the Company intends to employ these assets to provide services under the terms of the management agreement, as amended, with CTOA. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial statements of businesses acquired. Report of Independent Accountants Texas Radiation Oncology Group, LLP, Austin Cancer Center, Ltd. and Austin Cancer Center II, Ltd. Combined Balance Sheet as of December 31, 1996 Texas Radiation Oncology Group, LLP, Austin Cancer Center, Ltd. and Austin Cancer Center II, Ltd. Combined Statement of Operations and Partners' Capital for the Year Ended December 31, 1996 Texas Radiation Oncology Group, LLP, Austin Cancer Center, Ltd. and Austin Cancer Center II, Ltd. Combined Statement of Cash Flows for the Year Ended December 31, 1996 Notes to Financial Statements (b) Pro forma financial information. Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1996 Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1996 2 (c) Exhibits: 2.1 Master Transaction Agreement, dated as of April 25, 1997, among American Oncology Resources, Inc., AOR of Texas Management Limited Partnership, Shannon D. Cox, M.D., John H. Wilbanks, M.D., George R. Brown, M.D., Bruce M. Turner, M.D., Texas Radiation Oncology Group, L.L.P., Austin Cancer Center, Limited, Austin Cancer Center II, Limited, Central Texas Radiation Oncology Physicians, P.A. and Central Texas Oncology Associates, P.A. 2.2 Purchase Agreement, dated as of April 25, 1997, among American Oncology Resources, Inc., AOR of Texas Management Limited Partnership, Shannon D. Cox, M.D., John H. Wilbanks, M.D., George R. Brown, M.D., Bruce M. Turner, M.D., Texas Radiation Oncology Group, L.L.P., Austin Cancer Center, Limited, Austin Cancer Center II, Limited, Central Texas Radiation Oncology Physicians, P.A. and Central Texas Oncology Associates, P.A. 2.3 Management Services Agreement, effective as of September 1, 1996, between Central Texas Oncology Associates, P.A. and American Oncology Resources, Inc. (as assigned to AOR of Texas Management Limited Partnership), as amended effective April 25, 1997. Each of the above-listed agreements contains a list identifying all omitted exhibits and schedules. The Company agrees to furnish a supplementary copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN ONCOLOGY RESOURCES, INC. Date: May 9, 1997 By: /s/ R. DALE ROSS ----------------------------------- R. Dale Ross, Chairman of the Board and Chief Executive Officer 4 ITEM 7. (A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Texas Radiation Oncology Group, LLP, Austin Cancer Center, Ltd. and Austin Cancer Center II, Ltd. In our opinion, the accompanying combined balance sheet and the related combined statements of operations and partners' capital and of cash flows present fairly, in all material respects, the financial position of Texas Radiation Oncology Group, LLP, Austin Cancer Center, Ltd. and Austin Cancer Center II, Ltd. (collectively, the Group) at December 31, 1996 and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Group's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Houston, Texas February 26, 1997 5 TEXAS RADIATION ONCOLOGY GROUP, LLP, AUSTIN CANCER CENTER, LTD. AND AUSTIN CANCER CENTER II, LTD. COMBINED BALANCE SHEET DECEMBER 31, 1996 (IN THOUSANDS) ASSETS Current assets: Cash $ 330 Accounts receivable, net of allowance for doubtful accounts of $529 1,399 Prepaid assets 17 ------ Total current assets 1,746 ------ Property and equipment: Medical equipment 677 Furniture and fixtures 164 Leasehold improvements 120 ------ 961 Less - accumulated depreciation (274) ------ 687 ------ Total assets $2,433 ====== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable $ 152 Payor credit balances 131 Accrued compensation 108 Current portion of indebtedness 251 ------ Total current liabilities 642 Long-term indebtedness 93 ------ Total liabilities 735 Partners' capital 1,698 ------ Commitments and contingencies (Note 5) ------ Total liabilities and partners' capital $2,433 ====== The accompanying notes are an intergral part of this statement. TEXAS RADIATION ONCOLOGY GROUP, LLP, AUSTIN CANCER CENTER, LTD. AND AUSTIN CANCER CENTER II, LTD. COMBINED STATEMENT OF OPERATIONS AND PARTNERS' CAPITAL YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) Revenue $ 8,036 ------- Operating expenses: Compensation and benefits 1,011 Other practice costs 907 Depreciation and amortization 186 ------- 2,104 ------- Income from operations 5,932 Interest expense (15) Other income 7 ------- Net income 5,924 Partners' capital: Beginning of period 2,188 Contributions 121 Distributions (6,535) ------- End of period $ 1,698 ======= The accompanying notes are an integral part of this statement. TEXAS RADIATION ONCOLOGY GROUP, LLP, AUSTIN CANCER CENTER, LTD. AND AUSTIN CANCER CENTER II, LTD. COMBINED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) Cash flows from operating activities:- Net income $ 5,924 Noncash adjustment: Depreciation and amortization 186 Cash provided (used) by changes in: Accounts receivable 54 Prepaid assets 18 Accounts payable 97 Accrued compensation (10) Payor credit balances 79 ------- Net cash provided by operating activities 6,348 ------- Cash flows from investing activities: Acquisitions of property and equipment (594) ------- Net cash used by investing activities (594) ------- Cash flows from financing activities: Partners' contributions 121 Partners' distributions (6,535) Repayment of indebtedness (21) Proceeds from promissory note 225 Proceeds from draw note 140 ------- Net cash used by financing activities (6,070) ------- Net decrease in cash (316) Cash: Beginning of period 646 ------- End of period $ 330 ======= Supplemental cash flow disclosures: Interest paid $ 14 The accompanying notes are an integral part of this statement. TEXAS RADIATION ONCOLOGY GROUP, LLP, AUSTIN CANCER CENTER, LTD. AND AUSTIN CANCER CENTER II, LTD. NOTES TO COMBINED FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Texas Radiation Oncology Group, LLP is a physician-owned group serving the greater Austin, Texas area. The partnership was formed in January 1995 for the purpose of rendering professional radiation oncology services. Austin Cancer Center, Ltd. is a limited partnership formed in February 1995 for the principle purpose of operating a radiation therapy treatment facility servicing the greater Austin area. Austin Cancer Center II, Ltd. is a limited partnership formed in January 1996 for the principle purpose of operating a radiation therapy treatment facility servicing the northern Austin area. These entities (collectively, the Group) which are under substantially common control, have been combined for financial statement purposes. The following is a summary of the Group's significant accounting policies: Principles of combination The financial statements of Texas Radiation Oncology Group, LLP, Austin Cancer Center, Ltd., and Austin Cancer Center II, Ltd. have been combined to present the aggregate financial position and results of operations of these entities which are under common control. All significant intercompany transactions and balances have been eliminated. Use of estimates The preparation of the Group's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. Because of inherent uncertainties in this process, actual future results could differ from those expected at the reporting date. Fair value Management believes the carrying amounts of indebtedness approximate fair value. The Group's accounts receivable, payables and accrued liabilities are substantially current and believed by management to approximate fair value. Revenue recognition Revenues for services rendered to patients by the Group are recognized when the services are provided based on established charges reduced to the net amounts estimated to be collectible for patients covered under contractual programs and by allowances for doubtful accounts. For the year ended December 31, 1996, approximately 18% of the Group's net revenues were derived from Medicare. At December 31, 1996, 14% of the Group's accounts receivable are due from Medicare. These accounts receivable are uncollateralized but are believed to have minimum credit risk. Property and equipment Property and equipment is stated at cost. Medical equipment and furniture and fixtures are depreciated using accelerated methods over the estimated useful lives of five to seven years. Leasehold improvements are depreciated using the straight-line method over the estimated useful life not in excess of the remaining lease terms. Income taxes No provision for income taxes has been recorded for the Group because the Group's income is reported by the partners in their respective income tax returns. The net excess of reported amounts of assets and liabilities over their tax basis at December 31, 1996 is approximately $1,009 which is principally comprised of differences associated with the cash basis of accounting for income tax reporting purposes. NOTE 2 - LEASE OBLIGATIONS Future minimum lease payments for noncancelable operating leases are as follows (in thousands): 1997 $157 1998 107 1999 104 2000 102 2001 102 Thereafter 224 ---- Total $796 ==== Rental expense under noncancelable operating leases for the year ended December 31, 1996 approximated $253,000. NOTE 3 - INDEBTEDNESS Indebtedness at December 31, 1996 consists of the following (in thousands): Bank promissory note, principal and interest at prime plus 1.00% (9.25% at December 31, 1996) payable monthly with final payment due December 10, 2000 $119 Bank draw note, total amount available of $275, principal and variable rate 225 interest (8.25% at December 31, 1996) ---- payable on demand 344 Less - current portion 251 ---- $ 93 ==== The Group has two unused $200,000 revolving loans available at December 31, 1996. One note has a variable interest rate (8.25% at December 31, 1996) and the other has a variable interest rate (8.25% at December 31, 1996) plus .25%. Each note is due on demand or in monthly installments with final principal and accrued interest payments due December 19, 1997. Subsequent to December 31, 1996, the Group repaid the bank draw note from proceeds of a $350,000 term loan. Principal on the new note and variable rate interest (8.50% at December 31, 1996) are due on demand or in monthly installments of $7,000 beginning January 19, 1997 with a final payment of principal and accrued interest due December 19, 2001. Substantially all of the Group's equipment has been pledged to secure borrowings under the promissory note and revolving loans. The partners of the Group have also personally guaranteed the loans. Future maturities of indebtedness, as refinanced, are $250,000 in 1997, $29,000 in 1998, $30,000 in 1999 and $35,000 in 2000. NOTE 4 - EMPLOYEE BENEFIT PLANS The Group has a 401(k) profit sharing plan and Money Purchase Plan (the Plans) in which substantially all employees meeting age requirements are eligible to participate after completion of six months of service, as defined by the Plans' agreements. Contributions to the Plans are discretionary and are determined by the Group on an annual basis. Employees vest pro rata in the Group's contributions over four years and the partners of the Group are the trustees of the Plan. Group contributions to the Plans for the year ended December 31, 1996 approximated $60,000. NOTE 5 - COMMITMENTS, CONTINGENCIES AND RELATED PARTIES The Group maintains insurance with respect to medical malpractice risks on a claims-made basis in amounts management believes to be adequate. Management is not aware of any outstanding claims. The Company has a noncancelable operating lease for office space with an entity owned by a partner in the Group. Related party rental expense for the year ended December 31, 1996 was approximately $168,000. Future minimum lease payments to related parties are approximately $28,000 for 1997. The Group does not guarantee debt, if any, associated with the leased property. Such related party rental expense and future minimum lease commitments are included in the amounts in Note 2. Subsequent to year end, the Group committed to purchase a used accelerator for $115,000. NOTE 6 - SUBSEQUENT EVENT The Group has entered into a letter of intent to negotiate the sale of substantially all of its operating assets. The physicians are also negotiating an agreement whereby the purchaser will manage the physicians' medical practice on a long-term basis. ITEM 7. (B) PRO FORMA FINANCIAL INFORMATION The following Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1996 and the Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1996 have been prepared to reflect adjustments to the Company's historical results of operations and financial position to give effect to the TROG transactions. The Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1996 has been prepared as if the TROG transactions occurred on January 1, 1996. The Unaudited Pro Forma Consolidated Balance Sheet has been prepared as if the TROG transactions occurred on December 31, 1996. The pro forma financial statements have been prepared by the Company based on the financial statements of the Company. To prepare the pro forma financial statements, the Company has estimated revenues for the periods prior to the Company's affiliation with TROG by applying the management fee formula contained in the management agreement with TROG to the historical medical practice revenue of the group. No adjustments to the operating costs or expenses of the group were made. These pro forma financial statements are presented for illustrative purposes only and are not necessarily indicative of the results that would have been obtained had the transaction been completed at the time above. This information should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto and the historical financial statements of TROG and the notes thereto included in the Registration Statement and elsewhere herein. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 (IN THOUSANDS)
HISTORICAL PRO FORMA ------------------------------ ---------------------------- AMERICAN ONCOLOGY REPORTED TRANSACTION AS RESOURCES, INC. TRANSACTON(1) ADJUSTMENTS ADJUSTED -------------- ------------- ----------- ------------ Assets Current Assets: Cash and equivalent $ 3,429 $ 330 $ (330) (2) $ 3,429 Accounts receivable 61,183 1,399 (1,399) (2) 61,183 Prepaids and other current assets 5,775 17 (17) (2) 5,775 Due from affiliated physician groups 5,356 5,356 ----------- ----------- ---------- ----------- Total current assets 75,743 1,746 (1,746) 75,743 Property and equipment, net 18,943 687 19,630 Management service agreements 240,034 11,207 (3) 251,241 Other assets 4,680 4,680 ----------- ----------- ---------- ----------- Total assets $ 339,400 $ 2,433 $ 9,461 $ 351,294 =========== =========== ========== =========== Liabilities and Stockholders' Equity Current liabilities: Current maturities of long-term indebtedness $ 9,783 $ 251 $ 10,034 Accounts payable 15,148 152 (152) (2) 15,148 Payor credit balances 131 (131) (2) - Due to medical groups 616 616 Accrued compensation costs 1,806 108 (108) (2) 1,806 Accrued interest payable 2,325 2,325 Income taxes payable 641 641 Other accrued liabilities 2,452 2,452 ----------- ----------- ---------- ----------- Total current liabilities 32,771 642 (391) 33,022 Deferred income taxes 3,068 3,068 Long-term indebtedness 81,707 93 9,797 (4) 91,597 ----------- ----------- ---------- ----------- Total liabilities 117,546 735 9,406 127,687 ----------- ----------- ---------- ----------- Stockholders' equity: Common stock 284 284 Additional paid-in capital 139,804 139,804 Common stock to be issued 61,225 1,753 (6) 62,978 Treasury stock (8,530) (8,530) Retained earnings 29,071 1,698 (1,698)(5) 29,071 ----------- ----------- ---------- ----------- Total stockholders' equity 221,854 1,698 55 223,607 ----------- ----------- ---------- ----------- Total liabilities and stockholders' equity $ 339,400 $ 2,433 $ 9,461 $ 351,294 =========== =========== ========== ===========
Unaudited Pro Forma Consolidated Statement of Operations Twelve Months Ended December 31, 1996 (in thousands, except per share data)
HISTORICAL PRO FORMA ------------------------------ ---------------------------- AMERICAN REPORTED ONCOLOGY REPORTED TRANSACTION AS RESOURCES, INC. TRANSACTON(1) ADJUSTMENTS ADJUSTED -------------- ------------- ----------- ------------ Revenue $ 205,460 $ 8,036 $ (3,222) $ 210,274 ----------- ----------- ---------- ----------- Operating Expenses: Pharmaceuticals and supplies 85,210 85,210 Practice compensation and benefits 41,350 1,011 42,361 Other Practice Costs 23,495 907 24,402 General and Administrative 14,095 14,095 Depreciation and Amortization 9,343 186 280 (8) 9,809 ----------- ----------- ---------- ----------- 173,493 2,104 280 175,877 ----------- ----------- ---------- ----------- Income from operations 31,967 5,932 (3,502) 34,397 Other income (expense) Interest income 1,062 1,062 Interest expense (4,307) (15) (686) (9) (5,008) Other income (net) 7 7 ----------- ----------- ---------- ----------- Income before taxes 28,722 5,924 (4,188) 30,458 Income tax provision/(benefit) 11,072 668 (10) 11,740 ----------- ----------- ---------- ----------- Net income/(loss) $ 17,650 $ 5,924 $ (4,856) $ 18,718 =========== =========== ========== =========== Net income per share 0.37 0.39 =========== =========== Shares used in per share calculations 47,549 47,892 =========== ===========
Notes To Unaudited Pro Forma Information (1) The column includes the historical financial information for TROG. The historical financial data was taken from the entity's financial statements included herein. (2) Adjustments to eliminate assets not acquired and liabilities not assumed in the transaction. (3) Adjustment to reflect the cost of management agreements, estimated for purposes of the pro forma balance sheet as $11,207,000. Such estimate is not expected to change materially when the Company completes its valuations of the acquired assets and assumed liabilities. (4) Adjustment to record $5,574,000 of funds borrowed under revolving line of credit to pay cash component of consideration and transaction costs and $4,223,000 for 7% promissory notes issued to the affiliated physicians. (5) Adjustment to eliminate the historical ownership interest of the TROG practice. (6) Adjustment to reflect commitment to issue 342,632 shares of Common Stock at specified future dates for no additional consideration. (7) Adjustment to eliminate medical practice revenues of the TROG practice that would not constitute revenue to the Company pursuant to the management agreement. (8) Adjustment to reflect additional amortization attributable to the newly obtained management agreement over the contractual term of 40 years. (9) Adjustment to reflect the impact of interest expense on funds borrowed under revolving line of credit and promissory notes granted as consideration. (10) Adjustment to reflect the impact of previous adjustments on the income taxes of the Company and the elimination of the partnership impact included in the TROG practice. Exhibit Index Exhibit numbers are in accordance with the Exhibit Table in Item 601 of Regulation S-K Exhibit Sequential Number Exhibit Description Page Number - ------- ------------------- ----------- 2.1 Master Transaction Agreement, dated as of April 25, 1997, among American Oncology Resources, Inc., AOR of Texas Management Limited Partnership, Shannon D. Cox, M.D., John H. Wilbanks, M.D., George R. Brown, M.D., Bruce M. Turner, M.D., Texas Radiation Oncology Group, L.L.P., Austin Cancer Center, Limited, Austin Cancer Center II, Limited, Central Texas Radiation Oncology Physicians, P.A. and Central Texas Oncology Associates, P.A. 2.2* Purchase Agreement, dated as of April 25, 1997, among American Oncology Resources, Inc., AOR of Texas Management Limited Partnership, Shannon D. Cox, M.D., John H. Wilbanks, M.D., George R. Brown, M.D., Bruce M. Turner, M.D., Texas Radiation Oncology Group, L.L.P., Austin Cancer Center, limited, Austin Cancer Center II, Limited, Central Texas Radiation Oncology Physicians, P.A. and Central Texas Oncology Associates, P.A. 2.3* Management Services Agreement, effective as of September 1, 1996, between Central Texas Oncology Associates, P.A. and American Oncology Resources, Inc. (as assigned to AOR of Texas Management Limited Partnership), as amended effective April 25, 1997. __________________ * Certain information in this exhibit is subject to request for confidential treatment. In accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended, such information has been omitted and filed separately with the Securities and Exchange Commission. EX-2.1 2 MASTER TRANSACTION AGREEMENT EXHIBIT 2.1 MASTER TRANSACTION AGREEMENT BY AND AMONG AMERICAN ONCOLOGY RESOURCES, INC. AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP SHANNON D. COX, M.D. JOHN H. WILBANKS, M.D. GEORGE R. BROWN, M.D. BRUCE M. TURNER, M.D. TEXAS RADIATION ONCOLOGY GROUP, LLP AUSTIN CANCER CENTER, LIMITED AUSTIN CANCER CENTER II, LIMITED CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A. AND CENTRAL TEXAS ONCOLOGY ASSOCIATES, P.A. INDEX
PAGE ARTICLE I. DEFINITIONS..................................................... 1 ARTICLE II. RESTRUCTURING................................................... 5 Section 2.01 Pre-Closing Actions............................................. 5 Section 2.02 Purchase and Conveyance Agreement............................... 5 Section 2.03 Transfer of Management Services Agreement....................... 6 Section 2.04 Employment and Settlement Agreements............................ 6 Section 2.05 Merger.......................................................... 6 Section 2.06 Noncompetition and Confidentiality Covenants.................... 6 ARTICLE III. THE CLOSING..................................................... 7 Section 3.01 Closing......................................................... 7 Section 3.02 Deliveries to the AOR Parties at the Closing.................... 7 Section 3.03 Deliveries to the Physician Parties at the Closing.............. 8 ARTICLE IV. CONDITIONS...................................................... 8 Section 4.01 Conditions Precedent to the Obligations of All Parties.......... 8 Section 4.02 Conditions Precedent to the Obligations of the AOR Parties...... 9 Section 4.03 Conditions Precedent to the Obligations of the Physician Parties.............................................. 9 ARTICLE V. MISCELLANEOUS................................................... 10 Section 5.01 Taxes........................................................... 10 Section 5.02 Expenses........................................................ 10 Section 5.03 Parties Bound................................................... 10 Section 5.04 Choice of Law................................................... 10 Section 5.05 Assignment...................................................... 10 Section 5.06 Multiple Counterparts........................................... 10 Section 5.07 Headings........................................................ 11
EXHIBITS Exhibit A Form of Amendment to Management Services Agreement Exhibit B Form of Buy-Sell Agreement Exhibit C Form of Conveyance Agreement Exhibit D Form of CTROP Bylaws Exhibit E Form of CTROP Charter Exhibit F Form of CTROP Organizational Minutes Exhibit G Form of Employment Agreement Exhibit H Form of Escrow Agreement Exhibit I Form of Management Services Agreement Exhibit J Form of Merger Agreement i Exhibit K Form of New P Partnership Agreement Exhibit L Form of Note Exhibit M Form of Option Agreement Exhibit N Form of Partnership Interest Purchase Agreement Exhibit O Form of Purchase Agreement Exhibit P Form of Settlement Agreement ii MASTER TRANSACTION AGREEMENT This Master Transaction Agreement ("Master Transaction Agreement"), dated and effective as of April 25, 1997 (the "Closing Date"), is by and among AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation ("AOR"); AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP, a Texas limited partnership ("AOR Management"); SHANNON D. COX, M.D., JOHN H. WILBANKS, M.D., GEORGE R. BROWN, M.D. and BRUCE M. TURNER, M.D. (individually a "Physician" and collectively the "Physicians"); TEXAS RADIATION ONCOLOGY GROUP, LLP, a Texas limited liability partnership ("TROG"); AUSTIN CANCER CENTER, LIMITED, a Texas limited partnership ("ACC"); AUSTIN CANCER CENTER II, LIMITED, a Texas limited partnership ("ACC II"); CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A., a Texas professional association ("CTROP"); and CENTRAL TEXAS ONCOLOGY ASSOCIATES, P.A., a Texas professional association ("CTOA") (AOR, AOR Management, the Physicians, TROG, ACC, ACC II, CTROP and CTOA are individually referred to herein as a "Party" and collectively referred to herein as "Parties"). RECITALS A. Each Physician is a physician licensed to practice medicine in the State of Texas. Each Physician currently conducts such Physician's medical oncology practice with the other Physicians, practicing together through TROG. B. The Physicians desire to restructure their medical practice currently conducted through TROG by consummation of the transactions described in this Master Transaction Agreement. C. The Parties to this Master Transaction Agreement desire to set forth the terms and conditions upon which the restructuring described above shall be accomplished and to agree upon other matters set forth herein. NOW, THEREFORE, in consideration of the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows: ARTICLE I. DEFINITIONS For purposes of this Master Transaction Agreement, the following terms, in addition to other capitalized terms used in this Master Transaction Agreement that are defined elsewhere herein, shall have the meanings set forth herein. Amendment. The Amendment to the Management Services Agreement to be executed between AOR Management and CTOA in the form set forth in Exhibit A. AOR Audited Financial Statements. As defined in Section 5.01(e) of the Purchase Agreement. AOR Common Stock. The Common Stock, par value $.01 per share, of AOR. AOR Indemnified Persons. As defined in Section 9.01 of the Purchase Agreement. AOR Parties. AOR and AOR Management. Assumed Obligations. As defined in Section 3.03 of the Purchase Agreement. Buy-Sell Agreement. The Buy-Sell Agreement, a joinder to which is to be executed between CTOA and the Physicians in the form set forth in Exhibit B. Closing. The closing of the transactions contemplated by this Master Transaction Agreement. Closing Date. As defined in the introduction to this Master Transaction Agreement. Code. The Internal Revenue Code of 1986, as amended. Conveyance Agreement. The Conveyance Agreement to be executed between TROG and CTROP in the form set forth in Exhibit C. CTROP Bylaws. The Bylaws of CTROP in the form set forth in Exhibit D. CTROP Charter. The Articles of Association of CTROP in the form set forth in Exhibit E. CTROP Organizational Minutes. The organizational minutes of CTROP in the form set forth in Exhibit F. Disclosure Schedule. The disclosure schedule attached to the Purchase Agreement setting forth, with reference to the applicable section and subsection of the Purchase Agreement, certain information and exceptions to the representations, warranties and covenants of the Physicians. Employment Agreements. Collectively, the Employment Agreements to be executed between each Physician and CTROP in the form set forth in Exhibit G. Environmental Claim. As defined in Section 9.01(a)(iv) of the Purchase Agreement. Environmental Laws. As defined in Section 4.01(m) of the Purchase Agreement. ERISA. As defined in Section 4.01(l) of the Purchase Agreement. 2 Escrow Agent. As defined in the Escrow Agreements. Escrow Agreement. Collectively, the Escrow Agreements that, subject to the occurrence of certain events described in Section 10.02 of the Purchase Agreement, will be executed among the Escrow Agent, AOR and a Physician substantially in the form set forth in Exhibit H. Exchange Act. The Securities Exchange Act of 1934, as amended. GAAP. Generally accepted accounting principles, consistently applied. Governmental Authority. Any national, state, provincial, local or tribal governmental, judicial or administrative authority or agency. Hazardous Wastes. As defined in Section 4.01(m) of the Purchase Agreement. Indemnity Loss. As defined in Section 9.01 of the Purchase Agreement. Investment Representations Schedule. The schedule attached to the Purchase Agreement setting forth exceptions to each Physician's representations, warranties and covenants set forth in Section 6.01 of the Purchase Agreement. Management Services Agreement. The Management Services Agreement between New P and CTROP in the form set forth in Exhibit I. Market Price. The market price per share of AOR Common Stock determined in the following manner: (i) the closing price (which shall be the last reported sales price, or, in case no such sales take place on such day, the average of the closing bid and the asked prices) per share of the AOR Common Stock on the principal national securities exchange on which the AOR Common Stock is then listed or admitted to trading, if the AOR Common Stock is then listed or admitted to trading on any national securities exchange; (ii) if the AOR Common Stock is not then so listed on a national securities exchange, the average of the closing bid and asked prices of the AOR Common Stock in the over-the-counter market as reported by Nasdaq; (iii) if the AOR Common Stock is not then quoted by Nasdaq, as furnished by any member of NASD selected by AOR for that purpose; or (iv) if no member of NASD furnishes quotes with respect to the AOR Common Stock, an amount determined in good faith by the board of directors of AOR. Medical Assets. As defined in Section 3.02 of the Purchase Agreement. Merger Agreement. The Merger Agreement (including the Certificate of Merger to be executed and filed with the Secretary of State of the State of Texas in connection therewith) to be executed between CTROP and CTOA in the form set forth in Exhibit J. NASD. The National Association of Securities Dealers, Inc. 3 Nasdaq. The National Association of Securities Dealers Automated Quotation System. New P. Radiation Oncology Management Partnership, a Texas general partnership. New P Partnership Agreement. The Partnership Agreement of New P in the form set forth in Exhibit K. Nonmedical Assets. As defined in Section 3.01 of the Purchase Agreement. Notes. Collectively, the subordinated non-negotiable promissory notes to be delivered to the Physicians pursuant to the Purchase Agreement in the form set forth in Exhibit L. Option Agreement. The Option Agreement, a joinder to which is to be executed between the Physicians and Lloyd K. Everson, M.D. in the form set forth in Exhibit M. Partnership Interest Purchase Agreement. The Partnership Interest Purchase Agreement to be executed between John M. Barnett, M.D. and AOR in the form set forth in Exhibit N. Physician Indemnified Persons. As defined in Section 9.02 of the Purchase Agreement. Physician Parties. The Physicians, CTROP, TROG, ACC and ACC II. Practice. The radiation oncology and all other related health-care practices conducted from time to time by TROG prior to the Closing and CTROP after the Closing. Purchase Agreement. The Purchase Agreement to be executed by and among AOR, AOR Management, the Physicians, TROG, CTROP, ACC and ACC II in the form set forth in Exhibit O. Real Property Leases. As defined in Section 3.02(f) of the Purchase Agreement. SEC. The Securities and Exchange Commission. Securities. The Notes and the shares of AOR Common Stock to be issued pursuant to the Purchase Agreement. Securities Act. The Securities Act of 1933, as amended. Settlement Agreement. The Settlement Agreement to be executed among the AOR Parties, the Physician Parties and John M. Barnett, M.D. in the form set forth in Exhibit P. Taxes. As defined in Section 4.01(j) of the Purchase Agreement. 4 Transaction Documents. This Master Transaction Agreement, the Amendment, the Buy-Sell Agreement, the Conveyance Agreement, the CTROP Bylaws, the CTROP Charter, the CTROP Organizational Minutes, the Employment Agreements, the Escrow Agreements, the Management Services Agreement, the Merger Agreement, the New P Partnership Agreement, the Option Agreement, the Partnership Interest Purchase Agreement, the Purchase Agreement, the Settlement Agreement and each other document and instrument executed and delivered at the Closing. TROG Audited Financial Statements. As defined in Section 4.01(d) of the Purchase Agreement. TROG Balance Sheet. As defined in Section 4.01(d) of the Purchase Agreement. TROG Balance Sheet Date. As defined in Section 4.01(d) of the Purchase Agreement. ARTICLE II. RESTRUCTURING Section 2.01 Pre-Closing Actions. Prior to the Closing, the following actions shall have occurred in the order set forth in this Section 2.01: (a) each Physician and TROG have terminated any existing employment agreement, oral, written or otherwise, between such Physician and TROG or the other Physicians; (b) the Physicians have caused CTROP to be duly organized and, to that end, have caused (i) the CTROP Charter to be filed with the Secretary of State of the State of Texas, (ii) the CTROP Bylaws to be adopted, (iii) the CTROP Organizational Minutes to be approved and (iv) shares of CTROP to be issued to the Physicians in the amounts set forth in the CTROP Organizational Minutes for the consideration described therein; (c) the Physicians, together with John M. Barnett, M.D., have duly organized New P by executing and delivering the New P Partnership Agreement; and (d) New P and CTOA have executed and delivered the Management Services Agreement. Section 2.02 Purchase and Conveyance Agreements. Each Physician, TROG, CTROP, ACC, ACC II, AOR and AOR Management will execute and deliver the Purchase Agreement; and AOR will execute and deliver, and the Physicians will cause John M. Barnett, M.D. to execute and deliver, the Partnership Interest Purchase Agreement. By virtue of AOR's purchase of 100% of the partnership interests of New P pursuant to the Purchase Agreement, New P will dissolve and will transfer, assign and convey to AOR all of the assets of New P, and AOR will assume all of the liabilities, duties and obligations of New P. In addition, pursuant to the 5 Purchase Agreement, AOR Management will purchase the Nonmedical Assets from TROG, ACC and ACC II, and will assume the Assumed Obligations. After the actions listed in the foregoing paragraph, TROG and CTROP will execute and deliver the Conveyance Agreement pursuant to which TROG will convey to CTROP the Medical Assets. Section 2.03 Transfer of Management Services Agreement. At the Closing, after the occurrence of the events described in Section 2.02, AOR will transfer and contribute to AOR Management all of AOR's right, title and interest in and to the Management Services Agreement, and AOR Management will assume all liabilities, duties and obligations under the Management Services Agreement. Section 2.04 Employment and Settlement Agreements. At the Closing, after the occurrence of the events set forth in Section 2.03, CTROP and each Physician will execute and deliver an Employment Agreement. In addition, the AOR Parties, the Physician Parties and John M. Barnett, M.D. will execute and deliver the Settlement Agreement. Section 2.05 Merger. At the Closing, after the occurrence of the events set forth in Section 2.04, CTROP and CTOA will execute and deliver the Merger Agreement and will cause the Certificate of Merger to be filed on or about April 25, 1997 with the Secretary of State of the State of Texas. Pursuant thereto, CTROP will merge with and into CTOA, with CTOA being the surviving corporation. In connection with the merger of CTROP into CTOA, the steps set forth below will occur: (a) Buy-Sell and Option Agreements. As set forth in the Merger Agreement, each Physician will become a shareholder of CTOA. As a shareholder of CTOA, each Physician will execute and deliver joinders to the Buy-Sell Agreement and the Option Agreement. (b) Amendment. Following the merger of CTROP with and into CTOA, without the taking of any additional action, the Management Services Agreement shall terminate and cease to be of any further force or effect; and CTOA and AOR Management shall execute and deliver the Amendment. (c) Employment Agreements. CTROP shall assign and delegate all of its rights and obligations under each Employment Agreement to CTOA, with each such Physician to become an employee of CTOA under the terms of such Employment Agreement. Section 2.06 Noncompetition and Confidentiality Covenants. In connection with the consummation of the transactions contemplated by this Master Transaction Agreement, and by executing and delivering certain of the other Transaction Documents, the Physicians will be entering into certain noncompetition and confidentiality covenants. The Physicians recognize 6 that such covenants are an essential part of the transactions contemplated by this Master Transaction Agreement and certain other Transaction Documents and that, but for the contemplated agreement of each Physician to comply with such covenants, the AOR Parties would not have entered into this Master Transaction Agreement. ARTICLE III. THE CLOSING Section 3.01 Closing. (a) The Closing shall take place at the offices of Mayor, Day, Caldwell & Keeton, L.L.P., 700 Louisiana, Suite 1900, Houston, Texas 77002, at 10:00 A.M. on the Closing Date. (b) At the Closing, the Parties shall complete the transactions provided for in Sections 2.02, 2.03, 2.04 and 2.05 in the sequence specified in Article II hereof. The consummation of the transactions contemplated by Sections 2.02, 2.03, 2.04 and 2.05 shall be effective for all purposes as of 12:01 a.m., April 25, 1997, but none of the transactions contemplated by such Sections shall be deemed to have been consummated until each such transaction shall have been consummated. Section 3.02 Deliveries to the AOR Parties at the Closing. At the Closing, and simultaneously with the deliveries to the Physician Parties specified in Section 3.03 hereof, and in addition to any other deliveries required to be made to an AOR Party pursuant to any other Transaction Document at the Closing, the Physician Parties shall deliver or cause to be delivered to the AOR Parties the following: (a) the CTROP Bylaws, the CTROP Charter and the CTROP Organizational Minutes; (b) the New P Partnership Agreement duly executed by each Physician and John M. Barnett, M.D.; (c) the Management Services Agreement duly executed by New P and CTROP; (d) the Purchase Agreement duly executed by the Physicians, TROG, CTROP, ACC and ACC II; (e) the Partnership Interest Purchase Agreement duly executed by John M. Barnett, M.D. (f) the Conveyance Agreement duly executed by TROG and CTROP; (g) the Employment Agreements duly executed by the Physicians and CTROP; 7 (h) the Settlement Agreement duly executed by the Physician Parties and John M. Barnett, M.D. (i) the Merger Agreement (together with the Certificate of Merger) duly executed by CTROP and CTOA; (j) the joinder to the Buy-Sell Agreement duly executed by the Physicians; (k) the joinder to the Option Agreement duly executed by the Physicians; (l) the Amendment duly executed by CTOA; and (m) such other closing documents, certificates and instruments as are contemplated by the other Transaction Documents or as shall have been reasonably requested by the AOR Parties and as are customarily delivered in connection with transactions of the type contemplated herein. Section 3.03 Deliveries to the Physician Parties at the Closing. At the Closing, and simultaneously with the deliveries to the AOR Parties specified in Section 3.02, and in addition to any other deliveries required to be made to a Physician Party pursuant to any other Transaction Document at the Closing, the AOR Parties shall deliver or cause to be delivered to the Physician Parties the following: (a) the Purchase Agreement duly executed by AOR and AOR Management; (b) the Partnership Interest Purchase Agreement duly executed by AOR; (c) the Settlement Agreement duly executed by the AOR Parties; (d) the Amendment duly executed by AOR Management; and (e) such other closing documents, certificates and instruments as are contemplated by the other Transaction Documents or as shall have been reasonably requested by the Physician Parties and as are customarily delivered in connection with transactions of the type contemplated herein. ARTICLE IV. CONDITIONS Section 4.01 Conditions Precedent to the Obligations of All Parties. The obligations of the Parties to complete the Closing shall be subject to the fulfillment, at or prior to the time of the Closing, of each of the following conditions: 8 (a) all permits, approvals, waivers, releases and consents of any Governmental Authority or of any third party necessary or appropriate for consummation of the Closing shall have been obtained; (b) no preliminary or permanent injunction or other order of a court or other Governmental Authority in the United States shall have been issued and be in effect, and no United States federal or state statute, rule or regulation shall have been enacted or promulgated after the date hereof and be in effect, that prohibits the consummation of the Closing; and (c) there shall not be any action or proceeding commenced by or before any court or other Governmental Authority in the United States that challenges the consummation of the Closing. Section 4.02 Conditions Precedent to the Obligations of the AOR Parties. The obligations of the AOR Parties to complete the Closing shall be subject to the fulfillment, at or prior to the time of the Closing, of each of the following conditions: (a) the Physician Parties shall have performed, complied with and fulfilled all the covenants, agreements, obligations and conditions required by any of the Transaction Documents to be performed, complied with or fulfilled by them prior to or at the Closing; and (b) the AOR Parties shall have received all of the instruments, documents and other items described in Section 3.02, and the form and substance of all such deliveries shall be satisfactory in all reasonable respects to the AOR Parties and their counsel. Section 4.03 Conditions Precedent to the Obligations of the Physician Parties. The obligations of the Physician Parties to complete the Closing shall be subject to the fulfillment at or prior to the time of the Closing, of each of the following conditions: (a) the AOR Parties shall have performed, complied with and fulfilled all of the covenants, agreements, obligations and conditions required by any of the Transaction Documents to be performed, complied with or fulfilled by them prior to or at the Closing; and (b) the Physician Parties shall have received from the AOR Parties all of the instruments, documents and other items described in Section 3.03, and the form and substance of all such deliveries shall be satisfactory in all reasonable respects to the Physician Parties and their counsel. 9 ARTICLE V. MISCELLANEOUS Section 5.01 Taxes. The Physician Parties will pay all transfer taxes, sales and other taxes and charges, if any, which may become payable in connection with the transactions contemplated by the Transaction Documents. Section 5.02 Expenses. Whether or not the transactions contemplated by this Master Transaction Agreement are consummated, each of the Parties shall pay the fees and expenses of their respective counsel, accountants and other experts incident to the negotiation and preparation of the Transaction Documents and consummation of the transactions contemplated thereby. Section 5.03 Parties Bound. Except to the extent otherwise expressly provided herein, this Master Transaction Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, representatives, administrators, guardians, successors and assigns; and no other person shall have any right, benefit or obligation hereunder. SECTION 5.04 CHOICE OF LAW. THIS MASTER TRANSACTION AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT WITH RESPECT TO MATTERS OF LAW CONCERNING THE INTERNAL AFFAIRS OF ANY CORPORATE OR PARTNERSHIP ENTITY WHICH IS A PARTY TO OR THE SUBJECT OF THIS MASTER TRANSACTION AGREEMENT, AND AS TO THOSE MATTERS THE LAW OF THE STATE OF INCORPORATION OR ORGANIZATION OF THE RESPECTIVE ENTITY SHALL GOVERN. THE PARTIES AGREE THAT IF A CONTROVERSY OR CLAIM BETWEEN OR AMONG THEM ARISES OUT OF OR IN RELATION TO THIS MASTER TRANSACTION AGREEMENT AND RESULTS IN LITIGATION, THE COURTS OF TRAVIS COUNTY, TEXAS OR THE COURTS OF THE UNITED STATES OF AMERICA LOCATED IN TRAVIS COUNTY, TEXAS SHALL HAVE JURISDICTION TO HEAR AND DECIDE SUCH MATTER, AND THE PARTIES HEREBY SUBMIT TO JURISDICTION TO SUCH COURTS. Section 5.05 Assignment. The Master Transaction Agreement may not be assigned by operation of law or otherwise except that AOR shall have the right to assign this Master Transaction Agreement, at any time, to any direct or indirect wholly owned subsidiary of AOR. No such assignment shall relieve AOR of its obligations hereunder. Section 5.06 Multiple Counterparts. This Master Transaction Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 5.07 Headings. The headings of the several Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Master Transaction Agreement. 10 IN WITNESS WHEREOF, the parties have caused this Master Transaction Agreement to be duly executed as of April 25, 1997. AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation By:___________________________________ Name:_________________________________ Title:________________________________ AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP, a Texas limited partnership By: AOR Management Company of Texas, Inc., its General Partner By:___________________________________ Name:_________________________________ Title:________________________________ ______________________________________ SHANNON D. COX, M.D. ______________________________________ JOHN H. WILBANKS, M.D. ______________________________________ GEORGE R. BROWN, M.D. ______________________________________ BRUCE M. TURNER, M.D. 11 TEXAS RADIATION ONCOLOGY GROUP, LLP, a Texas limited liability partnership By:______________________________________ Name:____________________________________ Title:___________________________________ AUSTIN CANCER CENTER, LIMITED, a Texas limited partnership By: GP Austin Cancer Center, Inc., Its General Partner By:_________________________________ Name:_______________________________ Title:______________________________ AUSTIN CANCER CENTER II, LIMITED, a Texas limited partnership By: GP Austin Cancer Center, Inc., Its General Partner By:_________________________________ Name:_______________________________ Title:______________________________ CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A., a Texas professional association By:______________________________________ Name:____________________________________ Title:___________________________________ 12 CENTRAL TEXAS ONCOLOGY ASSOCIATES, P.A., a Texas professional association By:______________________________________ Name:____________________________________ Title:___________________________________ 13 EX-2.2 3 PURCHASE AGREEMENT EXHIBIT 2.2 CERTAIN INFORMATION IN THIS EXHIBIT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT. IN ACCORDANCE WITH RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, SUCH INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF SUCH OMITTED INFORMATION HAS BEEN INDICATED WITH AN ASTERISK [*]. PURCHASE AGREEMENT BY AND AMONG AMERICAN ONCOLOGY RESOURCES, INC. AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP TEXAS RADIATION ONCOLOGY GROUP, LLP AUSTIN CANCER CENTER, LIMITED AUSTIN CANCER CENTER II, LIMITED CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A. SHANNON D. COX, M.D. JOHN H. WILBANKS, M.D. GEORGE R. BROWN, M.D. AND BRUCE M. TURNER, M.D. TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS............................................ 1 ARTICLE II TERMS OF PARTNERSHIP INTEREST PURCHASE................. 2 Section 2.01 Purchase and Sale...................................... 2 Section 2.02 Consideration.......................................... 2 ARTICLE III TERMS OF ASSET PURCHASE................................ 3 Section 3.01 Purchase and Sale...................................... 3 Section 3.02 Medical Assets......................................... 5 Section 3.03 Assumption of Obligations and Liabilities.............. 6 Section 3.04 Purchase Price......................................... 7 Section 3.05 Tax Allocation......................................... 7 ARTICLE IV REPRESENTATIONS OF THE PHYSICIAN PARTIES............... 7 Section 4.01 Representations of the Physician Parties............... 7 (a) Organization, Valid Authorization and Good Standing.... 7 (b) Compliance............................................. 8 (c) Approvals.............................................. 8 (d) Financial Statements................................... 8 (e) Undisclosed Liabilities................................ 8 (f) Absence of Changes or Events........................... 9 (g) Litigation............................................. 10 (h) Permits; Compliance with Laws.......................... 10 (i) Insurance.............................................. 11 (j) Tax Matters............................................ 11 (k) Contracts.............................................. 12 (l) Employee Benefit Plans................................. 12 (m) Environmental Protection............................... 14 (n) Labor Matters.......................................... 14 (o) Employees.............................................. 15 (p) Title to Nonmedical Assets............................. 15 (q) Value of Assets........................................ 15 (r) Inventory.............................................. 15 (s) ....................................................... 15 (t) Tangible Personal Property............................. 15 (u) Leases................................................. 15 (v) Contract Rights........................................ 16 (w) Prepaid Items.......................................... 16 (x) Accounts Payable....................................... 16 (y) Completeness and Conditions of Assets.................. 16
(i) (z) Brokers................................................ 16 (aa) Disclosure............................................. 17 Section 4.02 Representations of the Physicians...................... 17 (a) Valid Authorization.................................... 17 (b) Compliance............................................. 17 (c) Approvals.............................................. 17 (d) Litigation............................................. 18 (e) Permits................................................ 18 (f) Staff Privileges....................................... 18 (g) Organization of New P.................................. 18 (h) Title to Partnership Interests......................... 19 (i) Management Services Agreement.......................... 19 (j) Undisclosed Liabilities................................ 19 (k) Intentions............................................. 19 (l) Disclosure............................................. 19 ARTICLE V REPRESENTATIONS OF THE AOR PARTIES..................... 20 Section 5.01 Representations of the AOR Parties..................... 20 (a) Organization, Valid Authorization and Good Standing.... 20 (b) Compliance............................................. 20 (c) Approvals.............................................. 20 (d) Capitalization......................................... 21 (e) Financial Statements................................... 21 (f) Litigation............................................. 21 (g) Registration Rights.................................... 21 (h) Brokers................................................ 21 (i) Disclosure............................................. 22 ARTICLE VI ADDITIONAL AGREEMENTS.................................. 22 Section 6.01 Investment Representations and Covenants of Physicians. 22 Section 6.02 No Corporate Practice.................................. 24 Section 6.03 Current Public Information............................. 24 Section 6.04 Rule 144 Covenant...................................... 24 Section 6.05 Consents of Accountants................................ 25 Section 6.06 Access to Business Records............................. 25 ARTICLE VII NON-COMPETITION AND CONFIDENTIALITY COVENANTS.......... 25 Section 7.01 Physician Non-Competition Covenant..................... 25 Section 7.02 Physician Confidentiality Covenant..................... 27 ARTICLE VIII CLOSING................................................ 28 Section 8.01 Documents to be Delivered by........................... 28 Section 8.02 Documents to be Delivered by AOR Parties............... 29
(ii) ARTICLE IX INDEMNIFICATION........................................ 29 Section 9.01 Indemnification by the Physician Parties............... 29 Section 9.02 Indemnification by the AOR Parties..................... 31 Section 9.03 Notice................................................. 31 Section 9.04 Defense of Third-Party Claims.......................... 32 Section 9.05 Payment of Losses...................................... 33 Section 9.06 Limitations............................................ 34 Section 9.07 EXTENT OF INDEMNIFICATION.............................. 34 ARTICLE X PIGGYBACK REGISTRATION RIGHTS.......................... 35 Section 10.01 Registration Rights.................................... 35 Section 10.02 Covenants of AOR....................................... 36 Section 10.03 Covenants of the Physicians............................ 37 Section 10.04 Indemnification of Physicians.......................... 38 Section 10.05 Indemnification of AOR................................. 38 Section 10.06 Defense of Claim....................................... 39 Section 10.07 Transfer of Registration Rights........................ 40 ARTICLE XI ARBITRATION............................................ 40 Section 11.01 Scope.................................................. 40 Section 11.02 Arbitrators............................................ 40 Section 11.03 Applicable Rules....................................... 41 ARTICLE XII MISCELLANEOUS.......................................... 41 Section 12.01 Taxes.................................................. 42 Section 12.02 Remedies Not Exclusive................................. 42 Section 12.03 Parties Bound.......................................... 42 Section 12.04 Notices................................................ 42 Section 12.05 Choice of Law.......................................... 43 Section 12.06 Entire Agreement; Amendments and Waivers............... 43 Section 12.07 Confidentiality Agreements............................. 44 Section 12.08 Reformation Clause..................................... 44 Section 12.09 Assignment............................................. 44 Section 12.10 Attorneys' Fees........................................ 44 Section 12.11 Further Assurances..................................... 44 Section 12.12 Announcements and Press Releases....................... 45 Section 12.13 Antidilution........................................... 45 Section 12.14 No Tax Representations................................. 45 Section 12.15 No Rights as Stockholder............................... 46 Section 12.17 Headings............................................... 46 Section 12.18 Severability........................................... 46
(iii) SCHEDULES: Disclosure Schedule Investment Representations Schedule EXHIBITS: Exhibit A TROG General Bill of Sale, Conveyance, Transfer and Assignment and Agreement Regarding Assumption of Liabilities Exhibit B ACC General Bill of Sale, Conveyance, Transfer and Assignment and Agreement Regarding Assumption of Liabilities Exhibit C ACC II General Bill of Sale, Conveyance, Transfer and Assignment and Agreement Regarding Assumption of Liabilities (iv) PURCHASE AGREEMENT This Purchase Agreement ("Purchase Agreement"), dated and effective as of April 25, 1997, is by and among AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation ("AOR"); AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP, a Texas limited partnership ("AOR Management"); TEXAS RADIATION ONCOLOGY GROUP, LLP, a Texas limited liability partnership ("TROG"); AUSTIN CANCER CENTER, LIMITED, a Texas limited partnership ("ACC"); AUSTIN CANCER CENTER II, LIMITED, a Texas limited partnership ("ACC II"); CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A., a Texas professional association ("CTROP"); and SHANNON D. COX, M.D., JOHN H. WILBANKS, M.D., GEORGE R. BROWN, M.D. and BRUCE M. TURNER, M.D. (collectively, the "Physicians" and individually, a "Physician") (AOR, AOR Management, TROG, ACC, ACC II, CTROP and the Physicians are individually referred to herein as a "Party" and collectively referred to herein as "Parties"). RECITALS A. In connection with the transactions contemplated by the Master Transaction Agreement, dated and effective as of April 25, 1997, among the Parties and Central Texas Oncology Associates, P.A. (the "Master Transaction Agreement"), the Physicians desire to sell all of their partnership interests in Radiation Oncology Management Partnership, a Texas general partnership ("New P"), and AOR desires to purchase such partnership interests in New P. B. In addition, in connection with the transactions contemplated by the Master Transaction Agreement, each of TROG, ACC and ACC II desires to sell and transfer all of its nonmedical assets, and AOR Management desires to purchase and acquire such nonmedical assets and desires to assume certain liabilities. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows: ARTICLE I DEFINITIONS Any capitalized term not defined herein shall have the meaning ascribed to such term in the Master Transaction Agreement. ARTICLE II TERMS OF PARTNERSHIP INTEREST PURCHASE Section 2.01 Purchase and Sale. Subject to the terms and conditions set forth herein and in the Master Transaction Agreement, and in reliance upon the representations, warranties and covenants set forth herein, at the Closing, each Physician agrees to sell and hereby sells to AOR, and AOR agrees to purchase and hereby purchases from each such Physician, the partnership interest of New P set forth after such Physician's name on the Disclosure Schedule. Each Physician's partnership interest of New P is hereinafter referred to as "Partnership Interest," and all such partnership interests of New P are hereinafter referred to as "Partnership Interests." Section 2.02 Consideration for Such Transfer. In consideration for the aforesaid transfer of the Partnership Interests, AOR shall deliver the following consideration to the Physicians in the amounts and on the dates set forth below: (a) At the Closing, AOR shall deliver to each Physician cash in the amount set forth opposite such Physician's name: Physician Cash Amount --------- ----------- Shannon D. Cox, M.D. $1,273,194 John H. Wilbanks, M.D. 1,013,016 George R. Brown, M.D. 879,743 Bruce M. Turner, M.D. 812,807 ---------- $3,978,760 ========== Payment of such cash amounts shall be made by AOR by wire transfer at Closing in immediately available funds to bank accounts designated by the Physicians. (b) At the Closing, AOR shall deliver to each Physician a Note in the original principal amount set forth opposite such Physician's name: Principal Amount Physician of Note --------- ---------------- Shannon D. Cox, M.D. $ 858,085 John H. Wilbanks, M.D. 676,266 George R. Brown, M.D. 586,800 Bruce M. Turner, M.D. 536,355 ---------- $2,657,506 ========== ; provided, however, that, to secure for CTOA the benefits of each Employment Agreement and as an additional inducement for the performance by each Physician of 2 such Physician's obligations thereunder, in the event the Employment Agreement between CTOA and any Physician is terminated prior to the fifth anniversary of the Closing Date by (i) CTOA for cause and without such Physician's payment of the appropriate amount of liquidated damages, as specified in such Employment Agreement, or (ii) such Physician without cause and without such Physician's payment of the appropriate amount of liquidated damages, as specified in such Employment Agreement, then such Physician shall execute an appropriate assignment of the Note held by the Physician pursuant to which all of the Physician's rights under such Note are assigned to CTOA; provided, however, that in no event shall the total amount paid to CTOA under such Physician's Note and under Section 4.2 or Section 4.3 of such Physician's Employment Agreement exceed the total amount of liquidated damages to which CTOA is entitled under such Physician's Employment Agreement. If such Physician fails to execute the assignment of Note provided for in this Section 2.02(b), such Note shall be deemed assigned to CTOA, and AOR shall be and hereby is authorized to make all payments under the Note subsequent to such assignment, whether express or deemed, directly to CTOA. (c) On the third, fourth and fifth anniversaries of the Closing Date, AOR shall deliver to each Physician the number of shares of AOR Common Stock set forth opposite such Physician's name: Number of Shares ---------------- Shannon D. Cox, M.D. John H. Wilbanks, M.D. [*] George R. Brown, M.D. Bruce M. Turner, M.D. ARTICLE III TERMS OF ASSET PURCHASE Section 3.01 Purchase and Sale. Subject to the terms and conditions herein set forth, and in reliance upon the representations and warranties set forth herein, each of TROG, ACC and ACC II agrees to sell, convey, assign, transfer and deliver to AOR Management, and AOR Management agrees to purchase and acquire, the assets consisting of all the assets (other than the Medical Assets specified in Section 3.02 hereof and any accounts receivable) owned by such Party as a going concern as of the Closing Date, of every kind, character and description, whether tangible, real, personal, or mixed, and wheresoever located, whether carried on the books of such Party or not carried on the books of such Party due to having been expensed, fully depreciated, or otherwise (such Party's assets are referred to herein as the "Nonmedical Assets"), including without limitation the following (except to the extent that any of the following are specifically enumerated as Medical Assets in Section 3.02 hereof): - -------------- * This information has been omitted from this exhibit and is subject to a request for confidential treatment. In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended, such information has been filed separately with the Securities and Exchange Commission. 3 (a) All of the inventory owned by such Party ("Inventory"); (b) [Intentionally left blank] (c) All of such Party's rights in, to and under all leases of supplies, instruments, equipment, furniture, machinery and other items of tangible personal property ("Personal Property Leases"), including without limitation the Personal Property Leases described on the Disclosure Schedule; (d) All of such Party's rights in, to and under all contracts, agreements, insurance policies, purchase orders and commitments (the "Transferred Contracts"), including without limitation the Transferred Contracts described on the Disclosure Schedule; (e) All tangible personal property (including supplies, instruments, equipment, furniture and machinery) owned by such Party ("Tangible Personal Property"), including without limitation the Tangible Personal Property described on the Disclosure Schedule; (f) All books and records of such Party, including without limitation, all credit records, payroll records, computer records, computer programs, contracts, agreements, operating manuals, schedules of assets, correspondence, books of account, files, papers, books and all other public and confidential business records (together the "Business Records"), whether such Business Records are in hard copy form or are electronically or magnetically stored; (g) All franchises, licenses, permits, certificates, approvals and other governmental authorizations necessary to own and operate any of the other Nonmedical Assets, a complete and correct list of which is set forth on the Disclosure Schedule (the "Licenses"); (h) All (i) United States and foreign patents, patent applications, trademarks, trademark applications and registrations, service marks, service mark applications and registrations, copyrights, copyright applications and registrations and trade names of such Party; (ii) proprietary data and technical, manufacturing know-how and information (and all materials embodying such information) of such Party; (iii) developments, discoveries, inventions, ideas and trade secrets of such Party; and (iv) rights to sue for past infringement (all of the foregoing, collectively, "Intellectual Property"); (i) All of such Party's right, title and interest in, to and under all telephone numbers used in connection with the Practice, including all extensions thereto; 4 (j) All rights in, to and under all representations, warranties, covenants and guaranties made or provided by third parties to or for the benefit of such Party with respect to any of the other Nonmedical Assets; (k) All of such Party's prepaid expenses, prepaid insurance, deposits and other similar items ("Prepaid Items"); and If and to the extent the assignment of any personal property lease, contract, agreement, purchase order, work order, commitment, license, permit, certificate or approval listed on the Disclosure Schedule shall require the consent of another party thereto, then (i) such personal property lease, contract, agreement, purchase order, work order, commitment, license, permit, certificate or approval shall constitute a Personal Property Lease, Transferred Contract or License, as the case may be, only upon and subject to receipt of such consent; (ii) such personal property lease, contract, agreement, purchase order, work order, commitment, license, permit, certificate or approval shall not be a Personal Property Lease, Transferred Contract or License, as the case may be, if and for so long as the attempted assignment would constitute a breach thereof; and (iii) such Party shall cooperate fully with AOR Management in seeking such consent or reasonable arrangement designed to provide to AOR Management the benefits, claim or rights arising thereunder. Section 3.02 Medical Assets. None of TROG, ACC or ACC II shall sell, convey, assign, transfer or deliver to AOR Management, and AOR Management shall not be obligated to acquire (or make any payments or otherwise discharge any liability or obligation of TROG with respect to), the following assets of such Party (the "Medical Assets"): (a) Any of such Party's right, title and interest in, to or under, or possession of, all drugs, pharmaceuticals, products, substances, items or devices whose purchase, possession, maintenance, administration, prescription or security requires the authorization or order of a licensed health care provider or requires a permit, registration, certification or any other governmental authorization held by a licensed health care provider as specified under any federal or state law, or both; (b) Any of such Party's right, title and interest in and to records of identity, diagnosis, evaluation or treatment of patients; (c) Any of such Party's right, title and interest in, to and under insurance policies covering or relating to medical malpractice; (d) The name of such Party; (e) Any franchises, licenses, permits, certificates, approvals and other governmental authorizations necessary or desirable to own and operate any of the other Medical Assets, a complete and correct list of which is set forth on the Disclosure Schedule; 5 (f) The leasehold estates created by, and all rights conferred on such Party under or by virtue of, all real property lease agreements (such real property lease agreements are hereinafter referred to as "Real Property Leases" and the parcels of real property in which such Party has a leasehold interest and that are subject to the Real Property Leases are hereinafter referred to as "Leased Property"), including without limitation estates created by, and rights conferred under, the Real Property Leases described on the Disclosure Schedule, and any and all estates, rights, titles and interests in, to and under all warehouses, storage facilities, buildings, works, structures, fixtures, landings, constructions in progress, improvements, betterments, installations, and additions constructed or located on or attached or affixed to the Leased Property; and (g) Any of such Party's right, title or interest in, to or under any contract or agreement that requires performance by a licensed health care provider under federal or applicable state law ("Medical Contracts"). Section 3.03 Assumption of Obligations and Liabilities. At the Closing, AOR Management shall assume and agree to pay or perform, promptly as they become due, only those obligations and liabilities of TROG, ACC and ACC II expressly set forth below in this Section 3.03 (such Party's obligations and liabilities are referred to herein as the "Assumed Obligations"). Except for the Assumed Obligations, neither AOR nor AOR Management shall assume or be deemed to have assumed and shall not be responsible for any other obligation or liability of such Party, direct or indirect, known or unknown, choate or inchoate, absolute or contingent, including without limitation (i) any and all obligations regarding any foreign, Federal, state or local income, sales, use, franchise or other tax liabilities, (ii) any and all obligations or liabilities relating to any of fees or expenses of the Physician Parties' counsel, accountants or other experts incident to the negotiation and preparation of the Transaction Documents and consummation of the transactions contemplated thereby, and (iii) any and all liabilities relating to or arising from the provision of professional medical services (or failure to provide professional medical services) prior to the Closing Date. The Assumed Obligations are: (a) The accounts payable and other obligations of such Party specifically set forth on the Disclosure Schedule and incurred in connection with the operation of the Practice in the ordinary course of business ("Accounts Payable"); and (b) The obligations or liabilities of such Party that relate to periods, events or circumstances occurring on or after the Effective Date, and not to events or circumstances occurring prior to the Effective Date in, to and under the Personal Property Leases listed on the Disclosure Schedule and the Transferred Contracts listed on the Disclosure Schedule; provided, however, that (i) each of such Personal Property Leases listed on the Disclosure Schedule and such Transferred Contracts listed on the Disclosure Schedule shall be on the same terms and conditions as are in effect prior to and on the Effective Date, and (ii) AOR Management shall assume no obligation or liability in, to or under any such lease, agreement or order that is not included on the Disclosure Schedule. 6 Section 3.04 Purchase Price. AOR Management agrees that, subject to the terms and conditions of this Purchase Agreement, and in full consideration for the aforesaid sale, transfer, conveyance, assignment and delivery of the Nonmedical Assets to AOR Management, and the assumption of the Assumed Obligations by AOR Management, AOR Management shall deliver to (i) TROG cash in an amount equal to $40,223; (ii) ACC cash in the amount of $294,363; and (iii) ACC II cash in the amount of $1,000 (collectively, the "Purchase Price"). Payment of such cash amount shall be made by AOR by wire transfer at Closing in immediately available funds to a bank account designated by each such Party. Section 3.05 Tax Allocation. The Purchase Price plus the Assumed Obligations constitute, for federal income tax purposes, the total consideration paid by AOR Management for all of the Nonmedical Assets (the "Tax Consideration"). The Parties estimate the Tax Consideration to be allocated among all of the Nonmedical Assets in the manner set forth on the Disclosure Schedule. The allocation set forth on the Disclosure Schedule is estimated to be based on the fair market value of the assets acquired, and the allocation is intended to be in compliance with Section 1060 of the Code. AOR Management and TROG, ACC and ACC II, as appropriate, agree to finalize the allocation within 150 days of the Closing Date and to use the final allocations in all tax returns or statements filed with any taxing authority. AOR Management and TROG, ACC and ACC II, as appropriate, agree to file timely the applicable Forms 8594 with their respective federal income tax returns for the taxable year in which the Closing Date occurs. ARTICLE IV REPRESENTATIONS OF THE PHYSICIAN PARTIES Section 4.01 Representations of the Physician Parties. The Physician Parties jointly and severally represent and warrant to the AOR Parties that: (a) Organization, Valid Authorization and Good Standing. Each of TROG, ACC, ACC II and CTROP is duly organized, validly existing and in good standing under the laws of the State of Texas. TROG, ACC and ACC II have the power and authority to own all of their properties and assets and to conduct the Practice prior to the Closing Date, and CTROP has the power and authority to own all of its properties and assets and to conduct the Practice after the Closing Date. Each of TROG, ACC, ACC II and CTROP has the power and authority to enter into the Transaction Documents to which it is a party and to carry out its obligations thereunder. The execution and delivery of the Transaction Documents to which any of TROG, ACC, ACC II or CTROP is a party and the consummation of the transactions contemplated thereby have been duly and validly authorized by such Party, and no other corporate or other proceedings on the part of such Party are necessary to authorize the Transaction Documents and the transactions contemplated thereby. This Purchase Agreement has been duly and validly executed and delivered by each of TROG, ACC, ACC II and CTROP and constitutes the valid and binding agreement of each such Party enforceable against it in accordance with its terms. 7 Each Transaction Document executed and delivered by any of TROG, ACC, ACC II or CTROP will upon such execution and delivery constitute the valid and binding agreement of such Party enforceable against it in accordance with its terms. (b) Compliance. Except as disclosed on the Disclosure Schedule, the execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby by each of TROG, ACC, ACC II and CTROP will not (i) violate any provision of its organizational documents, (ii) violate any material provision of or result in the breach of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any material obligation under, any mortgage, lien, lease, contract, license, instrument or any other agreement to which such Party is a party, (iii) result in the creation or imposition of any material lien, charge, pledge, security interest or other material encumbrance upon any property of such Party or (iv) to the best of the Physician Parties' knowledge, violate or conflict with any order, award, judgement or decree or other material restriction or any law, ordinance or regulation to which such Party or its property is subject. (c) Approvals. To the best of the Physician Parties' knowledge, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other person is required in connection with the execution and delivery of the Transaction Documents by each of TROG, ACC, ACC II and CTROP or the consummation by such Party of the transactions contemplated thereby, except for those consents or approvals set forth in the Disclosure Schedule. (d) Financial Statements. TROG, together with ACC and ACC II, has furnished to the AOR Parties TROG's audited financial statements for the year ended December 31, 1996, and for the -month period ended , 1997, consisting of a balance sheet, the related statement of income and changes in stockholders' equity and cash flows, together with the report thereon of Price Waterhouse LLP, independent accountants (the "TROG Audited Financial Statements"). Except as disclosed on the Disclosure Schedule, the TROG Audited Financial Statements (i) have been prepared in accordance with GAAP and (ii) present fairly, in all material respects, the financial position of TROG at such dates and the results of its operations for the periods ended on such dates. Except as set forth in the Disclosure Schedule, the TROG Audited Financial Statements reflect all of the liabilities and obligations that are required to be reflected or disclosed therein in accordance with GAAP. For purposes of this Purchase Agreement, the latest balance sheet included in the TROG Audited Financial Statements is referred to as the "TROG Balance Sheet" and the date thereof is referred to as the "TROG Balance Sheet Date." (e) Undisclosed Liabilities. None of TROG, ACC or ACC II has any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether due or to become due, and whether choate or inchoate) individually or in the aggregate 8 in excess of $10,000, and to the best of the Physician Parties' knowledge, there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against such Party giving rise to any liability, except as set forth on the TROG Balance Sheet or on the Disclosure Schedule. (f) Absence of Changes or Events. Except as set forth on the Disclosure Schedule, since the TROG Balance Sheet Date, each of TROG, ACC and ACC II has conducted the Practice only in the ordinary course of business, and none of TROG, ACC or ACC II has: (i) Incurred any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, whether individually or in the aggregate, that has had or might have a material adverse effect on such Party or the Practice; (ii) Pledged or subjected to any material lien, charge, security interest or any other encumbrance or restriction on any of its assets; (iii) Sold, transferred, leased to others or otherwise disposed of any of its assets material to the operation of the Practice, except in the ordinary course of the business of such Party; (iv) Canceled or compromised any material debt or claim, or waived or released any right of substantial value; (v) Received any notice of termination of any contract, lease or other agreement, or suffered any damage, destruction or loss that, individually or in the aggregate, has had or might have a material adverse effect on such Party or the Practice; (vi) Instituted, settled or agreed to settle any litigation, action, proceeding or arbitration; (vii) Failed to replenish its inventory or supplies in a normal and customary manner or made any material purchase commitment other than in the ordinary course of business of such Party; (viii) Failed to pay any accounts or notes payable or any other obligations on a timely basis consistent with the past practices of such Party; (ix) Entered into any material transaction, contract or commitment other than in the ordinary course of the business of such Party; 9 (x) Suffered any event or events, whether individually or in the aggregate, that has had or could be reasonably expected to have a material adverse effect on the financial condition, results of operations, properties, assets, liabilities, business, operations or prospects of such Party, CTROP or the Practice; (xi) Made any material change in the rate of compensation, commission, bonus or other remuneration payable, or paid or agreed to pay any material bonus, extra compensation, pension, severance or vacation pay, to any partner or employee; (xii) Issued any equity interests, declared or paid any distribution on equity interests (not including bonuses) or entered into any agreement or understanding to do or engage in any of the foregoing actions; (xiii) Engaged in any activities or practices other than the Practice; or (xiv) Entered into any agreement or made any commitment to take any of the actions described in Subsections (i) through (xiii) inclusive of this Section 4.01(f). (g) Litigation. Except as disclosed on the Disclosure Schedule, there are no material claims, actions, suits, proceedings (arbitration or otherwise) or investigations pending or, to the best of the Physician Parties' knowledge, threatened against any of TROG, ACC, ACC II or the Practice at law or in equity in any court or before or by any Governmental Authority, and, to the best of the Physician Parties' knowledge, there are no, and have not been any, facts, conditions or incidents that may result in any such actions, suits, proceedings (arbitration or otherwise) or investigations. To the best of the Physician Parties' knowledge, none of TROG, ACC, ACC II or the Practice is in default in respect of any judgment, order, writ, injunction or decree of any court or other Governmental Authority. (h) Permits; Compliance with Laws. To the best of the Physician Parties' knowledge, each of TROG, ACC, ACC II and CTROP has all permits, licenses, orders and approvals of all Governmental Authorities material to the conduct of the Practice, a true and correct list of which is set forth on the Disclosure Schedule. To the best of the Physician Parties' knowledge, all such permits, licenses, orders and approvals are in full force and effect, and no suspension or cancellation of any of them is pending or threatened. To the best of the Physician Parties' knowledge, none of such permits, licenses, orders or approvals, and no application for any of such permits, licenses, orders or approvals, will be adversely affected by the consummation of the transactions contemplated by this Purchase Agreement or any other Transaction Document. Except as set forth on the Disclosure Schedule, no consent or approval is required for, and no other impediment or restriction exists that will prohibit or limit, the transfer of any of 10 such permits, licenses, orders and approvals (and any applications therefor) in accordance with the terms of the Transaction Documents. To the best of the Physician Parties' knowledge, each of TROG, ACC and ACC II has complied in all material respects with the rules and regulations of all Governmental Authorities having authority over it, including without limitation, agencies concerned with occupational safety, environmental protection, employment practices, and Medicare and Medicaid requirements applicable to billing procedures (except denials of claims in the ordinary course of business), and none of TROG, ACC or ACC II has received notice of violation of any such rules or regulations, whether corrected or not, within the last three years. (i) Insurance. The Physician Parties have obtained and maintained in full force and effect insurance to protect them and the Practice against the types of liabilities, including medical malpractice, customarily insured against by persons in connection with the operation of similar practices, and all premiums due on such policies have been paid. Such insureds have complied in all material respects with the provisions of all such policies. Except as set forth on the Disclosure Schedule, no consent or approval is required for, and no other impediment or restriction exists that will prohibit or limit, the transfer of any such insurance policies included within the Nonmedical Assets in accordance with the terms of this Purchase Agreement. The Physician Parties have made available to the AOR Parties complete and correct copies of all such policies, together with all riders and amendments thereto. The Physician Parties have set forth on the Disclosure Schedule a complete and correct list of all such insurance policies and a list of malpractice insurance policies previously maintained within the last ten (10) years by them. The Physician Parties have also set forth on such Disclosure Schedule a list of all malpractice claims and similar types of claims, actions or proceedings asserted against any of the Physician Parties at any time within the last ten (10) years. (j) Tax Matters. To the best of the Physician Parties' knowledge, all federal, state, local and foreign tax returns required to be filed by each Physician Party prior to the Closing Date have been filed on a timely basis with the appropriate Governmental Authorities in all jurisdictions in which such returns are required to be filed and all such returns are true and correct. To the best of the Physician Parties' knowledge, all federal, state, local and foreign income, franchise, sales, use, property, and all other taxes, fees, assessments or other governmental changes (including withholding taxes), and all interest and penalties thereon (all of the foregoing, collectively "Taxes") due from, or properly accruable by, each Physician Party with respect to taxable periods ending on or prior to, and the portion of any interim period through, the date hereof have been fully and timely paid or, in the case of Taxes for which payment is not yet required, properly and fully accrued for on the TROG Audited Financial Statements. The AOR Parties will not after the Closing owe to any person or entity or be liable for, directly or indirectly, any taxes imposed upon any Physician Party. No Physician Party is currently the subject of any audit, examination or any similar investigation by any Governmental Authority. The Disclosure Schedule sets forth all audits, examinations or similar investigations of any Physician Party by any 11 Governmental Authority since January 1, 1992. There are no liens for taxes (other than for current taxes not yet due and payable) upon any of the Nonmedical Assets. To the best of the Physician Parties' knowledge, none of the Nonmedical Assets is property that is required to be treated as being owned by any other person pursuant to the so-called "safe harbor lease" provisions of former Section 168(f)(8) of the Code. To the best of the Physician Parties' knowledge, none of the Nonmedical Assets is "tax- exempt use property" within the meaning of Section 168(h) of the Code. The consummation of the transactions contemplated by this Purchase Agreement will not be subject to any sales or other transfer tax of any state or local taxing authority. (k) Contracts. Set forth on the Disclosure Schedule is a complete and correct list of all material agreements, contracts and commitments, written or oral, to which any of TROG, ACC or ACC II is a party or by which it or any of its properties or the Practice is bound, including without limitation: (i) mortgages, indentures, notes, letters or credit, security agreements and other agreements and instruments relating to the borrowing of money by or extension of credit to or by such Party; (ii) employment and consulting agreements, employee benefit, profit-sharing and retirement plans and all collective bargaining agreements; (iii) joint venture or partnership agreements; (iv) licenses of software or any patent, trademark or other intellectual property rights; (v) agreements or commitments for capital expenditures; (vi) brokerage or finder's agreements; (vii) agreements regarding clinical research; and (viii) agreements with payors, leases for real or personal property or contracts to provide medical or health-care services. The Physician Parties have made available to the AOR Parties complete and correct copies of all written agreements, contracts and commitments (together with all amendments thereto) and accurate descriptions of all oral agreements set forth on the list on the Disclosure Schedule. All such agreements, contracts and commitments are in full force and effect and, to the best of the Physician Parties' knowledge, all parties thereto have performed all material obligations required to be performed by them to date, are not in default in any material respect thereunder, and have not violated any representation or warranty, explicit or implied, contained therein. No claim or default by any party has been made or is now pending under any such agreement, contract or commitment, and, to the best of the Physician Parties' knowledge, no event has occurred and is continuing that with notice or the passing of time or both would constitute a default thereunder or would excuse performance by any party thereto. No such agreement, contract or commitment materially adversely affects the business, condition, properties, assets, earnings or operations of the Practice. Except as set forth in the Disclosure Schedule, no consents or approvals are required under the terms of any agreement listed on the Disclosure Schedule in connection with any of the transactions contemplated by the Transaction Documents including, without limitation, the transfer of any such agreement pursuant to this Purchase Agreement. (l) Employee Benefit Plans. Except as set forth on the Disclosure Schedule, none of TROG, ACC, ACC II or any other entity, whether or not incorporated, which is deemed to be under common control (as defined in Section 414 of the Code or 4001(b) 12 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) with such Party ("Commonly Controlled Entity") maintains or contributes to any employee pension benefit plan (as defined in Section 3(2) of ERISA) that is a defined contribution plan described in Section 3(34) of ERISA or Section 414(i) of the Code, or that is a defined benefit plan described in Section 3(35) of ERISA or Section 414(j) of the Code, and that gives, or will give, rise to any liability of such Party for (i) any premium payments due under Section 4007 of ERISA with respect to any such defined benefit plan or (ii) any unpaid minimum funding contributions that would result in the imposition of a lien on any assets of such Party pursuant to Section 412(c)(11) of the Code or Section 302(c)(11) of ERISA. to the best of the Physician Parties' knowledge, none of TROG, ACC, ACC II or any Commonly Controlled Entity sponsors or sponsored, or maintains or maintained, any defined benefit plan (described in the immediately preceding sentence) that has been, or will be, terminated in a manner that would result in any liability of such Party to the Pension Benefit Guaranty Corporation or that would result in the imposition of a lien on any assets of such Party pursuant to Section 4068 of ERISA. At no time during the five (5) consecutive year period immediately preceding the first day of the year in which the Closing Date occurs has any of TROG, ACC, ACC II or any Commonly Controlled Entity participated in or contributed to any multiemployer plan defined in Section 4001(a)(3) of ERISA or Section 414(f) of the Code, nor during such period has any of TROG, ACC, ACC II or any Commonly Controlled Entity had an obligation to participate in or contribute to any such multiemployer plan. Except as set forth on the Disclosure Schedule, none of TROG, ACC or ACC II is obligated under any agreement or other arrangement pursuant to which compensation or benefits will become payable as a result of the consummation of the transactions contemplated in this Purchase Agreement. To the best of the Physician Parties' knowledge, none of TROG, ACC, ACC II or any of its respective directors, officers, employees or agents has, with respect to any employee benefit plan (as defined in Section 3(3) of ERISA) that is or has been established by or contributed to, or with respect to which costs or liabilities are accrued by TROG, ACC or ACC II, engaged in any conduct that would result in any material taxes or penalties on prohibited transactions under Section 4975 of the Code or under Section 502(i) or (1) of ERISA or in breach of fiduciary duty liability under Section 409 of ERISA which, in the aggregate, could be material to the business, financial condition or results of operation of TROG, ACC or ACC II, taken as a whole, and no actions, investigations, suits or claims with respect to the fiduciaries, administrators or assets of any such employee benefit plan (other than routine claims for benefits) is pending or threatened, which in the aggregate could reasonably be expected to give rise to material liability of TROG, ACC or ACC II or that could otherwise be material to the business, financial condition or results of operations of TROG, ACC or ACC II, taken as a whole. None of TROG's, ACC's or ACC II's welfare benefit plans (as defined in Section 3(1) of ERISA) provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of TROG, ACC or ACC II other than "continuation coverage" required under the Controlled Omnibus Budget Reconciliation Act of 1985. Any and all plans, policies, programs or arrangements of TROG, ACC, ACC II or any Commonly Controlled Entity which are subject to 13 Section 4980B of the Code have been and are in compliance with the requirements of Section 4980B of the Code and Part 6 of Title I of ERISA. The Physician Parties will remain fully liable with respect to all plans, programs, policies or other arrangements, including but not limited to any pension, profit-sharing, thrift or other retirement plan; deferred compensation; or any other pension benefit plan of any kind; stock ownership, stock purchase, performance share, bonus or other incentive plan; severance plan; disability, medical, dental, vision or other health plan; life insurance or death benefit plan; vacation, sick leave, holiday or other paid leave plan; cafeteria plan, medical flexible spending account reimbursement plan; dependent care plan; or any other welfare benefit plan of any kind; or any other benefit plan, policy, program or arrangement whether or not any such plan, policy, program or other arrangement is, or is intended to be, qualified under Section 401(a) of the Code, and whether or not any such plan, policy, program or arrangement is subject to the provisions of ERISA, and the AOR Parties will not be required to assume by law or under any form of any such plans, policies, programs or arrangements any of the liabilities for or under such plans, policies, programs or arrangements. (m) Environmental Protection. To the best of the Physician Parties' knowledge, TROG, ACC, ACC II and CTROP have each obtained all permits, licenses and other authorizations that are required under any federal, state and local laws and the regulations promulgated thereunder relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of hazardous substances, materials or wastes (collectively, "Hazardous Wastes"), into the environment (including, without limitation, ambient air, surface water, ground water or land) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Wastes (collectively, "Environmental Laws"). To the best of the Physician Parties' knowledge, TROG, ACC, ACC II, CTROP and the Practice are each in material compliance with all terms and conditions of such required permits, licenses and authorizations, and are also in compliance with all applicable Environmental Laws. Except as set forth on the Disclosure Schedule, no consent or approval is required for, and no other impediment or restriction exists that will prohibit or limit, the transfer of such permits, licenses and authorizations in accordance with the terms of this Purchase Agreement. There are no pending or, to the best of the Physician Parties' knowledge, threatened, investigations, actions or proceedings of whatsoever nature involving TROG, ACC, ACC II or the Practice arising under any Environmental Laws. (n) Labor Matters. Except as described on the Disclosure Schedule, none of the employees of TROG, ACC or ACC II is represented by any union or other collective bargaining representative, and there are no contracts for the employment of any officer or employee of TROG, ACC or ACC II in effect. The Physician Parties are not aware of any organizational efforts by any union directed towards any of the employees of TROG, ACC or ACC II. Except as listed on the Disclosure Schedule, there has not been, nor to the knowledge of TROG, ACC or ACC II is there threatened or 14 contemplated, any strike, slowdown, picketing or work stoppage by any such employees, any lockout of any of such employees or any labor trouble or other occurrence, event or condition of a similar character materially affecting, individually or in the aggregate, or which may materially affect, individually or in the aggregate, the operations, assets, properties or prospects of TROG, ACC, ACC II or the Practice. (o) Employees. The Disclosure Schedule sets forth a complete list of the names and positions held of all employees of TROG, ACC and ACC II and the current annual rate of compensation (including bonuses) paid to each such employee. (p) Title to Nonmedical Assets. Except as set forth on the Disclosure Schedule, each of TROG, ACC and ACC II is the owner and has, as of the date hereof, good and marketable title to such Party's Nonmedical Assets, free and clear of any and all liens, charges, pledges, claims, security interests, exceptions or other encumbrances of any kind. (q) Value of Assets. As of the date hereof, the sum of the book values of all of the Nonmedical Assets less all of the Assumed Obligations is not less than $335,586. (r) Inventory. Except as set forth on the Disclosure Schedule, to the best of the Physician Parties' knowledge: (i) the Inventory of each of TROG, ACC and ACC II is in its originally manufactured condition, fit for the use for which it is intended, free from any known defect and in a quality and quantity usable in the ordinary course of business; (ii) such Party's Inventory does not contain material amounts of items that are slow- moving, obsolete or of below-standard quality; (iii) the qualities and quantities of such Party's Inventory are reasonable and warranted in the present and anticipated circumstances of the Practice; and (iv) there has been no decrease in the quantities of Inventory since the TROG Balance Sheet Date, other than in the ordinary course of business. (s) [Intentionally left blank] (t) Tangible Personal Property. Except as set forth on the Disclosure Schedule, to the best of the Physician Parties' knowledge, the Tangible Personal Property of each of TROG, ACC and ACC II is in good operating condition, working order and repair (normal wear and tear excepted) and is fully suitable for the uses for which it is employed in the conduct of the Practice. (u) Leases. With respect to each of the Real Property Leases and Personal Property Leases of each of TROG, ACC and ACC II, except as set forth on the Disclosure Schedule: 15 (i) such lease is legal, valid, binding, enforceable and in full force and effect; (ii) such lease will continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing; (iii) no party to such lease is in material breach or default, and no event has occurred that, with notice or lapse of time, would constitute a material breach or default or permit termination, modification or acceleration thereunder; (iv) no party to such lease has repudiated in writing any provision thereof; (v) there are no disputes, oral agreements or forbearance programs in effect as to such lease; and (vi) TROG, ACC or ACC II, as applicable, has performed and satisfied in full each material obligation to be performed by such Party under such lease. (v) Contract Rights. Except as set forth on the Disclosure Schedule, each of the Transferred Contracts of each of TROG, ACC and ACC II is valid and enforceable and is in full force and effect, and there is no material default or existing condition that, with the giving of notice or the passage of time or both, would constitute such a default by such Party or by any parties thereto. Such Party has performed and satisfied in full each material obligation required to be performed by such Party under each Transferred Contract. If services are to be provided to such Party under any of such Transferred Contract, such services have been and are being performed satisfactorily and timely, substantially in accordance with terms of such Transferred Contract. (w) Prepaid Items. Each of the Prepaid Items may be transferred to AOR Management without the necessity of obtaining any consent or approval. (x) Accounts Payable. Each of the Accounts Payable was incurred in the ordinary and usual course of business of the applicable Party may be transferred to AOR Management and is due and payable in the ordinary course of business of such Party. (y) Completeness and Conditions of Assets. All of the Nonmedical Assets, together with all of the Medical Assets, include all the assets and properties used to conduct the Practice as presently conducted. (z) Brokers. All negotiations relating to the Transaction Documents and the transactions contemplated hereby have been carried on without the intervention of any 16 person acting on behalf of the Physician Parties as a group in such manner as to give rise to any valid claim for any broker's or finder's fee or similar compensation. (aa) Disclosure. To the best of the Physician Parties' knowledge, no representation, warranty or statement made by any of the Physician Parties in this Purchase Agreement or any of the exhibits or schedules hereto, or any agreements, certificates, documents or instruments delivered or to be delivered to the AOR Parties in accordance with this Purchase Agreement or the other Transaction Documents, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. The Physician Parties do not know of any fact or condition (other than general economic conditions or legislative or administrative changes in health-care delivery) that materially adversely affects, or in the future may materially adversely affect, the condition, properties, assets, liabilities, business, operations or prospects of the Practice that has not been set forth herein or in the Disclosure Schedule. Section 4.02 Representations of the Physicians. Each of the Physicians severally represents and warrants to the AOR Parties as to such Physician that: (a) Valid Authorization. Such Physician is competent and has full power, capacity and authority to enter into the Transaction Documents to which such Physician is a party and to carry out such Physician's obligations thereunder. This Purchase Agreement has been duly and validly executed and delivered by such Physician and constitutes the valid and binding agreement of such Physician enforceable against such Physician in accordance with its terms. Each Transaction Document executed and delivered at the Closing by such Physician will upon such execution and delivery constitute the valid and binding agreement of such Physician enforceable against such Physician in accordance with its terms. (b) Compliance. Except as set forth on the Disclosure Schedule, the execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby by such Physician will not (i) violate any material provision of or result in the breach of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any material obligation under any mortgage, lien, lease, contract, license, instrument or any other agreement to which such Physician is a party, (ii) result in the creation or imposition of any material lien, charge, pledge, security interest or other encumbrance upon any property of such Physician or (iii) to the best of such Physician's knowledge, violate or conflict with any order, award, judgment or decree or other material restriction or any law, ordinance or regulation to which such Physician or the property of such Physician is subject. (c) Approvals. Except as set forth on the Disclosure Schedule, to the best of such Physician's knowledge, no consent, approval, order or authorization of, or 17 registration, declaration or filing with, any Governmental Authority or other person is required in connection with the execution and delivery of the Transaction Documents by such Physician or the consummation by such Physician of the transactions contemplated thereby. (d) Litigation. Except as disclosed on the Disclosure Schedule, there are no claims, actions, suits, proceedings (arbitration or otherwise) or investigations pending or, to the best of such Physician's knowledge, threatened against such Physician or New P at law or in equity in any court or before or by any Governmental Authority, and, to the best of such Physician's knowledge, there are no, and have not been any, facts, conditions or incidents that may result in any such actions, suits, proceedings (arbitration or otherwise) or investigations. To the best of such Physician's knowledge, neither such Physician nor New P is in default in respect of any judgement, order, writ, injunction or decree of any court or other Governmental Authority. Except as set forth on the Disclosure Schedule, there have been no disciplinary, revocation or suspension proceedings or similar types of claims, actions or proceedings, hearings or investigations against any of the Physicians. (e) Permits. To the best of such Physician's knowledge, such Physician has all permits, licenses, orders and approvals of all Governmental Authorities necessary to perform the services performed by such Physician in connection with the conduct of the Practice. To the best of such Physician's knowledge, all such permits, licenses, orders and approvals are in full force and effect and no suspension or cancellation of any of them is pending or threatened. To the best of such Physician's knowledge, none of such permits, licenses, orders or approvals, and no application for any of such permits, licenses, orders or approvals will be adversely affected by the consummation of the transactions contemplated by the Transaction Documents. Such Physician is a participating physician, as such term is defined by the Medicare program, and such Physician has not been disciplined, sanctioned or excluded from the Medicare program and has not been subject to any plan of correction imposed by any professional review body. (f) Staff Privileges. The Disclosure Schedule lists all hospitals at which such Physician has full staff privileges. Such staff privileges have not been revoked, surrendered, suspended or terminated, and to the best of such Physician's knowledge, there are no, and have not been any, facts, conditions or incidents that may result in any such revocation, surrender, suspension or termination. (g) Organization of New P. To the best of such Physician's knowledge, the New P Partnership Agreement is in full force and effect and has not been amended or repealed. No party to the New P Partnership Agreement is in violation or breach of any of the provisions thereof. The Partnership Interests, together with John M. Barnett, M.D.'s partnership interest, constitute all interests in New P. There are no options, subscription rights or similar rights to purchase any interest in New P. 18 (h) Title to Partnership Interests. Each Physician is the sole owner of his Partnership Interest, free and clear of any lien, charge, security interest, encumbrance or claim whatsoever, with full legal power, right and authority to sell and transfer his Partnership Interest to AOR as provided herein and to enter into and perform his obligations under this Purchase Agreement. Upon the sale and transfer of each Physician's Partnership Interest as provided herein, AOR will acquire good and marketable title to such Physician's Partnership Interest free and clear of any lien, charge, security interest, encumbrance or other claim. Upon the sale and transfer of such Physician's Partnership Interest to AOR as provided herein, such Physician shall have no further interest, beneficial or otherwise, in New P. (i) Management Services Agreement. Except for the Management Services Agreement and except for the amount of cash on hand and in banks as set forth on the Disclosure Schedule, New P has no assets, including without limitation any ownership interest, beneficial or otherwise, in any other entity, and is not a party to any contract, agreement, order, lease or commitment. Except for executing and delivering the Management Services Agreement, since the date of New P's formation, New P has not conducted any business whatsoever. The Management Services Agreement is in full force and effect, and, to the best of such Physician's knowledge, there is no default or existing condition that, with the giving of notice or the passage of time or both, would constitute such a default by any of the parties thereto. To the best of such Physician's knowledge, New P has performed and satisfied in full each obligation required to be performed by it under the Management Services Agreement. (j) Undisclosed Liabilities. Except for obligations relating to or arising from the Management Services Agreement, to the best of such Physician's knowledge, New P does not have any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether due or to become due, and whether choate or inchoate), and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against New P giving rise to any liability. (k) Intentions. Except as set forth on the Disclosure Schedule, such Physician intends to continue practicing medicine on a full-time basis for the next five (5) years with CTOA and does not know of any fact or condition that materially adversely affects, or in the future may materially adversely affect, his ability or intention to practice medicine on a full-time basis for the next five years with CTOA. (l) Disclosure. Such Physician does not know of any fact or condition (other than general economic conditions or legislative or administrative changes in health-care delivery) that materially adversely affects, or in the future may materially adversely affect, the condition, properties, assets, liabilities, business, operations or prospects of the Practice that has not been set forth herein or in the Disclosure Schedule. 19 ARTICLE V REPRESENTATIONS OF THE AOR PARTIES Section 5.01 Representations of the AOR Parties. The AOR Parties jointly and severally represent and warrant to each of the Physicians that: (a) Organization, Valid Authorization and Good Standing. AOR is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and AOR Management is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Texas. Each of the AOR Parties has the power and authority to own all of its properties and assets and to conduct its business. Each of the AOR Parties has the power and authority to enter into the Transaction Documents to which it is a party and to carry out its obligations thereunder. The execution and delivery of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly and validly authorized by each of the AOR Parties, and no other corporate or other proceedings on the part of either of the AOR Parties are necessary to authorize the Transaction Documents and the transactions contemplated thereby. This Purchase Agreement has been duly and validly executed and delivered by each of the AOR Parties and constitutes the valid and binding agreement of each of the AOR Parties enforceable against the AOR Parties, in accordance with its terms. Each Transaction Document executed and delivered at the Closing by an AOR Party will upon such execution and delivery constitute the valid and binding agreement of such AOR Party, enforceable against such AOR Party in accordance with its terms. (b) Compliance. The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby by the AOR Parties will not (i) violate any provision of their respective charters, limited partnership agreements or bylaws, (ii) violate any material provision of or result in the breach of or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any material obligation under, any mortgage, lien, lease, contract, license, instrument or any other agreement to which either of the AOR Parties is a party, (iii) result in the creation or imposition of any material lien, charge, pledge, security interest or other encumbrance upon any property of either of the AOR Parties or (iv) violate or conflict with any order, award, judgement or decree or other material restriction or any law, ordinance or regulation to which either of the AOR Parties or the property of either of the AOR Parties is subject. (c) Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other person not yet obtained is required in connection with the execution and delivery of the Transaction Documents by either of the AOR Parties or the consummation by either of the AOR Parties of the transactions contemplated thereby, except for (i) any filings and approvals required under the rules and regulations of the Securities and Exchange Commission, and 20 filings and approvals required by the Blue Sky laws of the various states and (ii) the approval by First Union National Bank of North Carolina of the transactions contemplated by the Transaction Documents. (d) Capitalization. The authorized capital stock of AOR consists of (i) 60,000,000 shares of AOR Common Stock of which, as of March 24, 1997, 26,643,582 shares are issued and outstanding, and (ii) 1,000,000 shares of Preferred Stock, $.01 par value per share, none of which is outstanding. All of the issued and outstanding shares of AOR Common Stock are, and all shares of AOR Common Stock to be issued pursuant to the transactions described in Article II will be, validly issued, fully paid and non- assessable. (e) Financial Statements. AOR has furnished to the Physician Parties AOR's audited financial statements for the year ended December 31, 1996, consisting of a balance sheet, the related statement of income and changes in stockholders' equity (the "AOR Audited Financial Statements"). The AOR Audited Financial Statements (i) have been prepared in accordance with GAAP, (ii) are true, complete and correct in all material respects as of their date and for the period above stated and (iii) fairly present the financial position of AOR at such date and the results of its operations for the period ended on such date. Except as set forth on the Disclosure Schedule, the AOR Audited Financial Statements reflects all of the liabilities and obligations of AOR that are required to be reflected or disclosed therein in accordance with GAAP. (f) Litigation. There are no claims, actions, suits, proceedings (arbitration or otherwise) or investigations pending or, to either of the AOR Parties' knowledge, threatened against either of the AOR Parties at law or in equity in any court or before or by any Governmental Authority, and, to such AOR Parties' knowledge, there are no, and have not been any, facts, conditions or incidents that may result in any such actions, suits, proceedings (arbitration or otherwise) or investigations. Neither of the AOR Parties is in default in respect of any judgment, order, writ, injunction or decree of any court or other Governmental Authority. (g) Registration Rights. AOR has not granted registration rights to any member of a physician group managed by AOR or a subsidiary thereof that, with respect to (i) the period during which registration rights may be exercised and (ii) the percentage of shares of AOR Common Stock that are registrable, are superior to the terms and provisions of the corresponding limitations of the registration rights that are granted pursuant to Article X hereto. (h) Brokers. All negotiations relating to the Transaction Documents and the transactions contemplated hereby have been carried on without the intervention of any person acting on behalf of the AOR Parties in such manner as to give rise to any valid claim for any broker's or finder's fee or similar compensation. 21 (i) Disclosure. No representation, warranty or statement made by any of the AOR Parties in this Purchase Agreement or any of the exhibits or schedules hereto, or any agreements, certificates, documents or instruments delivered or to be delivered to the Physician Parties in accordance with this Purchase Agreement or the other Transaction Documents contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. ARTICLE VI ADDITIONAL AGREEMENTS Section 6.01 Investment Representations and Covenants of Physicians. (a) Each Physician understands that the Securities will not be registered under the Securities Act or any state securities laws on the grounds that the issuance of the Securities is exempt from registration pursuant to Section 4(2) of the Securities Act or Regulation D promulgated under the Securities Act and pursuant to similar provisions of applicable state securities laws, and that the reliance of AOR on such exemptions is predicated in part on the Physician's representations, warranties, covenants and acknowledgments set forth in this Section. (b) Except as disclosed on the Investment Representations Schedule attached hereto, each Physician represents and warrants that such Physician is an "accredited investor" as defined in Rule 501 promulgated under the Securities Act. (c) Each Physician represents and warrants that the Securities to be acquired by such Physician upon consummation of the transactions described in Article II hereof will be acquired by such Physician for such Physician's own account, not as a nominee or agent, and without a view to resale or other distribution within the meaning of the Securities Act and the rules and regulations thereunder, except as contemplated in Article X hereof, and that such Physician will not distribute any of the Securities in violation of the Securities Act. (d) Each Physician represents and warrants that the address set forth below such Physician's name in the Investment Representations Schedule is such Physician's principal residence. (e) Each Physician (i) acknowledges that the Securities issued to such Physician must be held indefinitely by such Physician unless subsequently registered under the Securities Act or an exemption from registration is available, (ii) is aware that any routine sales of Securities made pursuant to Rule 144 under the Securities Act may be made only in limited amounts and in accordance with the terms and conditions of that 22 Rule and that in such cases where the Rule is not applicable, compliance with some other registration exemption will be required, and (iii) is aware that Rule 144 is not currently available for use by such Physician for resale of any of the Securities to be acquired by such Physician upon consummation of the transactions described in Article II hereof. (f) Each Physician represents and warrants to AOR that such Physician has such knowledge and experience in financial and business matters such that such Physician is capable of evaluating the merits and risks of such Physician's investment in any of the Securities to be acquired by such Physician upon consummation of the transactions described in Article II hereof. (g) Each Physician confirms that such Physician has received and reviewed (i) AOR's Annual Report for 1996 and (ii) AOR's Proxy Statement for AOR's 1997 Annual Meeting of Stockholders. Each Physician also confirms that AOR has made available to such Physician the opportunity to ask questions of and receive answers from it concerning the terms and conditions of such Physician's investment in the Securities, and the Physician has received to such Physician's satisfaction, such additional information, in addition to that set forth herein, about AOR's operations and the terms and conditions of the offering as such Physician has requested. (h) In order to ensure compliance with the provisions of paragraph (c) hereof, each Physician agrees that after the Closing such Physician will not sell or otherwise transfer or dispose of Securities or any interest therein (unless such shares have been registered under the Securities Act) without first complying with either of the following conditions, the expenses and costs of satisfaction of which shall be fully borne and paid for by such Physician: (i) AOR shall have received a written legal opinion from legal counsel, which opinion and counsel shall be satisfactory to AOR in the exercise of its reasonable judgment, or a copy of a "no-action" or interpretive letter of the Securities and Exchange Commission specifying the nature and circumstances of the proposed transfer and indicating that the proposed transfer will not be in violation of any of the registration provisions of the Securities Act and the rules and regulations promulgated thereunder; or (ii) AOR shall have received an opinion from its own counsel to the effect that the proposed transfer will not be in violation of any of the registration provisions of the Securities Act and the rules and regulations promulgated thereunder. Each Physician also agrees that the certificates or instruments representing the Securities to be issued to such Physician pursuant to this Purchase Agreement may contain a restrictive legend noting the restrictions on transfer described in this Article and required by federal and applicable state securities laws, and that appropriate "stop-transfer" instructions will be given to AOR's 23 transfer agent, if any, provided that this paragraph (h) shall no longer be applicable to any Securities following their transfer pursuant to a registration statement effective under the Securities Act or in compliance with Rule 144 or if the opinion of counsel referred to above is to the further effect that transfer restrictions and the legend referred to herein are no longer required in order to establish compliance with any provisions of the Securities Act. Section 6.02 No Corporate Practice. No Physician Party has knowledge that the actions, transactions or relationships arising from, and contemplated by the Transaction Documents violate any law, rule or regulation relating to the corporate practice of medicine. Each Physician Party accordingly agrees that such Physician Party will not, in an attempt to void or nullify any Transaction Document or any relationship involving any AOR Party or any Physician Party, sue, claim, aver, allege or assert that any such Transaction Document or any such relationship violates any law, rule or regulation relating to the corporate practice of medicine; provided, however, such Physician Party is entitled to make any such claim, averment, allegation or assertion if such Physician Party reasonably believes, on advice from counsel, that failure to terminate such Transaction Document or such relationship will subject such Physician Party to material liability or will materially adversely affect such Physician Party's right to practice medicine. Section 6.03 Current Public Information. AOR shall use commercially reasonable efforts to comply with the requirements of Rule 144 under the Securities Act, as such Rule may be amended from time to time (or any similar rule or regulation hereafter adopted by the SEC) regarding the availability of current public information to the extent required to enable any holder of shares of AOR Common Stock to sell such shares without registration under the Securities Act pursuant to Rule 144 (or any similar rule or regulation). Upon the request of any holder of the shares of AOR Common Stock issued pursuant to this Purchase Agreement, AOR will deliver to such holder a written statement as to whether AOR has complied with such requirements. Section 6.04 Rule 144 Covenant. AOR believes that the holding period, as determined by Rule 144(d)(3)(iii) enacted under the Securities Act of 1933, as in effect on the Closing Date (the "Holding Period"), for any shares of AOR Common Stock acquired by any Physician pursuant to Section 2.02(c) of this Purchase Agreement should commence on the Closing Date. In the event that a Physician elects to sell any of such shares pursuant to Rule 144 within sixty days of receipt thereof and is unable to do so by reason of the Holding Period being deemed to have commenced on a date later than the Closing Date (other than by reason of a change in the law), then (i) such Physician shall promptly notify AOR of such inability and provide AOR with the opportunity for five business days after receipt of such notice (the "Assistance Period") to assist such Physician in effecting the proposed sale and (ii) in the event that such proposed sale is not effected within the Assistance Period, AOR shall redeem a number of such shares of AOR Common Stock from such Physician up to a number equal to the quotient determined by dividing such Physician's Tax Liability by the value per share used to calculate such Tax Liability. For purposes of this Section 6.04, a Physician's "Tax Liability" shall be determined by multiplying the number of shares that are delivered to such Physician at a given time by the Market Price 24 on such date (or such lesser price as the Physician represents such Physician intends to use for purposes of preparing his applicable income tax return), and then multiplying such product by the highest stated federal and state income rate applicable to individuals. Section 6.05 Consents of Accountants. CTROP and the Physicians shall cause Price Waterhouse LLP, independent accountants, to deliver in a timely fashion to AOR all reports, opinions and consents required to be filed by Price Waterhouse LLP in any SEC filing made by AOR. Section 6.06 Access to Business Records. For a period of four (4) years from and after the date of Closing, or for such longer period as may be required by law, AOR shall retain and preserve the Business Records of the Physician Parties acquired by AOR hereunder, and will give the Physician Parties, and their counsel, accountants, consultants and other agents and representatives, full and complete access, during reasonable business law and upon reasonable request, to such records. ARTICLE VII NON-COMPETITION AND CONFIDENTIALITY COVENANTS Section 7.01 Physician Non-Competition Covenant. (a) The Physicians recognize that the covenants of each Physician contained in this Section 7.01 are an essential part of this Purchase Agreement and that, but for the agreement of each Physician to comply with such covenants, the AOR Parties would not have entered into this Purchase Agreement. Each Physician acknowledges and agrees that each Physician's covenant not to compete is necessary to ensure the continuation of the Business (as defined herein) and the reputation of the AOR Parties and that irrevocable harm and damage will be done to the AOR Parties if any Physician competes with either of them. Each Physician accordingly agrees that for a period of five (5) years from and after the date hereof, such Physician shall not: (i) directly or indirectly, either as principal, agent, independent contractor, consultant, director, officer, employee, employer, advisor, stockholder, partner or in any other individual or representative capacity whatsoever, either for such Physician's own benefit or for the benefit of any other person or entity either knowingly (A) hire, attempt to hire, contact or solicit with respect to hiring any employee of AOR (or of any of its direct or indirect subsidiaries) or (B) induce or otherwise counsel, advise or encourage any employee of AOR (or of any of its direct or indirect subsidiaries) to leave the employment of AOR; (ii) act or serve, directly or indirectly, as a principal, agent, independent contractor, consultant, director, officer, employee, employer or 25 advisor or in any other position or capacity with or for, or acquire a direct or indirect ownership interest in or otherwise conduct (whether as stockholder, partner, investor, joint venturer, or as owner of any other type of interest), any Competing Business as such term is defined herein; provided, however, that this clause (ii) shall not prohibit such Physician from being the owner of up to 5% of any class of outstanding securities or any company or entity if such class of securities is publicly traded; or (iii) directly or indirectly, either as principal, agent, independent, contractor, consultant, director, officer, employee, employer, advisor, stockholder, partner or in any other individual or representative capacity whatsoever, either for such Physician's own benefit or for the benefit of any other person or entity, call upon, solicit, divert or take away, any customers or clients of the Business. (b) For the purposes of this Section 7.01, the following terms shall have the meaning set forth below: (i) "Business" shall mean management and administration of the nonmedical aspects of oncology and hematology practices. (ii) "Competing Business" shall mean an individual, business, corporation, association, firm, undertaking, company, partnership, joint venture, organization or other entity that either (A) conducts a business substantially similar to the Business within the State of Texas or (B) provides or sells a service which is the same or substantially similar to, or otherwise competitive with the services provided by the Business within the State of Texas; provided, however, that "Competing Business" shall not include the Physician's internal management and administration of such Physician's medical practice or participation in the management and administration of a physician group in which such Physician devotes a significant amount of time to the practice of medicine. (c) Should any portion of this Section 7.01 be deemed unenforceable because of the scope, duration or territory encompassed by the undertakings of such Physician hereunder, and only in such event, then such Physician and AOR consent and agree to such limitation on scope, duration or territory as may be finally adjudicated as enforceable by a court of competent jurisdiction after the exhaustion of all appeals. (d) This covenant shall be construed as an agreement ancillary to the other provisions of this Purchase Agreement, and the existence of any claim or cause of action of such Physician against an AOR Party, whether predicated on this Purchase Agreement or otherwise, shall not constitute a defense to the enforcement by AOR of this covenant. Without limiting other possible remedies to AOR for breach of this covenant such Physician agrees that injunctive or other equitable relief will be available to enforce the 26 covenants of this provision, such relief to be without the necessity of posting a bond, cash or otherwise. Such Physician further expressly acknowledges that the damages that would result from a violation of his non-competition covenant would at a minimum be not less than $250,000. Such Physician shall pay to AOR in cash $250,000 within sixty (60) business days after AOR notifies such Physician that such Physician has breached this non-competition covenant as determined solely by AOR in the reasonable exercise of its discretion. If such Physician fails to make payment as contemplated by this Section, AOR shall be entitled to (i) cancel the number of shares of AOR Common Stock held by such Physician or, with respect to shares of AOR Common Stock entitled to be received by such Physician, terminate its obligation to deliver such number of shares of AOR Common Stock, valued at the Market Price per share, representing $250,000 or (ii) set off all or any of such $250,000 against amounts payable under the Note held by such Physician, or each of the foregoing, but in no event shall AOR be entitled to offset amounts in excess of $250,000 pursuant to this Section 7.01. Such Physician agrees to deliver to AOR the certificates representing any such shares canceled by AOR or any Note that, as a result of the exercise of set-off rights, is paid in full. (e) In the event that such Physician violates such Physician's non- competition covenant set forth above, then, notwithstanding any provision herein to the contrary, the time period specified above for which the non- competition covenant is effective shall be extended day for day for the time period that such Physician is in violation of any such covenant. (f) Notwithstanding anything contained herein, this Section 7.01 shall not be construed to (i) limit the freedom of any patient of any Physician to choose the facility or physician from whom such patient shall receive health-care services or (ii) limit or interfere with such Physician's ability to exercise his professional medical judgment in treating his patients or his ability or provide medical services to his patients. Section 7.02 Physician Confidentiality Covenant. From the date hereof, each Physician shall not, directly or indirectly, use for any purpose (other than in connection with the performance of such Physician's duties under such Physician's Employment Agreement with CTROP) or disclose to any third party, any trade secret, supplier list, financial data, pricing or marketing policy or plan or any other proprietary or confidential information that is the property of AOR (or of any of its direct or indirect subsidiaries). Without limiting the other possible remedies to AOR for the breach of this covenant, such Physician agrees that injunctive or other equitable relief shall be available to enforce this covenant, such relief to be without the necessity of posting a bond, cash or otherwise. Such Physician further agrees that if any restriction contained in this Section 7.02 is held by any court to be unenforceable or unreasonable, a lesser restriction shall be enforced in its place and remaining restrictions contained herein shall be enforced independently of each other. Such Physician further acknowledges that the damages that would result from a violation of this Section 7.02 would be at a minimum not less than $250,000. Such Physician shall pay to AOR in cash $250,000 within sixty (60) business days after AOR notifies such Physician that such Physician has breached this Section 7.02, as 27 determined solely by AOR in the reasonable exercise of its discretion. If such Physician fails to make payment as contemplated by this Section 7.02, AOR shall be entitled to (i) cancel the number of shares of AOR Common Stock held by such Physician or, with respect to shares of AOR Common Stock entitled to be received by such Physician, terminate its obligation to deliver such number of shares of AOR Common Stock, valued at the Market Price per share, representing $250,000 or (ii) set off all or any of such $250,000 against amounts payable under the Note held by such Physician, or each of the foregoing, but in no event shall AOR be entitled to offset amounts in excess of $250,000 pursuant to this Section 7.02. Such Physician agrees to deliver to AOR the certificates representing any such shares canceled by AOR or any Note that, as a result of the exercise of set-off rights, is paid in full. ARTICLE VIII CLOSING Section 8.01 Documents to be Delivered by Physician Parties. At the Closing, pursuant to this Purchase Agreement, the Physician Parties shall deliver, or cause to be delivered, to AOR Management the following: (a) Bills of sale, endorsements, assignments, drafts, checks or other instruments, as to all Nonmedical Assets, and any other appropriate instruments in such reasonable or customary form as shall be requested by AOR Management and its counsel and reasonably satisfactory to TROG and its counsel, including without limitation the TROG General Bill of Sale, Conveyance, Transfer and Assignment and Agreement Regarding Assumption of Liabilities covering all the Nonmedical Assets and the Assumed Obligations substantially in the form attached hereto as Exhibit A; (b) Bills of sale, endorsements, assignments, drafts, checks or other instruments, as to all Nonmedical Assets, and any other appropriate instruments in such reasonable or customary form as shall be requested by AOR Management and its counsel and reasonably satisfactory to ACC and its counsel, including without limitation the ACC General Bill of Sale, Conveyance, Transfer and Assignment and Agreement Regarding Assumption of Liabilities covering all the Nonmedical Assets and the Assumed Obligations substantially in the form attached hereto as Exhibit B; (c) Bills of sale, endorsements, assignments, drafts, checks or other instruments, as to all Nonmedical Assets, and any other appropriate instruments in such reasonable or customary form as shall be requested by AOR Management and its counsel and reasonably satisfactory to ACC II and its counsel, including without limitation the ACC II General Bill of Sale, Conveyance, Transfer and Assignment and Agreement Regarding Assumption of Liabilities covering all the Nonmedical Assets and the Assumed Obligations substantially in the form attached hereto as Exhibit C; and 28 (d) Evidence satisfactory to AOR management that all liens, claims, pledges, security interests and other encumbrances on the Nonmedical Assets have been released. Section 8.02 Documents to be Delivered by AOR Parties. At the Closing, pursuant to this Purchase Agreement, AOR or AOR Management, as the case may be, shall deliver the following: (a) Appropriate instruments of assumption, as to all Assumed Obligations, and any other appropriate instruments in such reasonable or customary form as shall be requested by TROG and its counsel and reasonably satisfactory to AOR Management and its counsel, including without limitation the TROG General Bill of Sale, Conveyance, Transfer and Assignment and Agreement Regarding Assumption of Liabilities covering all the Nonmedical Assets and Assumed Obligations substantially in the form attached hereto as Exhibit A; (b) Appropriate instruments of assumption, as to all Assumed Obligations, and any other appropriate instruments in such reasonable or customary form as shall be requested by ACC and its counsel and reasonably satisfactory to AOR Management and its counsel, including without limitation the ACC General Bill of Sale, Conveyance, Transfer and Assignment and Agreement Regarding Assumption of Liabilities covering all the Nonmedical Assets and Assumed Obligations substantially in the form attached hereto as Exhibit B; (c) Appropriate instruments of assumption, as to all Assumed Obligations, and any other appropriate instruments in such reasonable or customary form as shall be requested by ACC II and its counsel and reasonably satisfactory to AOR Management and its counsel, including without limitation the ACC II General Bill of Sale, Conveyance, Transfer and Assignment and Agreement Regarding Assumption of Liabilities covering all the Nonmedical Assets and Assumed Obligations substantially in the form attached hereto as Exhibit C; and (d) The Notes in the original principal amounts set forth in this Purchase Agreement. ARTICLE IX INDEMNIFICATION Section 9.01 Indemnification by the Physician Parties. (a) Except as provided in Section 9.01(b) and subject to the limitations set forth in Section 9.06, each of the Physician Parties, jointly and severally, hereby agrees to indemnify, defend and hold the AOR Parties, and their respective officers, directors, employees and shareholders (collectively, "AOR Indemnified Persons") harmless from 29 and against all demands, suits, claims, actions or causes of action, assessments, losses, damages, liabilities, liens, settlements, penalties, and forfeitures, and reasonable costs and expenses incident thereto (including reasonable attorneys' fees) (collectively, the "Indemnity Losses" and individually, an "Indemnity Loss"), asserted against or suffered or incurred, directly or indirectly, by any of the AOR Indemnified Persons and resulting from: (i) any misrepresentation in or breach of the representations or warranties of any of the Physician Parties or the failure of any of the Physician Parties to perform any of their respective covenants or obligations contained in this Purchase Agreement or in any exhibit, schedule, certificate or other instrument or document furnished or to be furnished by any of the Physician Parties pursuant to this Purchase Agreement; (ii) any and all obligations or liabilities of any of the Physician Parties of any kind, description or character, direct or indirect, absolute or contingent, known or unknown; (iii) any tax liability arising out of, or by virtue of, or based on any Physician Party; (iv) any Environmental Claim (as hereinafter defined) arising out of or based upon (i) operation of the properties covered by any of the Real Property Leases on or prior to the Closing Date or (ii) operation of the Practice on or prior to the Closing Date. For purposes of this Purchase Agreement, the term "Environmental Claim" means any liabilities, responsibilities, third party (including private parties, governmental agencies and employees) actions, lawsuits, claims or proceedings (whether they arise under common law or statute or are recognized now or at a later time and regardless of form, including strict liability and negligence) which relate to or arise from or in connection with any Environmental Law or Hazardous Wastes, including, but not limited to, any liability which relates to or arises from or in connection with any investigation, remediation or removal of any Hazardous Wastes. (b) Notwithstanding the foregoing provisions of Section 9.01(a), the Physician Parties shall not be obligated to jointly and severally indemnify, defend or hold the AOR Indemnified Parties harmless from and against any Indemnity Losses asserted against or suffered or incurred by any of the AOR Indemnified Parties and resulting from any misrepresentation in or breach of any representation of any Physician contained in Section 4.02 hereof or Section 6.01 hereof or from the failure of any Physician to perform any of such Physician's covenants or obligations contained in Sections 7.01 or 7.02 hereof. In each of these cases, each Physician shall severally and not jointly indemnify, defend and hold the AOR Parties harmless from and against all Indemnity Losses asserted against or suffered or incurred by any of the AOR Indemnified Parties 30 and resulting from any misrepresentation in or breach of such representations of such Physician or from the failure of such Physician to perform any of such covenants or obligations. Section 9.02 Indemnification by the AOR Parties. Subject to the limitations set forth in Section 9.06, the AOR Parties, jointly and severally, hereby agree to indemnify, defend and hold the Physician Parties and their respective officers, directors, employees, partners and shareholders (collectively "Physician Indemnified Persons") harmless from and against any Indemnity Loss asserted against or suffered or incurred by any of Physician Indemnified Persons and resulting from: (i) any misrepresentation in or breach of the representations and warranties of any of the AOR Parties or the failure of any of the AOR Parties to perform any of their respective covenants or obligations contained in this Purchase Agreement or in any exhibit, schedule, certificate or other instrument or document furnished or to be furnished by any of the AOR Parties pursuant to this Purchase Agreement; (ii) the use of any of the Nonmedical Assets after the Closing; (iii) the Assumed Obligations; (iv) any tax liability arising out of, or by virtue of, or based on any AOR Party; or (v) any Environmental Claim arising out of or based upon the operation of the business of AOR on or prior to the Closing Date. Section 9.03 Notice. If any person or entity has reason to believe that he, she or it has suffered or incurred (or has a reasonable belief that he, she or it will suffer or incur) any Indemnity Loss subject to indemnity hereunder, such person or entity shall so notify the indemnifying party promptly in writing describing such loss or expense, the amount thereof, if known, and the method of computation of such Indemnity Loss, all with reasonable particularity. If the nature of the Indemnity Loss set forth in the notice does not involve any third party claim, and if the indemnifying party does not respond to the indemnified party in writing contesting the existence of amount of any Indemnity Loss within thirty (30) days after delivery of such notice, then such indemnifying party shall be obligated to pay, and shall pay in accordance with Section 9.05, the amount of the Indemnity Loss set forth in such notice to the indemnified party. If any action at law, suit in equity, administrative action or arbitration or mediation proceeding is instituted by or against a third party with respect to which any person intends to claim any liability or expense as an Indemnity Loss under this Article IX, such person shall promptly notify the indemnifying party of such action. The failure to give or to timely give any notice required by this Section 9.03 shall not relieve the party from whom indemnity is sought of any of its obligations under this Article IX, except to the extent that such failure results in actual prejudice to the indemnifying party. 31 Section 9.04 Defense of Third-Party Claims. (a) With respect to any action at law, suit in equity, administrative action or arbitration or mediation proceeding that is instituted by or against a third party with respect to which any person intends to claim any liability or expense under this Article IX, the indemnifying party shall have ten (10) business days after receipt of the notice with respect thereto referred to in the first sentence of Section 9.03 to notify the indemnified party that it elects to conduct and control any action, suit or proceeding with respect to such claim. If the indemnifying party does not give such notice, the indemnified person shall have the right to defend, contest, settle or compromise such action, suit or proceeding in the exercise of its exclusive discretion, and the indemnifying party shall, upon request from the indemnified person, promptly pay the indemnified person in accordance with the other terms and conditions of this Article IX the amount of any Indemnity Loss subject to indemnity hereunder resulting from its liability to the third party claimant. If the indemnifying party gives such notice, it shall have the right to participate in, and, to the extent that it shall desire, to undertake, conduct and control, through counsel of its own choosing (which counsel shall be satisfactory to the indemnified party in the reasonable judgment of the indemnified party and shall not, except with the consent of the indemnified party, be counsel to the indemnified party) and at its sole expense, the conduct and settlement of such action, suit or proceeding, and the indemnified person shall cooperate with the indemnifying party in connection therewith; provided, however, that (i) the indemnifying party shall not thereby permit to exist any lien, encumbrance or other adverse charge securing the claims indemnified hereunder upon any asset of the indemnified person, (ii) the indemnifying party shall not thereby consent to the imposition of any injunction against the indemnified person without the written consent of the indemnified person, (iii) the indemnifying party shall permit the indemnified person to participate in such conduct or settlement through counsel chosen by the indemnified person, but the fees and expenses of such counsel shall be borne by the indemnified person except as provided below, and (iv) upon a final determination of such action, suit or proceeding, the indemnifying party shall promptly reimburse to the extent required under this Article IX the indemnified person for the full amount of any Indemnity Loss resulting from such action, suit or proceeding and all reasonable and related expenses incurred by the indemnified person, other than fees and expenses of counsel for the indemnified person incurred after the assumption of the conduct and control of such action, suit or proceeding by the indemnifying party (except as provided below); provided further, however, that such fees and expenses of counsel for the indemnified party shall be borne and paid on a current basis by the indemnifying party if (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) the indemnified party has reasonably concluded (based on the advice of counsel) that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party, (iii) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between such party and the indemnifying party in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party, or 32 (iv) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after giving notice of its intent to assume such defense. So long as the indemnifying party is contesting any such action in good faith, the indemnified person shall not pay or settle any such action, suit or proceeding. Notwithstanding the foregoing, the indemnified person shall have the right to pay or settle any such action, suit or proceeding, provided that in such event the indemnified person shall waive any right to indemnity therefor from the indemnifying party and no amount in respect thereof shall be claimed as an Indemnity Loss under this Article IX. (b) If requested by the indemnifying party, the indemnified person agrees to cooperate with the indemnifying party and its counsel in contesting any claim which the indemnifying party elects to contest or, if appropriate, in making any counterclaim against the person asserting the claim, or any cross-complaint against any person asserting the claim, or any cross-complaint against any person and further agrees to take such other action as reasonably may be requested by an indemnifying party to reduce or eliminate any loss or expense for which the indemnifying party would have responsibility, but the indemnifying party will reimburse the indemnified person for any expenses incurred by it in so cooperating or acting at the request of the indemnifying party. (c) The indemnified person agrees to afford the indemnifying party and its counsel the opportunity to be present at, and to participate in, conferences with all persons, including governmental authorities, asserting any claim against the indemnified person or conferences with representatives of or counsel for such persons. Section 9.05 Payment of Losses. Except as specifically set forth in any other section of this Purchase Agreement with respect to payment of losses, which section shall govern payment of losses with respect to matters set forth therein, the indemnifying party shall pay to the indemnified person in cash the amount of any Indemnity Loss to which the indemnified person may become entitled by reason of the provisions of this Agreement, such payment to be made within sixty (60) business days after any such amount of losses is finally determined either pursuant to mutual agreement of the Parties, pursuant to the second sentence of Section 9.03, pursuant to the provisions of Section 9.04(a) or pursuant to the dispute resolution provisions set forth in Article XI or pursuant to a final, unappealable binding judgment of a court with jurisdiction. If any of the Physicians is the indemnifying party and fails to make payment as contemplated by this Section 9.05, AOR, at its election, shall be entitled to (i) cancel the number of shares of the AOR Common Stock held by such indemnifying party or, with respect to shares of AOR Common Stock entitled to be received by such indemnifying party, terminate its obligation to deliver such number of shares of AOR Common Stock, valued at the Market Price per share as of the date payment was due under this Section 9.05, representing the amount equal to or less than the amount of Indemnity Loss, or (ii) set off all or any amounts payable under the Note held by such Physician, representing the amount equal to or less than the amount of the Indemnity Loss, or each of the foregoing, but in no event shall AOR be entitled to offset amounts in excess of the Indemnity Loss pursuant to this Section 9.05. Such indemnifying party 33 agrees to redeliver to AOR the certificates representing any such shares canceled by AOR or any Note that, as a result of the exercise of set-off rights is paid in full. If AOR or AOR Management is the indemnifying party and fails to make payment as contemplated by this Section 9.05, CTROP, at its election, shall be entitled to set off all or any amounts payable to AOR Management under Section 6.1 of the Management Services Agreement. Section 9.06 Limitations. Notwithstanding anything contained to the contrary in this Purchase Agreement, a Party's right to recover any amounts under the indemnification provisions of this Article IX shall be limited as provided in this Section 9.06. (a) All representations, warranties and indemnities made by the Parties shall survive the Closing and shall thereafter terminate and expire twenty-four (24) months after the Closing Date, except that representations, warranties (Section 4.01(j)) and associated indemnities with respect to tax matters, and representations, warranties (Section 4.01(m)) and associated indemnities with respect to environmental matters, shall survive for a period equal to the statute of limitations applicable to any claim arising from or attributable to such matters; provided, however, that notwithstanding the foregoing, the rights and obligations with respect to indemnification as provided in Article IX shall continue with respect to any matter for which indemnification has been properly sought pursuant to the terms and conditions of this Purchase Agreement prior to the expiration of any such survival period. (b) The Physician Parties' liabilities to AOR Indemnified Persons pursuant to this Article IX shall be limited as follows: with respect to any claim for indemnification under Section 9.01, no AOR Indemnified Person shall be entitled to indemnification pursuant to Article IX until the AOR Indemnified Parties in the aggregate have suffered or incurred Indemnity Losses of $25,000, and each Physician Party's obligations under this Article IX shall be limited to the amount set forth opposite such Physician Party's name on the Disclosure Schedule; provided, however, that nothing contained in this Section 9.06(b) shall be deemed to limit or impair an AOR Party's right to seek injunction or other equitable relief for a Physician's breach of any provision set forth in Article VII. (c) The AOR Parties' liabilities to Physician Indemnified Persons pursuant to this Article IX shall be limited as follows: with respect to any claim for indemnification under Section 9.02, no Physician Indemnified Person shall be entitled to indemnification pursuant to Article IX until the Physician Indemnified Persons in the aggregate have suffered or incurred Indemnity Losses of $25,000, and the AOR Parties' obligations in the aggregate under this Article IX shall be limited to $9,291,666. Section 9.07 EXTENT OF INDEMNIFICATION. WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE INDEMNIFICATION, RELEASE AND ASSUMPTION OBLIGATIONS SET FORTH HEREIN, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF, 34 REGARDLESS OF WHETHER THE INDEMNITY LOSS GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, GROSS, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF, OR VIOLATION OF ANY LAW BY, SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS STATEMENT CONSTITUTES A CONSPICUOUS LEGEND. ARTICLE X PIGGYBACK REGISTRATION RIGHTS Section 10.01 Registration Rights. In the event that AOR proposes to file a registration statement with the SEC on Form S-1, S-2 or S-3 or such other comparable successor form as may be prescribed from time to time by the SEC (the "Registration Statement") with respect to an underwritten public offering by AOR of AOR Common Stock for cash, whether or not for AOR's own account, during the period commencing on the date hereof and ending on the fifth anniversary of the Closing Date, AOR shall give written notice of such proposed filing to the Physicians at least fifteen (15) days before the anticipated filing date (in which notice AOR shall use its best efforts to name the proposed managing underwriters of such offering and the anticipated price range per share of AOR Common Stock), and such notice shall offer each Physician the opportunity to register such number of the Physician's shares of AOR Common Stock as such Physician may request in writing within ten (10) days after receipt of such notice; provided, however, that the maximum numbers of shares of AOR Common Stock that such Physician may request to include shall be equal to the lesser of (i) that fraction of his shares of AOR Common Stock which equals the maximum fraction of shares of AOR Common Stock held by any person having piggyback registration rights (other than AOR or the Physicians) that such other person is permitted to request to include in such filing and (ii) 50% of such Physician's shares of AOR Common Stock. Notwithstanding the foregoing, if the managing underwriter of such offering advises AOR that the total numbers of shares of AOR Common Stock which AOR, the Physicians and any other persons intend to include in such offering would adversely affect the success of such offering, then the amount of shares of AOR Common Stock to be offered for the account of the Physicians shall be reduced to the extent necessary to reduce the total number of shares of AOR Common Stock to be included in such offering to the amount recommended by such managing underwriter; provided that if shares of AOR Common Stock are being offered for the account of other persons as well as the Physicians, such reduction shall not represent a greater fraction of the number of shares of AOR Common Stock requested to be registered by the Physicians than the fraction of similar reductions imposed on such other persons over the amount of securities requested to be registered by such other persons. Nothing contained herein shall require AOR to (a) reduce the amount of shares of AOR Common Stock to be offered by AOR in such offering for any reason or (b) include any shares of AOR Common Stock of any Physician in any public offering for which a Registration Statement is or is proposed to be filed if such shares of AOR Common Stock are, at the time of effectiveness of such Registration Statement, eligible to be sold under paragraph (k) of Rule 144 under the Securities Act. Nothing in this Article X shall create any liability on the part of AOR to such 35 Physician if AOR for any reason should decide not to file a Registration Statement or decide not to request that the Registration Statement be declared effective or otherwise elect not to consummate the public offering contemplated thereby. The rights hereunder are subject to the condition that Physicians desiring to include shares of AOR Common Stock in the public offering agree to timely execute and deliver the underwriting agreement to be executed and delivered by AOR and the other sellers, if any, in connection with such public offering. Section 10.02 Covenants of AOR. (a) AOR hereby covenants and agrees: (i) To take such steps as may be necessary to comply with the Blue Sky laws of such states as the managing underwriter may reasonably request; provided that in no event shall AOR be obligated to qualify to do business in any state where it is not so qualified or to take any action which would subject it to unlimited service of process in any state where it is not at such time so subject; (ii) To use reasonable efforts to cause the Registration Statement to become effective and to keep the Registration Statement effective for such period as may be required under the terms of the underwriting agreement relating thereto, to file such post-effective amendments as may be necessary to keep any prospectus contained in such Registration Statement true and complete during such period as the Registration Statement shall be effective, and to furnish and file such other amendments, supplements, and other documents the managing underwriter may reasonably request; (iii) To supply such numbers of prospectuses as may be reasonably required by the managing underwriter or the Physician; (iv) To pay the reasonable costs and expenses of the Registration Statement incurred by AOR, including without limitation all registration and Blue Sky filing fees, all fees and expenses of AOR's counsel (but not the fees and expenses of counsel for such Physician), all accounting costs (including costs associated with the preparation of interim period financial statements) incurred by AOR, NASD fees, printing costs, experts' fees and expenses incurred by AOR, costs of post-effective amendments, and all other usual and customary expenses in connection with the Registration Statement, except for such Physician's pro rata share of underwriting discounts and selling commissions (calculated in the manner set forth in this Article X); (v) With respect to any Registration Statement filed pursuant to this Article X, to cooperate with the underwriters to the best of its abilities and to enter into an underwriting agreement with such underwriters containing such 36 representations, warranties, and covenants on the part of AOR as are usual and customary in an underwritten public sale of common stock; and (vi) After the filing of the Registration Statement, to promptly notify the Physician of any stop order issued or threatened by the SEC, and to take all actions required to prevent the entry of such stop order or remove it if entered. (b) If, at the time AOR notifies a Physician pursuant to the first sentence of Section 10.01, AOR is obligated to issue in the future additional shares of AOR Common Stock to such Physician pursuant to Section 2.02(c) hereof, and if a Physician notifies AOR pursuant to the first sentence of Section 10.01 that it desires to register the offer and sale of such unissued shares of AOR Common Stock of which such Physician will be the owner, then AOR shall be obligated to issue such number of shares of AOR Common Stock (issuing such shares in the order they would otherwise be issuable pursuant to Section 2.02(c)) to such Physician; provided, however, that AOR is not obligated to issue such shares of AOR Common Stock if such Physician is not otherwise entitled to register the offer and sale of such shares pursuant to Section 10.01; and provided further, that prior to AOR's issuance of such additional shares of AOR Common Stock, AOR, AOR Management, the Escrow Agent and such Physician shall execute and deliver the Escrow Agreement. (c) If, subsequent to the Closing Date, AOR grants registration rights to physicians in connection with AOR's or a wholly owned subsidiary's management of such physicians' medical practice pursuant to a management agreement or similar arrangement, and if the terms of such registration rights relating to limitations with respect to (i) the period during which registration rights may be exercised and (ii) the percentage of shares of AOR Common Stock that are registrable are superior to the terms of the registration rights relating to such limitations granted pursuant to this Article X, then, without the taking of any additional action, such terms of registration rights granted pursuant to this Article X shall be amended to equal such terms of the subsequently granted registration rights. Section 10.03 Covenants of the Physicians. Each Physician hereby covenants and agrees: (a) To cooperate with AOR in its compliance with all federal and state securities laws, including without limitation providing such information and signing such documents as are reasonably necessary to effect a registration pursuant to this Purchase Agreement; (b) To pay his pro rata portion (calculated on the basis of the ratio of the aggregate offering price attributable to the shares of such Physician being registered and sold in relation to the aggregate offering price attributable to the total number of securities being registered and sold, including securities being registered and sold by 37 other selling stockholders) of the underwriting discounts and selling commissions and to pay all the fees and disbursements of his counsel in connection with such registration; and (c) In addition to the transfer restrictions otherwise provided for herein, unless otherwise so agreed to in writing by AOR, such Physician will agree, whether or not such Physician has the right or elects to cause the registration of his shares pursuant to this Article X, not to sell or otherwise dispose of any shares of AOR Common Stock (other than the shares covered by such registration, which may be sold in accordance with the plan or plans of distribution described in the Registration Statement) owned by such Physician for a period of the shorter of (i) the lock-up period applicable to AOR, if any, or (ii) one hundred twenty (120) days following the effective date of such Registration Statement. The maximum amount of liability of any Physician under this Section 10.05 shall be limited to the aggregate amount of all sale proceeds actually received by such Physician upon the sale of such Physician's AOR Common Stock in connection with such registration. Section 10.04 Indemnification of Physicians. Whenever registration with respect to any shares of a Physician's AOR Common Stock is effected under the Securities Act pursuant hereto, AOR will indemnify and hold harmless such Physician, each underwriter, the directors, officers, employees and agents of each underwriter, and each person, if any, who controls each underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any prospectus included in such Registration Statement or any amendment or supplement to the Registration Statement or any such prospectus or the omission or alleged omission to state in such document a material fact required to be stated in it or necessary to make the statements in it not misleading, provided that AOR will not be liable to such Physician to the extent that such loss, claim, liability, expense or damage is based on an untrue statement or omission made in reliance on and in conformity with information furnished to AOR by such Physician, or by such Physician through any attorney-in-fact, expressly for inclusion in the Registration Statement or any prospectus included in such Registration Statement. Section 10.05 Indemnification of AOR. Whenever registration with respect to any shares of a Physician's AOR Common Stock is effected under the Securities Act pursuant hereto, such Physician will indemnify and hold harmless AOR, each of AOR's directors, each of AOR's officers, each person who controls AOR within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each underwriter, the directors, officers, employees and agents of each underwriter, and each person, if any, who controls each underwriter within the 38 meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any prospectus included in such Registration Statement or any amendment or supplement to the Registration Statement or any such prospectus or the omission or alleged omission to state in such document a material fact required to be stated in it or necessary to make the statements in it not misleading, provided that the Physician will not be liable except to the extent that such loss, claim, liability, expense or damage arises from or is based upon an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information furnished to AOR by the Physician, or by such Physician through any attorney-in-fact, expressly for inclusion in the Registration Statement or any prospectus included in such Registration Statement. Section 10.06 Defense of Claim. Promptly after receipt by an indemnified party of notice of the commencement of any action, the indemnified party shall notify the indemnifying party in writing of the commencement thereof if a claim in respect thereof is to be made against an indemnifying party under this Article X, but the omission of such notice shall not relieve the indemnifying party from liability which it may have to the indemnified party under this Article X, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice, and shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Article X. In case any action is brought against the indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and to the extent that it chooses, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party that it so chooses, the indemnifying party shall not be liable for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided however that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the claim within twenty (20) days after receiving notice from the indemnified party that the indemnified party believes the indemnifying party has failed to diligently defend such claim, or (ii) if the indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there are legal defenses available to the indemnified party which are not available to the indemnifying party, or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then the indemnified party shall have the right to assume or continue its own defense as set forth above and the indemnifying party shall reimburse each indemnified party for the costs of such defense as provided in Sections 10.04 and 10.05. In no event shall the indemnifying party be responsible for the fees of more than one firm of counsel for all indemnified parties. 39 Section 10.07 Transfer of Registration Rights. The rights to register AOR Common Stock pursuant to this Article X may be assigned in connection with any transfer or assignment by a Physician of AOR Common Stock provided that such transfer may otherwise be effected in accordance with applicable securities laws. No transfer or assignment will divest a Physician or any subsequent owner of such rights and powers unless all AOR Common Stock owned by such Physician are transferred or assigned. ARTICLE XI ARBITRATION Section 11.01 Scope. Unless otherwise specifically provided in any other Transaction Document, the parties hereto agree that any claim, controversy, dispute or disagreement between or among any of the parties to any of the Transaction Documents arising out of or relating to any Transaction Document (other than claims involving any noncompetition or confidentiality covenant) shall be governed exclusively by the terms and provisions of this Article XI; provided, however, that the terms and provisions of this Article XI shall not preclude any party hereto from seeking, or a court of competent jurisdiction from granting, a temporary restraining order, temporary injunction or other equitable relief for any breach of (i) any noncompetition or confidentiality covenant in any Transaction Document or (ii) any duty, obligation, covenant, representation or warranty, the breach of which may cause irreparable harm or damage. Section 11.02 Arbitrators. In the event any claim or claims for an Indemnity Loss is brought by any of the AOR Parties or any of the Physician Parties, or there is any other claim, controversy, dispute or disagreement among any of the AOR Parties or the Physician Parties arising out of or relating to any Transaction Document, and the parties are unable to resolve such claim, controversy, dispute or disagreement within thirty (30) days after notice is first delivered pursuant to Section 9.03, the Parties agree to select arbitrators to hear and decide all such claims under this Article XI. If such claim, controversy, dispute or disagreement is between any of the Physician Parties, on the one hand, and any of the AOR Parties, on the other hand, then such Physician Parties shall select one arbitrator, and the AOR Parties shall select one arbitrator. If such claim, controversy, dispute or disagreement is between any of the Physicians, on the one hand, and CTROP, on the other hand, then the Physician shall select one arbitrator, and CTROP shall select one arbitrator. The two arbitrators so chosen shall then select a third arbitrator who is experienced in the matter or action that is subject to such arbitration. If such matter or action involves health-care issues, then the third arbitrator shall have such qualifications as would satisfy the requirements of the National Health Lawyers Association Alternative Dispute Resolution Service. Each of the arbitrators chosen shall be impartial and independent of all parties to the Transaction Documents. If either of the parties fails to select an arbitrator within twenty days after the end of such thirty-day period, or if the arbitrators chosen fail to select a third arbitrator within twenty days, then any party may in writing request the United States District Court for the Western District of Texas senior in term of service to appoint the arbitrator or arbitrators and, subject to this Article XI, such arbitrators shall hear all arbitration matters arising under this Article XI and, in default of such selection, may ask the American Arbitration Association. 40 Section 11.03 Applicable Rules. (a) Each arbitration hearing shall be held at a place in Austin, Texas acceptable to a majority of the arbitrators. The arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association to the extent such rules do not conflict with the terms hereof. The decision of a majority of the arbitrators shall be reduced to writing and shall be binding on the parties. Judgment upon the award(s) rendered by a majority of the arbitrators may be entered and execution had in any court of competent jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement. The charges and expenses of the arbitrators shall be shared equally by the parties to the hearing. (b) The arbitration shall commence within thirty (30) days after the arbitrators are selected in accordance with the provisions of this Article XI. In fulfilling their duties with respect to determining the amount of an Indemnity Loss, the arbitrators may consider such matters as, in the opinion of the arbitrators, are necessary or helpful to make a proper valuation. The arbitrators may consult with and engage disinterested third parties to advise the arbitrators. The arbitrators shall add any interest factor reflecting the time value of money to the amount of any Indemnity Loss and shall not award any punitive damages. (c) If any of the arbitrators selected hereunder should die, resign or be unable to perform his or her duties hereunder, the remaining arbitrators or such senior judge (or such judge's successor) shall select a replacement arbitrator. The procedure set forth in this Article XI for selecting the arbitrators shall be followed from time to time as necessary. (d) As to any determination of the amount of an Indemnity Loss, or as to the resolution of any other claim, controversy, dispute or disagreement, that under the terms hereof is made subject to arbitration, no lawsuit based on such claimed Indemnity Loss or such resolution shall be instituted by any of the AOR Parties or the Physician Parties, other than to compel arbitration proceedings or enforce the award of the arbitrators. (e) All privileges under Texas and federal law, including attorney- client and work-product privileges, shall be preserved and protected to the same extent that such privileges would be protected in a federal court proceeding applying Texas law. 41 ARTICLE XII MISCELLANEOUS Section 12.01 Taxes. The Physician Parties will pay all transfer taxes, sales and other taxes and charges, if any, which may become payable in connection with the transactions contemplated by the Transaction Documents. Section 12.02 Remedies Not Exclusive. No remedy conferred by any of the specific provisions of this Purchase Agreement or any other Transaction Document is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. The election of any one or more remedies by any party hereto shall not constitute a waiver of the right to pursue other available remedies. Section 12.03 Parties Bound. Except to the extent otherwise expressly provided herein, this Purchase Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives, administrators, guardians, successors and assigns; and no other person shall have any right, benefit or obligation hereunder. Section 12.04 Notices. All notices, reports, records or other communications that are required or permitted to be given to the parties under this Purchase Agreement shall be sufficient in all respects if given in writing and delivered in person, by telecopy, by overnight courier or by registered or certified mail, postage prepaid, return receipt requested, to the receiving party at the following address: If to the AOR Parties, addressed to: American Oncology Resources, Inc. 16825 Northchase Drive, Suite 1300 Houston, Texas 77060 Attention: R. Dale Ross Telecopy: 713-873-7762 With copies to: Mayor, Day, Caldwell & Keeton, L.L.P. 700 Louisiana, Suite 1900 Houston, Texas 77002 Attention: Diana M. Hudson Telecopy: 713-225-7047 42 If to the Physician Parties, addressed to: Central Texas Radiation Oncology Physicians, P.A. 1305 W. 34th Street, Suite 210 Austin, Texas 78705 Attention: President With copies to: Haynes & Boone, LLP 901 Main Street, Suite 3100 Dallas, Texas 75202 Attention: Lewis Lefco, Esq. Telecopy: 214-651-5940 or to such other address as such party may have given to the other parties by notice pursuant to this Section 12.04. Notice shall be deemed given on the date of delivery, in the case of personal delivery or telecopy, or on the delivery or refusal date, as specified on the return receipt, in the case of overnight courier or registered or certified mail. SECTION 12.05 CHOICE OF LAW. THIS PURCHASE AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT WITH RESPECT TO MATTERS OF LAW CONCERNING THE INTERNAL AFFAIRS OF ANY CORPORATE OR PARTNERSHIP ENTITY WHICH IS A PARTY TO OR THE SUBJECT OF THIS PURCHASE AGREEMENT, AND AS TO THOSE MATTERS THE LAW OF THE STATE OF INCORPORATION OR ORGANIZATION OF THE RESPECTIVE ENTITY SHALL GOVERN. THE PARTIES AGREE THAT IF A CONTROVERSY OR CLAIM BETWEEN OR AMONG THEM ARISES OUT OF OR IN RELATION TO THIS PURCHASE AGREEMENT AND RESULTS IN LITIGATION, THE COURTS OF TRAVIS COUNTY, TEXAS OR THE COURTS OF THE UNITED STATES OF AMERICA LOCATED IN TRAVIS COUNTY, TEXAS SHALL HAVE JURISDICTION TO HEAR AND DECIDE SUCH MATTER, AND THE PARTIES HEREBY SUBMIT TO JURISDICTION TO SUCH COURTS. Section 12.06 Entire Agreement; Amendments and Waivers. This Purchase Agreement, together with the other Transaction Documents and all Exhibits and Schedules hereto and thereto, constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties, and there are no warranties, representations or other agreements between the parties in connection with the subject matter hereof. No supplement, modification or waiver of this Purchase Agreement shall be binding unless it shall be specifically designated to be a supplement, modification or waiver of this Purchase Agreement and shall be executed in writing by the Party to be bound thereby. No waiver of any of the provisions of this Purchase Agreement shall be binding unless executed in writing by the Party to be bound thereby. No waiver of any of the provisions of this Purchase Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether 43 or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. Section 12.07 Confidentiality Agreements. The provisions of the Confidentiality Agreements, and the provisions of the Letter of Intent between AOR and the Physicians shall terminate and cease to be of any force or effect at and upon the Closing. Section 12.08 Reformation Clause. It is the intention of the parties hereto to conform strictly to applicable laws regarding the practice and regulation of medicine, whether such laws are now or hereafter in effect, including the laws of the United States of America, the State of Texas or any other applicable jurisdiction, and including any subsequent revisions to, or judicial interpretations of, those laws, in each case to the extent they are applicable to this Purchase Agreement (the "Applicable Laws"). Accordingly, if the transfer of any Nonmedical Assets by TROG to AOR Management violates any Applicable Law, then the parties hereto agree as follows: (a) the provisions of this Section 12.08 shall govern and control; (b) if neither of the parties hereto is materially economically disadvantaged, then any Nonmedical Asset, the transfer of which violates any Applicable Law, shall be deemed to have never been transferred to AOR Management; (c) if one or more of the parties hereto is materially economically disadvantaged, then the parties hereto agree to negotiate in good faith such changes to the structure and terms of the transactions provided for in this Purchase Agreement as may be necessary to make these transactions, as restructured, lawful under applicable laws and regulations, without materially disadvantaging either party; (d) this Purchase Agreement shall be deemed reformed; and (e) the parties to this Purchase Agreement shall execute and deliver all documents or instruments necessary to effect or evidence the provisions of this Section 12.08. Section 12.09 Assignment. The Purchase Agreement may not be assigned by operation of law or otherwise except that AOR shall have the right to assign this Purchase Agreement, at any time, to any direct or indirect wholly owned subsidiary of AOR. No such assignment shall relieve AOR of its obligations hereunder. Section 12.10 Attorneys' Fees. Except as otherwise specifically provided herein, if any action or proceeding is brought by any party with respect to this Purchase Agreement or the other Transaction Documents, or with respect to the interpretation, enforcement or breach hereof, the prevailing party in such action shall be entitled to an award of all reasonable costs of litigation or arbitration, including, without limitation, attorneys' fees, to be paid by the losing party, in such amounts as may be determined by the court having jurisdiction of such action or proceeding or by the arbitrators deciding such action or proceeding. Section 12.11 Further Assurances. From time to time hereafter and without further consideration, each of the parties hereto shall execute and deliver such additional or further instruments of conveyance, assignment and transfer and take such actions as any of the other parties hereto may reasonably request in order to more effectively consummate the transactions contemplated by the Transaction Documents or as shall be reasonably necessary or appropriate 44 in connection with the carrying out of the parties' respective obligations hereunder or the purposes of this Agreement. Section 12.12 Announcements and Press Releases. Any press releases or any other public announcements concerning this Purchase Agreement or the other Transaction Documents shall be approved by both AOR and CTROP; provided, however, that if any party reasonably believes that it has a legal obligation to make a press release and the consent of the other party cannot be obtained, then the release may be made without such approval. Section 12.13 Antidilution. (a) The existence of AOR's obligation to issue shares of AOR Common Stock pursuant to Section 2.02(c) hereof shall not affect in any way the right or power of AOR or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in AOR's capital structure or its business, or any merger or consolidation of AOR, or any issue of bonds, debentures, preferred or prior preference stock ahead of, or affecting the AOR Common Stock, or the rights thereof, as the dissolution or liquidation of AOR, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of similar character or otherwise. (b) If AOR effects a subdivision or consolidation of shares of AOR Common Stock or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of AOR Common Stock outstanding, without receiving compensation therefor in money, services or property, then the number of shares of AOR Common Stock subject to issuance pursuant to Section 2.02(c) hereunder shall be appropriately adjusted in such a manner to entitle the Physicians to receive the same total number and class of shares as it would have received had it received shares of AOR Common Stock immediately prior to the event requiring the readjustment. In the event of any capital reorganization or reclassification of the capital stock of AOR, any consolidation or merger of AOR with or into another corporation, or any sale, lease or disposition of all or substantially all of the assets of AOR that is effected in such a manner that holders of shares of AOR are entitled to receive additional shares, other securities and/or property (including cash) with respect to or in exchange for shares of AOR Common Stock, AOR shall, as a condition precedent to such transaction, cause effective provision to be made so that the Physicians shall thereafter have the right to receive the kind and amount of additional shares, other securities and/or other property receivable upon such event as it would have received had it received the shares of AOR Common Stock immediately prior to the event. Section 12.14 No Tax Representations. Each party acknowledges that it is relying solely on its advisors to determine the tax consequences of the transactions contemplated hereunder and that no representation or warranty has been made by any party as to the tax consequences of such transactions. 45 Section 12.15 No Rights as Stockholder. No Physician shall have any rights as a stockholder with respect to any shares of AOR Common Stock until the issuance of a stock certificate for such shares. Except as otherwise provided in Section 12.13, no adjustment shall be made for dividends or distributions or other rights for which the record date is prior to such date any such stock certificate is issued. Section 12.16 Multiple Counterparts. This Purchase Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 12.17 Headings. The headings of the several Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Purchase Agreement. Section 12.18 Severability. Each article, section, subsection and lesser section of this Purchase Agreement constitutes a separate and distinct undertaking, covenant or provision hereof. In the event that any provision of this Purchase Agreement shall finally be determined to be unlawful, such provision shall be deemed severed from this Purchase Agreement, but every other provision of this Purchase Agreement shall remain in full force and effect. 46 IN WITNESS WHEREOF, the parties have caused this Purchase Agreement to be duly executed as of April 25, 1997. AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP, a Texas limited partnership By: AOR Management Company of Texas, Inc., its General Partner By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- -------------------------------------------- SHANNON D. COX, M.D. -------------------------------------------- JOHN H. WILBANKS, M.D. -------------------------------------------- GEORGE R. BROWN, M.D. -------------------------------------------- BRUCE M. TURNER, M.D. 47 TEXAS RADIATION ONCOLOGY GROUP, LLP, a Texas limited liability partnership By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.C., a Texas professional association By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- AUSTIN CANCER CENTER, LIMITED, a Texas limited partnership By: GP Austin Cancer Center, Inc., Its General Partner By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- AUSTIN CANCER CENTER II, LIMITED, a Texas limited partnership By: GP Austin Cancer Center, Inc., Its General Partner By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 48 EX-2.3 4 MANAGEMENT SERVICES AGREEMENT Certain information in this exhibit is subject to a request for confidential treatment. In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended, such information has been omitted and filed separately with the Securities and Exchange Commission. The location of omitted information is indicated with an asterisk [*]. MANAGEMENT SERVICES AGREEMENT BY AND BETWEEN AMERICAN ONCOLOGY RESOURCES, INC. A DELAWARE CORPORATION AND CENTRAL TEXAS ONCOLOGY ASSOCIATES, P.A. A TEXAS PROFESSIONAL ASSOCIATION TABLE OF CONTENTS Page No. ARTICLE I. DEFINITIONS................................................... 2 Section 1.1 Adjusted Gross Revenue.................................... 2 Section 1.2 Adjustments............................................... 2 Section 1.3 Ancillary Revenue......................................... 2 Section 1.4 Base Management Fee....................................... 2 Section 1.5 Budget.................................................... 2 Section 1.6 Business Manager.......................................... 2 Section 1.7 Business Manager Consent.................................. 2 Section 1.8 Business Manager Expense.................................. 3 Section 1.9 Capitation/Case Rate Revenues............................. 3 Section 1.10 Confidential Information.................................. 3 Section 1.11 GAAP...................................................... 4 Section 1.12 Management Fee............................................ 4 Section 1.13 Management Services....................................... 4 Section 1.14 Management Services Agreement............................. 4 Section 1.15 Master Transaction Agreement.............................. 4 Section 1.16 Medical Services.......................................... 4 Section 1.17 New PA.................................................... 4 Section 1.18 New PA Account............................................ 4 Section 1.19 New PA Consent............................................ 4 Section 1.20 New PA Expense............................................ 5 Section 1.21 Office.................................................... 5 Section 1.22 Office Expense............................................ 5 Section 1.23 Performance Fee........................................... 6 Section 1.24 Physician................................................. 6 Section 1.25 Policy Board.............................................. 6 Section 1.26 Practice Territory........................................ 6 Section 1.27 Professional Services Revenues............................ 6 Section 1.28 Representatives........................................... 7 Section 1.29 State..................................................... 7 Section 1.30 Subcontractor Costs....................................... 7 Section 1.31 Term...................................................... 7 ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER................ 7 Section 2.1 Appointment............................................... 7 Section 2.2 Authority................................................. 7 Section 2.3 Patient Referrals......................................... 7 i Section 2.4 Internal Management of New PA............................. 8 Section 2.5 Practice of Medicine...................................... 8 ARTICLE III. RESPONSIBILITIES OF THE POLICY BOARD........................ 8 Section 3.1 Formation and Operation of the Policy Board............... 8 Section 3.2 Duties and Responsibilities of the Policy Board........... 8 Section 3.3 Medical Decisions......................................... 9 Section 3.4 Formation of Texas Oncology Associates.................... 9 ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER........... 10 Section 4.1 Office and Equipment...................................... 10 Section 4.2 Medical Supplies.......................................... 11 Section 4.3 Support Services.......................................... 11 Section 4.4 Quality Assurance, Risk Management, and Utilization Review 11 Section 4.5 Licenses and Permits...................................... 11 Section 4.6 Personnel................................................. 11 Section 4.7 Contract.................................................. 12 Section 4.8 Billing and Collection.................................... 12 Section 4.9 New PA Account............................................ 13 Section 4.10 Fiscal Matters............................................ 14 Section 4.11 Reports and Records....................................... 16 Section 4.12 Recruitment of New PA Physicians.......................... 17 Section 4.13 Confidential and Proprietary Information.................. 17 Section 4.14 Business Manager's Insurance.............................. 18 Section 4.15 No Warranty............................................... 18 Section 4.16 Noncompetition Covenant from Business Manager............. 18 ARTICLE V. COVENANTS AND RESPONSIBILITIES OF NEW PA...................... 18 Section 5.1 Organization and Operation................................ 18 Section 5.2 New PA Personnel.......................................... 19 Section 5.3 Professional Standards.................................... 19 Section 5.4 Medical Services.......................................... 20 Section 5.5 Code of Business Conduct.................................. 20 Section 5.6 Peer Review/Quality Assurance............................. 20 Section 5.7 New PA's Insurance........................................ 20 Section 5.8 Confidential and Proprietary Information.................. 21 Section 5.9 Noncompetition............................................ 21 Section 5.10 Name, Trademark........................................... 23 Section 5.11 Peer Review............................................... 23 ii ARTICLE VI. FINANCIAL ARRANGEMENT........................................ 23 Section 6.1 Definitions............................................... 23 Section 6.2 Management Fee............................................ 23 Section 6.3 Adjustments............................................... 24 Section 6.4 Reasonable Value.......................................... 24 Section 6.5 Payment of Management Fee................................. 25 Section 6.6 Accounts Receivable....................................... 25 Section 6.7 Disputes Regarding Fees................................... 25 ARTICLE VII. TERM AND TERMINATION........................................ 26 Section 7.1 Initial and Renewal Term.................................. 26 Section 7.2 Termination............................................... 26 Section 7.3 Effects of Termination.................................... 27 Section 7.4 Repurchase Obligation..................................... 28 Section 7.5 Repurchase Option......................................... 29 Section 7.6 Closing of Repurchase..................................... 29 ARTICLE VIII. MISCELLANEOUS.............................................. 30 Section 8.1 Administrative Services Only.............................. 30 Section 8.2 Status of Contractor...................................... 30 Section 8.3 Notices................................................... 30 Section 8.4 Governing Law............................................. 31 Section 8.5 Assignment................................................ 31 Section 8.5A PRN Assignment............................................ 32 Section 8.6 Arbitration............................................... 33 Section 8.7 Waiver of Breach.......................................... 33 Section 8.8 Enforcement............................................... 33 Section 8.9 Gender and Number......................................... 33 Section 8.10 Additional Assurances..................................... 33 Section 8.11 Consents, Approvals, and Exercise of Discretion........... 33 Section 8.12 Force Majeure............................................. 34 Section 8.13 Severability.............................................. 34 Section 8.14 Divisions and Headings.................................... 34 Section 8.15 Amendments and Management Services Agreement Execution.... 34 Section 8.16 Entire Management Services Agreement...................... 34 EXHIBIT 4.8 POWER OF ATTORNEY EXHIBIT 5.1 EMPLOYMENT AGREEMENT (SHAREHOLDERS) iii EXHIBIT 5.1A LIST OF SHAREHOLDERS EXHIBIT 5.1B BUY-SELL AGREEMENT EXHIBIT 5.2(a) EMPLOYMENT AGREEMENT (NONSHAREHOLDERS) EXHIBIT 5.5 CODE OF BUSINESS CONDUCT iv MANAGEMENT SERVICES AGREEMENT THIS MANAGEMENT SERVICES AGREEMENT is made and entered into effective as of September 1, 1996, by and between American Oncology Resources, Inc., a Delaware corporation ("Business Manager"), and Central Texas Oncology Associates, P.A., a Texas professional association ("New PA"). RECITALS This Management Services Agreement is made with reference to the following facts: A. New PA is a validly existing Texas professional association, formed for and engaged in the conduct of a medical practice and the provision of medical services to the general public in and around the Austin, Texas metropolitan areas through individual physicians who are licensed to practice medicine in the State of Texas and who are employed or otherwise retained by New PA. B. Business Manager is a validly existing Delaware corporation which is in the business of managing medical practices. C. New PA desires to focus its energies, expertise and time on the practice of medicine and on the delivery of medical services to patients, and to accomplish this goal it desires to delegate the increasingly more complex business functions of its medical practice to persons with business expertise. D. New PA wishes to engage Business Manager to provide such management, administrative and business services as are necessary and appropriate for the day-to-day administration of the nonmedical aspects of New PA's medical practice in the Practice Territory (as defined below), and Business Manager desires to provide such services all upon the terms and conditions hereinafter set forth. E. New PA and Business Manager have determined a fair market value for the services to be rendered by Business Manager, and based on this fair market value, have developed a formula for compensation for Business Manager that will allow the parties to establish a relationship permitting each party to devote its skills and expertise to the appropriate responsibilities and functions. F. Business Manager is willing to commit significant resources to New PA based upon the representations and warranties of New PA that the current shareholders of New PA will continue to practice medicine for New PA in the Practice Territory for five (5) years from the effective date of this Management Services Agreement. G. For accounting purposes, it is expressly recognized that for the purpose of assessing Business Manager's performance of its management, consulting, supervisory and other obligations under this Agreement and determining Business Manager's compensation therefor, all Office Expenses, whether such expenses are paid or incurred by New PA or Business Manager as defined herein, shall be considered costs of the Business Manager due to Business Manager's care, custody, and control over such expenses with respect to its management, supervisory, and related responsibilities, all as required by law and regulation. NOW, THEREFORE, in consideration of the mutual terms, covenants and conditions hereinabove and hereinafter set forth, the parties agree as follows: ARTICLE I. DEFINITIONS For the purposes of this Management Services Agreement, the following terms shall have the following meanings ascribed thereto, unless otherwise clearly required by the context in which such term is used. Section 1.1 Adjusted Gross Revenue. The term "Adjusted Gross Revenue" shall mean the sum of Professional Services Revenue and Ancillary Revenue. Section 1.2 Adjustments. The term "Adjustments" shall mean any adjustments on an accrual basis for uncollectible accounts, Medicare, Medicaid and other payor contractual adjustments, discounts, workers' compensation adjustments, professional courtesies, and other reductions in collectible revenue that result from activities that do not result in collectible charges. Section 1.3 Ancillary Revenue. The term "Ancillary Revenue" shall mean all other revenue actually recorded each month (net of Adjustments) that is not Professional Services Revenues or Subcontractor Capitation Revenues, and shall include (a) any amounts received by New PA as liquidated damages under Section 4.2 or Section 4.3 of any Physician's employment agreement and (b) any amounts paid to New PA under any Physician's Notes (as defined in the Master Transaction Agreement) that have been assigned or have been deemed to have been assigned to New PA under the terms of Section 2.02(b) of the Purchase Agreement. Section 1.4 Base Management Fee. The term "Base Management Fee" shall mean the amount set forth in Section 6.1. Section 1.5 Budget. The term "Budget" shall mean an operating budget and capital expenditure budget for each fiscal year as prepared by Business Manager and adopted by New PA. Section 1.6 Business Manager. The term "Business Manager" shall mean American Oncology Resources, Inc., a Delaware corporation or any entity that succeeds to the interests of American Oncology Resources, Inc., a Delaware corporation and to whom the obligations of Business Manager are assigned and transferred. Section 1.7 Business Manager Consent. The term "Business Manager Consent" shall mean the consent granted by Business Manager's representatives (or either representative) to the Policy Board created pursuant to Article III herein. When any provision of this Management Services Agreement requires Business Manager Consent, Business Manager Consent shall not be unreasonably withheld and shall be binding on Business Manager. Section 1.8 Business Manager Expense. The term "Business Manager Expense" shall mean an expense or cost incurred by the Business Manager and for which the Business Manager, and not New PA, is financially liable. Business Manager Expense shall specifically include the costs of American Oncology Resources, Inc. ("AOR") corporate personnel and the travel costs of such corporate personnel. Section 1.9 Capitation/Case Rate Revenues. The term "Capitation/Case Rate Revenues" shall mean all revenues from managed care organizations, third party payors, or employers where such payment is made based on a per member, case rate, or other similar basis (i.e., all payments which are not made based on a fee for service reimbursement methodology) for the partial or total medical needs of a subscribing patient. Capitation/Case Rate Revenues shall include any associated plan payments received such as patient co-payments, incentive bonuses, or incentive fund penalties. All Capitation/Case Rate Revenues shall be allocated in good faith on an actuarial basis as follows: (a) Professional Services Capitation: the portion or payments designated for physician services currently performed by New PA (e.g., office and hospital visits, chemotherapy administration, pharmaceuticals, laboratory, radiation, etc.). Professional Services Capitation shall be Professional Services Revenues; and (b) Subcontractor Capitation Revenues: the portion of payments designated for physician or other medical services that will be Subcontractor Costs (e.g., reinsurance, hospitalization, surgical procedures, stem cell harvesting, radiation therapy, etc.), including incentive bonuses or penalties, will first be allocated to cover subcontractor services, including an estimate for incurred but not reported claims. Subcontractor Capitation Revenues shall not be Professional Services Revenues, but shall be revenues of New PA. The final allocation methodology is subject to approval by the Policy Board or Joint Policy Board. 3 Section 1.10 Confidential Information. The term "Confidential Information" shall mean any information of Business Manager or New PA, as appropriate (whether written or oral), including all notes, studies, patient lists, information, forms, business or management methods, marketing data, fee schedules, or trade secrets of the Business Manager or of New PA, as applicable, whether or not such Confidential Information is disclosed or otherwise made available to one party by the other party pursuant to this Management Services Agreement. Confidential Information shall also include the terms and provisions of this Management Services Agreement and any transaction or document executed by the parties pursuant to this Management Services Agreement. Confidential Information does not include any information that (i) is or becomes generally available to and known by the public (other than as a result of an unpermitted disclosure directly or indirectly by the receiving party or its affiliates, advisors, or Representatives); (ii) is or becomes available to the receiving party on a nonconfidential basis from a source other than the furnishing party or its affiliates, advisors, or Representatives, provided that such source is not and was not bound by a confidentiality agreement with or other obligation of secrecy to the furnishing party of which the receiving party has knowledge at the time of such disclosure; or (iii) has already been or is hereafter independently acquired or developed by the receiving party without violating any confidentiality agreement with or other obligation of secrecy to the furnishing party. Section 1.11 GAAP. The term "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity or other practices and procedures as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of the determination. For purposes of this Management Services Agreement, GAAP shall be applied on an accrual basis in a manner consistent with the historic practices of the person to which the term applies. Section 1.12 Management Fee. The term "Management Fee" shall mean Business Manager's compensation established as described in Article VI hereof. Section 1.13 Management Services. The term "Management Services" shall mean the business, administrative, and management services to be provided for New PA, including without limitation the provision of equipment, supplies, support services, nonmedical personnel, office space, management, administration, financial recordkeeping and reporting, and other business office services. Section 1.14 Management Services Agreement. The term "Management Services Agreement" shall mean this Management Services Agreement by and between New PA and Business Manager and any amendments hereto as may be adopted as provided in this Management Services Agreement. 4 Section 1.15 Master Transaction Agreement. The term "Master Transaction Agreement" shall mean the agreement effective as of September 1, 1996, by and between American Oncology Resources, Inc. ("AOR"), AOR of Texas Management Limited Partnership, Central Texas Diagnostic Center, a professional association, New PA, and John D. Doty, M.D., Richard E. Helmer, M.D., Brenda L. Towell, M.D., Dennis A. Tweedy, M.D., J. Dudley Youman, M.D., Robert O. Kerr, M.D., Demetrius F. Loukas, M.D., Thomas B. Tucker, M.D., John J. Whitaker, M.D, Gregory B. Smith, M.D., Ellen B. Smith, M.D., and Mark A. Crozier, M.D. Section 1.16 Medical Services. The term "Medical Services" shall mean medical care and services, including but not limited to the practice of hematology and oncology and all related health care services provided by New PA through New PA's Physicians and other health care providers that are retained by or professionally affiliated with New PA. Section 1.17 New PA. The term "New PA" shall mean Central Texas Oncology Associates, P.A., a Texas professional association. Section 1.18 New PA Account. The term "New PA Account" shall mean the bank account of New PA established as described in Sections 4.8 and 4.9. Section 1.19 New PA Consent. The term "New PA Consent" shall mean the consent granted by New PA's representatives (or either representative) to the Policy Board created pursuant to Article III herein. When any provision of this Management Services Agreement requires New PA Consent, New PA Consent shall not be unreasonably withheld and shall be binding on New PA. Section 1.20 New PA Expense. The term "New PA Expense" shall mean an expense incurred by the Business Manager or New PA and for which New PA, and not the Business Manager, is financially liable. New PA Expense shall include such items as salaries for Physicians, physician assistants, and other physician "extenders," benefits, and other direct costs (including professional dues, subscriptions, continuing medical education expenses, and travel costs for continuing medical education or other business travel but excluding business travel requested by Business Manager which shall be an Office Expense). In the event New PA incurs consulting, accounting or legal fees without coordinating such engagement through Business Manager, all fees and expenses so incurred shall be New PA Expenses. Section 1.21 Office. The term "Office" shall mean any office space, clinic, facility, including satellite facilities, that Business Manager shall own or lease or otherwise procure for the exclusive use of New PA. Section 1.22 Office Expense. The term "Office Expense" shall mean all operating and non-operating expenses incurred by the Business Manager or New PA in the provision of services to New PA. Office Expense shall not include any State or federal income tax, any Medical Assets (as defined in the Master Transaction Agreement), any payment by AOR on the Note (as defined in 5 Article I of the Master Transaction Agreement), or any other expense that is a New PA Expense or a Business Manager Expense. Without limitation, Office Expense shall include: (a) the salaries, benefits, and other direct costs of all employees of Business Manager at the Office and the salaries, benefits, and other direct costs of the nonphysician employees of New PA (including those of any Business Manager managed care/payor contracting developer or New PA's pro rata share of such costs if such developer's services are not dedicated solely to New PA but is otherwise approved as an Office Expense in the Budget) but not the salaries, benefits, or other direct costs of the Physicians (which are New PA Expenses pursuant to Section 1.20 above); (b) the direct cost of any employee or consultant that provides services at or in connection with the Office for improved clinic performance, such as management, billing and collections, business office consultation, accounting and legal services, but only when such services are coordinated by Business Manager; (c) reasonable recruitment costs and out-of-pocket expenses of Business Manager or New PA associated with the recruitment of additional physician employees of New PA; (d) malpractice insurance expenses for Physicians, Business Manager employees, and nonphysician employees; comprehensive and general liability and vicarious liability insurance covering the Office and employees of New PA and Business Manager at the Office; and key person life and disability insurance on any shareholder or physician employee of New PA in amounts, if any, as determined reasonable and sufficient by Business Manager; proceeds from which shall not be Professional Services Revenues but shall be revenues of New PA. (e) the expense of using, leasing, purchasing or otherwise procuring the Office and related equipment, including depreciation but not including monies paid by third parties; (f) the cost of capital (whether as actual interest on indebtedness incurred on behalf of New PA or as reasonable imputed interest on capital advanced by Business Manager) to finance or refinance obligations of New PA, purchase medical or nonmedical equipment, or finance new ventures of New PA; (g) the Base Management Fee; (h) direct costs related to obtaining and maintaining Capitation/Case Rate Revenues contracts for professional medical services or health care service contracts with medical or health care providers not associated with New PA; (i) the reasonable travel expenses (except for the corporate staff of AOR) associated with attending meetings, conferences, or seminars to benefit New PA; 6 (j) the cost of medical supplies (including but not limited to drugs, pharmaceuticals, products, substances, items, or medical devices), office supplies, inventory, and utilities other than those medical supplies or medical inventory owned by New PA on the date of this Management Services Agreement; and (k) any state sales tax, assessed on those certain enumerated services in Article IV that have been determined to be taxable services by the state. Section 1.23 Performance Fee. The term "Performance Fee" shall mean the amount payable to the Business Manager, if any, determined under Section 6.2, as a Management Fee based upon the Business Manager assisting New PA to achieve certain pre-determined performance criteria. Section 1.24 Physician. The term "Physician" shall mean each individually licensed professional who is employed or otherwise retained by or associated with New PA, each of whom shall meet at all times the qualifications described in Section 5.2 and Section 5.3. Section 1.25 Policy Board. The term "Policy Board" shall refer to the body responsible for developing and implementing management and administrative policies for the overall operation of New PA's facilities. If New PA becomes a partner in Texas Oncology Associates, the term "Policy Board" may, as applicable, instead refer to the Joint Policy Board formed pursuant to the Affiliation Agreement (as defined by the Master Transaction Agreement). Section 1.26 Practice Territory. The term "Practice Territory" shall mean the geographic area within a radius of thirty (30) miles of any current or future facility from which New PA provides Medical Services in Texas, representing the geographic boundaries of the medical practice conducted by New PA. Section 1.27 Professional Services Revenues. The term "Professional Services Revenues" shall mean the sum of (i) all professional fees actually recorded each month on an accrual basis under GAAP (net of Adjustments) as a result of professional medical services and related health care services rendered by the Physicians whether rendered in an outpatient or inpatient setting, and (ii) Professional Services Capitation allocated to Professional Services Revenues. Professional Services Revenues shall not include those monies specifically excluded from Professional Fees pursuant to Section 1.2 of the separate Physician Employment Agreement executed by Physicians, liquidated damages and applicable insurance proceeds. Section 1.28 Representatives. The term "Representatives" shall mean a party's officers, directors, employees, or other agents or representatives. Section 1.29 State. The term "State" shall mean the State of Texas. 7 Section 1.30 Subcontractor Costs. The term "Subcontractor Costs" shall mean the amounts due third parties for providing medical services pursuant to Capitation/Case Rate Revenues. Section 1.31 Term. The term "Term" shall mean the initial and any renewal periods of duration of this Management Services Agreement as described in Section 7.1. ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER Section 2.1 Appointment. New PA hereby appoints Business Manager as its sole and exclusive agent for the management, and administration of the business functions and business affairs of New PA, and Business Manager hereby accepts such appointment, subject at all times to the provisions of this Management Services Agreement. Section 2.2 Authority. Consistent with the provisions of this Management Services Agreement, Business Manager shall have the responsibility and commensurate authority to provide Management Services for New PA. Subject to the terms and conditions of this Management Services Agreement, Business Manager is hereby expressly authorized to provide the Management Services in any reasonable manner Business Manager deems appropriate to meet the day-to-day requirements of the business functions of New PA. Business Manager is also expressly authorized to negotiate and execute on behalf of New PA contracts that do not relate to the provision of Medical Services, provided that such contracts shall be consistent with the Budget. New PA shall give Business Manager thirty (30) days prior notice of New PA's intent to execute any agreement obligating New PA to perform Medical Services or otherwise creating a binding legal obligation on New PA. Unless an expense is expressly designated as a Business Manager Expense in this Management Services Agreement, all expenses incurred by Business Manager in providing services pursuant to this Management Services Agreement shall be an Office Expense. The parties acknowledge and agree that New PA, through its Physicians, shall be responsible for and shall have complete authority, responsibility, supervision, and control over the provision of all Medical Services and other professional health care services performed for patients, and that all diagnoses, treatments, procedures, and other professional health care services shall be provided and performed exclusively by or under the supervision of Physicians as such Physicians, in their sole discretion, deem appropriate. Business Manager shall have and exercise absolutely no control or supervision over the provision of Medical Services. Section 2.3 Patient Referrals. Business Manager and New PA agree that the benefits to New PA hereunder do not require, are not payment for, and are not in any way contingent upon the referral, admission, or any other arrangement for the provision of any item or service offered by Business Manager to patients of New PA in any facility, laboratory, infusion center, or health care operation controlled, managed, or operated by Business Manager. Section 2.4 Internal Management of New PA. Matters involving the internal management, control, or finances of New PA, including specifically the allocation of professional 8 income among the shareholders and Physician employees of New PA, tax planning, and investment planning, shall remain the responsibility of New PA and the shareholders of New PA. Section 2.5 Practice of Medicine. The parties acknowledge that Business Manager is not authorized or qualified to engage in any activity that may be construed or deemed to constitute the practice of medicine. To the extent any act or service herein required by Business Manager should be construed by a court of competent jurisdiction or by the Texas State Board of Medical Examiners constitute the practice of medicine, the requirement to perform that act or service by Business Manager shall be deemed waived and unenforceable. ARTICLE III RESPONSIBILITIES OF THE POLICY BOARD Section 3.1 Formation and Operation of the Policy Board. The parties hereby establish a Policy Board which shall be responsible for developing and implementing management and administrative policies for the overall operation of New PA's facilities. The Policy Board shall consist of six (6) members. Business Manager shall designate, in its sole discretion, two (2) members of the Policy Board. The members of New PA Executive Committee shall be the four (4) New PA members of the Policy Board. The Policy Board members selected by New PA shall be full-time physician employees of New PA practicing in the Practice Territory. Each party's representatives to the Policy Board shall have the authority to make decisions on behalf of the respective party. Except as may otherwise be provided, the number of total votes the members shall be authorized to cast shall be equal as between Business Manager and New PA and a majority vote of the members of the Policy Board shall be the act of the Policy Board. Section 3.2 Duties and Responsibilities of the Policy Board. The Policy Board, except as otherwise limited by Section 3.3, shall have the following duties, obligations, and authority: (a) Capital Improvements and Expansion. Any renovation and expansion plans and capital equipment expenditures with respect to New PA's facilities shall be reviewed and approved by the Policy Board and shall be based upon economic feasibility, physician support, productivity and then current market conditions. (b) Marketing and Advertising. All marketing and other advertising of the services performed at New PA's facilities shall be subject to the prior review and approval of the Policy Board. (c) Patient Fees; Collection Policies. As a part of the annual operating budget, in consultation with New PA and Business Manager, the Policy Board shall review and approve the fee schedule and collection policies for all physician and ancillary services rendered by New PA. (d) Ancillary Services. The Policy Board shall approve New PA-provided ancillary services based upon the pricing, access to and quality of such services. 9 (e) Provider and Payor Relationships. Decisions regarding the establishment or maintenance of relationships with institutional health care providers and third party payors shall be approved by the Policy Board in consultation with New PA. The Policy Board shall review and approve discounted fee schedules, including capitated fee arrangements, and shall allocate Capitation/Case Rate Revenues. (f) Strategic Planning. The Policy Board shall develop long-term strategic planning objectives. (g) Capital Expenditures. The Policy Board shall determine the priority of major capital expenditures. (h) Physician Hiring. The Policy Board shall recommend to New PA and confirm or approve New PA's decisions regarding the number and type of physicians required for the efficient operation of New PA's facilities. The Policy Board shall review and approve any variations to the restrictive covenants in any physician employment contract. (i) Fee Dispute Resolution. Upon submission by New PA of a dispute concerning a set-off or reduction in Management Fees, the Policy Board shall consider, develop, and implement a resolution to New PA and Business Manager. (j) Grievance Referrals. The Policy Board shall consider and make recommendations to New PA regarding grievances pertaining to matters not specifically addressed in this Management Services Agreement as referred to it by New PA's Board of Directors. Section 3.3 Medical Decisions. Despite the above listing of activities and areas of interest, all medical decisions will be made solely by physicians, but nonphysician members of the Policy Board may participate in the discussion process. The physician members of the Policy Board shall review and resolve issues relating to: (a) Types and levels of Medical Services to be provided; (b) Recruitment of physicians to New PA, including the specific qualifications and specialties of recruited physicians; (c) Acquisition of or merger with any other medical practices in the Practice Territory; (d) Fee schedules; and (e) Any other function or decision that the parties agree is medical related. 10 The Policy Board meetings shall be held as mutually agreed, but at least quarterly, in Texas. Meetings shall be open to any shareholder in New PA. Section 3.4 Formation of Texas Oncology Associates. If New PA becomes a partner in Texas Oncology Associates ("Global P") pursuant to Section 2.05 of the Master Transaction Agreement, the Policy Board shall delegate to the Joint Policy Board (created pursuant to the Affiliation Agreement as defined in the Master Transaction Agreement) decision-making authority for those matters specifically described in the Affiliation Agreement. It is intended that the Joint Policy Board assume responsibility for only those matters that are specified in the Affiliation Agreement which have an effect on two or more parties to the Affiliation Agreement. However, it is intended that notwithstanding the formation of the Joint Policy Board, the Policy Board shall continue in effect with its same rights, obligations and duties subject only to the rights of the Joint Policy Board as described in this Section 3.4. In addition, New PA agrees that it shall fully cooperate with Business Manager to obtain a provider number for Global P, that it shall cease to use its provider number when Global P obtains a provider number, and that it shall begin to use the provider number of Global P. ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER During the Term, Business Manager shall serve generally in a supervisory capacity in order to best oversee all aspects of the Management Services provided hereunder, specifically by arranging and coordinating such Management Services as Business Manager, in its supervisory capacity, deems necessary and appropriate to facilitate the day-to-day administration of the business aspects of New PA's operations, including without limitation those set forth in this Article IV in accordance with all law, rules, regulations and guidelines applicable to the provision of Management Services. Section 4.1 Office and Equipment. (a) Subject to Section 4.1(b), as necessary and appropriate, taking into consideration the professional concerns of New PA, Business Manager shall lease, acquire or otherwise procure an Office in a location or locations reasonably acceptable to New PA and shall permit New PA to use the Office. Any Office procured by Business Manager for the use by New PA shall be procured at commercially reasonable rates. Any move from New PA's present practice location(s) shall be done only after Business Manager has received New PA's Consent. (b) In the event New PA is the lessee of the Office under a lease with an unrelated and nonaffiliated lessor, Business Manager may require New PA to assign such lease to Business Manager upon receipt of consent from the lessor. New PA shall use its best efforts to assist in obtaining the lessor's consent to the assignment. Upon request, New PA shall execute any instruments and shall take any acts that Business Manager may deem necessary to accomplish the assignment of the lease. Any expenses incurred in the assignment shall be Office Expenses. 11 (c) Business Manager shall provide all nonmedical equipment, fixtures, office supplies, furniture and furnishings deemed reasonably necessary by Business Manager for the operation of the Office and reasonably necessary for the provision of Medical Services. (d) Business Manager shall provide, finance, or cause to be provided or financed medical related equipment as required by New PA. Subject to economic feasibility, New PA shall have final authority in all medical equipment selections, and Business Manager shall have no authority in regard to medical equipment selection issues. Business Manager may, however, advise New PA on the relationship between its medical equipment decisions and the overall administrative and financial operations of the practice. All medical and nonmedical equipment, other than Physician-owned automobiles, acquired for the use of New PA shall be owned by Business Manager. (e) Business Manager shall be responsible for the care, custody, and control, including repair and maintenance of the Office, consistent with Business Manager's responsibilities under the terms of any lease or other use arrangement, and for the repair, maintenance, and replacement of all equipment other than such repairs, maintenance and replacement necessitated by the negligence or willful misconduct of New PA, its Physicians or other personnel employed by New PA, the repair or replacement of which shall be a New PA Expense and not an Office Expense. Section 4.2 Medical Supplies. Business Manager shall order, procure, purchase and provide on behalf of and as agent for New PA all reasonable medical supplies unless otherwise prohibited by federal and/or State law. Furthermore, Business Manager shall ensure that the Office is at all times adequately stocked with the medical supplies that are necessary and appropriate for the operation of New PA and required for the provision of Medical Services. The ultimate oversight, supervision and ownership for all medical supplies is and shall remain the sole responsibility of New PA. As used in this provision the term "medical supplies" shall mean all drugs, pharmaceuticals, products, substances, items or devices whose purchase, possession, maintenance, administration, prescription or security requires the authorization or order of a licensed health care provider or requires a permit, registration, certification or other governmental authorization held by a licensed health care provider as specified under any federal and/or State law. Section 4.3 Support Services. Business Manager shall coordinate, supervise, or otherwise arrange for all printing, stationery, forms, postage, duplication or photocopying services, and other support services as are reasonably necessary and appropriate for the operation of the Office and the provision of Medical Services therein. Section 4.4 Quality Assurance, Risk Management, and Utilization Review. Business Manager shall assist New PA in New PA's establishment and implementation of procedures to ensure the consistency, quality, appropriateness, and medical necessity of Medical Services provided by New PA, and shall arrange for administrative support for New PA's overall quality assurance, risk management, and utilization review programs. Business Manager shall perform these tasks in a 12 manner to ensure the confidentiality and nondiscoverability of these program actions to the fullest extent allowable under State and federal law. Section 4.5 Licenses and Permits. Business Manager shall, on behalf of and in the name of New PA, coordinate all development and planning processes, and apply for and use reasonable efforts to obtain and maintain all federal, State, and local licenses and regulatory permits required for or in connection with the operation of New PA and equipment (existing and future) located at the Office, other than those relating to the practice of medicine or the administration of drugs by Physicians retained by or associated with New PA. Section 4.6 Personnel. Except as specifically provided in Section 5.2(b) of this Management Services Agreement, Business Manager shall, consistent with the Budget, coordinate and supervise New PA's retention of and shall oversee the selection, hiring, training, supervision and termination of all management, administrative, clerical, secretarial, bookkeeping, accounting, payroll, billing and collection and other nonprofessional personnel of New PA to enable Business Manager to perform its duties and obligations under this Management Services Agreement. The Business Manager personnel required hereunder shall include, but not be limited to, an executive director, a practice administrator, a controller, an assistant controller, a managed care/payor contracting developer, and a business office manager, as applicable, the majority of whose time shall be devoted to performing supervisory and managerial functions on behalf of Business Manager, and each of whom shall maintain time records to reflect the appropriate allocation between supervision versus performance of such duties. Business Manager shall have sole responsibility for determining the salaries and providing such fringe benefits, and for withholding, as required by law, any sums for income tax, unemployment insurance, social security, or any other withholding required by applicable law or governmental requirement. Section 4.7 Contract Negotiations. Upon the request of New PA, Business Manager shall advise New PA with respect to and negotiate, either directly or on New PA's behalf, as appropriate, all contractual arrangements with third parties as are reasonably necessary and appropriate for New PA's provision of Medical Services, including, without limitation, negotiated price agreements with third party payors, alternative delivery systems, or other purchasers of group health care services. No contract or arrangement regarding the provision of Medical Services shall be entered into without New PA Consent. Section 4.8 Billing and Collection. On behalf of and for the account of New PA, Business Manager shall assist New PA in New PA's establishment and maintenance of credit and billing and collection policies and procedures, and shall coordinate and supervise New PA personnel to ensure the timely billing and collection of all professional and other fees for all billable Medical Services provided by New PA or Physicians. Business Manager shall advise and consult with New PA regarding the fees for Medical Services provided by New PA; it being understood, however, that New PA shall establish the fees to be charged for Medical Services and that Business Manager shall have no authority whatsoever with respect to the establishment of such fees. In connection with the 13 billing and collection services to be provided hereunder, and throughout the Term (and thereafter as provided in Section 7.3), New PA hereby grants to Business Manager an exclusive special power of attorney and appoints Business Manager as New PA's exclusive true and lawful agent and attorney-in-fact, and Business Manager hereby accepts such special power of attorney and appointment, for the following purposes: (a) To supervise and coordinate the billing of New PA's patients, in the name of Global P and on behalf of New PA or Global P, as applicable, for all billable Medical Services provided by New PA to patients. (b) To supervise and coordinate the billing in Global P's name and on New PA's or Global P's behalf, as applicable, all claims for reimbursement or indemnification from Blue Shield/Blue Cross, insurance companies, Medicare, Medicaid, and all other third party payors or fiscal intermediaries for all covered billable Medical Services provided by New PA to patients. (c) To ensure the collection and receipt in Business Manager's name and for Business Manager's account all accounts receivable of New PA purchased by Business Manager, and to deposit such collections in an account selected by Business Manager and maintained in Business Manager's name. (d) To ensure the collection and receipt in Global P's name and on New PA's or Global P's behalf, as applicable, all accounts receivable generated by such billings and claims for reim bursement that have not been purchased by Business Manager, to administer such accounts including, but not limited to, (i) extending the time of payment of any such accounts for cash, credit or otherwise; (ii) discharging or releasing the obligors of any such accounts; (iii) with the consent of the Policy Board, suing, assigning or selling at a discount such accounts to collection agencies; or (iv) with the consent of the Policy Board, taking other measures to require the payment of any such ac counts. (e) To deposit all amounts collected in Global P's name and on behalf of New PA or Global P, as applicable, into New PA Account which shall be and at all times remain in New PA's name. New PA covenants to transfer and deliver to Business Manager for deposit into New PA Account or itself to make such deposit of all funds received by New PA from patients or third party payors for Medical Services. Upon receipt by Business Manager of any funds from patients or third party payors or from New PA pursuant hereto for Medical Services, Business Manager shall immedi ately deposit same into the New PA Account. Business Manager shall disburse such deposited funds to creditors and other persons on behalf of New PA, maintaining records of such receipt and disbursement of funds as directed by New PA. (f) To take possession of, endorse in the name of New PA or Global P, as appropriate, and deposit into the New PA Account any notes, checks, money orders, insurance payments, and any other instruments received in payment for Medical Services. 14 (g) To sign checks, drafts, bank notes or other instruments on behalf of New PA or Global P, as appropriate, and to make withdrawals from the New PA Account for payments specified in this Management Services Agreement and as requested from time to time by New PA. Upon request of Business Manager, New PA shall execute and deliver to the financial institution wherein the New PA Account is maintained, such additional documents or instruments as may be necessary to evidence or effect the special and limited power of attorney granted to Business Manager by New PA pursuant to this Section 4.8 or pursuant to Section 4.9 of this Management Services Agreement. The special and limited power of attorney granted herein shall be coupled with an interest and shall be irrevocable except with Business Manager's written consent. The irrevocable power of attorney shall expire on the later of when this Management Services Agreement has been terminated, when all accounts receivable purchased by Business Manager have been collected or when all Management Fees due to Business Manager have been paid. If Business Manager assigns this Management Services Agreement in accordance with its terms, then New PA shall execute a power of attorney in favor of the assignee and in the form of Exhibit 4.8 attached hereto. Section 4.9 New PA Account. (a) Power of Attorney. Business Manager shall have access to the New PA Account solely for the purposes stated herein. In connection herewith and throughout the Term (and thereafter as provided in Section 7.3), New PA hereby grants to Business Manager an exclusive special power of attorney for the purposes herein and appoints Business Manager as New PA's exclusive true and lawful agent and attorney-in-fact, and Business Manager hereby accepts such special power of attorney and appointment, to deposit into the New PA Account all funds, fees, and revenues generated from the New PA's provision of Medical Services and collected by Business Manager, and to make withdrawals from New PA Account for payments specified in this Management Services Agreement and as requested from time-to-time by New PA. Notwithstanding the exclusive special power of attorney granted to Business Manager hereunder, New PA may, upon reasonable advance notice to Business Manager, draw checks on the New PA Account; provided, however, that New PA shall neither draw checks on the New PA Account nor request Business Manager to do so if the balance remaining in the New PA Account after such withdrawal would be insufficient to enable Business Manager to pay on behalf of New PA any Office Expense attributable to the operations of New PA or to the provision of Medical Services, and/or any other obligations of New PA. Disbursements made without prior New PA Consent shall be consistent with the type and amount of expenditures authorized by the Budget. Limits on authority to sign checks and purchase orders shall be mutually agreed upon by Business Manager and New PA's representatives to the Policy Board (or Joint Policy Board). (b) Priority of Payments. Each month Business Manager shall apply funds that are in the New PA Account in the following order of priority: 15 (1) (2) (3) [*] (4) (5) Section 4.10 Fiscal Matters. (a) Annual Budget. (1) Initial Budget. The initial Budget shall be agreed upon by the parties before the execution of this Management Services Agreement. To assure that New PA receives the full amount of the charges for the provision of Medical Services by Physician, physician assistants and all other "physician extenders" who can bill for their own services, such amounts shall be set forth in the initial Budget and shall be increased or decreased as set forth in the Budget and mutually agreed upon by Business Manager and New PA. The initial Budget shall also set forth the criteria under which Business Manager shall be entitled to receive the Performance Fee and the Budget shall also set forth the amount of the Performance Fee. (2) Process for Succeeding Budgets. Annually and at least thirty (30) days prior to the commencement of each fiscal year of New PA, Business Manager, in consultation with New PA's representatives to the Policy Board (or Joint Policy Board), shall prepare and deliver to New PA for New PA's approval a proposed Budget, setting forth an estimate of New PA's revenues and expenses for the upcoming fiscal year (including, without limitation, the Management Fee and Performance Fee associated with the services provided by Business Manager hereunder). New PA shall review the proposed Budget and either approve the proposed Budget or request any changes within twenty-one (21) days after receiving the proposed Budget. Upon the Budget's adoption by New PA after reasonable review and comment, the Budget may be revised or modified only after consultation with the Business - ----------------- *This information has been omitted from this exhibit and is subject to a request for confidential treatment. In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended, such information has been filed separately with the Securities and Exchange Commission. 16 Manager. If New PA does not adopt the proposed Budget, the Budget process shall be governed by Section 4.10(a)(4). (3) Succeeding Budgets; Special Rates. In each succeeding Budget, unless the parties otherwise mutually agree, New PA shall continue to retain for New PA Expenses the full amount of the charges for the provision of Medical Services, as adjusted as provided for in paragraph 4.10(a)(1) above. In each succeeding Budget, unless the parties otherwise mutually agree, the criteria for the Performance Fee and Business Manager's right to receive the Performance Fee shall be continued on the same basis. If the option is exercised pursuant to that certain Option Agreement of even date herewith between the shareholder of New PA and the Optionee (as defined in the Option Agreement) such that the Optionee becomes the controlling shareholder of New PA, the amount of the Performance Fee and method of determining the Performance Fee for all succeeding years shall not be changed and shall be determined exactly as specified in the last Budget approved before the exercise of the option, and New PA shall continue to retain the full amount of the charges for professional services, as adjusted as provided in paragraph 4.10(a)(1) above for New PA Expense through the Term. (4) Deadlock. In the event the parties are unable to agree on a Budget by the beginning of the fiscal year, until an agreement is reached, the Budget (including the performance criteria set forth therein) for the prior year (as adjusted in accordance with Section 4.10(a)(1)) shall be deemed to be adopted as the Budget for the current year, with each line item in the Budget (with the exception of the Base Management Fee) increased or decreased by (i) the percentage by which the Adjusted Gross Revenue in the current year, excluding any liquidated damages paid or payable by any Physician, has increased or decreased compared to the corresponding period of the prior year; (ii) the increase or decrease from the prior year in the Consumer Price Index - Health Medical Services, Austin Texas area; and (iii) the proportionate increase or decrease in mutually agreed upon personnel costs as measured by the increase or decrease in full-time equivalent personnel. (5) Obligation of Business Manager. Business Manager shall use commercially reasonable efforts to manage and administer the operations of New PA as herein provided so that the actual revenues, costs and expenses of the operation and maintenance of New PA during any applicable period of New PA's fiscal year shall be consistent with the Budget. (b) Accounting and Financial Records. Business Manager shall establish and administer accounting procedures, controls, and systems for the development, preparation, and safekeeping of administrative or financial records and books of account relating to the business and financial affairs of New PA and the provision of Medical Services all of which shall be prepared and maintained in accordance with GAAP and applicable laws and regulations. Business Manager shall prepare and deliver to New PA, within ninety (90) days of the end of each calendar year, a balance sheet and a profit and loss statement reflecting the financial status of New PA as of the end of such calendar 17 year, all of which shall be prepared in accordance with GAAP consistently applied. In addition, Business Manager shall prepare and deliver such other financial statements or records as New PA may reasonably request. (c) Review of Expenditures. Either one of New PA's representatives to the Policy Board shall review all expenditures related to the operation of New PA, but neither shall have the power to prohibit or invalidate any expenditure that is consistent with the Budget. Business Manager shall not make any expenditures not consistent with the Budget without New PA Consent. (d) Tax Matters. (1) In General. Business Manager shall prepare or arrange for the preparation by an accountant approved in advance by New PA (which approval shall not be unreasonably withheld) of all appropriate tax returns and reports required of New PA. (2) Sales, Franchise, Use or Other Taxes. Business Manager and New PA acknowledge and agree that although Business Manager generally acts in a supervisory and consultative capacity hereunder by coordinating, overseeing and otherwise facilitating the provision of services, there are certain services provided by Business Manager hereunder that may be subject to State sales, franchise, use or other taxes and for which Business Manager may have a legal obligation to collect such taxes and to remit same to the appropriate tax collection authorities. New PA agrees to the payment of such taxes as an Office Expense. Section 4.11 Reports and Records. (a) Medical Records. Business Manager shall establish, monitor, and maintain procedures and policies for the timely creation, preparation, filing and retrieval of all medical records generated by New PA in connection with New PA's provision of Medical Services; and, subject to applicable law, shall ensure that medical records are promptly available to Physicians and any other appropriate persons. All such medical records shall be retained and maintained in accordance with all applicable State and federal laws relating to the confidentiality and retention thereof. All medical records shall be and remain the property of New PA. (b) Other Reports and Records. Business Manager shall timely create, prepare, and file such additional reports and records as are reasonably necessary and appropriate for New PA's provision of Medical Services, and shall be prepared to analyze and interpret such reports and records upon the request of New PA. 18 Section 4.12 Recruitment of New PA Physicians. Upon New PA's request, Business Manager shall coordinate, supervise or perform all administrative services reasonably necessary and appropriate to recruit potential physician personnel to become employees of New PA. Business Manager shall provide New PA with model agreements to document New PA's employment, retention or other service arrangements with such individuals. It will be and remain the sole and complete responsibility of New PA to interview, select, contract with, supervise, control and terminate all Physicians performing Medical Services or other professional services, and Business Manager shall have no authority whatsoever with respect to such activities. Section 4.13 Confidential and Proprietary Information. (a) Business Manager will not disclose any Confidential Information of New PA to other persons without New PA's express written authorization, such Confidential Information will not be used in any way directly or indirectly detrimental to New PA, and Business Manager will keep such Confidential Information confidential and will ensure that its affiliates and advisors who have access to such Confidential Information comply with these nondisclosure obligations; provided, however, that Business Manager may disclose Confidential Information to those of its Representatives who need to know Confidential Information for the purposes of this Management Services Agreement, it being understood and agreed to by Business Manager that such Representatives will be informed of the confidential nature of the Confidential Information, will agree to be bound by this Section, and will be directed by Business Manager not to disclose to any other person any Confidential Information. Business Manager agrees to be responsible for any breach of this Section by its affiliates, advisors, or Representatives. If Business Manager is requested or required (by oral questions, interrogatories, requests for information or documents, subpoenas, civil investigative demands, or similar processes) to disclose or produce any Confidential Information furnished in the course of its dealings with New PA or its affiliates, advisors, or Representatives, Business Manager will (i) provide New PA with prompt notice thereof and copies, if possible, and, if not, a description, of the Confidential Information requested or required to be produced so that New PA may seek an appropriate protective order or waive compliance with the provisions of this Section and (ii) consult with New PA as to the advisability of New PA's taking of legally available steps to resist or narrow such request. Business Manager further agrees that, if in the absence of a protective order or the receipt of a waiver hereunder Business Manager is nonetheless, in the written opinion of its legal counsel, compelled to disclose or produce Confidential Information concerning New PA to any tribunal legally authorized to request and entitled to receive such Confidential Information or to stand liable for contempt or suffer other censure or penalty, Business Manager may disclose or produce such Confidential Information to such tribunal without liability hereunder; provided, however, that Business Manager shall give New PA written notice of the Confidential Information to be so disclosed or produced as far in advance of its disclosure or production as is practicable and shall use its best efforts to obtain, to the greatest extent practicable, an order or other reliable assurance that confidential treatment will be accorded to such Confidential Information so required to be disclosed or produced. 19 (b) Notwithstanding clause (a) above, Business Manager may share, subject to the restrictions of this section, with other professional corporations, associations, medical practices, or health care delivery entities the practice statistics of New PA, including utilization review data, quality assurance data, cost data, outcomes data, or other practice data. The practice statistics may be disclosed within New PA, to AOR or AOR's management, to other medical groups with whom Business Manager has a management relationship, to managed care providers or other third party payors for the purpose of obtaining or maintaining third party payor contracts, or to financial analysts and underwriters; provided that any disclosure outside of New PA or AOR for any purpose not related to managed care contracting shall not identify any Physician by name without New PA Consent. In addition, Business Manager may disclose all practice-related information necessary or desirable in connection with any public or private offering of any AOR security, or in accordance with its reporting requirements under the Securities Exchange Act of 1934, but no such data will disclose or divulge patient identifying information. Section 4.14 Business Manager's Insurance. Throughout the Term, Business Manager shall, as an Office Expense, obtain and maintain with commercial carriers, through self-insurance or some combination thereof, appropriate workers' compensation coverage for Business Manager's employed personnel provided pursuant to this Management Services Agreement, and professional, casualty and comprehensive general and vicarious liability insurance covering Business Manager, Business Manager's personnel, and all of Business Manager's equipment in such amounts, on such basis and upon such terms and conditions as Business Manager deems appropriate. Upon the request of New PA, Business Manager shall provide New PA with a certificate evidencing such insurance coverage. Business Manager may also carry, as an Office Expense, key person life and disability insurance on any shareholder or Physician employee of New PA in amounts determined reasonable and sufficient by Business Manager. Business Manager shall be the owner and beneficiary of any such insurance. Section 4.15 No Warranty. New PA acknowledges that Business Manager has not made and will not make any express or implied warranties or representations that the services provided by Business Manager will result in any particular amount or level of medical practice or income to New PA. Section 4.16 Noncompetition Covenant from Business Manager. Business Manager represents, warrants and covenants that during the Term, neither Business Manager nor any person or entity affiliated directly or indirectly with Business Manager will, anywhere in the Practice Territory, enter into a direct or indirect relationship similar to the relationship between New PA and Business Manager with, or acquire the nonmedical assets of, any medical oncology practice group without approval of the Policy Board. 20 ARTICLE V. COVENANTS AND RESPONSIBILITIES OF NEW PA Section 5.1 Organization and Operation. New PA, as a continuing condition of Business Manager's obligations under this Management Services Agreement, shall at all times during the Term be and remain legally organized and operated to provide Medical Services in a manner consistent with all State and federal laws. New PA shall operate and maintain within the Practice Territory a full time practice of medicine specializing in the provision of oncology Medical Services, and for the first five (5) years of the Term of this Management Services Agreement, New PA shall maintain and enforce employment agreements in the form of Exhibit 5.1 with the shareholders of New PA specified in Exhibit 5.1A. New PA shall also maintain and enforce employment agreements in the form of Exhibit 5.2(a) with any nonshareholder Physician employees, as applicable, of New PA. New PA shall not amend the employment agreements in any manner which would cause the employment agreement to be in breach of the terms of this Management Services Agreement. Recognizing that Business Manager would not have entered into this Management Services Agreement but for New PA's covenant to maintain employment agreements with its original shareholders, New PA agrees that any damages, compensation, payment, or settlement received by New PA as liquidated damages from a Physician who terminates the employment agreement without cause or whose employment agreement is terminated by New PA for cause shall be treated as Ancillary Revenue under this Agreement. Throughout the term of this Management Services Agreement, New PA shall maintain and enforce written Buy-Sell Agreements in the form of Exhibit 5.1B with the shareholders of New PA specified in Exhibit 5.1A, and shall cause all new shareholders of New PA to execute such agreements prior to becoming a shareholder in New PA. New PA shall not amend the Buy-Sell Agreement or waive any rights thereunder without the prior written consent of Business Manager. Section 5.2 New PA Personnel. (a) Physician Personnel. New PA shall retain, as a New PA Expense and not as an Office Expense, that number of Physicians, as are reasonably necessary and appropriate in the sole discretion of New PA for the provision of Medical Services. Each Physician shall hold and maintain a valid and unrestricted license to practice medicine in the State, and shall be competent in the practice of oncology, including such subspecialties as medical infusion, radiation therapy or other subspecialties that such Physician will practice on behalf of New PA. New PA shall enter into and maintain with each such retained Physician a written employment agreement substantially in the form of either Exhibit 5.1 for shareholders of New PA or consistent with Exhibit 5.2(a) for nonshareholders and will not commit and permit to remain outstanding any breach of such employment agreement that would allow the Physician to terminate for cause. New PA shall be responsible for paying the compensation and benefits as applicable, for all Physicians and any other physician personnel or other contracted or affiliated physicians, and for withholding, as required by law, any sums for income tax, unemployment insurance, social security, or any other withholding required by applicable law. Business Manager may, on behalf of New PA, establish and administer 21 the compensation program with respect to such individuals in accordance with the written agreement between New PA and each Physician. Business Manager shall neither control nor direct any Physician in the performance of Medical Services for patients. (b) Nonphysician Health Care Personnel. All nonphysician health care personnel who provide patient care services in the diagnostic areas shall be employed by or retained by New PA as an Office Expense and shall be under New PA's control, supervision and direction in the performance of Medical Services for patients; however, supervision and direction of such personnel's daily performance of all other responsibilities shall be Business Manager's as set forth in Section 4.6 of this Management Services Agreement. Section 5.3 Professional Standards. As a continuing condition of Business Manager's obligations hereunder, each Physician and any other physician personnel retained by New PA to provide Medical Services must (i) comply with, be controlled and governed by and otherwise provide Medical Services in accordance with the Code of Business Conduct referenced in Section 5.5 and all applicable federal, State and municipal laws, rules, regulations, ordinances and orders, and the ethics and standard of care of the medical community wherein the principal office of each Physician is located and (ii) obtain and retain appropriate medical staff membership with appropriate clinical privileges at any hospital or health care facility at which Medical Services are to be provided. Procurement of temporary staff privileges pending the completion of the medical staff approval process shall satisfy this provision, provided the Physician actively pursues full appointment and actually receives full appointment within a reasonable time. Section 5.4 Medical Services. New PA shall ensure that Physicians and nonphysician health care personnel are available to provide Medical Services to patients. In the event that Physicians employed by, or shareholders of, New PA are not available to provide Medical Services coverage, New PA shall assure consistent and continuous coverage, which shall include New PA's engagement and retention of locum tenens coverage as necessary and appropriate. Physicians retained on a locum tenens basis shall meet all of the requirements of Section 5.3, and the cost of providing locum tenens coverage shall be a New PA Expense. With the assistance of the Business Manager, New PA and the Physicians shall be responsible for scheduling Physician and nonphysician health care personnel coverage of all medical procedures. New PA shall cause all Physicians to develop and promote New PA. Section 5.5 Code of Business Conduct. New PA shall adopt by resolution the American Oncology Resources, Inc. Code of Business Conduct ("Code") in substantially the form of Exhibit 5.5, and shall require the compliance of all New PA shareholders and employees with such Code. Section 5.6 Peer Review/Quality Assurance. New PA shall adopt a peer review/quality assurance program to monitor and evaluate the quality and cost- effectiveness of Medical Services provided by physician personnel of New PA. Upon request of New PA, Business Manager shall pro vide administrative assistance to New PA in performing its peer review/quality assurance activities, 22 but only if such assistance can be provided consistent with maintaining the confidentiality and nondiscoverability of the processes and actions of the peer review/quality assurance process of New PA. Section 5.7 New PA's Insurance. New PA shall, as an Office Expense, obtain and maintain with commercial carriers reasonably acceptable to Business Manager appropriate worker's compensation coverage for New PA's employed personnel, if any, and professional and comprehensive general liability and vicarious liability insurance covering New PA and each of the Physicians New PA retains or employs to provide Medical Services. The comprehensive general liability and vicarious liability coverage shall be in the minimum amount of Two Million Dollars ($2,000,000); and professional liability coverage shall be in the minimum amount of Two Million Dollars ($2,000,000) for each occurrence and Four Million Dollars ($4,000,000) annual aggregate. The insurance policy or policies shall provide for at least thirty (30) days advance written notice to New PA from the insurer as to any alteration of coverage, cancellation, or proposed cancellation for any cause. New PA shall cause to be issued to Business Manager by such insurer or insurers a certificate reflecting such coverage and shall provide written notice to Business Manager promptly upon receipt of notice given to Physician of the cancellation or proposed cancellation of such insurance for any cause. Upon the termination of this Management Services Agreement for any reason, New PA shall obtain and maintain as a New PA Expense "tail" professional liability coverage, in the amounts specified in this section for the reporting period or extended reporting period that is standard in the industry or as may otherwise be required by law, and New PA shall be responsible for paying all premiums for "tail" insurance coverage. In no event shall the professional liability insurance carrier be replaced or changed without New PA Consent. Section 5.8 Confidential and Proprietary Information. New PA will not disclose any Confidential Information of Business Manager without Business Manager's express written authorization, such Confidential Information will not be used in any way directly or indirectly detrimental to Business Manager, and New PA will keep such Confidential Information confidential and will ensure that its affiliates and advisors who have access to such Confidential Information comply with these nondisclosure obligations; provided, however, that New PA may disclose Confidential Information to those of its Representatives who need to know Confidential Information for the purposes of this Management Services Agreement, it being understood and agreed to by New PA that such Representatives will be informed of the confidential nature of the Confidential Information, will agree to be bound by this Section, and will be directed by New PA not to disclose to any other person any Confidential Information. New PA agrees to be responsible for any breach of this Section by its affiliates, advisors, or Representatives. If New PA is requested or required (by oral questions, interrogatories, requests for information or documents, subpoenas, civil investigative demands, or similar processes) to disclose or produce any Confidential Information furnished in the course of its dealings with Business Manager or its affiliates, advisors, or Representatives, New PA will (i) provide Business Manager with prompt notice thereof and copies, if possible, and, if not, a description, of the Confidential Information requested or required to be produced so that Business Manager may seek an appropriate protective order or waive compliance with the provisions of this 23 Section and (ii) consult with Business Manager as to the advisability of Business Manager's taking of legally available steps to resist or narrow such request. New PA further agrees that, if in the absence of a protective order or the receipt of a waiver hereunder New PA is nonetheless, in the written opinion of its legal counsel, compelled to disclose or produce Confidential Information concerning Business Manager to any tribunal legally authorized to request and entitled to receive such Confidential Information or to stand liable for contempt or suffer other censure or penalty, New PA may disclose or produce such Confidential Information to such tribunal without liability hereunder; provided, however, that New PA shall give Business Manager written notice of the Confidential Information to be so disclosed or produced as far in advance of its disclosure or production as is practicable and shall use its best efforts to obtain, to the greatest extent practicable, an order or other reliable assurance that confidential treatment will be accorded to such Confidential Information so required to be disclosed or produced. Section 5.9 Noncompetition. New PA hereby recognizes and acknowledges that Business Manager will incur substantial costs in providing the equipment, support services, personnel, management, administration, and other items and services that are the subject matter of this Management Services Agreement and that in the process of providing services under this Management Services Agreement, New PA will be privy to financial and Confidential Information, to which New PA would not otherwise be exposed. The parties also recognize that the services to be provided by Business Manager will be feasible only if New PA operates an active practice to which the Physicians associated with New PA devote their full professional time and attention. New PA agrees and acknowledges that the noncompetition covenants described hereunder are necessary for the protection of Business Manager, and that Business Manager would not have entered into this Management Services Agreement without the following covenants. (a) During the Term of this Management Services Agreement and except for its obligations pursuant to this Management Services Agreement, New PA shall not establish, operate, or provide Medical Services at a medical office, clinic or other health care facility anywhere within the Practice Territory. (b) Except as specifically agreed to by Business Manager in writing, New PA covenants and agrees that during the Term of this Management Services Agreement and for a period of five (5) years from the date this Management Services Agreement is terminated, New PA shall not directly or indirectly own (excluding ownership of less than five percent (5%) of the equity of any publicly traded entity), manage, operate, control, or be otherwise associated with, lend funds to, lend its name to, or maintain any interest whatsoever in any enterprise (i) having to do with the provision, distribution, promotion, or advertising of any type of management or administrative services or products to third parties in competition with Business Manager, in the Practice Territory; and/or (ii) offering any type of service(s) or product(s) to third parties similar to those offered by Business Manager to New PA in the Practice Territory. Notwithstanding the above restriction, nothing herein shall prohibit New PA or any of its shareholders from providing management and administrative 24 services to its or their own medical practices after the termination of this Management Services Agreement. (c) The written employment agreements described in Section 5.1 shall contain covenants of the shareholder employees pursuant to which the shareholders agree not to compete with New PA within the Practice Territory for one (1) year after termination of the employment agreement. (d) New PA shall obtain and enforce formal written agreements from its nonshareholder physician employees in the form of Exhibit 5.2(a), pursuant to which the employees agree not to compete with New PA within the Practice Territory for one (1) year after termination of the employment agreement. (e) New PA understands and acknowledges that the foregoing provisions in Section 5.8 and Section 5.9 are designed to preserve the goodwill of Business Manager and the goodwill of the individual Physicians of New PA. Accordingly, if New PA breaches any obligation of Section 5.8 or Section 5.9, in addition to any other remedies available under this Management Services Agreement, at law or in equity, Business Manager shall be entitled to enforce this Management Services Agreement by injunctive relief and by specific performance of the Management Services Agreement, such relief to be without the necessity of posting a bond, cash or otherwise. Additionally, nothing in this paragraph shall limit Business Manager's right to recover any other damages to which it is entitled as result of New PA's breach. If any provision of the covenants is held by a court of competent jurisdiction to be unenforceable due to an excessive time period, geographic area, or restricted activity, the covenant shall be reformed to comply with such time period, geographic area, or restricted activity that would be held enforceable. Section 5.10 Name, Trademark. New PA represents and warrants that until New PA becomes a partner in Global P, New PA shall conduct its professional practice under the name of, and only under the name of "Central Texas Oncology Associates, P.A." and that such name is the name of New PA under State law, and that New PA is the sole and absolute owner of the name. New PA covenants and promises that, without the prior written consent of the Business Manager, New PA will not: (a) take any action or omit to take any action that is reasonably likely to result in the change or loss of the name; (b) license, sell, give, or otherwise transfer the name or the right to use the name to any medical practice, physician, professional corporation, professional association, or any other entity; or (c) cease conducting the professional practice of New PA under the name. 25 New PA covenants and promises that, when New PA becomes a partner in Global P pursuant to Section 1.1 of the Partnership Agreement of Global P, New PA shall cease conducting the professional practice of New PA under the name and shall begin conducting the professional practice of New PA under the name of Global P. Section 5.11 Peer Review. New PA shall designate a committee of Physicians to function as a medical peer review committee to review credentials of potential recruits, perform quality assurance functions, and otherwise resolve medical competence issues. The medical peer review committee shall function pursuant to formal written policies and procedures. ARTICLE VI. FINANCIAL ARRANGEMENT Section 6.1 Definitions. For purposes of this Article VI, capitalized terms used herein shall have the meanings ascribed as follows: (a) Monthly Fee. The Monthly Fee shall be [*] (b) Fee Amount. The Fee Amount shall be [*] (c) Base Management Fee. The Base Management Fee shall be [*] Section 6.2 Management Fee. New PA and Business Manager agree to the compensation set forth herein as being paid to Business Manager in consideration of a substantial commitment made by Business Manager hereunder and that such fees are fair and reasonable. Each month, in the priority established by Section 4.9(b), Business Manager shall cause the following to be paid: (i) the amount of all Office Expenses (other than the Base Management Fee) paid on behalf of New PA. (ii) the Base Management Fee. (iii) the Performance Fee if the pre-established criteria for payment of the Performance Fee set forth in the Budget have been met. Section 6.3 Adjustments. Adjustments to the Management Fee calculation shall be made as follows: - ---------------- *This information has been omitted from this exhibit and is subject to a request for confidential treatment. In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended, such information has been filed separately with the Securities and Exchange Commission. 26 (a) Upon termination of this Management Services Agreement, a liability for the Management Fee shall be established in an amount equal to the difference, if any, between [*] (b) After the fifth anniversary of this Management Services Agreement, the Monthly Fee shall [*] (c) If there are not sufficient funds to pay the Performance Fee, unpaid amounts shall accumulate and carry over from month to month until paid. No amounts carried over shall earn interest. Furthermore, the amount of the Performance Fee paid will be monitored and reconciled consistent with the Budget period and any overpayments of the Performance Fee shall be promptly refunded by the Business Manager. Section 6.4 Reasonable Value. Payment of the Base Management Fee or Performance Fee is not intended to be and shall not be interpreted or applied as permitting Business Manager to share in New PA's fees for Medical Services or any other services. Rather, such payment is acknowledged as the parties' negotiated agreement as to the reasonable fair market value of the management expertise, strategic planning, capital access, resource retention, equipment, contract analysis and support, purchasing, office space, and other management and administrative oversight services supervised, coordinated, arranged for or otherwise facilitated by Business Manager pursuant to this Management Services Agreement, as more specifically set forth in Article IV herein, as well as for the personnel services Business Manager provides under Section 4.6 hereof, considering the nature and extent of the services required and the risks assumed by Business Manager. Section 6.5 Payment of Management Fee. To facilitate the payment of the Management Fee as provided in Section 6.2 hereof, New PA hereby expressly authorizes Business Manager to make withdrawals of the Management Fee from the New PA Account as such fee becomes due and payable during the Term and thereafter as provided in Section 7.3. Section 6.6 Accounts Receivable. To assure that New PA receives the entire amount of professional fees for its services and to assist New PA in maintaining reasonable cash flow for the payment of Office Expenses, Business Manager may purchase, with recourse to New PA for the amount of the purchase, the accounts receivable of New PA arising during the previous month by transferring the amount set forth below into the New PA Account. The consideration for the - ---------------- *This information has been omitted from this exhibit and is subject to a request for confidential treatment. In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended, such information has been filed separately with the Securities and Exchange Commission. 27 purchase shall be an amount equal to the Adjusted Gross Revenue recorded each month (according to GAAP on an accrual basis net of Adjustments) less the Office Expenses due to Business Manager under Section 6.2 above. Although it is the intention of the parties that Business Manager purchase and thereby become the owner of the accounts receivable of New PA, in the event such purchase shall be ineffective for any reason, New PA is concurrently herewith granting to Business Manager a security interest in the accounts receivable, and New PA shall cooperate with Business Manager and execute all documents in connection with the pledge of such accounts receivable to Business Manager. All collections in respect to such accounts receivable purchased by Business Manager shall be received by Business Manager as the agent of New PA and shall be endorsed to Business Manager and deposited in a bank account at a bank designated by Business Manager. To the extent New PA comes into possession of any payments in respect of such accounts receivable, New PA shall direct such payments to Business Manager for deposit in bank accounts designated by Business Manager. Section 6.7 Disputes Regarding Fees. (a) It is the parties' intent that any disputes regarding performance standards of the Business Manager be resolved to the extent possible by good faith negotiation. To that end, the parties agree that if New PA in good faith believes that Business Manager has failed to perform its obligations, and that as a result of such failure, New PA is entitled to a set-off or reduction in its Management Fees, New PA shall give Business Manager notice of the perceived failure and request in the notice a set-off or reduction in Management Fees. Business Manager and New PA shall then negotiate the dispute in good faith, and if an agreement is reached, the parties shall implement the resolution without further action. (b) If the parties cannot reach a resolution within a reasonable time, New PA shall, at its option, submit the dispute to mediation. Mediation shall be conducted in Austin, Texas in accordance with the rules of the National Health Lawyers Association Alternative Dispute Resolution Service, and if the amount in dispute is $25,000 or less, the mediation shall be binding. (c) If the amount in dispute is greater than $25,000, or if the mediation process fails to resolve the dispute, the dispute shall be submitted by either party to binding arbitration as described by Article XI of the Purchase Agreement (as defined by the Master Transaction Agreement). ARTICLE VII TERM AND TERMINATION Section 7.1 Initial and Renewal Term. The Term of this Management Services Agreement will be for an initial period of forty (40) years after the effective date, and shall be automatically renewed for successive five (5) year periods thereafter, provided that neither Business Manager nor New PA shall have given notice of termination of this Management Services Agreement at least one hundred twenty (120) days before the end of the initial term or any renewal term, or unless otherwise terminated as provided in Section 7.2 of this Management Services Agreement. 28 Section 7.2 Termination. (a) Termination By Business Manager. Business Manager may terminate this Management Services Agreement upon the occurrence of any one of the following events which shall be deemed to be "for cause": (i) The revocation, suspension, cancellation or restriction of any New PA shareholder Physician's license to practice medicine in the State if, in the reasonable discretion of the Business Manager, New PA will not be financially viable after such revocation, suspension, cancellation, or restriction; (ii) New PA's loss or suspension of its Medicare or Medicaid provider number, and/or New PA's restriction from treating beneficiaries of the Medicare or Medicaid programs, except as effected in connection with the formation and operation of Global P; (iii) The dissolution of New PA or the filing of a petition in voluntary bankruptcy, an assignment for the benefit of creditors, or other action taken voluntarily or involuntarily under any State or federal statute for the protection of debtors; (iv) New PA materially defaults in the performance of any of its material duties or obligations hereunder, and such default continues for sixty (60) days after New PA receives notice of the default. (b) Termination By New PA. New PA may terminate this Management Services Agreement upon any of the following occurrences which shall be deemed to be "for cause": (i) In the event that Business Manager materially defaults in the performance of any of its material obligations hereunder and such default continues for sixty (60) days after Business Manager receives notice of the default; (ii) In the event that an arbitrator pursuant to Section 8.6 makes a final determination that Business Manager has materially failed to perform its obligations to New PA hereunder, New PA may terminate this Management Services Agreement upon ten (10) days written notice to Business Manager; (iii) In the event Business Manager in two (2) separate instances over a five (5) year period, intentionally and in bad faith misappropriates or misapplies New PA's funds in amounts exceeding one hundred thousand dollars 29 ($100,000) in each such instance, and after the parties agree, (or an arbitrator determines the appropriate amount of such misappropriation or misapplication if the parties cannot agree) and Business Manager fails to correct such misappropriation or inappropriate application within thirty (30) days of agreement by the parties or decision of the arbitrator that describes with reasonable particularity the misappropriation or misapplication; (iv) If there is payment Event of Default under any Note or under any Short-Term Note (each as defined in the Master Transaction Agreement) or Business Manager breaches its delivery obligation for the shares of AOR Common Stock and if such payment Event of Default or failure to deliver the shares of AOR Common Stock continues for ten (10) days after notice has been given to Business Manager, New PA may terminate this Management Services Agreement not less than thirty (30) days after Business Manager's receipt of such notice; or (v) In the event there is a dissolution of Business Manager. Termination by New PA hereunder shall require the affirmative vote of three- fourths of the outstanding voting shares of the common shareholders of New PA entitled to vote. (c) Termination by Agreement. In the event New PA and Business Manager shall mutually agree in writing, this Management Services Agreement may be terminated on the date specified in such written agreement. (d) Legislative, Regulatory or Administrative Change. In the event there shall be a change in the Medicare or Medicaid statutes, State statutes, case laws, regulations or general instructions, the interpretation of any of the foregoing, the adoption of new federal or State legislation, or a change in any third party reimbursement system, any of which are reasonably likely to materially and adversely affect the manner in which either party may perform or be compensated for its services under this Management Services Agreement or which shall make this Management Services Agreement unlawful, the parties shall immediately enter into good faith negotiations regarding a new service arrangement or basis for compensation for the services furnished pursuant to this Management Services Agreement that complies with the law, regulation, or policy and that approximates as closely as possible the economic position of the parties prior to the change. If good faith negotiations cannot resolve the matter, it shall be submitted to arbitration as referenced in Section 8.6. Section 7.3 Effects of Termination. Upon termination of this Management Services Agreement, as hereinabove provided, neither party shall have any further obligations hereunder except for (i) obligations accruing prior to the date of termination, including, without limitation, payment of the Management Fees and New PA Expenses relating to services provided prior to the termination of this Management Services Agreement, (ii) obligations, promises, or covenants set 30 forth herein that are expressly made to extend beyond the Term, including, without limitation, indemnities and noncompetition provisions, which provisions shall survive the expiration or termination of this Management Services Agreement by Business Manager for cause, and (iii) the obligations of New PA and Business Manager described in Section 7.4. In effectuating the provisions of this Section 7.3, New PA specifically acknowledges and agrees that Business Manager shall continue to collect and receive on behalf of New PA all cash collections from accounts receivable in existence at the time this Management Services Agreement is terminated, it being understood that such cash collections will represent, in part, compensation to Business Manager for management services already rendered and compensation on accounts receivable purchased by Business Manager. Upon the expiration or termination of this Management Services Agreement for any reason or cause whatsoever, Business Manager shall immediately surrender to New PA all books and records pertaining to New PA's medical practice. Section 7.4 Repurchase Obligation. Upon termination of this Management Services Agreement by Business Manager for cause or by New PA without cause, New PA shall: (a) Purchase from Business Manager at book value the intangible assets, deferred charges, and all other amounts on the books of the Business Manager relating to the Management Services Agreement as adjusted through the last day of the month most recently ended prior to the date of such termination in accordance with GAAP to reflect amortization or depreciation of the intangible assets, deferred charges, or covenants; (b) Purchase from Business Manager any real estate owned by Business Manager and used as an Office at the greater of the appraised fair market value thereof or the then book value thereof. In the event of any repurchase of real property, the appraised value shall be determined by Business Manager and New PA, each selecting a duly qualified appraiser, who in turn will agree on a third appraiser. This agreed-upon appraiser shall perform the appraisal which shall be binding on both parties. In the event either party fails to select an appraiser within fifteen (15) days of the selection of an appraiser by the other party, the appraiser selected by the other party shall make the selection of the third party appraiser; (c) Purchase at book value all improvements, additions, or leasehold improvements that have been made by Business Manager at any Office and that relate solely to the performance of Business Manager's obligations under this Management Services Agreement; (d) Assume all debt, and all contracts, payables, and leases that are obligations of Business Manager and that relate principally to the performance of Business Manager's obligations under this Management Services Agreement or the properties leased or subleased hereunder by Business Manager; and (e) Purchase from Business Manager at book value all of the equipment listed as set forth in the Master Transaction Agreement or an exhibit thereto, including all replacements and additions 31 thereto made by Business Manager pursuant to the performance of its obligations under this Management Services Agreement, and all other assets, including inventory and supplies, tangibles and intangibles, set forth on the books of the Business Manager as adjusted through the last day of the month most recently ended prior to the date of such termination in accordance with GAAP to reflect operations of the Office, depreciation, amortization, and other adjustments of assets shown on the books of the Business Manager. New PA acknowledges that certain assets listed above have been pledged as collateral pursuant to that certain Loan Agreement dated December 5, 1994 between AOR, as borrower, and First Union National Bank of North Carolina, as agent for various lenders. Section 7.5 Repurchase Option. Upon termination of this Management Services Agreement by New PA for cause or Business Manager without cause, New PA shall have the option but not the obligation to do all or none of the following: (a) Purchase from Business Manager any real estate owned by Business Manager and used as an Office at the greater of the appraised fair market value thereof or the then book value thereof. In the event of any repurchase of real property, the appraised value shall be determined by Business Manager and New PA, each selecting a duly qualified appraiser, who in turn will agree on a third appraiser. This agreed-upon appraiser shall perform the appraisal which shall be binding on both parties. In the event either party fails to select an appraiser within fifteen (15) days of the selection of an appraiser by the other party, the appraiser selected by the other party shall make the selection of the third party appraiser; (b) Purchase at book value all improvements, additions, or leasehold improvements that have been made by Business Manager at any Office and that relate solely to the performance of Business Manager's obligations under this Management Services Agreement; (c) Assume all debt, and all contracts, payables, and leases that are obligations of Business Manager and that relate principally to the performance of Business Manager's obligations under this Management Services Agreement or the properties leased or subleased by Business Manager; and (d) Purchase from Business Manager at book value all of the equipment listed as set forth in the Master Transaction Agreement or an exhibit thereto, including all replacements and additions thereto made by Business Manager pursuant to the performance of its obligations under this Management Services Agreement, and all other tangible assets, including inventory and supplies, set forth on the books of the Business Manager as adjusted through the last day of the month most recently ended prior to the date of such termination in accordance with GAAP to reflect operations of the Office, depreciation, amortization, and other adjustments of assets shown on the books of the Business Manager. 32 New PA acknowledges that certain assets listed above have been pledged as collateral pursuant to that certain Loan Agreement dated December 5, 1994 between AOR, as borrower, and First Union National Bank of North Carolina, as agent for various lenders. Section 7.6 Closing of Repurchase. New PA shall pay cash for the repurchased assets. The amount of the purchase price shall be reduced by the amount of debt and liabilities of Business Manager, if any, assumed by New PA. New PA and any Physician associated with New PA shall execute such documents as may be required to assume the liabilities set forth in Section 7.4(d) or Section 7.5(c) and to remove Business Manager from any liability with respect to such repurchased asset and with respect to any property leased or subleased by Business Manager. The closing date for the repurchase shall be determined by Business Manager but shall in no event occur sooner than sixty (60) days or later than one hundred eighty (180) days from the date of the notice of termination. The termination of this Management Services Agreement shall become effective upon the closing of the sale of the assets under Section 7.4 or the delivery of assets (or the date upon which New PA is prepared to receive the assets) under Section 7.5 and all parties shall be released from any restrictive covenants provided for in Section 4.16 or Section 5.9 on the closing date. From and after any termination, each party shall provide the other party with reasonable access of the books and records then owned by it to permit such requesting party to satisfy reporting and contractual obligations that may be required of it. ARTICLE VIII MISCELLANEOUS Section 8.1 Administrative Services Only. Nothing in this Management Services Agreement is intended or shall be construed to allow Business Manager to exercise control or direction over the manner or method by which New PA and its Physicians perform Medical Services or other professional health care services. The rendition of all Medical Services, including, but not limited to, infusion therapy and the prescription or administration of medicine and drugs shall be the sole responsibility of New PA and its Physicians, and Business Manager shall not interfere in any manner or to any extent therewith. Nothing contained in this Management Services Agreement shall be construed to permit Business Manager to engage in the practice of medicine, it being the sole intention of the parties hereto that the services to be rendered to New PA by Business Manager are solely for the purpose of providing nonmedical management and administrative services to New PA so as to enable New PA to devote its full time and energies to the professional conduct of its medical practice and provision of Medical Services to its patients and not to administration, or practice management. Section 8.2 Status of Contractor. It is expressly acknowledged that the parties hereto are "independent contractors," and nothing in this Management Services Agreement is intended and nothing shall be construed to create an employer/employee, partnership, or joint venture relationship, or to allow either to exercise control or direction over the manner or method by which the other performs the services that are the subject matter of this Management Services Agreement; provided always that the services to be provided hereunder shall be furnished in a manner consistent with the 33 standards governing such services and the provisions of this Management Services Agreement. Each party understands and agrees that (i) the other will not be treated as an employee for federal tax purposes, (ii) neither will withhold on behalf of the other any sums for income tax, unemployment insurance, social security, or any other withholding pursuant to any law or requirement of any governmental body or make available any of the benefits afforded to its employees, (iii) all of such payments, withholdings, and benefits, if any, are the sole responsibility of the party incurring the liability, and (iv) each will indemnify and hold the other harmless from any and all loss or liability arising with respect to such payments, withholdings, and benefits, if any. Section 8.3 Notices. Any notice, demand, or communication required, permitted, or desired to be given hereunder shall be in writing and shall be served on the parties at the following respective addresses: New PA: Central Texas Oncology Associates, P.A. 711 West 38th Street, Suite B-1 Austin, Texas 78705 Attn: President with a copy to: Cox & Smith Incorporated 112 East Pecan Street, Suite 1800 San Antonio, Texas 78205 Attn: David L. Butler Business Manager: American Oncology Resources, Inc. 16825 Northchase Drive, Suite 1300 Houston, Texas 77060 with a copy to: American Oncology Resources, Inc. 16825 Northchase Dr., Suite 1300 Houston, Texas 77060 Attn: Dale Ross or to such other address, or to the attention of such other person or officer, as any party may by written notice designate. Any notice, demand, or communication required, permitted, or desired to be given hereunder shall be sent either (a) by hand delivery, in which case notice shall be deemed received when actually delivered, (b) by prepaid certified or registered mail, return receipt requested, in which case notice shall be deemed received five calendar days after deposit, postage prepaid in the United States Mail, or (c) by a nationally recognized overnight courier, in which case notice shall be deemed received one business day after deposit with such courier. Section 8.4 Governing Law. This Management Services Agreement shall be governed by the laws of the State of Texas applicable to agreements to be performed wholly within the State. 34 Texas law was chosen by the parties after negotiation to govern interpretation of this Management Services Agreement because Harris County, Texas is the seat of management for Business Manager. The federal and State courts of Travis County, Texas shall be the exclusive venue for any litigation, special proceeding, or other proceeding between the parties that may arise out of, or be brought in connection with or by reason of, this Management Services Agreement. Section 8.5 Assignment. Except as may be herein specifically provided to the contrary, this Management Services Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors, and assigns; provided, however, that New PA may not assign this Management Services Agreement without the prior written consent of Business Manager, which consent may be withheld. The sale, transfer, pledge, or assignment of any of the common shares held by any shareholder of New PA or the issuance by New PA of common or other voting shares to any other person, or any combination of such transactions within a period of one (1) year, such that the existing shareholders in New PA fail to maintain a majority of the voting interests in New PA shall be deemed an attempted assignment by New PA, and shall be null and void unless consented to in writing by Business Manager prior to any such transfer or issuance. Any breach of this provision, whether or not void or voidable, shall constitute a material breach of this Management Services Agreement, and in the event of such breach, Business Manager may terminate this Management Services Agreement upon twenty-four (24) hours notice to New PA. The parties agree that American Oncology Resources, Inc. ("AOR") shall assign and deliver all of its rights and obligations hereunder to its wholly-owned subsidiary, AOR of Texas Management Limited Partnership ("AOR Management"). AOR Management shall then become the Business Manager under this Management Services Agreement. In addition, Business Manager or the transferee shall have the right to (i) assign all (but not less than all) its rights and obligations hereunder to any third party, and (ii) collaterally assign its interest in this Management Services Agreement and its right to collect Management Fees hereunder to any financial institution or other third party in a bonafide financing transaction without the consent of New PA. New PA acknowledges that Business Manager's interest in this Management Services Agreement and Business Manager's right to collect Management Fees under this Management Services Agreement have been collaterally assigned pursuant to that certain Loan Agreement dated December 5, 1994 between AOR, as borrower, and First Union National Bank of North Carolina, as agent for various lenders. Section 8.5A PRN Assignment. (a) If Business Manager assigns all of its rights, benefits and privileges in and under this Management Services Agreement to Physician Reliance Network, Inc., to any direct or indirect subsidiaries of Physician Reliance Network, Inc. or to any entity that Physician Reliance Network, Inc. directly or indirectly controls (collectively, "PRN"), and if PRN assumes all of Business Manager's liabilities and obligations under this Management Services Agreement, then, Business Manager shall immediately give written notice to New PA and for a period of thirty (30) days after receipt of such notice of such assignment to, and assumption by, PRN of this Management Services 35 Agreement, New PA shall have the right to terminate this Management Services Agreement by paying in cash to PRN the net aggregate amount of consideration that PRN paid to Business Manager for such assignment and assumption. Business Manager shall not be entitled to assign less than all of its rights, benefits and privileges in and under this Management Services Agreement to PRN, nor to permit the assignment of less than all of Business Manager's liabilities and obligations hereunder. (b) If there is a Change of Control (as defined below), then, for a period of thirty (30) days after the Change of Control Purchase Price (as defined below) is determined, New PA shall have the right to terminate this Management Services Agreement by paying in cash to PRN the Change of Control Purchase Price. (c) In the event that New PA terminates this Management Services Agreement pursuant to this Section 8.5A, then, other than Section 8.6 hereof, no provision of this Management Services Agreement shall have any force or effect whatsoever, including without limitation Section 5.9 or Section 7.4 hereof. (d) For purposes of this Section 8.5A, "Change of Control" shall mean the occurrence of any one or more of the following: (i) the Business Manager (or any entity or entities that control(s) the Business Manager) shall merge or consolidate with or into PRN with the effect that those persons who were the shareholders of PRN immediately prior to the effective date of such merger or consolidation hold more than 50% of the combined voting power of the outstanding securities of the surviving corporation of such merger or the corporation resulting from such consolidation ordinarily having the right to vote in the election of directors or (ii) PRN shall, directly or indirectly, as a result of a tender or exchange offer, open market purchase(s), privately negotiated purchase(s) or otherwise have become the "beneficial owner" (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the Business Manager (or any entity or entities that control(s) Business Manager) representing 50% or more of the combined voting power of the then outstanding securities of the Business Manager (or such entity or entities that control(s) Business Manager) having the right to vote in the election of directors. (e) For purposes of this Section 8.5A, "Change of Control Purchase Price" shall mean the fair market value of Business Manger's rights, benefits, and privileges and liabilities and obligations under this Management Services Agreement, and shall be determined as follows. Within thirty days after a Change of Control, PRN shall notify New PA in writing of such Change of Control. Within thirty (30) days after receipt of such notice, PRN shall select an independent accounting firm or valuation firm (the costs of which are to be borne by PRN), and New PA shall select an independent accounting firm or valuation firm (the costs of which are to be borne by New PA). The two (2) firms so selected shall then select a nationally recognized independent accounting firm or valuation firm (the costs of which are to be borne equally by PRN and New PA). Such three firms shall determine such fair market value. 36 Section 8.6 Arbitration. The parties shall use good faith negotiation to resolve any controversy, dispute or disagreement arising out of or relating to this Management Services Agreement or the breach of this Management Services Agreement. Any matter not resolved by negotiation shall be submitted to binding arbitration and such arbitration shall be governed by the terms of Article XI of the Purchase Agreement, which, as it applies to the parties hereto, is incorporated herein by reference in its entirety. Section 8.7 Waiver of Breach. The waiver by either party of a breach or violation of any provision of this Management Services Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. Section 8.8 Enforcement. In the event either party resorts to legal action to enforce or interpret any provision of this Management Services Agreement, the prevailing party shall be entitled to recover the costs and expenses of such action so incurred, including, without limitation, reasonable attorneys' fees. Section 8.9 Gender and Number. Whenever the context of this Management Services Agreement requires, the gender of all words herein shall include the masculine, feminine, and neuter, and the number of all words herein shall include the singular and plural. Section 8.10 Additional Assurances. Except as may be herein specifically provided to the contrary, the provisions of this Management Services Agreement shall be self-operative and shall not require further agreement by the parties; provided, however, at the request of either party, the other party shall execute such additional instruments and take such additional acts as are reasonable and as the requesting party may deem necessary to effectuate this Management Services Agreement. Section 8.11 Consents, Approvals, and Exercise of Discretion. Whenever this Management Services Agreement requires any consent or approval to be given by either party, or either party must or may exercise discretion, and except where specifically set forth to the contrary, the parties agree that such consent or approval shall not be unreasonably withheld or delayed, and that such discretion shall be reasonably exercised. Section 8.12 Force Majeure. Neither party shall be liable or deemed to be in default for any delay or failure in performance under this Management Services Agreement or other interruption of service deemed to result, directly or indirectly, from acts of God, civil or military authority, acts of public enemy, war, accidents, fires, explosions, earthquakes, floods, failure of transportation, strikes or other work interruptions by either party's employees, or any other similar cause beyond the reasonable control of either party unless such delay or failure in performance is expressly addressed elsewhere in this Management Services Agreement. 37 Section 8.13 Severability. The parties hereto have negotiated and prepared the terms of this Management Services Agreement in good faith with the intent that each and every one of the terms, covenants and conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Management Services Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction or an arbitration tribunal, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Management Services Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Management Services Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Management Services Agreement, to the extent possible consistent with its purposes, to conform to law. Section 8.14 Divisions and Headings. The divisions of this Management Services Agreement into articles, sections, and subsections and the use of captions and headings in connection therewith is solely for convenience and shall not affect in any way the meaning or interpretation of this Management Services Agreement. Section 8.15 Amendments and Management Services Agreement Execution. This Management Services Agreement and amendments hereto shall be in writing and executed in multiple copies on behalf of New PA by its President, and on behalf of Business Manager by a duly designated officer. Each multiple copy shall be deemed an original, but all multiple copies together shall con stitute one and the same instrument. Section 8.16 Entire Management Services Agreement. With respect to the subject matter of this Management Services Agreement, this Management Services Agreement supersedes all previous contracts and constitutes the entire agreement between the parties. Neither party shall be entitled to benefits other than those specified herein. No prior oral statements or contemporaneous negotiations or understandings or prior written material not specifically incorporated herein shall be of any force and effect, and no changes in or additions to this Management Services Agreement shall be recognized unless incorporated herein by amendment as provided herein, such amendment(s) to become effective on the date stipulated in such amendment(s). The parties specifically acknowledge that, in entering into and executing this Management Services Agreement, the parties rely solely upon the representations and agreements contained in this Management Services Agreement and no others. [THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK] 38 IN WITNESS WHEREOF, New PA and Business Manager have caused this Management Services Agreement to be executed by their duly authorized representatives, all as of the day and year first above written. NEW PA: Central Texas Oncology Associates, P.A. a Texas professional association By: ------------------------------------- Name: Demetrius F. Loukas, M.D. Title: President BUSINESS MANAGER: AMERICAN ONCOLOGY RESOURCES, INC. a Delaware corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- 39 AMENDMENT TO MANAGEMENT SERVICES AGREEMENT This Amendment to Management Services Agreement (the "Amendment"), dated and effective as of April 25, 1997 is by and between AOR of Texas Management Limited Partnership, a Texas limited partnership ("Business Manager"), Central Texas Oncology Associates, P.A., a Texas professional corporation, ("CTOA") and Central Texas Radiation Oncology Physicians, P.A. ("New PA"). R E C I T A L S 1. CTOA and American Oncology Resources, a Delaware corporation (whose rights and obligations thereunder were assigned to Business Manager) executed and delivered that certain Management Services Agreement, effective as of September 1, 1996 (the "Management Services Agreement"). 2. New PA and CTOA have executed and delivered a Merger Agreement, pursuant to which New PA merged with and into CTOA with the latter being the surviving corporation. 3. The parties hereto desire to amend certain terms and provisions of the Management Services Agreement. NOW THEREFORE in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Section 1.6 of the Management Services Agreement shall be amended in its entirety to read as follows: Section 1.6 Business Manager. The term "Business Manager" shall mean American Oncology Resources, Inc., a Delaware corporation or any entity that succeeds to the interests of American Oncology Resources, Inc., a Delaware corporation and to whom the obligations of Business Manager are assigned and transferred, subject to Section 8.5A. 2. Section 1.27 of the Management Services Agreement shall be amended in its entirety to read as follows: Section 1.27 Professional Services Revenues. The term "Professional Services Revenues" shall mean the sum of (i) all professional fees actually recorded each month on an annual accrual basis under GAAP (Net of Adjustment) 40 as a result of professional medical services and related health care services rendered by the Physicians whether rendered in an outpatient or inpatient setting, and (iii) Professional Services Capitation allocated to Professional Services Revenues. Professional Services Revenues shall not include those monies specifically excluded from Professional Fees pursuant to Section 1.2 of the separate Physician Employment Agreement executed by Physicians, liquidated damages, applicable insurance proceeds, and those fees for technical services, e.g., those services billed under the 77000 series of the American Medical Associations Physicians Current Professional Terminology 197 (CPT code). 3. Section 2.2 of the Management Services Agreement shall be amended in its entirety to read as follows: Section 2.2 Authority. Consistent with the provisions of this Management Services Agreement, Business Manager shall have the responsibility and commensurate authority to provide Management Services for New PA. Subject to the terms and conditions of this Management Services Agreement, Business Manager is hereby expressly authorized to provide the Management Services in any reasonable manner Business Manager deems appropriate to meet the day-to-day requirements of the business functions of New PA. Business Manager is also expressly authorized to negotiate and execute on behalf of New PA contacts that do not relate to the provision of Medical Services, provided that such contracts shall be consistent with the Budget. Any non-medical contracts inconsistent with the Budget shall be referred to the Policy Board for its review. New PA shall give Business Manager thirty (30) days prior notice of New PAs intent to execute any agreement obligating New PA to perform Medical Services or otherwise creating a binding legal obligation on New PA. Unless an expense is expressly designated as a Business Manager Expense in this Management Services Agreement, all expenses incurred by Business Manager in providing services pursuant to this Management Services Agreement shall be an Office Expense. The parties acknowledge and agree that New PA, through its Physicians, shall be responsible for and shall have complete authority, responsibility, supervision, and control over the provision of all Medical Services and other professional health care services performed for patients, and that all diagnoses, treatments, procedures, and other professional health care services shall be provided and performed exclusively by or under the supervision of Physicians as such Physicians, in their sole discretion, deem appropriate. Business Manager shall have and exercise absolutely no control or supervision over the provision of Medical Services. 4. Section 3.2 of the Management Services Agreement shall be amended to add a new subsection (k) as follows: 41 (k) Non-Medical Contracts. The Policy Board shall consider and make recommendations to Business Manager on non-medical contracts which are not consistent with the Budget. 5. Section 4.10 of the Management Services Agreement is amended to add a new subsection 9(d) as follows, and to reorder the existing subsection (d), Tax Matters, to be subsection (e): (d) Disputes Regarding Billing. It is the parties intent that any issues regarding financial penalties related to billing assessed by government programs or any other third party payor shall be resolved to the extent possible by good faith negotiation. To that end, if New PA and Business Manager in good faith agree that any such financial penalty is the result of or attributable to the acts of New PA or Physicians, then all penalty monies assessed and paid shall be New PA Expense. Alternatively, if New PA and Business Manager in good faith agree that any such financial penalty is the result of or attributable to the acts of Business Manager, then all penalty monies assessed and paid shall be Business Manager Expense. If the parties cannot agree which is responsible or if responsibility may be allocable between the parties and they cannot in good faith agree on their respective share of such penalty, then either party may submit the dispute to binding arbitration as governed by Article VI of the Master Transaction Agreement. 6. Section 4.16 of the Management Services Agreement shall be amended to include the words "or radiation oncology" directly following "medical oncology." 7. Section 5.9(b) of the Management Services Agreement shall be amended to add the following final sentence: This Section 5.9(b) shall be null and void upon the termination of this Management Services Agreement for cause by New PA or without cause by Business Manager. 8. Section 6.1(a) of the Management Services Agreement shall be amended in its entirety to read as follows: The Monthly Fee shall be [*] 9. The final sentence of Section 6.3(b) of the Management Services Agreement shall be amended in its entirety to read as follows: - ---------------- *This information has been omitted from this exhibit and is subject to a request for confidential treatment. In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended, such information has been filed separately with the Securities and Exchange Commission. 42 [*] 10. Sections 7.4 and 7.5 of the Management Services Agreement shall be amended to add the following final sentence to the end of the last paragraph in each section: Business Manager shall transfer such assets free and clear of any and all encumbrances upon payment of the purchase price. 11. Effect. This Amendment shall be effective only for the specific purposes set forth herein, and, except as modified by this Amendment, the terms, covenants and provisions of the Management Services Agreement are hereby ratified and confirmed and shall continue in full force and effect. [THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK] - ---------------- *This information has been omitted from this exhibit and is subject to a request for confidential treatment. In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended, such information has been filed separately with the Securities and Exchange Commission. 43 IN WITNESS WHEREOF the parties have executed this Amendment effective as of the day and year first above written. "BUSINESS MANAGER" AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- "CTOA" CENTRAL TEXAS ONCOLOGY ASSOCIATES, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- "NEW PA" CENTRAL TEXAS RADIATION ONCOLOGY PHYSICIANS, P.A. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 44 -----END PRIVACY-ENHANCED MESSAGE-----