EXHIBIT 2.3
PARENT STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of December 11,
1998, is by and between Physician Reliance Network, Inc. ("Grantee"), and
American Oncology Resources, Inc. ("Issuer").
RECITALS
P. Grantee and Issuer, together with Diagnostic Acquisition, Inc., have
entered into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), which has been executed in connection with this Agreement
(each capitalized term used herein without definition shall have the meaning
specified in the Merger Agreement).
Q. As a condition to Grantee's entering into the Merger Agreement and in
consideration therefor, Issuer has agreed to grant to Grantee the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. GRANT OF OPTION. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof,
3,450,000 shares of fully paid and nonassessable common stock of the Issuer, no
par value per share ("Common Stock"), which is equal to at least 10.1% of the
number of shares of Common Stock issued and outstanding on the date hereof,
together with any associated purchase rights (the "Rights") under the Rights
Agreement, dated as of May 29, 1997, between Issuer and American Stock Transfer
& Trust Company, as Rights Agent (references to shares purchasable upon exercise
of the Option shall be deemed to include the associated Rights), as of the date
hereof at a purchase price of $13.00 per share of Common Stock, as adjusted in
accordance with the provisions of Section 5 of this Agreement (such price, as
adjusted if applicable, the "Option Price").
2. EXERCISE OF OPTION.
(a) EXERCISE. Grantee may exercise the Option, in whole or part, and from
time to time, if, but only if, a Triggering Event (as hereinafter defined) shall
have occurred prior to the occurrence of an Option Termination Event (as
hereinafter defined), provided that Grantee shall have sent the written notice
of such exercise (as provided in subsection (e) of this Section 2) on or prior
to the last date of the 14-month period following such Triggering Event ("Option
Expiration Date").
(b) OPTION TERMINATION EVENTS. The term "Option Termination Event" shall
mean any of the following events: (i) immediately prior to the Effective Time
of the Merger; (ii) termination of
the Merger Agreement (other than immediately after or during the continuance of
a Triggering Event); or (iii) the last date of the 14-month period following any
termination of the Merger Agreement immediately after or during the continuance
of a Triggering Event. Notwithstanding the foregoing, the Option may not be
exercised if the Grantee is in material breach of its representation or
warranties, or in material breach of any of its covenants or agreements,
contained in this Agreement, the Parent Stock Option Agreement or the Merger
Agreement.
(c) TRIGGERING EVENTS. The term "Triggering Event" shall mean any of the
following events occurring after the date hereof: so long as the Merger
Agreement is not terminable pursuant to Section 9.1(f)(i) or Section 9.1(f)(ii)
thereof, at any time after the Merger Agreement becomes terminable pursuant to
Section 9.1(f)(iii), Section 9.1(f)(iv) or Section 9.1(e)(v) thereof (regardless
of whether the Merger Agreement is actually terminated).
(d) NOTICE OF TRIGGERING EVENT. Issuer shall notify Grantee promptly in
writing of the occurrence of any Triggering Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Grantee
to exercise the Option or for a Triggering Event to have occurred.
(e) NOTICE OF EXERCISE; CLOSING. In the event Grantee is entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if the closing of the purchase and sale pursuant to the Option
(the "Closing") cannot be consummated, in the reasonable opinion of Grantee, by
reason of any applicable judgment, decree, order, law or regulation, the period
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which restriction on consummation has expired or been
terminated; and provided further, without limiting the foregoing, that if, in
the reasonable opinion of Grantee, prior notification to or approval of any
regulatory agency is required in connection with such purchase, Grantee shall
promptly file the required notice or application for approval and shall
expeditiously process the same, and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. Notwithstanding this subsection (e), in no event shall any Closing
Date be more than 14 months after the related Notice Date, and if the Closing
Date shall not have occurred within 14 months after the related Notice Date due
to the failure to obtain any such required approval, the exercise of the Option
effected on the Notice Date shall be deemed to have expired.
(f) PURCHASE PRICE. At the Closing referred to in subsection (e) above,
Grantee shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude Grantee from exercising the Option.
(g) ISSUANCE OF COMMON STOCK. At the Closing, simultaneously with the
delivery of immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to Grantee a certificate or certificates
representing the number of shares of Common Stock purchased by the Grantee and,
if the Option is exercised in part only, a new Option evidencing the rights of
Grantee thereof to purchase the balance of the shares purchasable hereunder, and
the Grantee shall deliver to Issuer a copy of this Agreement and a letter
agreeing that Grantee will not offer to sell or otherwise dispose of such shares
in violation of applicable law or the provisions of this Agreement. If at the
time of issuance of any Option Shares (as defined herein) pursuant to an
exercise of all or part of the Option hereunder Issuer shall not have redeemed
the Rights, or shall have issued any similar securities, then each Option Share
issued pursuant to such exercise shall also represent rights or new rights with
terms substantially the same as and at least as favorable to Grantee as are
provided under Issuer's shareholder rights agreement or any similar agreement
then in effect.
(h) LEGEND. Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer and voting of the shares represented by this certificate are
subject to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the Securities
Act of 1933, as amended. A copy of such agreement is on file at the
principal office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) RECORD GRANTEE; EXPENSES. Upon the giving by Grantee to Issuer of the
written notice of exercise of the Option provided for under subsection (e) of
this Section 2 and the tender of the applicable purchase price in immediately
available funds, Grantee shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
Grantee or the Issuer shall have failed or refused to designate the bank account
described in subsection (f) of this Section 2. Issuer shall pay all expenses
and any and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issuance and
delivery of stock certificates under this Section 2 in the name of Grantee or
its assignee, transferee or designee.
3. RESERVATION OF SHARES. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock (and other securities issuable pursuant to
Section 5(a)) so that the Option may be exercised without additional
authorization of Common Stock (or such other securities) after giving effect to
all other options, warrants, convertible securities and other rights to purchase
Common Stock (or such other securities); (ii) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or sale
of assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer; (iii) promptly to take all action as
may from time to time be required (including without limitation complying with
all premerger notification, reporting and waiting periods under the HSR Act) in
order to permit Grantee to exercise the Option and Issuer duly and effectively
to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of Grantee against dilution.
4. DIVISION OF OPTION; LOST OPTIONS. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option of Grantee,
upon presentation and surrender of this Agreement at the principal office of
Issuer, for other agreements providing for Options of different denominations
entitling the holder thereof to purchase, on the same terms and subject to the
same conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Stock Option Agreements and related Options
for which this Agreement (and the Option granted hereby) may be exchanged. Upon
receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The number of shares of
Common Stock purchasable upon the exercise of the Option shall be subject to
adjustment from time to time as provided in this Section 5.
(a) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date hereof (an "Increase"), the number
of shares of Common Stock subject to the Option shall be increased so that the
number of shares issuable upon exercise of the Option shall be equal to the
product of (A) the percentage of the outstanding Common Stock for which the
Option was exercisable immediately prior to the Increase and (B) the number of
shares of Common Stock outstanding immediately after the Increase; provided that
the number of shares of Common Stock subject to the Option shall in no event
exceed 10.1% of the issued and outstanding shares of Common Stock immediately
prior to exercise.
(b) In the event of any change in Common Stock by reason of stock
dividends, splits, mergers, recapitalization, combinations, subdivisions,
conversions, exchanges of shares or other similar transactions and no adjustment
is required pursuant to the terms of Section 5(a), then the type and number of
shares of Common Stock purchasable upon exercise hereof shall be appropriately
adjusted so that Grantee shall receive upon exercise of the Option and payment
of the aggregate Option Price hereunder the number and class of shares or other
securities or property that Grantee would have received in respect of Common
Stock if the Option had been exercised in full immediately prior to such event,
or the record date therefor, as applicable.
(c) Whenever the number of shares of Common Stock changes after the date
hereof, the Option Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which shall be equal to the aggregate number of
shares of Common Stock purchasable prior to the adjustment and the denominator
of which shall be equal to the aggregate number of shares of Common Stock
purchasable immediately after the adjustment.
6. REGISTRATION RIGHTS. Upon the occurrence of a Triggering Event that
occurs prior to an Option Termination Event, Issuer shall, at the request of
Grantee, deliver at any time on or prior to the Option Expiration Date (whether
on its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a shelf registration statement under the
Securities Act covering any shares issued and issuable pursuant to this Option
and shall use its best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
any shares of Common Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition requested by
Grantee. Issuer will use its best efforts to cause such registration statement
first to become effective and then to remain effective for such period not in
excess of 180 days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary to effect such
sales or other dispositions. Grantee for a period of 14 months following such
first request shall have the right to demand a second such registration if
reasonably necessary to effect such sales or dispositions. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the
Grantee's Option or Option Shares would interfere with the successful marketing
of the shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may be
reduced; and provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the account of
Grantee shall constitute at least 25% of the total number of shares to be sold
by Grantee and Issuer in the aggregate; and provided further, however, that if
such reduction occurs, then the Issuer shall file a registration statement for
the balance as promptly as practicable and no reduction shall thereafter occur
(and such registration shall not be charged against Grantee). Grantee shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by any Grantee in
connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for the Issuer. Upon
receiving any request under this Section 6 from Grantee, Issuer agrees to send a
copy thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies.
7. REPURCHASE OF OPTION AND OPTION SHARES.
(a) Within ten business days following the occurrence of a Repurchase
Event (as defined below), Issuer shall (i) deliver an offer (a "Repurchase
Offer") to repurchase the Option from Grantee at a price (the "Option Repurchase
Price") equal to the amount by which (A) the Acquisition Proposal Price (as
defined below) exceeds (B) the Option Price, multiplied by the number of shares
for which the Option may then be exercised, and (ii) deliver an offer (also, a
"Repurchase Offer") to repurchase the Option Shares from each owner of Option
Shares (excluding such Option Shares as have been publicly distributed prior to
the delivery of the Repurchase Offer) from time to time (each, an "Owner") at a
price (the "Option Share Repurchase Price") equal to the Acquisition Proposal
Price multiplied by the number of Option Shares then held by such Owner. The
term "Acquisition Proposal Price" shall mean, as of any date for the
determination thereof, the price per share of Common Stock paid pursuant to the
Acquisition Proposal (as defined in the Merger Agreement) or, in the event of a
sale of assets of Issuer, the last per-share sale price of Common Stock on the
fourth trading day following the announcement of such sale. If the
consideration paid or received in the Acquisition Proposal shall be other than
in cash, the value of such consideration shall be determined by a nationally
recognized investment banking firm selected by Grantee, which determination
shall be conclusive for all purposes of this Agreement.
(b) Upon the occurrence of a Repurchase Event and whether or not Issuer
shall have made a Repurchase Offer under Section 7(a), (i) at the request (the
date of such request being the "Option Repurchase Request Date") of Grantee
delivered prior to the Option Expiration Date, Issuer shall repurchase the
Option from Grantee at the Option Repurchase Price, and (ii) at the request (the
date of such request being the "Option Share Repurchase Request Date") of any
Owner delivered prior to the Option Expiration Date, Issuer shall repurchase
such number of the Option Shares from the Owner as the Owner shall designate at
the Option Share Repurchase Price.
(c) Grantee and/or the Owner, as the case may be, may accept Issuer's
Repurchase Offer under Section 7(a) or may exercise its right to require Issuer
to repurchase the Option and/or any Option Shares pursuant to Section 7(b) by a
written notice or notices stating that Grantee or the Owner, as the case may be,
elects to accept such offer or to require Issuer to repurchase the Option and/or
the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five business days, after the
surrender to it of this Agreement and/or Certificates for Option Shares, as
applicable, following receipt of a notice under this Section 7(c) and the
occurrence of a Repurchase Event, Issuer
shall deliver or cause to be delivered to Grantee the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price and/or the portion thereof
that Issuer is not then prohibited from so delivering under applicable law.
(d) Issuer hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish any repurchase contemplated by
this Section 7. Nonetheless, to the extent that Issuer is prohibited under
applicable law from repurchasing the Option and/or any Option Shares in full,
Issuer shall immediately so notify Grantee and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to Grantee and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to Section 7(c) is prohibited under
applicable law, from delivering to Grantee and/or the Owner, as appropriate, the
Option Repurchase Price or the Option Share Repurchase Price, respectively, in
full, Grantee or the Owner, as appropriate, may revoke its notice of repurchase
of the Option or the Option Shares either in whole or in part whereupon, in the
case of a revocation in part, Issuer shall promptly (i) deliver to Grantee
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering
after taking into account any such revocation and (ii) deliver, as appropriate,
either (a) to Grantee, a new Agreement evidencing the right of Grantee to
purchase that number of shares of Common Stock equal to the number of shares of
Common Stock purchasable immediately prior to the delivery of the notice of
repurchase less the number of shares of Common Stock covered by the portion of
the Option repurchased or (b) to the Owner, a certificate for the number of
Option Shares covered by the revocation. If an Option Termination Event shall
have occurred prior to the date of the notice by Issuer described in the second
sentence of this subsection (d), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
Grantee shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
(e) The term "Repurchase Event" shall mean a Triggering Event followed by
the earlier of the signing of a definitive agreement to consummate or the
consummation of any transaction or event included in the definition of
Acquisition Proposal.
(f) Notwithstanding anything to the contrary in Sections 2(a) and 2(e),
the delivery of a notice by Grantee under Section 7(c) specifying that such
notice relating to an anticipated Repurchase Event is based on the Issuer's
public announcement of the execution of an agreement providing for the
consummation of an Acquisition Proposal shall be deemed to constitute an
election to exercise the Option as to the number of Option Shares not heretofore
purchased pursuant to one or more prior exercises of the Option on the fifth
business day following the public announcement of the consummation of the
transaction contemplated by such agreement, in which event a closing shall occur
with respect to such unpurchased Option
Shares in accordance with Section 2(e) on such fifth business day (or such later
date as determined pursuant to the provisos in the first sentence of Section
2(e)).
8. SUBSTITUTE OPTION IN THE EVENT OF CORPORATE CHANGE.
(a) In the event that prior to an Option Termination Event, Issuer shall
enter into an agreement (i) to consolidate with or merge into any person, other
than Grantee or one of its subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then-outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then-outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Grantee, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer
(if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee
of all or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the Acquisition Proposal Price, as
defined in Section 7.
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in
no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided, that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by the person merging
into Issuer or by any company which controls or is controlled by
such person, as Grantee may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee. The issuer of the Substitute Option shall
also enter into an agreement with Grantee in substantially the same form as this
Agreement, which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 10.1% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 10.1% of the
shares of the Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option shall make a cash payment to
Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by Grantee.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. EXTENSION OF TIME FOR REGULATORY APPROVALS. The 14-month period for
exercise of certain rights under Sections 2, 6, 7, 13 and 14 shall be extended:
(i) to the extent necessary to obtain all regulatory approvals for the exercise
of such rights, and for the expiration of all statutory waiting periods; and
(ii) to the extent necessary to avoid liability under Section 10(b) of the
Exchange Act by reason of such exercise.
10. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Issuer. This Agreement is the valid and legally
binding obligation of Issuer, enforceable against Issuer in accordance with its
terms.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests, and not subject to any preemptive rights.
(c) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation pursuant to any provisions of the Articles of
Incorporation or by-laws of Issuer or any Issuer subsidiary, subject to
obtaining any approvals or consents contemplated hereby, result in any violation
of any loan or credit agreement, note, mortgage, indenture, lease, plan, or
other agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Issuer or any Issuer subsidiary or their respective properties or assets
which violation would have, individually or in the aggregate, a Material Adverse
Effect on the Issuer.
11. ASSIGNMENT OF OPTION BY GRANTEE. Neither of the parties hereto may
assign any of its rights or obligations under this Option Agreement or the
Option created hereunder to any other person, without the express written
consent of the other party.
12. LIMITATION OF GRANTEE PROFIT.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $25,000,000
and, if it otherwise would exceed such amount, the Grantee, at its sole
election, shall either (i) reduce the number of shares of Common Stock subject
to this Option, (ii) deliver to the Issuer for cancellation Option Shares
previously purchased by Grantee, (iii) pay cash to the Issuer, or (iv) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed $25,000,000 after taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean the amount (before
taxes) of the following:
(1) the aggregate amount of (i) (x) the net cash amounts received by
Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or
exchanged) to any unaffiliated party within 12 months from the
exercise of this Option with respect to such
Option Shares, less (y) the Grantee's purchase price of such
Option Shares, (ii) any amounts received by Grantee on the
transfer of the Option (or any portion thereof) to any
unaffiliated party, if permitted hereunder, (iii) any equivalent
amount with respect to the Substitute Option, and (iv) the amount
received by Grantee pursuant to Section 9.4 of the Merger
Agreement; minus
(2) the amount of cash paid to the Issuer pursuant to this Section 12
plus the value of the Option Shares delivered to the Issuer for
cancellation.
(c) Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall affect the ability of Grantee to receive nor relieve Issuer's
obligation to pay a fee pursuant to Section 9.4 of the Merger Agreement;
provided, that if Total Profit received by Grantee would exceed $25,000,000
following the receipt of such fee, Grantee shall be obligated to comply with the
terms of Section 12(a) within 30 days of the later of (i) the date of receipt of
such fee and (ii) the date of receipt of the net cash by Grantee pursuant to the
sale of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party within 12 months of the
exercise of this Option with respect to such Option Shares.
13. FIRST REFUSAL. At any time after the first occurrence of a Triggering
Event and prior to the later of:
(a) the expiration of 14 months immediately following the first purchase
of shares of Common Stock pursuant to the Option; and
(b) the Option Expiration Date, if Grantee shall desire to sell, assign,
transfer or otherwise dispose of all or any of the Option or the shares of
Common Stock or other securities acquired by it pursuant to the Option, it shall
give Issuer written notice of the proposed transaction (an "Offeror's Notice"),
identifying the proposed transferee, accompanied by a copy of a binding offer to
purchase the Option or such shares or other securities signed by such transferee
and setting forth the terms of the proposed transaction. An Offeror's Notice
shall be deemed an offer by Grantee to Issuer, which may be accepted within 20
business days of the receipt of such Offeror's Notice, on the same terms and
conditions and at the same price at which Grantee is proposing to transfer the
Option or such shares or other securities to such transferee. The purchase of
the Option or any such shares or other securities by Issuer shall be settled
within 10 business days of the date of the acceptance of the offer and the
purchase price shall be paid to Grantee in immediately available funds; provided
that, if prior notification to or approval of any regulatory authority is
required in connection with such purchase, Issuer shall promptly file the
required notice or application for approval and shall expeditiously process the
same (and Grantee shall cooperate with Issuer in the filing of any such notice
or application and the obtaining of any such approval) and the period of time
that otherwise would run pursuant to this sentence shall run instead from the
date on which, as the case may be,
(1) required notification period has expired or been terminated, or
(2) such approval has been obtained and, in either event, any
requisite waiting period shall have passed.
In the event of the failure or refusal of Issuer to purchase all of the Option
or all of the shares or other securities covered by an Offeror's Notice or if
any regulatory authority disapproves Issuer's proposed purchase of any portion
of the Option or such shares or other securities, Grantee may, within 60 days
from the date of the Offeror's Notice (subject to any necessary extension for
regulatory notification, approval or waiting periods), sell all, but not less
than all, of such portion of the Option or such shares or other securities to
the proposed transferee at no less than the price specified and on terms no more
favorable than those set forth in the Offeror's Notice. The requirements of
this Section 13 shall not apply to (w) any disposition as a result of which the
proposed transferee would own beneficially not more than 2% of the outstanding
voting power of Issuer, (x) any disposition of Common Stock or other securities
by a person to whom Grantee has assigned its rights under the Option with the
consent of Issuer, (y) any sale by means of a public offering registered under
the Securities Act in which steps are taken to reasonably assure that no
purchaser will acquire securities representing more than 2% of the outstanding
voting power of Issuer, or (z) any transfer to a wholly owned subsidiary of
Grantee which agrees in writing to be bound by the terms hereof.
14. VOTING. For a period of 14 months from the date of exercise of the
Option, so long as Grantee beneficially owns any Option Shares, Grantee agrees
to:
(a) be present, in person or represented by proxy, at all stockholder
meetings of Issuer, so that all Option Shares beneficially owned by holder may
be counted for the purpose of determining the presence of a quorum at such
meetings; and
(b) vote or cause to be voted all Option Shares beneficially owned by it,
with respect to all matters submitted to stockholders for a vote, in the same
proportion as shares of Common Stock are voted by stockholders unaffiliated with
Grantee.
15. APPLICATION FOR REGULATORY APPROVAL. Each of Grantee and Issuer will
use its reasonable efforts to make all filings with, and to obtain consents of,
all third parties and governmental authorities necessary to the consummation of
the transactions contemplated by this Agreement, including without limitation
making application to list the shares of Common Stock issuable hereunder on
Nasdaq's National Market System upon official notice of issuance.
16. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be enforceable by
either party hereto through injunctive or other equitable relief.
17. SEPARABILITY OF PROVISIONS. If any term, provision, covenant, or
restriction, contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, and covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated.
18. NOTICES. All notices, claims, demands and other communications
hereunder shall be deemed to have been duly given or made when delivered in
person, by registered or certified mail (postage prepaid, return receipt
requested), by overnight courier, or by facsimile at the respective addresses of
the parties set forth in the Merger Agreement.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed to be an original, but all of which
shall constitute one and the same agreement.
21. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
22. ENTIRE AGREEMENT. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein. Any provision of
this Agreement may be waived only in writing at any time by the party that is
entitled to the benefits of such provision. This Agreement may not be modified,
amended, altered, or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
23. FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise. Nothing contained
in this Agreement shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
AMERICAN ONCOLOGY RESOURCES, INC.
By:
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Name:
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Title:
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Attest:
Name:
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Title:
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PHYSICIAN RELIANCE NETWORK, INC.
By:
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Name:
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Title:
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Attest:
Name:
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Title:
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