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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
A. 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).
B. 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
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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.
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(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
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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.
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(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,
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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.
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(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
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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
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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.
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(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
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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
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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.
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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:
--------------------------------
Title:
--------------------------------
Attest:
Name:
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Title:
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PHYSICIAN RELIANCE NETWORK, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
Attest:
Name:
-----------------------------
Title:
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