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EXHIBIT 10.41
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SERVICE AGREEMENT
Dated as of the 1st day of September, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.,
WB&A Imaging Partners, Inc.
and
WB&A Imaging, P.C.
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SERVICE AGREEMENT
This Service Agreement (this "Agreement"), dated effective as of
September 1, 1998, is entered into by and among American Physician Partners,
Inc., a Delaware corporation ("Parent"), WB&A Imaging Partners, Inc., (formerly
known as Drs. Xxxxxx, Xxxxx & Associates, P.A.), a wholly-owned subsidiary of
Parent ("Administrator"), and WB&A Imaging, P.C., a Maryland professional
corporation ("Group").
R E C I T A L S:
A. The Group owns and operates a radiology medical practice and
provides professional and technical radiology services to the general public
through individual physicians who are licensed to practice medicine in the
Commonwealth of Virginia, the State of Maryland and/or the District of Columbia
and who are employed or otherwise retained by the Group.
B. Administrator is in the business of owning certain non-medical
assets of medical practices and providing management, administrative, and other
non-medical radiological support services to radiological medical practices
including, without limitation, furnishing necessary facilities, equipment,
non-physician personnel, supplies and non-physician support staff services.
C. The Group desires to obtain the services of Administrator in
performing such non- medical business functions so as to permit the Group to
devote its full professional time and attention to the rendering of
professional and technical radiology and related services to its patients.
D. The Group and Administrator have determined a fair market
value for the services to be rendered by Administrator, and based on this fair
market value, have developed a procedure for compensation of Administrator, all
as more particularly set forth in this Agreement.
E. Administrator is willing to commit significant management and
capital resources to the Group to allow for the Group's further growth, all as
provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, and on the terms and
subject to the conditions herein set forth, the parties hereto agree as
follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For the purposes of this Agreement, the
following definitions shall apply:
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EXHIBIT 10.42
BASIC LEASE INFORMATION
Lease Date: , 1996
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Tenant: Fibreboard Corporation
Tenant's Address: 0000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Contact: Xxxx Xxxxxxx Telephone: (000) 000-0000
Landlord: The Equitable-Nissei Dallas Company,
a joint venture
Landlord's Address: 0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Contact: Xxx Xxxxxx
Telephone: 000-000-0000
Premises: Suite No. 3600 in the office building (the
"Building") located on the land described
as Xxxx Xxxxx 000, Xxxxxx, Xxxxxx Xxxxxx,
Xxxxx and whose street address is 0000 Xxxx
Xxxxxx, Xxxxxx, Xxxxx (the "Land"). The
Premises are outlined on the plan attached to
the Lease as Exhibit A.
Term: 180 months, commencing September 1, 1996 (the
"Commencement Date") and ending at 5:00 p.m.
August 31, 2011, subject to adjustment and
earlier termination as provided in the Lease.
Basic
Rental: $31,590.29 per month for the first 5 years of
the Term; $35,005.46 per month for the next 5
years of the Term; and $40,128.21 per month
for the next 5 years of the Term.
Rent: Basic Rental, Tenant's Proportionate Share of
Electrical Costs, Tenant's share of Excess,
and all other sums that Tenant may owe to
Landlord under the Lease.
Permitted Use: General Office
Tenant's
Proportionate
Share: 1.7413%, which is the percentage obtained by
dividing (i) the 20,491 rentable square feet
in the Premises by (ii) the 1,176,736 rentable
square feet in the Building.
Expense Stop: 1996 base year.
Initial Liability
Insurance Amount: $5,000,000.
Maximum
Construction
Allowance: $12.00 per rentable square foot.
The foregoing Basic Lease Information is incorporated into and made a part of
the Lease identified above. If any conflict exists between any Basic Lease
Information and the Lease, then the Lease shall control.
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LANDLORD: TENANT:
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THE EQUITABLE-NISSEI DALLAS COMPANY, FIBREBOARD CORPORATION,
a joint venture a Delaware corporation
By: The Equitable Life Assurance By:_________________________
Society of the United States, Name:_______________________
a New York corporation, Title:______________________
its Managing Venturer
By:___________________________
Name:_________________________
Title:________________________
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TABLE OF CONTENTS
Page
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DEFINITIONS AND BASIC PROVISIONS. . . . . . . . . . . . . . . . . . 1
LEASE GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
a. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 1
b. Intentionally Deleted . . . . . . . . . . . . . . . . . . . 2
c. Electrical Costs . . . . . . . . . . . . . . . . . . . . . 2
d. Annual Cost Statement . . . . . . . . . . . . . . . . . . . 2
e. Adjustments to Electrical Costs . . . . . . . . . . . . . . 2
DELINQUENT PAYMENT; HANDLING CHARGES. . . . . . . . . . . . . . . . 2
LANDLORD'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . 2
a. Services . . . . . . . . . . . . . . . . . . . . . . . . . 2
b. Excess Utility Use . . . . . . . . . . . . . . . . . . . . 3
c. Discontinuance . . . . . . . . . . . . . . . . . . . . . . 3
d. Restoration of Services; Abatement . . . . . . . . . . . . 4
IMPROVEMENTS;ALTERATIONS; REPAIRS; MAINTENANCE. . . . . . . . . . . 4
a. Improvements; Alterations . . . . . . . . . . . . . . . . . 4
b. Repairs; Maintenance . . . . . . . . . . . . . . . . . . . 5
c. Performance of Work . . . . . . . . . . . . . . . . . . . . 5
d. Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . 5
USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . 6
a. Transfers; Consent . . . . . . . . . . . . . . . . . . . . 6
b. [Intentionally Deleted.] . . . . . . . . . . . . . . . . . 6
c. Additional Compensation. . . . . . . . . . . . . . . . . . 6
INSURANCE; WAIVERS; SUBROGATION; INDEMNITY. . . . . . . . . . . . . 6
a. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 6
b. Waiver of Negligence Claims; No Subrogation . . . . . . . . 7
c. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 7
SUBORDINATION ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE. . . . . . 8
a. Subordination . . . . . . . . . . . . . . . . . . . . . . . 8
b. Attornment . . . . . . . . . . . . . . . . . . . . . . . . 8
c. Notice to Landlord's Mortgagee . . . . . . . . . . . . . . 8
RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . 8
CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
a. Taking - Landlord's and Tenant's Rights . . . . . . . . . . 8
b. Taking - Landlord's Rights . . . . . . . . . . . . . . . . 8
c. Award . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FIRE OR OTHER CASUALTY. . . . . . . . . . . . . . . . . . . . . . . 9
a. Repair Estimate . . . . . . . . . . . . . . . . . . . . . . 9
b. Landlord's and Tenant's Rights . . . . . . . . . . . . . . 9
c. Landlord's Rights . . . . . . . . . . . . . . . . . . . . . 9
d. Repair Obligation . . . . . . . . . . . . . . . . . . . . . 9
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 10
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REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PAYMENT BY TENANT; NON-WAIVER . . . . . . . . . . . . . . . . . . . 11
a. Payment by Tenant . . . . . . . . . . . . . . . . . . . . . 11
b. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 12
SURRENDER OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . 12
HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CERTAIN RIGHTS RESERVED BY LANDLORD . . . . . . . . . . . . . . . . 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
a. Landlord Transfer . . . . . . . . . . . . . . . . . . . . . 13
b. Landlord's Liability . . . . . . . . . . . . . . . . . . . 13
c. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . 13
d. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . 13
e. Estoppel Certificates . . . . . . . . . . . . . . . . . . . 14
f. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 14
g. Separability . . . . . . . . . . . . . . . . . . . . . . . 14
h. Amendments; and Binding Effect . . . . . . . . . . . . . . 14
i. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . 14
j. Joint and Several Liability . . . . . . . . . . . . . . . . 14
k. Captions . . . . . . . . . . . . . . . . . . . . . . . . . 14
l. No Merger . . . . . . . . . . . . . . . . . . . . . . . . . 15
m. No Offer . . . . . . . . . . . . . . . . . . . . . . . . . 15
n. Tax Protest . . . . . . . . . . . . . . . . . . . . . . . . 15
o. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 16
p. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 16
SPECIAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 16
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LEASE
THIS LEASE AGREEMENT (this "Lease") is entered into as of , 1996,
between THE EQUITABLE-NISSEI DALLAS COMPANY, a joint venture ("Landlord"),
and FIBREBOARD CORPORATION, a Delaware corporation ("Tenant").
DEFINITIONS AND
BASIC PROVISIONS
1. The definitions and basic provisions set forth in the Basic Lease
Information (the "Basic Lease Information") executed by Landlord and Tenant
contemporaneously herewith are incorporated herein by reference for all
purposes.
LEASE GRANT
2. Subject to the terms of this Lease, Landlord leases to Tenant, and
Tenant leases from Landlord, the Premises.
TERM
3. If the Commencement Date is not the first day of a calendar month,
then the Term shall be extended by the time between the Commencement Date and
the first day of the next month. If this Lease is executed before the
Premises become vacant or otherwise available and ready for occupancy by
Tenant, or if any present occupant of the Premises holds over and Landlord
cannot acquire possession of the Premises before the Commencement Date, then
(a) Tenant's obligation to pay Rent hereunder shall be waived until Landlord
tenders possession of the Premises to Tenant, (b) the Term shall be extended
by the time between the scheduled Commencement Date and the date on which
Landlord tenders possession of the Premises to Tenant (which date will then
be defined as the Commencement Date), (c) Landlord shall not be in default
hereunder or be liable for damages therefor, and (d) Tenant shall accept
possession of the Premises when Landlord tenders possession thereof to
Tenant. By occupying the Premises, Tenant shall be deemed to have accepted
the Premises in their condition as of the date of such occupancy, subject to
the performance of punch-list items that remain to be performed by Landlord,
if any. Tenant shall execute and deliver to Landlord, within ten days after
Landlord has requested same, a letter confirming (i) the Commencement Date,
(ii) that Tenant has accepted the Premises, and (iii) that Landlord has
performed all of its obligations with respect to the Premises (except for
punch-list items specified in such letter). Notwithstanding anything herein
to the contrary, Landlord shall make the portion of the Premises designated
as "Area A" on Exhibit H available for the commencement of the Work (as
defined in Exhibit D) no later than July 15, 1996, and shall make the portion
of the Premises designated as "Area B" on Exhibit H available for the
performance of the Work no later than August 12, 1996.
RENT
4. a. Payment. Tenant shall timely pay to Landlord the Basic Rental and
all additional sums to be paid by Tenant to Landlord under this Lease,
including the amounts set forth in Exhibit C, without deduction or set off,
at Landlord's Address (or such other address as Landlord may from time to
time designate in writing to Tenant). Basic Rental, adjusted as herein
provided, shall be payable monthly in advance. The first monthly installment
of Basic Rental shall be payable on the Commencement Date; thereafter,
monthly installments of Basic Rental shall be due on the first day of the
second full calendar month of the Term and continuing on the first day of
each succeeding calendar month during the Term. Basic Rental for any
fractional month at the beginning of the Term shall be prorated based on
1/365 of the current annual Basic Rental for each day of the partial month
this Lease is in effect, and shall be due on the Commencement Date.
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b. [Intentionally Deleted.]
c. Electrical Costs. Tenant shall pay to Landlord an amount equal to
the product of (i) the cost of all electricity used by the Building except
for excess electrical use reimbursed to Landlord by tenants ("Electrical
Costs"), multiplied by (ii) Tenant's Proportionate Share. Such amount shall
be payable monthly based on Landlord's estimate of the amount due for each
month, and shall be due on the Commencement Date and on the first day of each
calendar month thereafter unless Landlord has theretofore furnished Tenant
with information indicating the amount due, in which event such amount shall
be due within ten days after Landlord has delivered to Tenant an invoice
therefor.
d. Annual Cost Statement. By April 1 of each calendar year, or as soon
thereafter as practicable, Landlord shall furnish to Tenant a statement of
Landlord's actual Electrical Costs (the "Annual Cost Statement") for the
previous year adjusted as provided in Section 4.e. If the Annual Cost
Statement reveals that Tenant paid more for Electrical Costs than Tenant's
Proportionate Share of Electrical Costs in the year for which such statement
was prepared, then Landlord shall promptly reimburse or credit Tenant such
excess; likewise, if Tenant paid less than Tenant's Proportionate Share of
Electrical Costs, then Tenant shall promptly pay Landlord such deficiency.
e. Adjustments to Electrical Costs. With respect to any calendar year
or partial calendar year in which the Building is not occupied to the extent
of 95% of the rentable area thereof, the Electrical Costs for such period
shall, for the purposes hereof, be increased to the amount which would have
been incurred had the Building been occupied to the extent of 95% of the
rentable area thereof.
DELINQUENT
PAYMENT;
HANDLING CHARGES
5. All payments required of Tenant hereunder shall bear interest from
the date due until paid at the per annum rate of three percent (3%) in excess
of the Prime Rate. In no event, however, shall the charges permitted under
this Section 5 or elsewhere in this Lease, to the extent the same are
considered to be interest under applicable law, exceed the maximum lawful
rate of interest.
6. [Intentionally Deleted.]
LANDLORD'S
OBLIGATIONS
7. a. Services. Provided no Event of Default exists, Landlord shall use
all reasonable efforts to furnish to Tenant (i) water (hot and cold) at those
points of supply provided for general use of tenants of the Building; (ii)
heated and refrigerated air conditioning as appropriate, at such times as
Landlord normally furnishes these services to all tenants of the Building,
and at such temperatures and in such amounts as are reasonably considered by
Landlord to be standard; (iii) janitorial service to the Premises on weekdays
other than holidays for Building-standard installations (Landlord reserves
the right to xxxx Tenant separately for extra janitorial service required for
non-standard installations) and such window washing as may from time to time
in Landlord's judgment be reasonably required; (iv) elevators for ingress and
egress to the floor on which the Premises are located, in common with other
tenants, provided that Landlord may reasonably limit the number of elevators
to be in operation at times other than during customary business hours and on
holidays; (v) replacement of Building-standard light bulbs
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and fluorescent tubes, provided that Landlord's standard charge for such
bulbs and tubes shall be paid by Tenant; and (vi) electrical current during
normal business hours other than for special lighting, equipment that
requires more than 110 volts, or other equipment whose electrical energy
consumption exceeds normal office usage. Landlord shall maintain the common
areas of the Building in reasonably good order and condition, except for
damage occasioned by Tenant, or its employees, agents or invitees. If
Tenant desires any of the services specified in this Section 7.a at any
time other than times herein designated, such services shall be supplied to
Tenant upon the written request of Tenant delivered to Landlord before 3:00
p.m. on the business day preceding such extra usage, and Tenant shall pay
to Landlord the reasonable cost of such services within ten days after
Landlord has delivered to Tenant an invoice therefor.
b. Excess Utility Use. Landlord shall use reasonable efforts to furnish
electrical current for computers, electronic data processing equipment,
special lighting, equipment that requires more than 110 volts, or other
equipment whose electrical energy consumption exceeds normal office usage
through the then-existing feeders and risers serving the Building and the
Premises, and Tenant shall pay to Landlord the cost of such service within
ten days after Landlord has delivered to Tenant an invoice therefor. Landlord
may determine the amount of such additional consumption and potential
consumption by a separate meter in the Premises installed, maintained, and
read by Landlord, at Tenant's expense. Tenant shall not install any
electrical equipment requiring special wiring or requiring voltage in excess
of 110 volts or otherwise exceeding Building capacity unless approved in
advance by Landlord, which consent shall not be unreasonably withheld or
delayed. The use of electricity in the Premises shall not exceed the capacity
of existing feeders and risers to or wiring in the Premises. Any risers or
wiring required to meet Tenant's excess electrical requirements shall, upon
Tenant's written request, be installed by Landlord, at Tenant's cost, if, in
Landlord's sole and absolute judgment, the same are necessary and shall not
cause permanent damage or injury to the Building or the Premises, cause or
create a dangerous or hazardous condition, entail excessive or unreasonable
alterations, repairs, or expenses, or interfere with or disturb other tenants
of the Building. If Tenant uses machines or equipment (other than general
office machines, excluding computers and electronic data processing
equipment) in the Premises which affect the temperature otherwise maintained
by the air conditioning system or otherwise overload any utility, Landlord
may install supplemental air conditioning units or other supplemental
equipment in the Premises, and the reasonable cost thereof, including the
cost of installation, operation, use, and maintenance, shall be paid by
Tenant to Landlord within ten days after Landlord has delivered to Tenant an
invoice therefor.
c. Discontinuance. Landlord's obligation to furnish services under
Section 7.a shall be subject to the rules and regulations of the supplier of
such services and governmental rules and regulations. If required by law or
the supplier of a service, Landlord may, upon not less than 30-days' prior
written notice to Tenant, discontinue any such service to the Premises,
provided Landlord first arranges for a direct connection thereof through the
supplier of such service. Tenant shall, however, be responsible for
contracting with the supplier of such service and for paying all deposits
for, and costs relating to, such service.
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d. Restoration of Services; Abatement. Landlord shall use reasonable
efforts to restore any service that becomes unavailable; however, such
unavailability shall not render Landlord liable for any damages caused
thereby, be a constructive eviction of Tenant, constitute a breach of any
implied warranty, or, except as provided below, entitle Tenant to any
abatement of Tenant's obligations hereunder. However, if Tenant is prevented
from making reasonable use of the Premises for more than 15 consecutive days
because of the unavailability of any such service, Tenant shall, as its
exclusive remedy therefor, be entitled to a reasonable abatement of Rent for
each consecutive day (after such 15 day period) that Tenant is so prevented
from making reasonable use of the Premises. In the event (i) such
unavailability of services (A) was not the result of a casualty described in
Section 15 of this Lease, (B) was not caused in whole or in part by Tenant or
Tenant's agents, employees or contractors, and (C) Tenant is prevented from
making reasonable use of the Premises, (ii) the curing of such unavailability
of services is within the reasonable control of Landlord, and (iii) such
unavailablity of services shall not be cured within sixty (60) days following
the occurrence of such event, Tenant shall have the right to terminate this
Lease by delivering to Landlord written notice of such termination prior to
the restoration of such services.
IMPROVEMENTS;
ALTERATIONS;
REPAIRS;
MAINTENANCE
8. a. Improvements; Alterations. Improvements to the Premises shall be
installed at the expense of Tenant only in accordance with plans and
specifications which have been previously submitted to and approved in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed. After the initial Tenant improvements are made, no alterations or
physical additions in or to the Premises may be made without Landlord's prior
written consent. Landlord agrees not to unreasonably withhold or delay its
consent with respect to non-structural alterations which do not affect the
Building systems and are not visible from the exterior of the Premises.
Tenant shall not paint or install lighting or decorations, signs, window or
door lettering, or advertising media of any type on or about the Premises
without the prior written consent of Landlord. Landlord agrees not to
unreasonably withhold or delay its consent with respect to such items that
are not visible from the exterior of the Premises. All alterations,
additions, or improvements (whether temporary or permanent in character, and
including without limitation all air-conditioning equipment and all other
equipment that is in any manner connected to the Building's plumbing system)
made in or upon the Premises, either by Landlord or Tenant, shall be
Landlord's property at the end of the Term and shall remain on the Premises
without compensation to Tenant. Approval by Landlord of any of Tenant's
drawings and plans and specifications prepared in connection with any
improvements in the Premises shall not constitute a representation or
warranty of Landlord as to the adequacy or sufficiency of such drawings,
plans and specifications, or the improvements to which they relate, for any
use, purpose, or condition, but such approval shall merely be the consent of
Landlord as required hereunder. Notwithstanding anything in this Lease to the
contrary, with respect to the Premises Tenant shall be responsible for
complying with the Americans with Disabilities Act of 1990, and all rules,
regulations, and guidelines promulgated thereunder, as the same may be
amended from time to time (collectively, the "ADA"). Landlord shall be
responsible for complying with the ADA with respect to the common areas of
the Building.
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b. Repairs; Maintenance. Tenant shall maintain the Premises in a clean,
safe, operable, attractive condition, and shall not permit or allow to remain
any waste or damage to any portion of the Premises. Tenant shall repair or
replace, subject to Landlord's direction and supervision, any damage to the
Building caused by Tenant or Tenant's agents, contractors, or invitees. If
Tenant fails to make such repairs or replacements within 15 days after the
occurrence of such damage, then Landlord may make the same at Tenant's cost.
In lieu of having Tenant repair any such damage outside of the Premises,
Landlord may repair such damage at Tenant's cost. The reasonable cost of any
repair or replacement work performed by Landlord under this Section 8 shall
be paid by Tenant to Landlord within ten days after Landlord has delivered to
Tenant an invoice therefor.
c. Performance of Work. All work described in this Section 8 shall be
performed only by Landlord or by contractors and subcontractors approved in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed. Tenant shall cause all contractors and subcontractors to procure and
maintain insurance coverage against such risks, in such amounts, and with
such companies as Landlord may reasonably require, and to procure payment and
performance bonds reasonably satisfactory to Landlord covering the cost of
the work. All such work shall be performed in accordance with all legal
requirements and in a good and workmanlike manner so as not to damage the
Premises, the primary structure or structural qualities of the Building, or
plumbing, electrical lines, or other utility transmission facility. All such
work which may affect the HVAC, electrical system, or plumbing must be
approved by the Building's engineer of record, which approval shall not be
unreasonably withheld or delayed.
d. Mechanic's Liens. Tenant shall not permit any mechanic's liens to be
filed against the Premises or the Building for any work performed, materials
furnished, or obligation incurred by or at the request of Tenant. If such a
lien is filed, then Tenant shall, within ten days after Landlord has
delivered notice of the filing to Tenant, either pay the amount of the lien
or diligently contest such lien and deliver to Landlord a bond or other
security reasonably satisfactory to Landlord. If Tenant fails to timely take
either such action, then Landlord may pay the lien claim without inquiry as
to the validity thereof, and any amounts so paid, including reasonable
expenses and interest, shall be paid by Tenant to Landlord within ten days
after Landlord has delivered to Tenant an invoice therefor.
USE
9. Tenant shall continuously occupy and use the Premises only for the
Permitted Use and shall comply with all laws, orders, rules, and regulations
relating to the use, condition, and occupancy of the Premises. The Premises
shall not be used for any use which is disreputable or creates extraordinary
fire hazards or results in an increased rate of insurance on the Building or
its contents or the storage of any hazardous materials or substances. If,
because of Tenant's acts, the rate of insurance on the Building or its
contents increases, then Tenant shall pay to Landlord the amount of such
increase on demand, and acceptance of such payment shall not constitute a
waiver of any of Landlord's other rights. Tenant shall conduct its business
and control its agents, employees, and invitees in such a manner as not to
create any nuisance or interfere with other tenants or Landlord in its
management of the Building.
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ASSIGNMENT AND
SUBLETTING
10. a. Transfers; Consent. Tenant shall not, without the prior written
consent of Landlord (which consent shall not be unreasonably withheld or
delayed), (i) advertise that any portion of the Premises is available for
lease, (ii) assign, transfer, or encumber this Lease or any estate or
interest herein, whether directly or by operation of law, (iii) permit any
other entity to become Tenant hereunder by merger, consolidation, or other
reorganization, (iv) if Tenant is an entity other than a corporation whose
stock is publicly traded, permit the transfer of an ownership interest in
Tenant so as to result in a change in the current control of Tenant, (v)
sublet any portion of the Premises, (vi) grant any license, concession, or
other right of occupancy of any portion of the Premises, or (vii) permit the
use of the Premises by any parties other than Tenant (any of the events
listed in clauses (ii) through (vii) being a "Transfer"). If Tenant requests
Landlord's consent to a Transfer, then Tenant shall provide Landlord with a
written description of all terms and conditions of the proposed Transfer,
copies of the proposed documentation, and the following information about the
proposed transferee: name and address; reasonably satisfactory information
about its business and business history; its proposed use of the Premises;
banking, financial, and other credit information; and general references
sufficient to enable Landlord to determine the proposed transferee's
creditworthiness and character. Tenant shall reimburse Landlord for its
reasnable attorneys' fees and other expenses incurred in connection with
considering any request for its consent to a Transfer. Landlord shall have a
period of seven (7) calendar days following receipt of such notice within
which to notify Tenant in writing that Landlord either agrees to such
transfer or the basis for Landlord's decision not to approve of such
Transfer. If Landlord consents to a proposed Transfer, then the proposed
transferee shall deliver to Landlord a written agreement whereby it expressly
assumes the Tenant's obligations hereunder; however, any transferee of less
than all of the space in the Premises shall be liable only for obligations
under this Lease that are properly allocable to the space subject to the
Transfer, and only to the extent of the rent it has agreed to pay Tenant
therefor. Landlord's consent to a Transfer shall not release Tenant from
performing its obligations under this Lease, but rather Tenant and its
transferee shall be jointly and severally liable therefor. Landlord's consent
to any Transfer shall not waive Landlord's rights as to any subsequent
Transfers. If an Event of Default occurs while the Premises or any part
thereof are subject to a Transfer, then Landlord, in addition to its other
remedies, may collect directly from such transferee all rents becoming due to
Tenant and apply such rents against Rent. Tenant authorizes its transferees
to make payments of rent directly to Landlord upon receipt of notice from
Landlord to do so.
b. [Intentionally Deleted.]
c. Additional Compensation. Tenant shall pay to Landlord, immediately
upon receipt thereof, 50% of all compensation received by Tenant for a
Transfer that exceeds the Basic Rental and Tenant's share of Electrical Costs
and Excess allocable to the portion of the Premises covered thereby.
INSURANCE;
WAIVERS;
SUBROGATION;
INDEMNITY
11. a. Insurance. Tenant shall at its expense procure and maintain
throughout the Term the following
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insurance policies: (i) comprehensive general liability insurance in
amounts of not less than a combined single limit of $5,000,000 (the
"Initial Liability Insurance Amount") or such other amounts as Landlord may
from time to time reasonably require, insuring Tenant, Landlord, and
Landlord's agents against all liability for injury to or death of a person
or persons or damage to property arising from the use and occupancy of the
Premises, (ii) contractual liability insurance coverage sufficient to cover
Tenant's indemnity obligations hereunder, (iii) insurance covering the full
value of Tenant's property and improvements, and other property (including
property of others), in the Premises, and (iv) xxxxxxx'x compensation
insurance, containing a waiver of subrogation endorsement reasonably
acceptable to Landlord. Tenant's insurance shall provide primary coverage
to Landlord when any policy issued to Landlord provides duplicate or
similar coverage, and in such circumstance Landlord's policy will be excess
over Tenant's policy. Tenant shall furnish certificates of such insurance
and such other evidence satisfactory to Landlord of the maintenance of all
insurance coverages required hereunder, and Tenant shall obtain a written
obligation on the part of each insurance company to notify Landlord at
least 30 days before cancellation or a material change of any such
insurance. All such insurance policies shall be in form, and issued by
companies, reasonably satisfactory to Landlord.
b. Waiver of Negligence Claims; No Subrogation. Landlord shall not be
liable to Tenant or those claiming by, through, or under Tenant for any
injury to or death of any person or persons or the damage to or theft,
destruction, loss, or loss of use of any property or inconvenience (a "Loss")
caused by casualty, theft, fire, third parties, or any other matter
(including Losses arising through repair or alteration of any part of the
Building, or failure to make repairs, or from any other cause), regardless of
whether the negligence of any party caused such Loss in whole or in part.
Landlord and Tenant each waives any claim it might have against the other for
any damage to or theft, destruction, loss, or loss of use of any property, to
the extent the same is insured against under any insurance policy that covers
the Building, the Premises, Landlord's or Tenant's fixtures, personal
property, leasehold improvements, or business, or, in the case of Tenant's
waiver, is required to be insured against under the terms hereof, regardless
of whether the negligence or fault of the other party caused such loss;
however, Landlord's waiver shall not include any deductible amounts on
insurance policies carried by Landlord or apply to any coinsurance penalty
which Landlord might sustain. Each party shall cause its insurance carrier to
endorse all applicable policies waiving the carrier's rights of recovery
under subrogation or otherwise against the other party.
c. Indemnity. Subject to Section 11.b, Tenant shall defend, indemnify,
and hold harmless Landlord and its agents from and against all claims,
demands, liabilities, causes of action, suits, judgments, and expenses
(including reasonable attorneys' fees) for any Loss arising from any
occurrence on the Premises or from Tenant's failure to perform its
obligations under this Lease (except to the extent a Loss arises from the
gross negligence or willful misconduct of Landlord or its agents). This
indemnity provision shall survive termination or expiration of this Lease.
Subject to Section 11.b., Landlord shall defend, indemnify, and hold harmless
Tenant and its officers, directors, employees and agents from and against all
claims, demands, liabilities, causes of action, suits,
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judgments, and expenses (including reasonable attorneys' fees) for any Loss
arising from Landlord's or its agents' gross negligence or willful
misconduct. This indemnity provision shall survive the termination or
expiration of this Lease.
SUBORDINATION
ATTORNMENT;
NOTICE TO
LANDLORD'S
MORTGAGEE
12. a. Subordination. This Lease shall be subordinate to any deed of
trust, mortgage, or other security instrument (a "Mortgage"), or any ground
lease, master lease, or primary lease (a "Primary Lease"), that now or
hereafter covers all or any part of the Premises (the mortgagee under any
Mortgage or the lessor under any Primary Lease is referred to herein as
"Landlord's Mortgagee").
b. Attornment. Tenant shall attorn to any party succeeding to
Landlord's interest in the Premises, whether by purchase, foreclosure, deed
in lieu of foreclosure, power of sale, termination of lease, or otherwise,
upon such party's request, and shall execute such agreements confirming such
attornment as such party may reasonably request.
c. Notice to Landlord's Mortgagee. Tenant shall not seek to enforce any
remedy it may have for any default on the part of the Landlord without first
giving written notice by certified mail, return receipt requested, specifying
the default in reasonable detail, to any Landlord's Mortgagee whose address
has been given to Tenant, and affording such Landlord's Mortgagee a
reasonable opportunity to perform Landlord's obligations hereunder.
RULES AND
REGULATIONS
13. Tenant shall comply with the rules and regulations of the Building
which are attached hereto as Exhibit B. Landlord may, from time to time,
change such rules and regulations for the safety, care, or cleanliness of the
Building and related facilities, provided that such changes are applicable to
all tenants of the Building and will not unreasonably interfere with Tenant's
use of the Premises. Tenant shall be responsible for the compliance with such
rules and regulations by its employees, agents, and invitees.
CONDEMNATION
14. a. Taking - Landlord's and Tenant's Rights. If any part of the
Building is taken by right of eminent domain or conveyed in lieu thereof (a
"Taking"), and such Taking prevents Tenant from conducting its business in
the Premises in a manner reasonably comparable to that conducted immediately
before such Taking, then Tenant may terminate this Lease as of the date of
such Taking by giving written notice to Landlord within 60 days after the
Taking, and Rent shall be apportioned as of the date of such Taking. If
Tenant does not terminate this Lease, then Rent shall be abated on a
reasonable basis as to that portion of the Premises rendered untenantable by
the Taking.
b. Taking - Landlord's Rights. If any material portion, but less than
all, of the Building becomes subject to a Taking, or if Landlord is required
to pay any of the proceeds received for a Taking to Landlord's Mortgagee,
then this Lease, at the option of Landlord, exercised by written notice to
Tenant within 30 days after such Taking, shall terminate and Rent shall be
apportioned as of the date of such Taking. If Landlord does not so terminate
15
this Lease, then this Lease will continue, but if any portion of the Premises
has been taken, Basic Rental shall xxxxx as provided in the last sentence of
Section 14.a.
c. Award. If any Taking occurs, then Landlord shall receive the entire
award or other compensation for the Land, the Building, and other
improvements taken, and Tenant may separately pursue a claim against the
condemnor for the value of Tenant's personal property which Tenant is
entitled to remove under this Lease, moving costs, loss of business, and
other claims it may have.
FIRE OR OTHER
CASUALTY
15. a. Repair Estimate. If the Premises or the Building are damaged by
fire or other casualty (a "Casualty"), Landlord shall, within 30 days after
such Casualty, deliver to Tenant a good faith estimate (the "Damage Notice")
of the time needed to repair the damage caused by such Casualty.
b. Landlord's and Tenant's Rights. If a material portion of the
Premises or the Building is damaged by Casualty such that Tenant is prevented
from conducting its business in the Premises in a manner reasonably
comparable to that conducted immediately before such Casualty and Landlord
estimates that the damage caused thereby cannot be repaired within 135 days
after the date of the Casualty, then Tenant may terminate this Lease by
delivering written notice to Landlord of its election to terminate within 30
days after the Damage Notice has been delivered to Tenant. If Tenant does not
terminate this Lease, then (subject to Landlord's rights under Section 15.c)
Landlord shall repair the Building or the Premises, as the case may be, as
provided below, and Rent for the portion of the Premises rendered
untenantable by the damage shall be abated on a reasonable basis from the
date of damage until the completion of the repair, unless Tenant caused such
damage, in which case, Tenant shall continue to pay Rent without abatement.
c. Landlord's Rights. If a Casualty damages a material portion of the
Building, and Landlord makes a good faith determination that restoring the
Premises would be uneconomical, or if Landlord is required to pay any
insurance proceeds arising out of the Casualty to Landlord's Mortgagee, then
Landlord may terminate this Lease by giving written notice of its election to
terminate within 30 days after the Damage Notice has been delivered to
Tenant, and Basic Rental hereunder shall be abated as of the date of the
Casualty.
d. Repair Obligation. If neither party elects to terminate this Lease
following a Casualty, then Landlord shall, within a reasonable time after
such Casualty, commence to repair the Building and the Premises and shall
proceed with reasonable diligence to restore the Building and Premises to
substantially the same condition as they existed immediately before such
Casualty; however, Landlord shall not be required to repair or replace any
part of the furniture, equipment, fixtures, and other improvements which may
have been placed by, or at the request of, Tenant or other occupants in the
Building or the Premises, and Landlord's obligation to repair or restore the
Building or Premises shall be limited to the extent of the insurance proceeds
actually received by Landlord for the Casualty in question.
TAXES
16. Tenant shall be liable for all taxes levied or assessed against
personal property, furniture, or fixtures placed by Tenant in the Premises.
If any taxes for which
16
Tenant is liable are levied or assessed against Landlord or Landlord's
property or if the assessed value of Landlord's property is increased by
inclusion of such personal property, furniture or fixtures, then Tenant
shall, within ten (10) days after Landlord has delivered notice of such
taxes to Tenant, either pay the amount of such taxes or diligently contest
such taxes and deliver to Landlord a bond or other security reasonably
satisfactory to Landlord. If Tenant fails to timely take either such
action, then Landlord may pay such taxes and Tenant shall pay to Landlord,
upon demand, that part of such taxes for which Tenant is primarily liable
hereunder.
EVENTS OF DEFAULT
17. Each of the following occurrences shall constitute an "Event of
Default":
a. Tenant's failure to pay Rent, or any other sums due from Tenant to
Landlord under the Lease (or any other lease executed by Tenant for space in
the Building), upon the expiration of a period of ten (10) days following
written notice to Tenant of such failure; provided, however, that Landlord
shall not be required to send such written notice to Tenant more than twice
in any one calendar year and after such two (2) written notices, Landlord
shall have no obligation to give Tenant written notice of any subsequent
default during the remainder of such calendar year and Tenant's failure or
refusal to timely pay Rent or other sums hereunder when due during the
remainder of such calendar year shall constitute an Event of Default;
b. Tenant's failure to perform, comply with, or observe any other
agreement or obligation of Tenant under this Lease (or any other lease
executed by Tenant for space in the Building) within 10 days following
written notice thereof to Tenant; provided, however, that in the event
Tenant's failure to perform, comply with, or observe any other agreement or
obligation of Tenant under this Lease cannot reasonably be cured within ten
(10) days following written notice to Tenant, Tenant shall not be in default
if Tenant commences to cure same within the ten (10) day period and
thereafter diligently prosecutes the curing thereof;
c. The filing of a petition by or against Tenant (the term "Tenant"
shall include, for the purpose of this Section 17.c, any guarantor of the
Tenant's obligations hereunder) (i) in any bankruptcy or other insolvency
proceeding; (ii) seeking any relief under any state or federal debtor relief
law; (iii) for the appointment of a liquidator or receiver for all or
substantially all of Tenant's property or for Tenant's interest in this
Lease; or (iv) for the reorganization or modification of Tenant's capital
structure, which petition remains undischarged for a period of sixty (60)
days;
d. Tenant shall desert or vacate any portion of the Premises for a
continuous period in excess of seven (7) days following written notice to
Tenant; provided, however, that such desertion or vacation shall not be a
default pursuant to this Lease so long as (i) Tenant performs all of its
obligations in accordance with this Lease, and (ii) so long as the Premises
are left in good condition and repair and in a clean condition which does not
detract from the appearance of the Building or the Premises; and
e. The admission by Tenant that it cannot meet its obligations as they
become due or the making by Tenant of an assignment for the benefit of its
creditors.
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REMEDIES
18. Upon any Event of Default, Landlord may, in addition to all other
rights and remedies afforded Landlord hereunder or by law or equity, take any
of the following actions:
a. Terminate this Lease by giving Tenant written notice thereof, in
which event, Tenant shall pay to Landlord the sum of (i) all Rent accrued
hereunder through the date of termination, (ii) all amounts due under Section
19.a., and (iii) an amount equal to (A) the total Rent that Tenant would have
been required to pay for the remainder of the Term discounted to present
value at a per annum rate equal to the "Prime Rate" as published on the date
this Lease is terminated by The Wall Street Journal, Southwest Edition, in
its listing of "Money Rates", minus (B) the then present fair rental value of
the Premises for such period, similarly discounted; or
b. Terminate Tenant's right to possession of the Premises without
terminating this Lease by giving written notice thereof to Tenant, in which
event Tenant shall pay to Landlord (i) all Rent and other amounts accrued
hereunder to the date of termination of possession, (ii) all amounts due from
time to time under Section 19.a., and (iii) all Rent and other sums required
hereunder to be paid by Tenant during the remainder of the Term, diminished
by any net sums thereafter received by Landlord through reletting the
Premises during such period. Landlord shall use reasonable efforts to relet
the Premises on such terms and conditions as Landlord in its sole discretion
may determine (including a term different from the Term, rental concessions,
and alterations to, and improvement of, the Premises); however, Landlord
shall not be obligated to relet the Premises before leasing other portions of
the Building. Landlord shall not be liable for, nor shall Tenant's
obligations hereunder be diminished because of, Landlord's failure to relet
the Premises or to collect rent due for such reletting. Tenant shall not be
entitled to the excess of any consideration obtained by reletting over the
Rent due hereunder. Reentry by Landlord in the Premises shall not affect
Tenant's obligations hereunder for the unexpired Term; rather, Landlord may,
from time to time, bring action against Tenant to collect amounts due by
Tenant, without the necessity of Landlord's waiting until the expiration of
the Term. Unless Landlord delivers written notice to Tenant expressly stating
that it has elected to terminate this Lease, all actions taken by Landlord to
exclude or dispossess Tenant of the Premises shall be deemed to be taken
under this Section 18.b. If Landlord elects to proceed under this Section
18.b., it may at any time elect to terminate this Lease under Section 18.a.
Additionally, without notice, Landlord may alter locks or other security
devices at the Premises to deprive Tenant of access thereto, and
Landlord shall not be required to provide a new key or right of access to
Tenant.
PAYMENT BY TENANT;
NON-WAIVER
19. a. Payment by Tenant. Upon any Event of Default, Tenant shall pay
to Landlord all reasonable costs incurred by Landlord (including court costs
and reasonable attorneys' fees and expenses) in (i) obtaining possession of
the Premises, (ii) removing and storing Tenant's or any other occupant's
property, (iii) repairing, restoring, altering, remodeling, or otherwise
putting the Premises into condition acceptable to a new tenant, excluding any
costs of tenant improvements, tenant moving allowances or tenant finish work,
(iv) if Tenant is dispossessed of the Premises and this Lease is not
terminated, reletting all or
18
any part of the Premises (including reasonable brokerage commissions, and
other reasonable costs incidental to such reletting), (v) performing
Tenant's obligations which Tenant failed to perform, and (vi) enforcing, or
advising Landlord of, its rights, remedies, and recourses arising out of
the Event of Default.
b. No Waiver. Landlord's acceptance of Rent following an Event of
Default shall not waive Landlord's rights regarding such Event of Default. No
waiver by Landlord of any violation or breach of any of the terms contained
herein shall waive Landlord's rights regarding any future violation of such
term or violation of any other term.
20. [Intentionally Deleted.]
SURRENDER OF
PREMISES
21. No act by Landlord shall be deemed an acceptance of a surrender of
the Premises, and no agreement to accept a surrender of the Premises shall be
valid unless the same is made in writing and signed by Landlord. At the
expiration or termination of this Lease, Tenant shall deliver to Landlord the
Premises with all improvements located thereon in good repair and condition,
reasonable wear and tear (and condemnation and fire or other casualty damage
not caused by Tenant, as to which Sections 14 and 15 shall control) excepted,
and shall deliver to Landlord all keys to the Premises. Provided that Tenant
has performed all of its obligations hereunder, Tenant may remove all trade
fixtures, furniture, and personal property placed in the Premises by Tenant
(but Tenant shall not remove any such item which was paid for, in whole or in
part, by Landlord). Additionally, Tenant shall remove such alterations,
additions, improvements, trade fixtures, equipment, wiring and furniture as
Landlord may request. Tenant shall repair all damage caused by such removal.
All items not so removed shall be deemed to have been abandoned by Tenant and
may be appropriated, sold, stored, destroyed, or otherwise disposed of by
Landlord without notice to Tenant and without any obligation to account for
such items. The provisions of this Section 21 shall survive the end of the
Term.
HOLDING OVER
22. If Tenant fails to vacate the Premises at the end of the Term, then
Tenant shall be a tenant at will and, in addition to all other damages and
remedies to which Landlord may be entitled for such holding over, Tenant
shall pay, in addition to the other Rent, a daily Basic Rental equal to the
greater of (a) 135% of the daily Basic Rental payable during the last month
of the Term, or (b) the prevailing market rental rate in the Building for
similar space.
CERTAIN RIGHTS
RESERVED BY
LANDLORD
23. Provided that the exercise of such rights does not unreasonably
interfere with Tenant's occupancy and quiet enjoyment of the Premises,
Landlord shall have the following rights:
a. To make reasonable inspections, repairs, alterations, additions,
changes, or improvements, whether structural or otherwise, in and about the
Building, or any part thereof; for such purposes, to enter upon the Premises
and, during the continuance of any such work, to temporarily close doors,
entryways, public space, and corridors in the Building; to interrupt or
temporarily suspend Building services and facilities; and to change the
arrangement and location of entrances or passageways, doors, and doorways,
corridors, elevators, stairs, restrooms, or other public parts of the
Building;
19
b. To take such reasonable measures as Landlord deems advisable for the
security of the Building and its occupants, including without limitation
searching all persons entering or leaving the Building; evacuating the
Building for cause, suspected cause, or for drill purposes; temporarily
denying access to the Building; and closing the Building after normal
business hours and on Saturdays, Sundays, and holidays, subject, however, to
Tenant's right to enter when the Building is closed after normal business
hours under such reasonable regulations as Landlord may prescribe from time
to time which may include by way of example, but not of limitation, that
persons entering or leaving the Building, whether or not during normal
business hours, identify themselves to a security officer by registration or
otherwise and that such persons establish their right to enter or leave the
Building;
c. To change the name by which the Building is designated; and
d. To enter the Premises at all reasonable hours after reasonable prior
notice (which notice may be oral or written) to show the Premises to
prospective purchasers, lenders, or tenants.
24. [Intentionally Deleted.]
MISCELLANEOUS
25. a. Landlord Transfer. Landlord may transfer, in whole or in part,
the Building and any of its rights under this Lease. If Landlord assigns its
rights under this Lease and the transferee assumes all obligations of
Landlord hereunder, then Landlord shall thereby be released from any further
obligations hereunder.
b. Landlord's Liability. The liability of Landlord to Tenant for any
default by Landlord under the terms of this Lease shall be limited to
Tenant's actual direct, but not consequential, damages therefor and shall be
recoverable from the interest of Landlord in the Building and the Land, and
Landlord shall not be personally liable for any deficiency. This section
shall not be deemed to limit or deny any remedies which Tenant may have in
the event of default by Landlord hereunder which do not involve the personal
liability of Landlord.
c. Force Majeure. Other than for Tenant's monetary obligations under
this Lease and obligations which can be cured by the payment of money (e.g.,
maintaining insurance), whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall not be liable or
responsible for, and there shall be excluded from the computation for any
such period of time, any delays due to strikes, riots, acts of God, shortages
of labor or materials, war, governmental laws, regulations, or restrictions,
or any other causes of any kind whatsoever which are beyond the control of
such party.
d. Brokerage. Except for Xxxxxxxx & Co. and Xxxxxxxx Xxxx Dallas/Ft.
Worth, Inc., who shall be paid by Landlord pursuant to separate agreements,
Landlord and Tenant each warrant to the other that it has not dealt with any
broker or agent in connection with the negotiation or execution of this
Lease. Tenant and Landlord shall each indemnify the other against all
reasonable costs, expenses, attorneys' fees, and other liability for
commissions or other compensation claimed by any broker or agent claiming the
same by, through, or under the indemnifying party.
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e. Estoppel Certificates. From time to time, Tenant shall furnish to
any party designated by Landlord, within ten days after Landlord has made a
request therefor, a certificate signed by Tenant confirming and containing
such factual certifications and representations as to this Lease as Landlord
may reasonably request.
f. Notices. All notices and other communications given pursuant to this
Lease shall be in writing and shall be (i) mailed by first class, United
States Mail, postage prepaid, certified, with return receipt requested, and
addressed to the parties hereto at the address specified in the Basic Lease
Information, (ii) hand delivered to the intended address, or (iii) sent by
prepaid telegram, cable, facsimile transmission, or telex followed by a
confirmatory letter. Notice sent by certified mail, postage prepaid, shall be
effective three business days after being deposited in the United States
Mail; all other notices shall be effective upon delivery to the address of
the addressee. The parties hereto may change their addresses by giving notice
thereof to the other in conformity with this provision.
g. Separability. If any clause or provision of this Lease is illegal,
invalid, or unenforceable under present or future laws, then the remainder of
this Lease shall not be affected thereby and in lieu of such clause or
provision, there shall be added as a part of this Lease a clause or provision
as similar in terms to such illegal, invalid, or unenforceable clause or
provision as may be possible and be legal, valid, and enforceable.
h. Amendments; and Binding Effect. This Lease may not be amended except
by instrument in writing signed by Landlord and Tenant. No provision of this
Lease shall be deemed to have been waived by Landlord unless such waiver is
in writing signed by Landlord, and no custom or practice which may evolve
between the parties in the administration of the terms hereof shall waive or
diminish the right of Landlord to insist upon the performance by Tenant in
strict accordance with the terms hereof. The terms and conditions contained
in this Lease shall inure to the benefit of and be binding upon the parties
hereto, and upon their respective successors in interest and legal
representatives, except as otherwise herein expressly provided. This Lease is
for the sole benefit of Landlord and Tenant, and, other than Landlord's
Mortgagee, no third party shall be deemed a third party beneficiary hereof.
i. Quiet Enjoyment. Provided Tenant has performed all of the terms and
conditions of this Lease to be performed by Tenant, Tenant shall peaceably
and quietly hold and enjoy the Premises for the Term, without hindrance from
Landlord or any party claiming by, through, or under Landlord, subject to the
terms and conditions of this Lease.
j. Joint and Several Liability. If there is more than one Tenant, then
the obligations hereunder imposed upon Tenant shall be joint and several. If
there is a guarantor of Tenant's obligations hereunder, then the obligations
hereunder imposed upon Tenant shall be the joint and several obligations of
Tenant and such guarantor, and Landlord need not first proceed against Tenant
before proceeding against such guarantor nor shall any such guarantor be
released from its guaranty for any reason whatsoever.
k. Captions. The captions contained in this Lease are for convenience
of reference only, and do not limit or enlarge the terms and conditions of
this Lease.
21
l. No Merger. There shall be no merger of the leasehold estate hereby
created with the fee estate in the Premises or any part thereof if the same
person acquires or holds, directly or indirectly, this Lease or any interest
in this Lease and the fee estate in the leasehold Premises or any interest in
such fee estate.
m. No Offer. The submission of this Lease to Tenant shall not be
construed as an offer, nor shall Tenant have any rights under this Lease
unless Landlord executes a copy of this Lease and delivers it to Tenant.
n. Tax Protest. Except for taxes set forth in Section 16, Tenant has no
right to protest the real estate tax rate assessed against the Project and/or
the appraised value of the Project determined by any appraisal review board
or other taxing entity with authority to determine tax rates and/or appraised
values (each a "Taxing Authority"). Tenant hereby knowingly, voluntarily and
intentionally waives and releases any right, whether created by law or
otherwise, to (a) file or otherwise protest before any Taxing Authority any
such rate or value determination even though Landlord may elect not to file
any such protest; (b) receive, or otherwise require Landlord to deliver, a
copy of any reappraisal notice received by Landlord from any Taxing
Authority; and (c) appeal any order of a Taxing Authority which determines
any such protest. The foregoing waiver and release covers and includes any
and all rights, remedies and recourse of Tenant, now or at any time
hereafter, under Section 41.413 and Section 42.015 of the Texas Tax Code (as
currently enacted or hereafter modified) together with any other or further
laws, rules or regulations covering the subject matter thereof. Tenant
acknowledges and agrees that the foregoing waiver and release was bargained
for by Landlord and Landlord would not have agreed to enter into this Lease
in the absence of this waiver and release. If, notwithstanding any such
waiver and release, Tenant files or otherwise appeals any such protest, then
Tenant will be in default under this Lease and, in addition to Landlord's
other rights and remedies, Tenant must pay or otherwise reimburse Landlord
for all reasonable costs, charges and expenses incurred by, or otherwise
asserted against, Landlord as a result of any tax protest or appeal by
Tenant, including, reasonable appraisal costs, tax consultant charges and
attorneys' fees (collectively, the "Tax Protest Costs"). If, as a result of
Tenant's tax protest or appeal, the appraised value for the Project is
increased above that previously determined by the Taxing Authority (such
increase, the "Value Increase") for the year covered by such tax protest or
appeal (such year, the "Protest Year"), then Tenant must pay Landlord, in
addition to all Tax Protest Costs, an amount (the "Additional Taxes") equal
to the sum of the following: (i) the product of the Value Increase multiplied
by the tax rate in effect for the Protest Year; plus (ii) the amount of
additional taxes payable during the five (5) year period following the
Protest Year, such amount to be calculated based upon the Value Increase
multiplied by the tax rate estimated to be in effect for each year during
such five (5) year period. Tenant must pay all Additional Taxes - even those
in excess of Tenant's proportionate share and which may relate to years
beyond the term of this Lease. The Additional Taxes will be conclusively
determined by a tax consultant selected by Landlord, without regard to
whether and to what extent Landlord may be able in years following the
Protest Year to reduce or otherwise eliminate any Value Increase. All Tax
Protest Costs and Additional Taxes must be paid by Tenant within five (5)
days following written demand by Landlord.
22
o. Exhibits. All exhibits and attachments attached hereto are
incorporated herein by this reference.
Exhibit A - Outline of Premises
Exhibit B - Building Rules and Regulations
Exhibit C - Operating Expense Escalator
Exhibit D - Tenant Finish Work: Allowance
Exhibit E - Parking
Exhibit F - Extension Option
Exhibit G - Tenant's Preferential Right to
Lease
Exhibit H - Areas A and B
p. Entire Agreement. This Lease constitutes the entire agreement
between Landlord and Tenant regarding the subject matter hereof and
supersedes all oral statements and prior writings relating thereto. Except
for those set forth in this Lease, no representations, warranties, or
agreements have been made by Landlord or Tenant to the other with respect to
this Lease or the obligations of Landlord or Tenant in connection therewith.
SPECIAL PROVISIONS
26. a. Moving Allowance. Landlord shall pay to Tenant a moving
allowance equal to those costs and expenses which are actually incurred by
Tenant if such costs and expenses are due and payable to third parties and
are necessary to effectuate Tenant's relocation to the Premises; provided,
however, that Landlord shall not be obligated to pay an amount in excess of
the product of (i) the number of rentable square feet in the Premises
multiplied by (ii) $3.00. Such allowance shall be due and payable 30 days
after Tenant's delivery to Landlord of the paid invoices evidencing such
expense. In the event the moving expenses do not exceed the moving allowance,
Tenant may use such excess moving allowance to pay for the costs of
constructing the Work (as defined in Exhibit D hereof).
b. Lobby Improvements. Landlord shall re-paint and re-carpet the
elevator lobby on the 36th floor of the Building with matching paint and
carpet which Tenant selects with respect to the Premises, provided that
Landlord determines, in its sole discretion, that such paint and carpet
selected by Tenant is appropriate for a class A office building multi-tenant
elevator lobby.
c. Refurbishment Allowance. Provided there is then no uncured Event of
Default, upon the expiration of the seventh year of the Term of the Lease,
Landlord shall provide Tenant with a refurbishment allowance (the
"Refurbishment Allowance") in an amount equal to the product of $5.00
multiplied by the number of rentable square feet of area then in the
Premises, to improve and refurbish the Premises pursuant to plans and
specifications approved by Landlord and Tenant and such refurbishment work to
be performed by contractors approved by Landlord and Tenant. The
Refurbishment Allowance shall not be disbursed to Tenant in cash, but shall
be paid by Landlord if, as, and when such costs are actually incurred.
EXCEPT AS EXPRESLLY SET FORTH TO THE CONTRARY IN THIS LEASE, LANDLORD AND
TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE
SUITABLE FOR TENANT'S INTENDED COMMERCIAL PURPOSE, AND TENANT'S OBLIGATION
TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES
OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT,
WITHOUT ABATEMENT, SETOFF, DEDUCTION, NOTWITHSTANDING ANY BREACH BY
LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR
IMPLIED.
23
DATED as of the date first above written.
LANDLORD: TENANT:
-------- ------
THE EQUITABLE-NISSEI DALLAS COMPANY, FIBREBOARD CORPORATION,
a joint venture a Delaware corporation
By: The Equitable Life Assurance By:_________________________
Society of the United States, Name:_______________________
a New York corporation, Title:______________________
its Managing Venturer
By:___________________________
Name:_________________________
Title:________________________
24
"Acquisition" shall mean the acquisition described in the Acquisition
Agreement.
"Acquisition Agreement" shall mean the Stock Purchase Agreement, dated
September 1, 1998, by and among Parent, Administrator and Xxxxx Xxxxxxxx, Xxxx
X. XxXxxxxx, Xxxxx Xxxxxxxxx, Xxxx X. Xxxxx, Xxxxxx X. Xxxxxxxxx, Xxxxxxx X.
X'Xxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxxx X. Perl, Xxxxxxx X. Xxxxx, Xxxx X.
Xxxxxxxx, Xxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, and Xxxxx X. Xxxxxxxx, and those
certain Asset Purchase Agreements, dated September 1, 1998, by and among
Parent, Ormond Imaging Partners, Inc. and (i) Magnetic Resonance Imaging
Associates Limited Partnership and Xxxx X. Xxxxx, Xxxxxxx X. Perl, Xxxxxxx X.
Xxxxx, Xxxx X. XxXxxxxx, Xxxxx X. Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxxxxx X. X'Xxxxx,
Xxxxxx X. Xxxxxxxx, and Xxxxxx X. Xxxxxxxxx and (ii) Duke Associates Limited
Partnership and Xxxx X. Xxxxx, Xxxxxxx X. Perl, Xxxxxxx X. Xxxxx, Xxxx X.
XxXxxxxx, Xxxxxxx X. X'Xxxxx, Xxxxxx X. Xxxxxxxxx, Xxxxx Xxxxxxxx, Xxxxxx X.
Xxxxxxxx, Xxxxx Xxxxxxxxx, and Xxxxx X. Xxxxxxxx.
"Acquisition Consideration" shall mean the Parent Common Stock and
other consideration furnished pursuant to the Acquisition Agreement by Parent
in connection with the Acquisition.
"Acquisition Effective Date" shall mean the date the Acquisition is
effective pursuant to the terms of the Acquisition Agreement.
"Adjustments" shall mean any adjustments on an accrual basis for
uncollectible accounts receivable or discounts and allowances, including but
not limited to, Medicare and Medicaid disallowances or other third-party
contractual allowances, workers' compensation, employee/dependent health care
benefit programs, professional courtesies, and other activities to the extent
they do not generate a collectible fee or offset a fee previously recorded.
"Administrator" shall have the meaning set forth in the first
paragraph hereof.
"Administrator Account" shall have the meaning set forth in Section
3.2(b)(ii).
"Administrator Expenses" shall mean, as determined pursuant to GAAP
applied on a consistent basis, any expenses of Administrator or Parent or any
of their Affiliates not incurred specifically for providing services to the
Practice including, without limitation: (i) any legal, accounting or other
professional expenses incurred by Administrator, Parent or any of their
Affiliates including those in connection with the Acquisition, (ii) any
expenses pertaining to the coordination of qualified retirement and benefit
plans of the Group, Parent, Administrator and their Affiliates incurred by
Administrator, Parent or any of their Affiliates in connection with the
Acquisition and pertaining to the transfer of Group's employees to
Administrator or Parent as a result of the Acquisition; and (iii) all taxes of
Administrator, Parent or any Affiliate not incurred on behalf of Practice
including, without limitation, income taxes of Administrator, Parent or any
Affiliate (but specifically excluding any sales and use taxes related to the
Practice which shall be a Practice Expense).
2
25
EXHIBIT 10.43
SUBLEASE AGREEMENT
This Agreement of Sublease ("Sublease"), made as of the 13th day of July, 1998,
by and between FIBREBOARD CORPORATION, a Delaware Corporation, Xxx Xxxxx
Xxxxxxx Xxxxxxx, Xxxxxx, Xxxx (hereinafter referred to as "Sublessor") and
AMERICAN PHYSICIAN PARTNERS, INC., a Delaware corporation, 0000 XxxxxxxXxxx
Xxxxx, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000-0000 (hereinafter referred to as
"Sublessee").
W I T N E S S E T H:
WHEREAS, The Equitable - Nissei Dallas Company, a joint venture, as Lessor
("Lessor") and Fibreboard Corporation, as Lessee, entered into that certain
lease (the "Lease") dated June 10, 1996 regarding 0000 Xxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxx (the "Premises");
WHEREAS, the Lease is attached hereto as Exhibit A hereof and is hereinafter
referred to as the "Dominant Lease"; and
WHEREAS, the Lessor and the Lessee entered into that certain First Amendment of
Lease dated April 17, 1997, pursuant to which Lessee leased from Lessor an
additional 5,321 square feet of rentable area at 0000 Xxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxx, and, as a result, the "Subleased Premises," as defined and used
herein, includes the additional 5,321 square feet so that the "Subleased
Premises" consists of approximately 25,812 square feet of rentable area located
on the 00xx Xxxxx xx 0000 Xxxx Xxxxxx; and
WHEREAS, Sublessor is desirous of subletting to Sublessee the Subleased
Premises;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises
hereinafter made and other good and valuable consideration, the parties agree
as follows:
1. SUBLEASE OF SUBLEASED PREMISES. Sublessor, in consideration of the
sub-rents to be paid and the agreements to be performed by Sublessee,
and subject to and upon all of the terms and conditions hereof, does
hereby sublease to Sublessee, and Sublessee hereby Subleases from
Sublessor, the Subleased Premises. Sublessee shall use the Subleased
Premises only as is permitted in Section 9 of the Dominant Lease.
2. TERM. The term of this Sublease ("Term") shall be for a period of one
hundred fifty-seven (157) months commencing on August 1, 1998 (the
"Commencement Date") and ending August 31, 2011 ("Expiration Date").
3. NET RENT. Sublessee shall pay to Sublessor monthly rent in advance, on
the first day of each month during the Term, in accordance with the
Rent Schedule attached hereto as Exhibit B. Rent under this Sublease
shall be paid without deduction or set-off, except to the extent
allowed "Lessee" in the Dominant Lease, in which event there shall be
a dollar-for-dollar reduction in the amount of rent payable hereunder
during any period of the Term when rent is not payable by Sublessor
thereunder. Prior to the Commencement Date, Sublessor shall permit
Sublessee without payment of rent to have access (with keys) and to
occupy for the purpose of inspecting the Subleased Premises and, at
Sublessee's expense and risk, the Subleased Premises (i) to begin work
on cabling and other computer-related
26
installation; (ii) to move certain personalty of Sublessee's into the
Subleased Premises; and (ii) for storage use and fixturing prior to
the Commencement Date. Should the Commencement Date occur on other
than the 1st day of a calendar month or should the Expiration Date
occur on any day except the last day of a calendar month, the monthly
rent for that month shall be prorated based on the number of days
Sublessee actually occupies the Subleased premises. Upon Commencement
Date, Sublessee shall have the right to fully occupy the entire
Subleased Premises consisting of 25,812 rentable square feet;
provided, however, Sublessee intends, and shall have the right, to
advertise for and subsublease the approximately 5,300 square foot
portion of the Subleased Premises which has its own separate entrances
and exits (the "5,300 feet"). Any rentals received by Sublessee from
the 5,300 Feet from any subsubtenant shall belong solely to Sublessee,
notwithstanding anything to the contrary contained in this Sublease or
the Dominant Lease.
4. ADDITIONAL RENTAL.
A) Sublessee shall also pay to Sublessor monthly as additional
rental the amount of electrical costs charged to Sublessor
pursuant to Section 4.C. of the Dominant Lease.
B) Sublessee shall also pay to Sublessor monthly as additional
rent all operating expense escalations charged to Sublessor
pursuant to Exhibit C of the Dominant Lease.
C) Notwithstanding anything contained in this Sublease or in the
Dominant Lease to the contrary, Sublessee shall not be
responsible for the payment of any additional rentals to the
Sublessor for the period of September 1, 1998 through November
30, 1999.
5. SECURITY DEPOSIT. On the date of execution of this Sublease by
Sublessee, there shall be due and payable by Sublessee to Sublessor a
Security Deposit in an amount equal to $79,587.00 to be held by
Sublessor for the performance by Sublessee of Sublessee's covenants
and obligations under this Sublease and Dominant Lease. Upon the
confirmed occurrence of any event of default by Sublessee, Sublessor
may, from time to time, without notice or prejudice to any other
remedy, use said Security Deposit to the extent necessary to make good
any arrears of rent or any other damage, injury, expense or liability
caused to Sublessor by such default or misuse. Any remaining balance
of Security Deposit shall be returned to Sublessee at the end of the
first four (4) years of the Term if there is then no default
hereunder, and otherwise upon satisfactory compliance with the terms
herein, inspection and acceptance by Sublessor of the vacated
Subleased Premises.
6. INCORPORATION AND OBSERVANCE OF DOMINANT LEASE. Sublessee accepts,
assumes and agrees to perform and be bound by all the terms, covenants
and conditions of the Dominant Lease which obligate the "Lessee"
thereunder unless this Sublease expressly provides for terms,
covenants or conditions which conflict with those of the "Lessee"
under the Dominant Lease; all terms of the Dominant Lease being
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27
incorporated herein by reference as though fully set forth herein.
Sublessor agrees to exert reasonable efforts to obtain the performance
of all the covenants of the "Lessor" pursuant to the provisions of
said Dominant Lease. In the event of conflict between the terms of
this Sublease and those of the Dominant Lease, as between the
Sublessor and Sublessee, the terms of this Sublease Agreement shall
control.
7. INSURANCE. Sublessee agrees to keep the Subleased Premises insured
with a reputable insurance company pursuant to a Tenants Comprehensive
General Liability Insurance policy with a minimum limit of $1,000,000
and All Risk Property policy insuring the contents contained within
the Premises. Such policies shall name Sublessor and Lessor as their
interests may appear, as additional insureds under the policies and
Sublessee shall provide Sublessor with a certificate evidencing such
insurance. The policies shall contain an agreement by the insurer
that such policies cannot be canceled or materially changed without at
least thirty (30) day's prior written notice to Sublessor.
8. DEFAULT. In addition to any default incorporated herein pursuant to
Paragraph 6 above, Sublessee shall be in default under this Sublease
if (a) Sublessee shall fail to pay, except as otherwise expressly
provided herein, when due any monthly rent payment within the time and
subject to the conditions applicable to Sublessor under the Dominant
Lease; or (b) Sublessee shall fail to perform any of its other
obligations under this Sublease after the same should have been
performed in accordance with the terms hereof within the time and
subject to the conditions applicable to Sublessor under the Dominant
Lease.
9. REMEDIES. If Sublessee shall be in default hereunder after having
been given notice of the existence of such default but with Sublessee
not having cured such default within thirty (30) days after receipt of
such notice, in addition to any other remedies that may be available
to Sublessor at law or in equity, Sublessor shall have the right to
immediately terminate this Sublease by written notice thereof to
Sublessee. In such event, Sublessee shall immediately quit and
surrender the Subleased Premises upon the date set forth in such
notice.
10. INDEMNITY. Sublessee shall indemnify and hold harmless Sublessor and
Sublessor's affiliates, and their respective directors, officers,
shareholders, employees, representatives and agents, from and against
any and all damages, losses, costs, claims, liabilities and expense
(including, without limitation, reasonable attorney's fees and
disbursements) incurred in connection with or otherwise arising from
(a) the occupancy and use of the Subleased Premises by Sublessee; and
(b) the breach or default by Sublessee of any of its obligations or
duties hereunder.
11. CONDITION OF SUBLEASED PREMISES AND ALTERATIONS. Sublessor Shall
deliver the Subleased Premises to Sublessee clean and free of debris
on the Commencement Date. Sublessor has no duty to construct or
improve the Subleased Premises and the Sublease Premises shall be
taken by Sublessee "As Is".
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28
12. SURRENDER OF SUBLEASED PREMISES. Subject to the requirements of
Section 6 above, at the termination of this Sublease, by lapse of time
or otherwise, Sublessee shall deliver up the Subleased Premises to
Sublessor in as good condition as existed on the date of possession by
Sublessee, ordinary wear and tear only excepted. Upon such
termination of this Sublease, Sublessor shall have the right to
re-enter and resume possession of the Subleased Premises.
13. ALTERATIONS TO SUBLEASED PREMISES. The Sublessee may, with the prior
written consent of the Sublessor and the Lessor, which consent shall
not be unreasonably withheld by the Sublessor and subject to the terms
of the Dominant Lease, at any time and from time to time during the
Term of this Sublease, make such changes and alterations, structural
or otherwise, to the Subleased Premises as the Sublessee shall deem
necessary or desirable in its sole discretion in connection with the
operation of Sublessee's business; provided that:
A) No change or alteration shall materially weaken, either
temporarily or permanently, the structure of the Subleased
Premises or, when completed, be of such character as to:
i) affect adversely the value of the Subleased Premises
in a material manner;
ii) reduce the cubic content of the Building; or
iii) reduce the general utility of the Subleased Premises.
B) Full sets of plans and specifications for any such changes and
alterations shall be supplied to the Sublessor and the Lessor.
C) Any interior or exterior structural alterations to the
Subleased Premises which are performed, or caused to be
performed, by the Sublessee shall become at once a part of the
realty and belong to Lessor. Lessor under the Dominant Lease
may, however, at its discretion, require that any such
alterations be removed upon surrender of the Subleased
Premises by the Sublessee, without expense to Sublessor or to
Lessor, and that the Subleased Premises be restored to its
condition, as it existed prior to such alteration at
Sublessee's sole cost and expense. Sublessee shall own and
retain title to all other leasehold improvements, moveable
furniture, trade fixtures, furnishings and equipment,
including those presently existing in the Subleased Premises
(collectively, the "Personalty"), providing Sublessee is not
in default under the terms of the Agreements. Sublessee shall
be responsible for all personal property taxes with respect to
the Personalty from and after the effective date of this
Sublease, with such taxes prorated for the 1998 tax year.
D) Any such alteration or change must be completed in a
professional and workmanlike manner, and must be completed in
full compliance with all applicable laws, regulations and
building codes.
14. HOLDOVER. If this Sublease is terminated for any reason and Sublessee
fails or refuses to vacate the Subleased Premises within five (5) days
of such termination, Sublessor, in
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addition to any other remedies available to it, shall be entitled to
receive 135% of the rental due during the period in which Sublessee
remains on the Subleased Premises in violation of this provision.
There are no renewal options granted to Sublessee hereunder or under
the Dominant Lease.
15. BROKERS. Only Xxxxxxx & Company was instrumental in arranging this
Sublease, and Sublessee indemnifies and holds harmless Sublessor and
Lessor from any claim for commission by any other broker, and
Sublessor is solely responsible for any commission due to Xxxxxxx &
Company as a result of this Sublease.
16. NOTICES. All notices required or permitted to be given hereunder
shall be given in writing and, if not delivered by hand, shall be
deposited, either registered or certified, in the United States mail,
postage prepaid, and addressed to Sublessor or Sublessee, as the case
may be, at its above address.
17. HAZARDOUS MATERIALS. SUBLESSEE SHALL NOT CONDUCT ANY ACTIVITIES ON OR
ABOUT THE SUBLEASED PREMISES WHICH RESULT IN THE GENERATION, STORAGE
OR RELEASE OF ANY TOXIC, HAZARDOUS OR SIMILAR SUBSTANCES (AS SUCH
TERMS MAY BE DEFINED FROM TIME TO TIME BY ANY FEDERAL, STATE OR LOCAL
LAW, RULE OR REGULATION). SUBLESSEE SPECIFICALLY AGREES TO INDEMNIFY,
DEFEND AND HOLD SUBLESSOR AND LESSOR HARMLESS FROM AND AGAINST ANY AND
ALL CLAIMS, DAMAGES, LIABILITIES AND LOSES ARISING AS A RESULT OF
SUBLESSEE'S BREACH OF THE FOREGOING PROHIBITION.
18. ASSIGNMENT. Sublessee shall not assign this Sublease nor sublet all
or any part of the Subleased Premises without the prior written
consent of Sublessor, which consent shall not be unreasonably
withheld; provided that, Sublessee may sublet subject to the terms,
covenants and conditions of this Sublease all or any part of the 5,300
feet, provided Sublessee remains obligated to Sublessor for the rental
and other obligations of Sublessee hereunder respecting the 5,300
Feet. With respect to any proposed subletting, Sublessee shall notify
Sublessor in writing at least forty-five (45) days prior to the
proposed commencement date of the new tenant's occupancy, and identify
the tenant, the nature of the tenant's business and the proposed use
of the new tenant's space. Sublessor shall approve or disapprove of
the proposed subletting in writing within fifteen (15) days after
receipt of Sublessee's notice. However, Sublessor shall have the
right, at any time, to assign this Sublease to any other party without
the consent of Sublessee.
19. LESSOR'S CONSENT. Sublessor and Sublessee each acknowledge and agree
that this Sublease is subject to the Sublessor obtaining the prior
written consent of Lessor in accordance with the terms of the Dominant
Lease. Such written consent shall be accompanied by the Lessor's
acknowledgment that there are no defaults by or offsets against
Sublessor under the Dominant Lease. In the event that such consent is
not obtained within thirty (30) days following the date hereof, but in
any event prior to the Commencement Date, this Sublease shall
terminate and neither party shall have any liability to the other
hereunder.
-5-
30
20. SUBLESSOR'S OBLIGATIONS. Sublessor agrees during the Term to:
A) Promptly provide Sublessee any notice or other communications
respecting the Dominant Lease received by Sublessor from
Landlord or any mortgagee of Landlord.
B) Cooperate with and assist Sublessee to perform Sublessee's
obligations under the Dominant Lease in any endeavor, such as
in the event of condemnation or casualty proceeds, wherein
Sublessor's participation is necessary in Sublessor's name
either under the Dominant Lease or by law.
21. SUBLESSOR'S REPRESENTATIONS. Sublessor represents that:
A) Sublessor will pay any amounts to be paid to Landlord under
subparagraph 10.a. of the Dominant Lease.
B) Sublessor will indemnify Sublessee for damages resulting from
Sublessor's default under the Dominant Lease through no fault
of Sublessee, including but not limited to, Sublessor's acts
or omissions of the type specified in subparagraph 11.c. of
the Dominant Lease.
C) This Sublease does not violate the terms of any mortgage
encumbering the Premises, those of any agreement between
Sublessor and any mortgagee of Landlord, nor those of any
other agreement with any other creditor of Sublessor's holding
a lien against or a security interest in the Premises.
D) All payments due and owing under the Dominant Lease have been
made, and Sublessor is not in default thereunder.
E) It will provide Sublessee by the Commencement Date an estoppel
letter from Lessor, specifying the address for monthly rent
due hereunder, approving this Sublease, and acknowledging that
so long as Sublessee is not in default hereunder, a default
under the Dominant Lease by Sublessor will not result in the
termination of Sublessee's tenancy so long as Sublessee
attorns to Lessor under the terms hereof.
F) The Subleased Premises comply with the Americans With
Disabilities Act.
22. SUBLESSEE'S RIGHT TO TERMINATE. Sublessee shall have the same rights
to terminate this Sublease as Sublessor would have under the Dominant
Lease for Landlord's acts or omissions as are specified in the
Dominant Lease or as otherwise provided to Sublessor by Law.
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23. REFURBISHMENT AND CONSTRUCTION ALLOWANCE. On the seventh (7th)
anniversary of the Commencement Date of the Dominant Lease, Sublessor
shall pay to Sublessee a lump sum of $102,455.00 in cash as an
allowance to refurbish the Subleased Premises, as such sum becomes
available to Sublessor under the Dominant Lease and any amendments
thereto. In addition, from and after the Commencement Date of this
Sublease, Sublessor shall make available the sum of $53,210 to
Sublease as a construction allowance to be disbursed to Sublessee from
time to time during the Term of this Sublease (if not utilized within
the first six months after the Commencement Date by Sublessee) for
Sublessee's improvements to the Subleased Premises.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
the day and year first above written.
SUBLESSOR: FIBREBOARD CORPORATION
By:
------------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
SUBLESSEE: AMERICAN PHYSICIAN PARTNERS, INC.
By:
------------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
LESSOR: The EQUITABLE-NISSEI DALLAS COMPANY, a
joint venture
By:
------------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
-8-
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"Affiliate" with respect to any person shall mean a person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such person. Neither
Administrator nor the Group is deemed to be an Affiliate of the other.
"Agreement" shall mean this Service Agreement, as amended from time to
time.
"Allocable Expenses" shall mean those Practice Expenses which are
attributable in part to both Technical Expenses and Professional Expenses, and
which shall be allocated as provided in Exhibit 1.1 attached hereto.
"APPM Group" shall mean Administrator, Parent and their Affiliates and
all professional associations or corporations or other entities to which
Administrator, Parent, or their Affiliates provide management services.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential and Proprietary Information" shall have the meaning set
forth in Section 6.1(d).
"Deposit Account" shall mean the bank account established for the
Group to deposit any and all payments intended for the payment of global fees,
professional fees and technical fees related to the Practice.
"ERISA" shall have the meaning set forth in Section 4.9.
"Excluded Practice Expenses" shall mean, as determined pursuant to
GAAP applied on a consistent basis: (i) any salaries, benefits, payroll taxes,
or other distributions made to Group Physician Stockholders, Physician
Employees and Physician Extender Employees; (ii) any federal, state or other
income taxes applicable to the Group; (iii) all professional related expenses
of the physicians, including but not limited to, professional meetings,
seminars, dues and subscriptions other than such seminars or meetings that
Administrator or Parent requests that any Physician Employees or Physician
Extender Employees attend; (iv) all costs and expenses associated with the
performance of professional services to or for the benefit of the Group by
legal, accounting, investment, financial or other advisors specifically
retained by the Group including, without limitation, all such costs and
expenses incurred by the Group in connection with the Acquisition; and (v) such
other professional expenses incurred by the Practice which are not Practice
Expenses or Administrator Expenses.
"Fair Market Value" shall mean as to any asset, the fair market value
of such asset as mutually determined by an Independent Financial Expert
selected by Administrator and an Independent Financial Expert selected by the
Group, provided further that in the event that the Independent Financial
Experts selected by Administrator and the Group cannot agree on the Fair Market
Value within ninety (90) days prior to the Purchase Closing then the two (2)
Independent Financial Experts shall mutually select a third Independent
Financial Expert to determine the Fair Market Value which determination shall
be binding on the parties hereto. Each such Independent
3
34
Financial Expert may use any customary and generally accepted method of
determining fair market values, and shall take into account the effect of any
liabilities, liens, claims or encumbrances that may reasonably be expected to
have an effect on the Fair Market Value. The cost of any Independent Financial
Experts retained by any person hereunder shall be paid one-half by
Administrator and one-half by the Group.
"Full-time Physician Employee" shall mean any Physician Employee who
would be eligible to participate in any qualified employee benefit plan of the
Group.
"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 and Securities and
Exchange Commission or their respective successors.
"Group" shall have the meaning set forth in the first paragraph
hereof.
"Group Account" shall mean the bank account established by the Group
solely for the benefit of the Group and into which Administrator shall deposit
the residual amounts to which the Group is entitled following the application
of the priority of payments set forth in Section 7.6 below.
"Group Physician Stockholders" shall mean those Physician Employees
and Physician Extender Employees who own an interest, directly or indirectly,
in the equity capital of the Group.
"HCFA" shall mean the Health Care Financing Administration or any
successor.
"Independent Financial Expert" shall mean any nationally-recognized
accounting or investment banking firm regularly engaged in the business of
evaluating assets of medical practices and associated businesses which (i) does
not (and whose directors, officers, employees, Affiliates or stockholders do
not) have a material direct or indirect financial interest in Administrator,
Parent or any of their Affiliates or in the Group or any of its Affiliates,
(ii) has not been, and at the time it is called upon to give independent
financial advice to the parties hereto is not (and none of whose directors,
officers, employees, Affiliates or stockholders is) a promoter, director or
officer of Administrator, Parent or any of their Affiliates or of the Group or
any of their Affiliates, and (iii) has not been retained to render advice,
service or an opinion to Administrator, Parent or the Group or any of their
Affiliates within the past five-year period except as an Independent Financial
Expert for purposes of this Agreement. Notwithstanding the preceding, prior
retention of any accounting or investment banking firm by Administrator, Parent
or the Group or any of its Affiliates shall not disqualify such firm from
serving as an Independent Financial Expert pursuant to this Agreement;
provided, that (i) such firm was retained solely to evaluate the fair market
value of assets of other medical practices and (ii) the individuals providing
services to Independent Financial Expert are not the same as those previously
rendering services and such firm establishes appropriate procedures to prevent
disclosure of any confidential information. Any individual performing services
on behalf of an Independent Financial Expert shall have at least five (5) years
of experience in evaluating the fair market value of assets of medical
practices and associated businesses.
"IRS" shall mean the Internal Revenue Service.
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"Joint Planning Board" shall mean the joint board described in, and
established pursuant to, Section 5.1.
"Managed Care Contracts" shall have the meaning set forth in Section
3.7.
"Managed Care Payors" shall have the meaning set forth in Section 3.7.
"Parent" shall have the meaning set forth in the first paragraph
hereof.
"Parent Common Stock" shall mean the common stock, $0.0001 par value
per share, of Parent.
"Payment Date" shall have the meaning set forth in Section 7.2.
"Personal Property" shall have the meaning set forth in Section
3.3(b).
"Physician Employee Employment Agreements" shall mean the employment
agreements entered into between the Group and each Physician Employee.
"Physician Employees" shall mean those individuals who are physicians
employed by the Group, or by shareholders, members or partners of the Group, or
who are otherwise under contract or associated with the Group from time to time
to provide professional medical services to patients of the Practice.
"Physician Extender Employees" shall mean those individuals who are
employed by or otherwise under contract or associated with the Practice from
time to time such as advanced practice nurses (APNs), physician assistants
(PAs), or any other position that generates a professional charge.
"Practice" shall mean all business operations conducted by or
attributable to the Group and shall include, without limitation, (i) the
Technical Operations and (ii) the Professional Operations.
"Practice Expenses" shall mean, as determined pursuant to GAAP applied
on a consistent basis, all operating and non-operating expenses of the Group,
Administrator and/or Parent or their Affiliates (including, without limitation,
Allocable Expenses)(for purposes of this paragraph, Affiliates shall exclude
entities not under the common ownership or control of Parent), on an accrual
basis and without xxxx-up, incurred in connection with the management,
administration or operation of the Professional Operations and the Technical
Operations. Provided, however, that, notwithstanding anything contained herein
to the contrary, (i) Administrator Expenses and Excluded Practice Expenses
shall not be included in Practice Expenses, and (ii) only expenses incurred by
Administrator and/or Parent with respect to the provision of non-medical
business services relating to the operation of the Practice shall be deemed
Practice Expenses.
"Practice Related Liabilities" shall have the meaning set forth in
Section 10.6(b).
"Practice Site(s)" shall mean any facilities, including satellite
locations at which the Group provides care to patients.
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"Premises" shall mean the premises provided to the Practice pursuant
to Section 3.3(a).
"Professional Expenses" shall mean all operating and non-operating
Practice Expenses, determined on an accrual basis and without xxxx-up, incurred
by Administrator and/or Parent or their Affiliates (for purposes of this
paragraph, Affiliates shall exclude entities not under the common ownership or
control of Parent) to the extent incurred in connection with the Professional
Operations including, without limitation: (i) salaries, benefits and other
direct costs of employees of Administrator who perform services for the
Professional Operations; (ii) direct costs of all employees of Administrator
engaged to provide services to improve performance of the Professional
Operations, provided such costs are approved in advance by the Joint Planning
Board; (iii) leases for assets utilized for the benefit of the Professional
Operations; (iv) personal and property taxes assessed against Administrator's
assets utilized for the benefit of Professional Operations; (v) interest on
indebtedness assumed by Administrator as a result of the Acquisition, or
incurred by Administrator to finance or refinance such indebtedness, and/or in
connection with making advances and capital available to the Practice, in each
case, for the benefit of the Professional Operations; (vi) any provider tax
assessed against the Professional Operations and any sales and use tax related
to the Professional Operations; (vii) direct expenses of requisite and
obligatory professional licensing and insurance costs related to the
Professional Operations; (viii) any amortization of any intangible asset set
forth on Parent's, Administrator's or their applicable Affiliates' financial
statements (as applicable) used in connection with the Professional Operations,
excluding any amortization associated with the Acquisition; (ix) any
depreciation of assets to the extent used in connection with the Professional
Operations; and (x) other reasonable expenses incurred by Administrator in
providing services for the direct benefit of the Professional Operations;
provided, however, that Administrator Expenses, Excluded Practice Expenses and
Technical Expenses shall not be included in Professional Expenses.
"Professional Operations" shall mean all business and operations
conducted by the Group including, without limitation, the provision of
professional medical services to patients by Physician Employees and Physician
Extender Employees at any Practice Site, but specifically excluding Technical
Operations.
"Professional Revenues" for any month shall mean all fees and income
of the Practice, as determined pursuant to GAAP applied on a consistent basis,
recorded each month (net of Adjustments) by or on behalf of the Practice,
generated by the Professional Operations including, but not limited to, any
fees generated by Physician Employees and Physician Extender Employees in their
professional capacity such as medical director fees, consulting fees, and fees
for expert testimony, but excluding any income derived by any such Physician
Employee from any outside medical activity or related source not required to be
assigned to the Group or the Practice as described in Section 6.2 hereof.
Global-fee Practice revenues shall be allocated between Professional Revenues
and Technical Revenues based upon the RVUs. To the extent RVUs or similar
measures are no longer established by HCFA, global-fee Practice revenues shall
be allocated between Professional Revenues and Technical Revenues based upon
the last available RVU allocation percentages on a modality-by- modality basis.
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"Purchase Assets" shall have the meaning set forth in Section 10.6(a).
"Purchase Closing" shall have the meaning set forth in Section 10.7.
"Purchase Price" shall have the meaning set forth in Section 10.6(c).
"Restrictive Covenants" shall have the meaning set forth in Section
6.2.
"RVUs" shall mean the relative value units in effect from time to time
as established by HCFA.
"Security Agreement" shall have the meaning set forth in Section 7.4.
"Stockholder Employment Agreements" shall mean the employment
agreements entered into between the Group and each Group Physician Stockholder.
"Tax Returns" shall include all federal, state, local, franchise,
property and other tax returns.
"Technical Employees" shall mean those persons who are employed or
otherwise under contract as employees of the Technical Operations from time to
time including, without limitation, technologists who provide services in the
diagnostic or therapeutic areas of the Practice.
"Technical Expenses" shall mean all operating and non-operating
expenses, determined on an accrual basis and without xxxx-up, incurred by
Administrator and/or Parent or their Affiliates (for purposes of this
paragraph, Affiliates shall exclude entities not under the common ownership or
control of Parent) to the extent incurred in connection with the Technical
Operations including, without limitation: (i) salaries, benefits and other
direct costs of employees of Administrator who perform services for the
Technical Operations, and all salaries and benefits of Technical Employees;
(ii) direct costs of all employees of Administrator engaged to provide services
to improve performance of the Technical Operations, provided such costs are
approved in advance by the Joint Planning Board; (iii) leases for assets
utilized for the benefit of the Technical Operations; (iv) personal and
property taxes assessed against Administrator's assets utilized for the benefit
of the Technical Operations; (v) interest on indebtedness incurred by
Administrator in connection with making advances and capital available to the
Technical Operations; (vi) any provider tax assessed against the Technical
Operations and any sales and use tax related to the Technical Operations; (vii)
direct expenses of requisite and obligatory licensing and insurance costs
related to the Technical Operations; (viii) any amortization of any intangible
asset set forth on Parent's, Administrator's or their applicable Affiliates'
financial statements (as applicable) to the extent used in connection with the
Technical Operations, excluding any amortization associated with the
Acquisition; (ix) any depreciation of assets to the extent used in connection
with the Technical Operations; and (x) other reasonable expenses incurred by
Administrator in providing services for the direct benefit of the Technical
Operations; provided, however, that Administrator Expenses, Professional
Expenses and Excluded Practice Expenses shall not be included in Technical
Expenses.
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"Technical Operations" shall mean outpatient imaging centers and/or
radiation oncology centers, hospital radiology departments, mobile imaging
services or any other operations utilizing facilities or equipment owned or
managed by Administrator, Parent or any of their Affiliates, or in which
Administrator, Parent or any of their Affiliates hold or own an ownership or
equity interest in, and which generate Technical Revenues.
"Technical Revenues" shall mean all fees and income of the Practice,
as determined pursuant to GAAP applied on a consistent basis, that are recorded
each month (net of Adjustments) by or on behalf of the Practice, for the use of
Administrator's facilities and equipment, net of any Professional Revenues.
Global-fee Practice revenues shall be allocated between Professional Revenues
and Technical Revenues based upon RVUs. To the extent RVUs or similar measures
are no longer established by HCFA, global-fee Practice revenues shall be
allocated between Professional Revenues and Technical Revenues based upon the
last available RVU allocation percentages on a modality-by-modality basis.
"Termination Date" shall have the meaning set forth in Section 10.5.
"Termination Notice" shall have the meaning set forth in Section
10.5(a).
ARTICLE II
Relationship of the Parties
Section 2.1 Independent Contractors. The Group and
Administrator/Parent are, and intend to act and perform as, independent
contractors, and the provisions hereof are not intended to create any
partnership, joint venture, agency or employment relationship between the
parties. The Group shall retain the exclusive authority to direct the medical,
professional, and ethical aspects of its medical practice. Neither Parent nor
Administrator shall exercise control or direction over the medical methods,
procedures or decisions or interfere with the physician-patient relationships
of the Group, which shall be maintained strictly between the Group, Physician
Employees and/or Physician Extender Employees and their patients.
Section 2.2 Practice of Medicine. Neither Administrator nor
Parent is authorized or qualified to engage in any activity which may be
construed or deemed to constitute the practice of medicine and nothing herein
shall be construed as the practice of medicine by Administrator or Parent. To
the extent any act or service required of Administrator is construed or deemed
to constitute the practice of medicine, Administrator is released from any
obligation to provide, and the Group shall be deemed not to have requested
Administrator to provide, such act or service without otherwise affecting the
other terms of this Agreement.
Section 2.3 No Payment or Other Compensation for Referrals. The
benefits to the Group hereunder do not require, are not payment or compensation
in cash or in kind for, and are not in any way contingent upon the admission,
referral or any other arrangement for the provision of any item or service
offered by Administrator, Parent or any of its Affiliates to any of the Group's
patients in any facility controlled, managed or operated by Administrator.
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Section 2.4 Group's Internal Matters. The Group shall be solely
responsible for matters involving its corporate governance, employees and
similar internal matters, including, but not limited to, preparation and
contents of such reports to regulatory authorities governing the Professional
Operations that the Group is required by law to provide, and distribution of
salaries, benefits and professional fee income among the Group Physician
Stockholders, Physician Employees and Physician Extender Employees.
Administrator shall assist the Group, where necessary and appropriate, by
providing the information and data to be included in such reports.
ARTICLE III
Services to be Provided by Administrator
Section 3.1 General. Administrator shall provide or arrange for
the services set forth in this Article III, and the reasonable costs, fees,
expenses and other disbursements incurred by Administrator or Parent in
connection therewith shall be included in Practice Expenses, except to the
extent such costs, fees or expenses are expressly included in Excluded Practice
Expenses or Administrator Expenses. Administrator is authorized to perform its
services hereunder as is necessary or appropriate for the efficient operation
of the Practice, including, without limitation, performance of some of the
business office functions at locations other than the Practice. Except to the
extent necessary to comply with applicable laws, regulations or professional
ethical standards, the Group will not act in a manner which would prevent
Administrator from performing its duties hereunder and will provide such
information and assistance to Administrator as is reasonably required by
Administrator to perform its services hereunder. Administrator shall cause its
employees to comply with all applicable federal, state and local laws, rules
and regulations in Administrator's provision of services hereunder.
Section 3.2 General Administrative Services.
(a) Exclusive Management Services; Scope of Services.
During the term of this Agreement, the Group hereby engages Administrator to
serve as its exclusive manager and administrator of non-medical business
services relating to the operation of the Practice, subject to matters reserved
for the Group or referred to the Joint Planning Board as herein contemplated,
and Administrator shall have all necessary authority and hereby agrees to
perform such services. The Group agrees that the purpose and intent of this
Agreement is to relieve the Group to the maximum extent possible of the
administrative, accounting, purchasing, non-physician personnel and other
non-medical business aspects of the Practice. Administrator agrees that the
Group, Physician Employees and Physician Extender Employees, and only the
Group, Physician Employees and Physician Extender Employees, will perform the
professional medical functions of the Practice. Administrator shall have no
authority, directly or indirectly, to perform, and shall not perform, any
professional medical function. Administrator may, however, advise the Group as
to the relationship between the Group's performance of professional medical
functions and the overall administrative and business functions of the Practice
to the extent permitted by applicable law.
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(b) Billing and Collection.
(i) Administrator shall, in the name of and on
behalf of the Group, xxxx patients, insurance companies, Managed Care
Payors, and other third-party payors and collect all fees for services
rendered in connection with the Practice at the Premises or any
Practice Site(s) (including all fees generated by both the Technical
Operations and the Professional Operations), for services performed
outside the Practice for its hospitalized patients, and for all other
professional and Practice services. The Group hereby appoints
Administrator for the term of this Agreement to be its true and lawful
attorney-in-fact, for the following purposes:
(A) to timely xxxx patients, insurance
companies, Managed Care Payors, and other third-party payors
in the Group's name and on its behalf;
(B) to collect accounts receivable
resulting from such billing not otherwise purchased by
Administrator (as provided for in Section 3.2(e) hereof) in
the Group's name and on its behalf, and to deposit such
collections in the Deposit Account;
(C) to receive payments on behalf of the
Group from insurance companies, prepayments received from
health care plans, Medicare, Medicaid, Managed Care Payors and
all other third-party payors, and to deposit such payments in
the Deposit Account;
(D) to ensure the collection and receipt
in Administrator's name and for Administrator's account of all
accounts receivable of the Practice purchased by
Administrator, and to deposit such collections in the
Administrator Account;
(E) to take possession of and endorse in
the name of the Group and deposit into the Deposit Account
(and/or in the name of an individual physician, such payment
intended for purpose of payment of professional fees related
to the Practice) any notes, checks, money orders, insurance
payments and other instruments received in payment of accounts
receivable of the Group not otherwise purchased by
Administrator; and
(F) upon the prior consent of the Group,
which consent shall not be unreasonably withheld or delayed,
to initiate the institution of legal proceedings in the name
of the Group or a Physician Employee to collect any accounts
and monies owed to the Group or the Physician Employee, to
enforce the rights of the Group or the Physician Employee, as
the case may be, as creditor under any contract or in
connection with the rendering of any service, and to contest
adjustments and denials by governmental agencies (or their
fiscal intermediaries) as third-party payors.
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In performing the foregoing billing practices,
Administrator shall implement, or cause to be implemented, and
maintain, or cause to be maintained, a comprehensive billing
compliance program to ensure that billing codes and other matters
relating to billing for and on behalf of the Practice, including for
and on behalf of the Group, are accurate, consistent with applicable
standards in the industry and handled by trained personnel who are
subject to periodic review and appropriate supervision. The Group
agrees to participate in and comply with any programs established by
Administrator or Parent to ensure that billing codes and other matters
relating to billing for and on behalf of the Practice are accurate and
consistent with applicable standards in the industry.
(ii) The Group hereby appoints Administrator as
its true and lawful attorney-in-fact to deposit into the Deposit
Account all Professional Revenues and Technical Revenues collected by
Administrator as provided for in this Section 3.2(b). The Group
covenants, and shall cause all Physician Employees and Physician
Extender Employees to covenant, to forward any payments received with
respect to any Professional Revenues or Technical Revenues generated
for services provided by the Group or any of its Physician Employees
and Physician Extender Employees to Administrator for deposit.
Administrator shall have the right to withdraw funds from the Deposit
Account and all owners of the Deposit Account shall execute a
revocable standing transfer order (the "Transfer Order") under which
the bank maintaining the Deposit Account shall periodically transfer
the entire balance of the Deposit Account to a separate bank account
owned solely by Administrator (the "Administrator Account"). The
Group and Administrator hereby agree to execute from time to time such
documents and instructions as shall be required by the bank
maintaining the Deposit Account and mutually agreed upon to effectuate
the foregoing provisions and to extend or amend such documents and
instructions. Any action by the Group that materially interferes with
the operation of this Section, including but not limited to, any
failure to deposit or to have Administrator deposit any Professional
Revenues and/or Technical Revenues into the Deposit Account, any
withdrawal of any funds from the Deposit Account not authorized by the
express terms of this Agreement or any other written agreement
executed by each of the parties, or any revocation of or attempt to
revoke the Transfer Order (otherwise than upon expiration or
termination of this Agreement), will constitute a breach of this
Agreement and will entitle Administrator, in addition to any other
remedies it may have at law or in equity, to seek a court ordered
assignment of the rights provided to Administrator pursuant to
subparagraph (i) above.
(iii) All monies shall be accounted for by
Administrator as being distinctly attributable to the Group. The
Group may perform the functions or exercise the rights set forth in
this Section 3.2(b) only with the prior written consent of
Administrator. The Group shall execute such documents in form and
substance as approved by Administrator and its legal counsel to permit
Administrator to exercise the rights and powers granted to
Administrator pursuant to this Section 3.2(b). The Group shall
cooperate with, and at the request of Administrator shall provide
reasonable assistance to, Administrator with the functions set forth
herein. In the performance of the services described in this Section
3.2(b), Administrator shall use commercially reasonable efforts to
collect such professional fees and
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shall comply with all applicable Managed Care Contracts and all
applicable laws, rules and regulations.
(iv) In the event the Group reasonably determines
that its funds have been mishandled by Administrator, and
Administrator and Parent have been unable to explain any discrepancy
to the reasonable satisfaction of the Group within ten (10) business
days of receipt of written notice by the Group indicating the specific
discrepancy, the Joint Planning Board shall appoint an independent
accountant or other entity to manage the business and financial
records of the Group and the Practice, including, in particular,
collections and receivables, until the conclusion of an investigation
by, or on behalf of, the Joint Planning Board, but not more than
twenty (20) days after the initial notice.
(c) Accounting. Administrator shall administer and
maintain the operation of an appropriate accounting system with respect to the
operation of the Practice, and Administrator shall perform all bookkeeping and
accounting services necessary or appropriate for the efficient operation of the
Practice, including the maintenance, custody and supervision of business
records, ledgers and reports; the establishment, administration and
implementation of accounting procedures, controls and systems; and
implementation and management of computer-based management information systems.
The Group and its authorized representatives shall have the right to review all
financial books and records maintained by Administrator relating to the
operation of the Practice and to the cash management transfer and uses
contemplated by Section 3.2(d) hereof. Such information shall be provided by
Administrator to the Group in any media reasonably requested upon reimbursement
of Administrator's actual cost.
(d) Cash Management. Administrator shall manage the cash
and cash equivalents of the Group, and Administrator shall be entitled (and is
hereby authorized) to transfer such cash to the Administrator Account and to
use such cash only for purposes consistent with the terms and provisions of
this Agreement.
(e) Purchase of Accounts Receivable and Right of Offset.
Effective each business day of the month and subject to applicable law,
Administrator shall purchase all accounts receivable of the Group arising
during the day or days just ended and shall make payment to Group therefor or
offset, without further notice or authorization, sums owed Administrator by
Group as the parties have agreed herein. The purchase price shall be an amount
equal to the aggregate face amount of the accounts receivable being sold less
"Adjustments" and estimated allowances for bad debt as determined from time to
time based on recent historical collection experience of one year or less.
Administrator shall make appropriate adjustments for bad debt and contractual
allowances following the close of each fiscal quarter of the Administrator.
(f) Obligations of Administrator. Administrator shall
supply to the Group all ordinary, necessary or appropriate services for the
timely and efficient operation of the Practice, including without limitation,
billing and collection, clerical, accounting, purchasing, payroll, legal,
bookkeeping and computer services, information management, preparation of Tax
Returns, printing, postage and duplication services and medical transcribing
services; provided, however, that the Group may elect to prepare its own Tax
Returns, in which case, the cost of preparing such Tax
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Returns in excess of $2,500 (or such greater amount as quoted by
Administrator's independent accounting firm) per annum shall be included in
Excluded Practice Expenses. Administrator shall prepare monthly unaudited
accrual or cash-basis (as designated by the Group) financial statements for the
Group containing a balance sheet, income statement and monthly operational
reports which detail payments, charges and accounts receivable statistics,
monthly reconciliation reports on cash management and any other financial
reports reasonably requested by a member of the Joint Planning Board designated
by the Group, which shall be delivered to the Group as soon as practicable, but
no later than thirty (30) days after the end of each calendar month. The Group
may elect to have an audit conducted with respect to such financial statements
by an accounting firm selected by Group in its sole discretion, in which case
the cost of such audit, including the Administrator's actual costs, shall be
included in Excluded Practice Expenses.
(g) Records and Files.
(i) Administrator's Business and Financial
Records. At all times during and after the term of this Agreement,
including any extensions or renewals hereof, all business records,
including but not limited to, business agreements, books of account,
personnel records, general administrative records and all information
generated under or contained in the management information system
pertaining to Administrator's obligations hereunder, and other
business information of Administrator of any kind or nature, except
for the "Group's Records" (as defined in subparagraph (ii) below),
shall be and remain the sole property of Administrator; provided that
during and after termination of this Agreement, the Group shall be
entitled to reasonable access to such records and information,
including the right to obtain copies thereof in any media reasonably
requested by the Group, for any purpose related to patient care or the
defense of any claim relating to patient care or the business of
Administrator or the Group or to the relationships of the parties
hereto, and the Administrator agrees to safeguard such records for
such period as may be required by applicable federal or state law
following termination of this Agreement, but in no event less than six
(6) years or such longer period as determined by the Joint Planning
Board.
(ii) The Group's Records. At all times during and
after the term of this Agreement, the business agreements, financial,
operational, corporate and personnel records and information relating
exclusively to the internal business and activities of the Group and
patient medical records and charts (hereinafter referred to as the
"Group's Records") shall be and remain the sole property of the Group.
At all times during and after the term of this Agreement,
Administrator shall provide storage space and related management
services in connection with patient medical records, as a Practice
Expense, including, storage of such records on- and off-site for such
periods of time as determined by the Joint Planning Board.
Administrator hereby agrees to preserve the confidentiality of such
patient medical records and to use the information in such records
only for the limited purposes necessary to perform management services
and, within the limits of its responsibilities hereunder, to ensure
that provision is made for appropriate care for patients of the
Practice.
(iii) Access to Records. At all times during and
after the term of this Agreement, each party and its authorized agents
shall be entitled, upon written request and with reasonable advance
notice, to obtain access (within not more than 30 days following
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receipt of such notice by the other party or parties) to all records
of the other party directly related to the performance of such party's
obligations pursuant to this Agreement; provided, however, that such
right shall not allow for access to patient, medical and other records
that must be kept confidential as required by law. Either party, at
its expense, shall have the right to make copies in any media of any
records to which it has access pursuant to this subparagraph (iii).
(iv) Compliance with Law. The management of all
files and records by Administrator and the Group shall comply with all
applicable federal, state and local statutes and regulations.
(h) Collections. Subject to the consent requirement
contained in Section 3.2(b)(i)(F), Administrator shall take such action as is
reasonably or lawfully necessary in the name of and on behalf of the Group to
collect fees and pay in a timely manner on behalf of Group all Practice
Expenses, except as otherwise agreed between Administrator and the Group.
Section 3.3 Facilities.
(a) Premises. Administrator shall make available to the
Group the Premises that are described in Exhibit 3.3(a) attached hereto and
such other improvements made by Administrator or Parent for the use of the
Group hereunder. The Premises shall be subject to such expansion or reduction
as reviewed and approved by the Joint Planning Board. Administrator shall
obtain for the Group all utilities reasonably required in connection with the
use of the Premises and shall provide for the proper cleanliness of the
Premises, including normal janitorial and maintenance services and refuse
disposal, including medical waste. Administrator shall maintain the Premises
in good condition and make or cause to be made all necessary repairs thereto.
(b) Personal Property. Administrator shall provide the
Group with the use of the equipment, furniture, fixtures, furnishings and other
personal property acquired in the Acquisition or any replacements thereto,
together with such other equipment, furniture, fixtures, furnishings and other
personal property necessary or appropriate or reasonably requested by the Group
for the efficient operation of the Practice acquired by Administrator or Parent
(subject to review and approval of the Joint Planning Board) for the use of the
Group pursuant to the terms hereof (collectively, the "Personal Property"), in
a manner consistent with community standards in the greater Washington
metropolitan area. Administrator shall maintain the Personal Property in good
condition and make or cause to be made all necessary repairs thereto.
(c) Expenses. All costs, fees, expenses and other
disbursements incurred by Administrator, Parent or their Affiliates in
connection with the Premises and the Personal Property, including, without
limitation, all reasonably necessary costs of repairs, maintenance and
improvements, utility expenses (i.e., telephone, electric, gas and water),
janitorial services, refuse disposal, real or personal property lease cost
payments and expenses, interest, refinancing expenses, depreciation, loss on
disposition of assets, taxes and casualty, liability and other insurance, shall
be included in Practice Expenses. To the extent the Premises or Personal
Property are used in connection with the Professional Operations, the costs and
expenses associated with such usage shall
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be allocated between Professional Expenses and Technical Expenses as approved
by the Joint Planning Board.
(d) Disposition. Subject to provisions contained in
existing agreements to which Administrator or Parent is or becomes a party and,
where necessary and appropriate for the efficient operation of the Practice,
nothing herein shall be construed as precluding Administrator or Parent from
selling, leasing or otherwise disposing of all or any part of the Premises,
Personal Property, real property, improvements, trade names, trademarks and
other intangible property; provided, however, any such sale, lease or
disposition shall be subject to the prior review and approval of the Joint
Planning Board.
(e) No Warranties or Representations. The Group
acknowledges that Administrator makes no warranties or representations, express
or implied, as to the fitness, suitability or adequacy of the Premises or the
Personal Property, or any other property furnished under this Agreement, for
the conduct of a medical practice or for any other particular purpose.
Section 3.4 Acquisition and Assistance.
(a) Employment of Physicians. Subject to consultation
with (but not approval of) the Joint Planning Board, in the event a decision is
made by the Group to employ additional physicians, if requested by the Group,
Administrator will assist the Group in the identification and selection of
physicians or physician groups or practices that may be beneficial in the
operation of the Practice. Subject to consultation with (but not approval of)
the Joint Planning Board, in the event that a decision is made by the Group to
pursue the employment of selected physicians, if requested by the Group,
Administrator will provide recruiting, consulting, negotiating and other
advisory services in connection with such transaction. Notwithstanding the
preceding, as set forth in and subject to the provisions of Section 4.1 hereof,
the Group shall have complete control of and responsibility for the hiring of
all Physician Employees and Physician Extender Employees.
(b) Acquisitions. In the event that the Group
contemplates acquiring or affiliating with a physician group, practice or other
entity, and such acquisition or affiliation involves the use or expenditure of
Administrator's and/or Parent's cash or other resources including the
assumption of any Practice Expenses or liabilities incurred or reasonably
expected to be incurred as a result of such an acquisition or affiliation
including, without limitation, capital and personnel (collectively, the
"Resources"), then the Group shall first consult with the Joint Planning Board
and Administrator. Any decision to make such affiliation or acquisition shall
be subject to prior approval of Administrator. Administrator's decision shall
be made following a satisfactory review of the physician group, practice or
other entity to be acquired or affiliated with and the terms and provisions of
the proposed affiliation or acquisition, and in any event, within 30 days
following notification of the proposed transaction and receipt of all necessary
information related thereto. If such contemplated acquisition or affiliation
does not involve the use or expenditure of any of Administrator's and/or
Parent's Resources, then such decision shall be in the sole discretion of the
Group. Notwithstanding any provision contained herein to the contrary, any
person or entity with which the Group affiliates or acquires shall be subject
to the terms and conditions of this Agreement. If a decision is made to
proceed with any affiliation or acquisition of a physician group or practice,
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the Group may seek from Administrator, and if so, Administrator shall provide
the Group with, consulting, negotiation and other services including without
limitation, legal, accounting and other professional advisory services in
connection with such affiliation or acquisition, provided, however, that if the
Group does not utilize the Resources, the transaction costs including legal,
accounting or other advisory services of such affiliation or acquisition shall
be the sole responsibility of the Group.
Section 3.5 Financial Planning and Budgeting.
(a) Budgeting. Administrator shall collaborate with the
Group and the Joint Planning Board in the preparation of all annual capital and
operating budgets. These annual budgets shall be subject to the review,
amendment and approval or disapproval of the Joint Planning Board. For
purposes of developing the initial annual operating budget, the Administrator
shall take into account the categories of expenses determined by Joint Planning
Board. The projected annual operating budget for each subsequent year shall be
subject to the approval of the Joint Planning Board and shall reflect the
Group's anticipated staffing requirements for the next fiscal year, as well as
other anticipated expenses of the Practice. For this purpose, the annual
capital budget will include amounts for any anticipated expansion of existing
facilities, acquisition of new facilities, acquisition or upgrades of
equipment, any practice asset acquisitions, and any other anticipated capital
expenses of the Practice necessary or appropriate to maintain and continue the
Practice.
(b) Capital Expenditures. Subject to the terms contained
herein, Administrator will make funds available for capital expenditures and
improvements by Administrator on behalf of the Practice as follows:
(i) Budgeted Expenditures. All budgeted capital
expenditures and improvement projects shall be subject to final review
and approval by the Joint Planning Board prior to the making of any
actual expenditure. Such review and approval shall be based on
confirming that the assumption, facts and circumstances on which the
decision to budget for such expenditure was based still support and
justify the actual expenditures.
(ii) Non-Budgeted Expenditures. Requests for
non-budgeted capital expenditures and improvement projects shall be
evaluated and prepared by the Joint Planning Board in consultation
with the Group and Administrator. All requests for non-budgeted
capital expenditures and improvements at or for the benefit of the
Practice in excess of the greater of either $75,000 individually or an
aggregate amount equivalent to $5,000 multiplied by the number of
Full-time Physician Employees employed at the time the capital budget
for such Group for the applicable year is determined (provided,
however, that such aggregate amount shall not exceed $250,000 for any
calendar year) must be approved by the Board of Directors of Parent or
by any committee specifically designated by the Board of Directors of
Parent for such purposes. Following the tenth (10th) anniversary of
this Agreement, the Group may request an increase in the limits set
forth in this paragraph. In connection with its review, Parent and/or
Administrator shall consider all relevant factors, including the
amounts provided in service agreements entered into with other Groups
at that time.
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(c) Capital Improvements and Expansion. Subject to
Section 3.5(b), any Practice Site or Premises renovation, expansion or
reduction plans and/or capital equipment expenditures with respect to the
Practice shall be reviewed and approved by the Joint Planning Board and shall
be based upon economic feasibility, productivity and then current market
conditions in light of both the particular project and the needs of the Group
as a whole.
Section 3.6 Personnel. Administrator shall provide non-physician
professional support (other than Physician Extender Employees) including,
without limitation, nurses, technologists, physicists and administrative,
clerical, secretarial, bookkeeping and collection personnel as is reasonably
necessary for the efficient conduct of the Practice's operations, as determined
by the Joint Planning Board. All such personnel shall be duly qualified by
education or experience for their respective positions and shall possess all
licenses which may be required by law. Such personnel shall be employees of
Administrator, and Administrator shall determine and cause to be paid the
salaries and benefits of all such personnel. Such personnel shall be
supervised by and comply with the directions and orders of Administrator,
except as otherwise required by applicable law.
Section 3.7 Provider and Payor Relationships. Upon request of
the Group, Administrator shall provide financial and business assistance to the
Group in the negotiation, establishment, supervision and maintenance of
contracts and relationships (collectively, the "Managed Care Contracts") with
all managed care, institutional health care providers and payors, health
maintenance organizations, preferred provider organizations, exclusive provider
organizations, Medicare, Medicaid, insurance companies, hospitals and other
similar persons (collectively, "Managed Care Payors"). Approval, disapproval,
termination or amendment of any contract or relationship of such Managed Care
Payors with the Group shall, after consultation with (but not approval of) the
Joint Planning Board, be the sole responsibility of the Group. Notwithstanding
the preceding language, if a contract or relationship between any Managed Care
Payor and the Group involves or affects a contract or relationship with any
other physician group or practice serviced or managed by Administrator, Parent
or any of their Affiliates (the "Other Practices") and a consensus among the
Group and the Other Practices cannot be reached regarding the contract or
relationship, then the ultimate decision as to the approval, disapproval,
termination or amendment of such contract or relationship involving the Group,
the Other Practices and such Managed Care Payor shall be determined by the
affirmative vote of the "Physician Board Members" (as defined below) who hold a
majority of the Group Voting Power (as defined below). For purposes of this
Section 3.7, (i) the term "Physician Board Members" shall mean (a) those
members appointed by the Group who serve on the Joint Planning Board and (b)
those persons appointed by the Other Practices who serve on the Other
Practices' joint boards (in a similar capacity to the Joint Planning Board) as
part of their contractual relationship with Parent, Administrator or any of
their Affiliates, and (ii) the term "Group Voting Power" shall mean the total
voting percentage which may be cast by the Physician Board Members on a
collective basis, with the percentage of votes able to be cast by any Group or
Other Practice, as applicable, shall be equal to the quotient determined by
dividing (x) the total estimated annual professional revenues to be generated
by the Group from such Managed Care Contract as determined by Administrator,
Parent or their Affiliates, as appropriate, in its sole discretion, by (y) the
total estimated annual professional revenues to be generated by the Group and
all Other Practices from such Managed Care Contract as determined by the
Administrator, Parent or their Affiliates, as appropriate, in its sole
discretion.
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Section 3.8 Inventory and Supplies. Administrator shall order,
purchase and provide to the Group on a timely basis inventory and supplies, and
such other ordinary, necessary or appropriate materials which are requested by
the Group and which the Group shall reasonably determine to be necessary in the
operation of the Practice on the same terms commercially available to
Administrator. Such inventory, supplies and other materials shall be included
in Practice Expenses at their cost to Parent or Administrator, as the case may
be.
Section 3.9 Advertising and Public Relations. At the direction
of the Joint Planning Board, Administrator shall implement (and design where
requested) an appropriate local public relations or advertising program on
behalf of the Practice, with appropriate emphasis on public awareness of the
availability of services at the Practice. Prior to publication or distribution
of such marketing or public relations material or information, Administrator
shall submit such material to the Group for its review and approval, which
shall not be unreasonably withheld. Administrator shall also design and
implement all national or other non-local public relations or advertising
programs on behalf of the Practice, the cost of which shall be included in
Administrator Expenses, except to the extent such national programs are
reasonably designed to replace or supplement the marketing benefits derived
from local public relations or advertising programs, in which case, a pro rata
share of such costs will be included in Practice Expenses as determined by the
Joint Planning Board. The parties hereto agree that all public relations and
advertising programs shall be conducted in compliance with applicable standards
of medical ethics and Federal and state laws and regulations.
Section 3.10 Quality Assurance. Subject to Article II,
Administrator, when reasonably requested by Group, shall assist the Group in
fulfilling its obligations to its patients to maintain a high quality of
medical and professional services. Any expenses that are related to the
overall maintenance of Administrator's quality assurance program shall be
included in Administrator Expenses; provided, however, that any expenses
related to such program that are incurred for services provided solely for the
direct benefit of the Practice shall be included in Practice Expenses.
Section 3.11 Other Consulting and Advisory Services.
Administrator will provide such consulting and other advisory services as
reasonably requested by the Group in all areas of the Group's business
functions, including, without limitation, financial planning, acquisition and
expansion strategies, development of long-term business objectives and other
related matters.
Section 3.12 Events Excusing Performance. In the event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies as a
result of no material involvement of Parent or Administrator, or other events
over which Administrator has no control, Administrator shall not be liable to
the Group for failure to perform any of the services required hereunder as may
be materially restricted by any such event and the Group shall not have the
right to terminate this Agreement pursuant to Section 10.3(b), for so long as
such events continue and for a reasonable period of time thereafter; provided
however that if such events continue and Administrator is not able to perform
any material portion of the services required hereunder for a period of 120
consecutive days or more, either Administrator or Group may terminate this
Agreement by written notice to the other.
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Section 3.13 Compliance with Laws. Administrator and Parent
shall use their best efforts to comply with all applicable federal, state and
local laws, rules, regulations and restrictions in the conduct of their
services provided in connection with the Practice's business. Without limiting
the generality of the foregoing, Administrator and Parent shall use their best
efforts to avoid, and to prohibit any employee of Administrator or Parent from:
(a) entering into any contract, lease, agreement or
arrangement, including, but not limited to, any joint venture or consulting
agreement, to provide services, lease space, lease equipment or engage in any
other venture or activity with any physician, hospital, pharmacy, home health
agency or other person or entity which is in a position to make or influence
referrals to, or otherwise generate business for, the Practice, if such
transaction is in violation of any applicable law, rule or regulation;
(b) knowingly and willfully making or causing to be made
a false statement or representation of a material fact in any application for
any benefit or payment from a Managed Care Payor or any other payor;
(c) knowingly and willfully making or causing to be made
a false statement or representation of a material fact for use in determining
rights to any benefit or payment from a Managed Care Payor or any other payor;
(d) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment;
(e) knowingly and willfully paying, soliciting or
receiving any remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind or offering to pay or
receive such remuneration (i) in return for referring an individual to a person
for the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare or Medicaid, or (ii)
in return for purchasing, leasing, or ordering, or arranging for or
recommending purchasing, leasing, or ordering any good, facility, service, or
item for which payment may be made in whole or in part by Medicare or Medicaid;
and
(f) undertaking any action that is not in accord with the
regulatory compliance plans, policies and manuals developed by or in
conjunction with Administrator or Parent.
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ARTICLE IV
Obligations of the Group
Section 4.1 Employment of Physician Employees and Physician
Extender Employees. Except as set forth in Article V, the Group shall have
complete control of and responsibility for the hiring, compensation,
supervision, training, evaluation and termination of its Physician Employees
and Physician Extender Employees. The Group shall conduct an appropriate and
reasonable due diligence review in connection with the hiring of any physician
or the acquisition of any physician group or practice. Although Administrator
may provide payroll and other related services to the Group, the Group shall be
solely responsible for the payment of such Physician Employees' and Physician
Extender Employees' salaries and wages, benefits, payroll taxes and all other
taxes now or hereafter applicable to their employment. The Group and its
Physician Employees and Physician Extender Employees shall not have any claim
under this Agreement or otherwise against Administrator or Parent for workers'
compensation, unemployment compensation or Social Security benefits, all of
which shall be the sole responsibility of the Group. The Group shall only
employ or contract with licensed physicians or other persons meeting applicable
credentialing guidelines established by the Group after consultation with (but
not subject to) the Joint Planning Board. The Group shall cooperate in the
obtaining and retaining of professional liability insurance by ensuring that
its Physician Employees and Physician Extender Employees, and other employees
who may have malpractice exposure or liability, are insurable and by
participating in an ongoing risk management program.
Section 4.2 Professional Services. The Group shall provide
professional services to its patients in compliance at all times with ethical
standards, laws, rules and regulations applicable to the operations of the
Practice, the Physician Employees and Physician Extender Employees. The Group
shall ensure that each Physician Employee and each Physician Extender Employee
has all required licenses, credentials, approvals or other certifications to
perform his or her duties and services for the Practice and, in the event that
the Group becomes aware of any disciplinary actions or medical malpractice
actions initiated against any Physician Employee or Physician Extender
Employee, the Group shall promptly inform Administrator of such action and the
underlying facts and circumstances. If required by applicable law, any state
or federal regulatory agency or any contractual obligations, the Group shall
carry out a program to monitor the quality of medical care practiced at the
Practice. The Group shall employ Physician Employees and Physician Extender
Employees as is necessary to provide efficient medical care to patients of the
Practice.
Section 4.3 Medical Practice. The Group shall use and occupy the
Premises exclusively for the practice of medicine and for providing other
related services and products. Unless otherwise approved in writing in advance
by Joint Planning Board, which approval shall not be unreasonably withheld or
delayed, it is expressly acknowledged by the parties hereto that the
professional medical practice or practices conducted at the Premises shall be
conducted solely by Physician Employees, and, no other physician or medical
practitioner shall be permitted to use or occupy the Premises; provided,
however, if any test or procedure is required to be performed jointly with
another physician who is not a Physician Employee or Physician Extender
Employee, then such physician may use and occupy the Premises for purposes of
performing such procedure or test so long as the
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Group receives usual and customary fees in connection with such procedure or
test. The Group shall be solely and exclusively in control of all aspects of
the practice of medicine and the delivery of medical services at the Practice
Sites. The rendition of all professional medical services, including, but not
limited to, diagnosis, treatment, therapy, the prescription of medicine and
drugs, and the supervision and preparation of medical reports shall be the sole
responsibility of the Group. From time to time the Group, after consultation
with (but not subject to approval of) the Joint Planning Board, will adopt and
implement fee schedules for (i) non-prepaid patients which shall be reasonable
in relation to fees generally being charged in the same or similar market areas
and (ii) for all rebillings and recovery items on prepaid Managed Care
Contracts which are authorized and permitted by such contracts. A copy of such
agreements and any amendment thereto shall be provided to Administrator no
later than thirty (30) days prior to the proposed effective date thereof.
Section 4.4 Group's Internal Matters. The Group shall be
responsible for matters involving its corporate governance, employees and
similar internal matters, including, but not limited to, preparation and
contents of such reports to regulatory authorities governing the Group that the
Group is required by law to provide, distribution of professional fee income
among the Group Physician Stockholders, disposition of the Group's property and
stock (subject to any restrictions contained herein), hiring and firing of its
employees, licensing and implementing all compliance plans and procedures as
described in Section 4.6. Except for the expenses attributable to the
distribution of professional fee income among the Group Physician Stockholders,
which will be included in Excluded Practice Expenses, the costs incurred in
connection with the foregoing matters shall be Practice Expenses.
Section 4.5 Name. Group shall be entitled to use on a
non-exclusive and non-transferable basis for the term of this Agreement the
names set forth on Exhibit 4.5 as may be necessary or appropriate in the
performance of the Group's services and obligations hereunder.
Section 4.6 Compliance with Laws. The Group shall use its best
efforts to, and to cause the Physician Employees, Physician Extender Employees
and other employees of the Group to, comply with all applicable federal, state
and local laws, rules, regulations and restrictions in the conduct of the
medical services provided in connection with the Practice's business. Without
limiting the generality of the foregoing, the Group shall comply and shall
cause each Physician Employee, Physician Extender Employee and other employee
of the Group to comply, with all laws applicable to the operation of the
Practice in the generation, transportation, treatment, storage, disposal or
other handling of radioactive, medical, biological or hazardous materials or
waste, and the Group shall use its best efforts to prohibit any Physician
Employee, Physician Extender Employee and any employee of the Group from:
(a) entering into any contract, lease, agreement or
arrangement, including, but not limited to, any joint venture or consulting
agreement, to provide services, lease space, lease equipment or engage in any
other venture or activity with any physician, hospital, pharmacy, home health
agency or other person or entity which is in a position to make or influence
referrals to, or otherwise generate business for, the Practice, if such
transaction is in violation of any applicable law, rule or regulation;
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(b) knowingly and willfully making or causing to be made
a false statement or representation of a material fact in any application for
any benefit or payment from a Managed Care Payor or any other payor;
(c) knowingly and willfully making or causing to be made
a false statement or representation of a material fact for use in determining
rights to any benefit or payment from a Managed Care Payor or any other payor;
(d) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment;
(e) knowingly and willfully paying, soliciting or
receiving any remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind or offering to pay or
receive such remuneration (i) in return for referring an individual to a person
for the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare or Medicaid, or (ii)
in return for purchasing, leasing, or ordering, or arranging for or
recommending purchasing, leasing, or ordering any good, facility, service, or
item for which payment may be made in whole or in part by Medicare or Medicaid;
and
(f) referring a patient for health services or products
to or providing health services to a patient upon a referral from an entity or
person with which the physician or an immediate family member has a financial
relationship, other than as permitted by exceptions set forth in federal or
state anti-referral laws or regulations; and
(g) undertaking any action that is not in accord with the
regulatory compliance plans, policies and manuals developed by or in
conjunction with Administrator or Parent.
Section 4.7 Ancillary Services. Except as set forth in Section
3.4(b), the Group shall not acquire, establish or commence the operation of any
satellite location, medical office, imaging center, health maintenance
organization, preferred provider organization, exclusive provider organization
or similar entity or organization established or operated by the Group after
the date hereof without the prior written consent of Joint Planning Board.
Section 4.8 Premises and Personal Property. The Group shall use
its best efforts to prevent damage, excessive wear and tear, and malfunction or
other breakdown of the Premises and Personal Property or any part thereof by
the Physician Employees and Physician Extender Employees or other employees of
the Group. The Group shall promptly inform Administrator both orally and in
writing of any and all necessary replacements, repairs or maintenance to any of
the Premises or Personal Property and any failures of equipment of which it
becomes aware. The Group shall comply with all covenants and provisions set
forth in any leases or subleases for the Premises entered into or assumed by
Administrator and Administrator agrees to make available to the Group copies of
all such leases to the Group.
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Section 4.9 Practice Employee Benefit Plans. The Group shall not
enter into or offer to any Physician Employee or other employee of the Group or
Administrator any "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) without
the express written consent of Administrator, which consent shall not be
unreasonably withheld.
Section 4.10 Events Excusing Performance. In the event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies as a
result of no material involvement of Group, or other events over which the
Group has no control, the Group shall not be liable to Administrator, Parent or
their Affiliates for failure to perform any of its obligations required
hereunder as may be materially restricted by any such event and Administrator
shall not have the right to terminate this Agreement pursuant to Section
10.4(a), for so long as such events continue and for a reasonable period of
time thereafter; provided however that if such events continue and the Group is
not able to perform any material portion of its obligations required hereunder
for a period of 120 consecutive days or more, either the Group or Administrator
may terminate this Agreement by written notice to the other.
ARTICLE V
Joint Planning Board
Section 5.1 Formation and Operation of the Joint Planning Board.
(a) The parties hereto shall establish the Joint Planning
Board which shall be responsible for developing long-term strategic planning
objectives and management policies for the overall operation of the Practice
and shall facilitate communication and interaction between Administrator and
the Practice. The Joint Planning Board shall consist of no less than three (3)
or more than six (6) members. Administrator shall designate, in its sole
discretion, two (2) members of the Joint Planning Board, who shall serve at the
pleasure of Administrator and who may be removed or replaced by Administrator
at any time. The Group shall designate, in its sole discretion, no less than
one (1) or more than four (4) members of the Joint Planning Board, who shall
serve at the pleasure of the Group and who may be removed and replaced by the
Group at any time. Each member appointed by Administrator shall be entitled to
one (1) vote per member, and each member appointed by the Group shall be
entitled to that number of votes equal to the quotient determined by dividing
(x) two (2) votes by (y) the number of members designated by the Group to the
Joint Planning Board. The act of the members holding a majority of the voting
power of the Joint Planning Board shall be the act of the Joint Planning Board.
(b) Each member of the Joint Planning Board shall have
the right to vote on every matter either in person, by telephone, by written
consent or by one or more agents, who are also members of the Joint Planning
Board, authorized by a written proxy signed by the member and filed with the
Joint Planning Board. A proxy shall state that it either shall be voted for or
against a specific matter or matters identified in the proxy or shall be voted
identically to the vote of the agent specified in the proxy on any and all
matters that may come before and be voted on by the Joint Planning Board. A
validly executed proxy which does not state that it is irrevocable shall
continue
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in full force and effect unless (i) revoked by the member executing it, before
the vote pursuant to that proxy, by a writing delivered to the Joint Planning
Board stating that the proxy is revoked, or by a subsequent proxy executed by,
or attendance at the meeting and voting in person by, the member executing the
proxy; or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the Joint Planning Board before the vote pursuant to that
proxy is counted; provided, however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy, unless otherwise
provided in the proxy.
Section 5.2 Duties and Responsibilities of the Joint Planning
Board. The Joint Planning Board shall advise the Group on the following
matters:
(a) Capital Improvements and Expansion. Subject to
Section 3.5(b), any site or Premises renovation, expansion or reduction plans
and/or capital equipment expenditures with respect to the Practice shall be
reviewed and approved by the Joint Planning Board and shall be based upon
economic feasibility, productivity and then current market conditions in light
of both the particular project and the Group as a whole.
(b) Annual Budgets. The Joint Planning Board shall
review and approve all annual capital and operating budgets prepared by
Administrator, as set forth in Section 3.5 and after the annual capital and
operating budgets have been approved as provided in Section 3.5, no substantial
changes may be made in such budgets without the approval of the Joint Planning
Board. For purposes of this Section 5.2, substantial means any change
individually or in the aggregate which would result in a change in excess of
five percent (5%) to the annual capital or operating budgets.
(c) Advertising. The Joint Planning Board shall consult
with Administrator on all local advertising and other marketing services
performed at the request of the Group.
(d) Patient Fees. As a part of the annual operating
budget, in consultation with and upon recommendation of the Joint Planning
Board, the Group shall review and adopt the fee schedule for all professional
services rendered by the Practice.
(e) Ancillary Services and Fees. The Joint Planning
Board shall approve Practice-provided non- medical ancillary services
(including, without limitation, fees for technical services which do not
generate Professional Revenues) based upon the pricing, access to, and quality
of such services and shall review and adopt the fee schedule for all ancillary
services.
(f) Provider and Payor Relationships. Subject to Section
3.7, decisions regarding the establishment or maintenance of relationships with
institutional health care providers and payors shall be approved by the Group
after consultation with the Joint Planning Board.
(g) Strategic Planning. The Joint Planning Board shall
develop a plan which depicts the strategic direction of the Practice, as
updated from time to time. Such plan will, among other things, identify
opportunities, objectives, and the resources required to effect such plan.
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(h) Capital Expenditures. The Joint Planning Board shall
determine the priority of capital expenditures in accordance with Section
3.5(b) hereof.
(i) Provider Hiring. The Joint Planning Board shall
consult with the Group to recommend the number and type of Physician Employees
and Physician Extender Employees required for the efficient operation of the
Practice.
(j) Non-Physician Personnel. The Joint Planning Board
shall consult with Administrator to recommend the number and type of
non-physician employees required for the efficient operation of the Practice.
Section 5.3 Acts of the Joint Planning Board. Except as
otherwise specifically provided herein, the act of the members holding a
majority of the voting power of the Joint Planning Board shall be the act of
the Joint Planning Board. The Group agrees that, unless the following are
approved in advance by the Joint Planning Board, it shall take no action or
implement any decision that would (i) require Administrator to expend funds or
incur obligations beyond those set forth under Sections 3.5 or 5.2 of this
Agreement; (ii) have a material adverse effect on the amount of Administrator's
management fee under Article VII; or (iii) otherwise have a material adverse
effect on Administrator's financial interests under this Agreement. The
Administrator and Parent agree that, unless the following are approved in
advance by the Joint Planning Board, they shall take no action or implement any
decision that would (a) have a material adverse effect on the balance due to
the Group under Article VII; or (b) otherwise have a material adverse effect on
the Group's financial interests under this Agreement. Except as provided in
the prior two sentences, the Group and Administrator hereby agree to be bound
by the act of the Joint Planning Board if such act is authorized by the members
holding a majority of the voting power of the Joint Planning Board present or
represented by proxy at the applicable meeting. In the event that a matter
cannot be resolved by the Joint Planning Board due to a tie vote, and no
compromise can be reached, then either (x) the Board of Directors of Parent or
(y) a committee designated by the Board of Directors of Parent containing at
least one (1) physician member will make a final determination on the matter in
dispute provided that both the Group and Administrator shall have had an
opportunity to make a presentation to the Board of Directors of Parent or a
committee thereof, as applicable. A quorum of the Joint Planning Board shall
consist of the members holding a majority of the voting power, present in
person, by telephone, or by proxy and the quorum must remain for the duration
of the meeting.
Section 5.4 Joint Planning Board Meetings. Meetings of the Joint
Planning Board may be held by telephone or similar communication equipment so
long as all members participating in a meeting can hear and speak to each
other. The Joint Planning Board shall prepare and maintain written minutes of
all meetings and shall provide a copy of the minutes to the members within
fifteen (15) business days following each meeting.
(a) Regular Meetings. The Joint Planning Board shall
hold not less than four (4) regular meetings each year, at such specific times
and places as the members may determine.
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(b) Special Meetings. A special meeting of the Joint
Planning Board may be called by fifty percent (50%) of the votes.
(c) Notice Requirement. A member calling a special
meeting must provide all other members with ten (10) days' advance written or
telephonic notice. Notice must be given or sent to the member's address or
telephone number as shown on the records of the Joint Planning Board. Notice
may be delivered directly to each member or to a person at the member's
principal place of business who would reasonably be expected to communicate
that notice promptly to the member.
(d) Waiver of Notice Requirement.
(i) Written Waiver, Consent or Approval. Notice
of a special meeting need not be given to any member who, either
before or after the meeting, signs a waiver of notice or a written
consent to the holding of the special meeting, or an approval of the
minutes of the special meeting. Such waiver, consent or approval need
not specify the purpose of the special meeting. All such waivers,
consents, and approvals shall be filed with the Joint Planning Board
records or made a part of the minutes of the special meetings.
(ii) Failure to Object. Notice of special meeting
need not be given to any member who attends the special meeting and
does not protest before or at the commencement of the special meeting
such lack of notice.
(e) Quorum. The smallest number of members that hold
votes that exceed fifty percent (50%) of all voting power shall constitute a
quorum of the Joint Planning Board.
(f) Proxies. The Joint Planning Board shall provide for
the use of proxies, telephonic conference calls, written consents or other
appropriate methods by which the full participation of the Group members and
Administrator members can be assured.
ARTICLE VI
Restrictive Covenants
The parties recognize that the services to be provided by
Administrator hereunder shall be feasible only if the Group operates active
Professional Operations and Technical Operations to which the physicians
associated with the Practice devote their full medical time and attention.
Accordingly, the parties hereto agree as follows:
Section 6.1 Restrictive Covenants of the Group.
(a) Noncompetition. During the term of this Agreement,
the Group shall not, without the prior written consent of Administrator, (i)
establish, operate or provide professional radiology, radiation oncology or
diagnostic services at any medical office, practice or other health care
facility (other than a Practice Site) providing services similar to those
provided by the Practice or enter into an agreement with any third party payor
to provide such services, (ii) enter into any
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other management or administrative services agreement or other arrangement with
any other person or entity (other than with Administrator) for purposes of
obtaining management, administrative or other support services, or (iii) engage
or participate in any business which engages in competition with the business
conducted by the APPM Group anywhere within 15 miles of any location at which
any member of the APPM Group conducts business.
(b) Covenant Not to Solicit. During the term of this
Agreement and for twenty-four (24) months following the termination of this
Agreement, the Group shall not, without the prior written consent of
Administrator: (i) unless the Group acquires the Practice Assets pursuant to
Article X, directly or indirectly recruit or hire, or induce any party to
recruit or hire any person who is an employee of, or who has entered into an
independent contractor arrangement with, any member of the APPM Group; (ii)
directly or indirectly, whether for itself or for any other person or entity,
call upon, solicit, divert or take away, or attempt to solicit, call upon,
divert or take away any customers, business, or clients of any member of the
APPM Group; (iii) directly or indirectly solicit, or induce any party to
solicit, any contractors of any member of the APPM Group, to enter into the
same or a similar type of contract with any other party; or (iv) disrupt,
damage, impair or interfere with the business of any member of the APPM Group.
(c) Engagement of Administrator. If (i) this Agreement
is terminated pursuant to Section 10.4(a) or (c), and (ii) the Group does not
acquire the Purchase Assets as provided in Article X, then if the Group
establishes, operates or provides professional services at any office,
practice, diagnostic imaging center, hospital or other health care facility
providing services substantially similar to those provided by the Practice
pursuant to this Agreement anywhere within 15 miles of any location of any
Practice Site(s), the Group or any successor thereto shall engage Administrator
as the sole and exclusive manager and administrator of the nonprofessional
functions and services of such other office, practice, hospital or health care
facility on the same terms and conditions as contained herein.
(d) Administrator's Obligations Regarding Proprietary Information.
(i) Acknowledgment of Proprietary Information.
Administrator, Parent and their Affiliates hereto recognize the
proprietary interest of the Group in any Confidential and Proprietary
Information (as hereinafter defined). Administrator, Parent and their
Affiliates acknowledge and agree that any and all Confidential and
Proprietary Information of the Group ("Group's Confidential and
Proprietary Information") communicated to, learned of, developed or
otherwise acquired by Administrator, Parent and their Affiliates
during the term of this Agreement shall be the property of the Group.
Administrator, Parent and their Affiliates further acknowledge and
understand that disclosure of any of Group's Confidential and
Proprietary Information will result in irreparable injury and damage
to the Group. As used herein, "Group's Confidential and Proprietary
Information" means all trade secrets and other confidential and/or
proprietary information of the Group, including information derived
from reports, investigations, research, work in progress, codes,
marketing and sales programs, financial projections, cost summaries,
pricing formula, contract analyses, financial information,
projections, confidential filings with any state or federal agency,
and all other confidential concepts, methods of doing business, ideas,
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materials or information prepared or performed for, by or on behalf of
the parties hereto by its employees, officers, directors, agents,
representatives, or consultants. Group's Confidential and Proprietary
Information shall not include any information which: (i) was known to
Administrator, Parent or their Affiliates prior to its disclosure by
the Group; (ii) is or becomes publicly known through no wrongful act
of Administrator, Parent or their Affiliates or any of their
employees; (iii) is disclosed pursuant to a statute, regulation or the
order of a court of competent jurisdiction, provided that the
Administrator, Parent or their Affiliates provide prior notice to the
Group.
(ii) Covenant Not-to-Divulge Confidential and
Proprietary Information. Administrator, Parent and their Affiliates
acknowledge and agree that the Group is entitled to prevent the
disclosure of Group's Confidential and Proprietary Information.
Administrator, Parent and their Affiliates agree at all times during
the term of this Agreement and thereafter to hold in strictest
confidence and not to disclose to any person, firm or corporation,
except as may be necessary for the discharge of its obligations under
this Agreement, and not to use, except in the pursuit of the business
of the Practice, Group's Confidential and Proprietary Information,
without the prior written consent of the Group; unless (i) such
information becomes known or available to the public generally through
no wrongful act of Administrator, Parent or their Affiliates or their
employees or (ii) disclosure is required by law or the rule,
regulation or order of any governmental authority under color of law;
provided, that prior to disclosing any Group's Confidential and
Proprietary Information pursuant to this clause (iii), Administrator,
Parent or their Affiliates shall, if possible, give prior written
notice thereof to the Group and provide the Group with the opportunity
to contest such disclosure. Administrator, Parent and their
Affiliates shall take all necessary and proper precautions against
disclosure of any of Group's Confidential and Proprietary Information
to unauthorized persons by any of its officers, directors, employees
or agents. All officers, directors, employees, and agents of
Administrator, Parent and their Affiliates who will have access to all
or any part of the Group's Confidential and Proprietary Information
will be required to execute an agreement upon request, valid under the
law of the jurisdiction in which such agreement is executed, and in a
form acceptable to Group and its counsel, committing themselves to
maintain the Group's Confidential and Proprietary Information in
strict confidence and not to disclose it to any unauthorized person or
entity. Upon termination of this Agreement for any reason, the
Administrator, Parent and their Affiliates and their employees shall
cease all use of any of the Group's Confidential and Proprietary
Information and shall execute such documents as may be reasonably
necessary to evidence their abandonment of any claim thereto.
(iii) Return of Materials. In the event of any
termination of this Agreement for any reason whatsoever, or at any
time upon the request of the Group, the Administrator, Parent and
their Affiliates will promptly deliver or cause to be delivered to the
Group all documents, data and other information in their possession
that contain any Group's Confidential and Proprietary Information.
The Administrator, Parent and their Affiliates shall not take or
retain any documents or other information, or any reproduction or
excerpt thereof, containing any Group's Confidential and Proprietary
Information, unless otherwise authorized in writing by the Group. In
the event of termination of this Agreement,
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Administrator, Parent and their Affiliates will deliver to the Group
all documents and data pertaining to Group's Confidential and
Proprietary Information not otherwise purchased as part of the
Acquisition.
(e) Group's Obligations Regarding Proprietary
Information.
(i) Acknowledgment of Proprietary Information.
The Group recognizes the proprietary interest of the Administrator,
Parent and their Affiliates in any Confidential and Proprietary
Information (as hereinafter defined). The Group acknowledges and
agrees that any and all Confidential and Proprietary Information of
Administrator, Parent or their Affiliates ("Administrators's
Confidential and Proprietary Information") communicated to, learned
of, developed or otherwise acquired by the Group during the term of
this Agreement shall be the property of Administrator, Parent or their
Affiliates. The Group further acknowledges and understands that its
disclosure of Administrator's Confidential and Proprietary Information
will result in irreparable injury and damage to Administrator, Parent
or their Affiliates. As used herein, "Confidential and Proprietary
Information" means all trade secrets and other confidential and/or
proprietary information of the Administrator, Parent or their
Affiliates, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales
programs, financial projections, cost summaries, pricing formula,
contract analyses, financial information, projections, confidential
filings with any state or federal agency, and all other confidential
concepts, methods of doing business, ideas, materials or information
(other than the Group's patient records) prepared or performed for, by
or on behalf of the parties hereto by its employees, officers,
directors, agents, representatives, or consultants. Confidential and
Proprietary Information shall not include any information which: (i)
was known to the parties hereto prior to its disclosure by the
Administrator, Parent or their Affiliate; (ii) is or becomes publicly
known through no wrongful act of the Group or any of its employees;
(iii) is disclosed pursuant to a statute, regulation or the order of a
court of competent jurisdiction, provided that the Group provides
prior notice to Administrator, Parent or their Affiliates.
(ii) Covenant Not-to-Divulge Confidential and
Proprietary Information. The Group acknowledges and agrees that
Administrator, Parent or their Affiliates are entitled to prevent the
disclosure of Confidential and Proprietary Information. The Group
agrees at all times during the term of this Agreement and thereafter
to hold in strictest confidence and not to disclose to any person,
firm or corporation, except as may be necessary for the discharge of
its obligations under this Agreement, and not to use, except in the
pursuit of the business of the Practice, Administrator's Confidential
and Proprietary Information, without the prior written consent of
Administrator, Parent and their Affiliates; unless (i) such
information becomes known or available to the public generally through
no wrongful act of the Group or its employees or (ii) disclosure is
required by law or the rule, regulation or order of any governmental
authority under color of law; provided, that prior to disclosing any
Administrator's Confidential and Proprietary Information pursuant to
this clause (iii), the Group shall, if possible, give prior written
notice thereof to Administrator, Parent and their Affiliates and
provide such parties with the opportunity to contest such disclosure.
The Group shall take all necessary and proper precautions against
disclosure of any
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Administrator's Confidential and Proprietary Information to
unauthorized persons by any of its officers, directors, employees or
agents. All officers, directors, employees, and agents of the Group
who will have access to all or any part of the Administrator's
Confidential and Proprietary Information will be required to execute
an agreement upon request, valid under the law of the jurisdiction in
which such agreement is executed, and in a form acceptable to
Administrator, Parent and their Affiliates and its counsel, committing
themselves to maintain the Administrator's Confidential and
Proprietary Information in strict confidence and not to disclose it to
any unauthorized person or entity. Upon termination of this Agreement
for any reason, the Group and their employees shall cease all use of
any of the Administrator's Confidential and Proprietary Information
and shall execute such documents as may be reasonably necessary to
evidence their abandonment of any claim thereto.
(iii) Return of Materials. In the event of any
termination of this Agreement for any reason whatsoever, or at any
time upon the request of Administrator, Parent or their Affiliates,
the Group will promptly deliver or cause to be delivered to
Administrator, Parent and their Affiliates all documents, data and
other information in their possession that contains any
Administrator's Confidential and Proprietary Information regarding
Administrator, Parent and their Affiliates. The Group shall not take
or retain any documents or other information, or any reproduction or
excerpt thereof, containing any Administrator's Confidential and
Proprietary Information, unless otherwise authorized in writing by the
party possessing such Administrator's Confidential and Proprietary
Information. In the event of termination of this Agreement, the Group
will deliver to Administrator, Parent and their Affiliates all
documents and data pertaining to Administrator's Confidential and
Proprietary Information of the other parties not otherwise purchased
as part of the Purchased Assets.
(f) Third Party Beneficiaries. The members of the APPM
Group not party to this Agreement are hereby specifically made third party
beneficiaries of this Section 6.1, with the power to enforce the provisions
hereof.
Section 6.2 Restrictive Covenants. The Group shall obtain and
enforce formal agreements with each Physician Employee who is either (i) a
Group Physician Stockholder or (ii), to the extent permitted under applicable
law, a Full-time Physician Employee which each contain certain restrictive
covenants thereof pertaining to covenants not to compete and/or solicit with
and not to divulge the Confidential and Proprietary Information of any member
of the APPM Group or the Practice (the "Restrictive Covenants"). Except as
otherwise approved by the Joint Planning Board, each Group Physician
Stockholder or Full-time Physician Employee shall agree, during the term of
his/her employment or contractor agreement with the Practice and for a period
of twenty-four (24) months after any termination of such agreement: (i) not to
establish, operate or provide professional radiology services at any office,
practice, hospital or health care facility providing services substantially
similar to those provided by the Practice pursuant to this Agreement within 15
miles of any location of any Practice Site(s) and (ii) to be bound by
non-solicitation, noncompetition and nondisclosure of confidential/proprietary
information and engagement of Administrator covenants similar to those
applicable to the Group as contained in Section 6.1 hereof, provided, however,
that for purposes of Section 6.2, noncompetition restrictions shall be limited
to
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the area within 15 miles of any Practice Site. Except as otherwise approved by
the Joint Planning Board, each Group Physician Stockholder or Full-time
Physician Employee shall agree, during the term of his/her employment or
contractor agreement with the Group, (w) not to practice radiological medicine
other than at the Premises or such other location or Practice Site(s) as
approved by the Joint Planning Board; (x) to devote substantially all of his or
her professional time, effort and ability to the Practice; (y) to request in
writing and receive in writing prior approval from the Joint Planning Board to
engage in any outside medical activities; and (z) to turn over to the Practice,
to be included in Professional Revenues attributed to the Practice, any income
derived by such Group Physician Stockholder or Full-time Physician Employee
from any outside medical activity or related source including, but not limited
to, the following medically-related activities: teaching, consulting, medical
research, inventions developed utilizing the Group's or the Practice's time and
material, testimony for litigation, and insurance examinations. The Group
shall not amend, alter or otherwise change any term or provision of any
Stockholder Employment Agreement or Physician Employee Employment Agreement
relating to the foregoing covenants in this Section 6.2 without the prior
written consent of Joint Planning Board. Notwithstanding the foregoing, any
such amendment, alteration or change shall not be inconsistent with the terms
or provisions of this Agreement. Following termination of this Agreement, the
Group shall not amend, alter or otherwise change any term or provision of the
Restrictive Covenants, unless such provisions are no longer in force and effect
pursuant to the terms of the applicable Stockholder Employment Agreement or
Physician Employee Employment Agreement at the time of termination of this
Agreement. In the event the Purchase Assets are acquired by the Group pursuant
to Article X or this Agreement is terminated pursuant to Section 10.3, the
Restrictive Covenants shall be limited to non- solicitation and nondisclosure
of confidential/proprietary information covenants.
Section 6.3 Enforcement of Restrictive Covenants and Other
Provisions. The Group shall enforce the Stockholder Employment Agreements and,
to the extent permitted under applicable law, the Physician Employee Employment
Agreements, including, without limitation, the Restrictive Covenants. The
costs and expenses of such enforcement shall be included in Professional
Expenses and all damages and other amounts recovered thereby shall be included
in Professional Revenues. In the event that, after a request by Administrator,
the Group does not pursue any remedy that may be available to it by reason of a
breach or default of the Restrictive Covenants and, to the extent permitted
under applicable law, the Physician Employee Employment Agreements, upon the
request of Administrator, the Group shall assign to Administrator such causes
of action and/or other rights it has related to such breach or default and
shall cooperate with and provide reasonable assistance to Administrator with
respect thereto; in which case, all costs and expenses incurred in connection
therewith shall be borne by Administrator and shall be included in
Administrator Expenses, and Administrator shall be entitled to all damages and
other amounts recovered thereby. In the event the Purchase Assets are acquired
by the Group pursuant to Article X or this Agreement is terminated pursuant to
section 10.3, the Restrictive Covenants shall be limited to non-solicitation
and nondisclosure of confidential/proprietary information covenants.
Section 6.4 Remedies. Administrator and the Group acknowledge
and agree that a remedy at law for any breach or attempted breach of the
provisions of this Article VI shall be inadequate, and therefore, either party
shall be entitled to specific performance and injunctive or other equitable
relief in the event of any such breach or attempted breach, in addition to any
other
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rights or remedies available to either party at law or in equity. Each party
hereto waives any requirement for the securing or posting of any bond in
connection with the obtaining of any such injunctive or other equitable relief.
If any provision of the Restrictive Covenants or this Article VI relating to
the restrictive period, scope of activity restricted and/or the territory
described therein shall be declared by a court of competent jurisdiction to
exceed the maximum time period, scope of activity restricted or geographical
area such court deems reasonable and enforceable under applicable law, the time
period, scope of activity restricted and/or area of restriction held reasonable
and enforceable by the court shall thereafter be the restrictive period, scope
of activity restricted and/or the geographical area applicable to such
provision of the Restrictive Covenants or this Article VI. The invalidity or
non-enforceability of any provision of the Restrictive Covenants or this
Article VI in any respect shall not affect the validity or enforceability of
the remainder of the Restrictive Covenants or this Article VI or of any other
provisions of this Agreement.
Section 6.5 Condition Precedent to Release of Obligations. In
the event a Group Physician Stockholder or Full-time Physician Employee
terminates his/her employment agreement with the Group, the Group shall be
entitled to release (with the consent of the Joint Planning Board) such Group
Physician Stockholder or Full-time Physician Employee from the restrictive
covenants contained in Section 6.2, above. In the event the Group elects to
release such Group Physician Stockholder or Full-time Physician Employee, the
Group hereby covenants that it shall obtain a formal agreement between each
Group Physician Stockholder or Full-time Physician Employee, as the case may
be, and Administrator which provides that, for a period of two (2) years
following termination of any employment agreement with the Group, such Group
Physician Stockholder or Full-time Physician Employee agrees to (a) engage
Administrator as the sole and exclusive manager and administrator of the
non-medical functions and services of said Group Physician Stockholder's or
Full-time Physician Employee's medical practice and (b) pay to Administrator
the identical amount of revenues paid by the Group to the Administrator
attributable to such Group Physician Stockholder or Full-time Physician
Employee derived from such Group Physician Stockholder's or Full-time Physician
Employee's performance of professional medical services within 15 miles of any
Practice Site.
Section 6.6 Survival of Certain Covenants. If this Agreement is
terminated pursuant to Section 10.4 (a), (b) or (c), the provisions of Section
6.2 and Section 6.3 shall survive such termination if the actions or events
giving rise to a breach of the Restrictive Covenants or other provisions
occurred prior to such termination. If the Agreement is terminated as
specified in the preceding sentence, all of the provisions of Section 6.1 shall
survive. However, regardless of the reason for termination, or upon expiration
of this Agreement, the provisions of Section 6.1 (d), (e), and (f) shall
survive such termination or expiration indefinitely unless otherwise expressly
limited as to a period of time.
Section 6.7 Definition. The term "Full-time Physician Employee"
as used in Sections 6.2 and 6.5 of this Article VI only, shall mean a Full-time
Physician Employee who shall have been employed by the Group for two (2) years;
provided, that such Full-time Physician Employee shall enter into a written
agreement at the commencement of the later of (i) his/her employment or (ii)
the Acquisition, which includes the provisions set forth in Sections 6.2 and
6.5, above, and acknowledges his/her understanding that such provisions will be
enforceable against such Full-time
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Physician Employee following such two (2) year period. Notwithstanding the
foregoing, the Group shall be entitled to apply to the Joint Planning Board for
the purpose of requesting that a particular Full-time Physician Employee not be
required to execute an employment agreement that contains the provisions
contained in Sections 6.2 and 6.5, which such release by Administrator shall
not be unreasonably withheld.
Section 6.8 Service Area Rights and Obligations.
(a) Primary Service Area. During the term of this Agreement and
within any Primary Service Area, Parent, Administrator or their Affiliates
shall not, without the prior written consent of the Group, (i) acquire or lease
the non-medical assets (through an asset acquisition, merger or other
consolidation or otherwise) of any Radiologist, group of Radiologists or
professional corporation or association (or other professional entity) whose
owners are Radiologists, (ii) acquire any imaging center where, within a
reasonable time period following such acquisition, the Group will not be
entitled to provide professional Radiology services for such imaging center, or
(iii) contract to provide management and administrative services similar to
those provided under this Agreement to any Radiologist, group of Radiologists
or professional corporation or association (or other professional entity) whose
owners are Radiologists. Following a request for written consent by
Administrator, Parent or their Affiliates hereunder, the Group shall respond
upon the earlier of (i) within thirty (30) days from receipt of such request
and all other necessary information related thereto or (ii) one-half of the
time during which Administrator, Parent or their Affiliates must respond. In
the event the Group, Parent, Administrator or their Affiliates acquire a
Professional Service Opportunity, the Group shall accept such Professional
Service Opportunity and shall perform any and all professional Radiology
services that are reasonably required at such location(s) in accordance with
the terms and provisions of this Agreement; provided (x) that the professional
reimbursement for such services is reasonable in relation to the overall market
environment and work effort required and (y) the Group shall not be required to
employ any Radiologist previously associated with such Professional Service
Opportunity.
(b) Secondary Service Area. During the term of this Agreement and
within any Secondary Service Area, Parent, Administrator or their Affiliates
shall first offer to the Group any New Professional Service Opportunity;
provided, however, that this provision shall not be applicable to any merger of
a Radiologist, group of Radiologists or professional corporation or association
(or other professional entity) whose owners are Radiologists with the Group.
Administrator shall give written notice (the "Administrator Notice") to the
Group describing the New Professional Service Opportunity. Within the earlier
of (i) thirty (30) days or (ii) one-half of the time during which the
Administrator, Parent or their Affiliates must respond to an offer described in
the Administrator's Notice, the Group shall deliver to Administrator a written
notice stating whether or not the Group elects to accept or reject the New
Professional Service Opportunity which election shall be binding on the Group.
If the Group does not elect to exercise the right or fails to provide the
notice to Administrator within the time frame herein provided, Administrator
shall be released from the right of first offer with respect to that particular
New Professional Service Opportunity. Prior to consummating any asset
acquisition, merger or other consolidation of any Radiologist, group of
Radiologists, or professional corporation or association (or other professional
entity) whose owners
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are Radiologists within any Secondary Service Area, Administrator shall first
consult with the Joint Planning Board.
(c) Determination of Primary and Secondary Service Area. The
existence and location of each of the Group's Primary Services Areas and
Secondary Services Areas shall be determined each time the Group, Parent,
Administrator or their Affiliates propose an acquisition, management
relationship, Professional Service Opportunity or New Professional Service
Opportunity as contemplated in subsections (a) and (b) above.
(d) Dispute Resolution. Any disputes regarding the interpretation
of the provisions of this Section 6.8 shall be referred to and decided by the
Joint Planning Board as provided in Section 5.3 of this Agreement.
(e) Definitions. The definitions utilized in connection with this
Section 6.8 shall have the following meanings:
"New Professional Service Opportunity" shall mean a
Professional Service Opportunity pursuant to which the Group or any other
member of an APPM Group managed by Parent, Administrator or their Affiliates is
not currently providing professional Radiology services.
"Primary Service Area" shall mean that area within a five (5)
mile radius from any imaging center owned, operated or managed by
Administrator, Parent or their Affiliates for which the Group provides
professional Radiology services or any hospital at which on-site professional
Radiology services are then provided by Physician Employee(s) or Physician
Extender Employee(s) of the Group.
"Professional Service Opportunity" shall mean any opportunity
to perform professional Radiology services for any hospital, hospital system or
imaging center under a formal agreement with such entity.
"Radiologist" shall mean and include both radiologists and
radiation oncologists.
"Radiology" shall mean and include diagnostic imaging,
interventional radiology and radiation oncology services.
"Secondary Service Area" shall mean that area which extends
five (5) miles beyond the boundary of any Primary Service Area.
ARTICLE VII
Financial and Security Arrangements
Section 7.1 Service Fee. The Group and Administrator agree that
the compensation set forth in this Article VII is being paid to Administrator
in consideration of the services provided and the substantial commitment and
effort made by Administrator hereunder and that such fees have been negotiated
at arms' length and are fair, reasonable and consistent with fair market value.
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Administrator shall be paid the service fee (the "Service Fee") as set forth on
Exhibit 7.1 hereto. Payment of the Service Fee is not intended to and shall
not be interpreted or implied as permitting Administrator to share in the
Group's fees for medical services but is acknowledged as the negotiated fair
market value compensation to Administrator considering the scope of services
and the business risks assumed by Administrator.
Section 7.2 Payments. Except as otherwise set forth on Exhibit
7.1 hereto, the amounts to be paid to Administrator under this Article VII
shall be calculated by Administrator on the accrual basis of accounting and
shall be payable monthly. Payments due for any Service Fee shall be made by
the Group each calendar month as provided herein and shall be paid on the 15th
day following the end of such month (or the first preceding day that is a
business day if the 15th day is not a business day) (a "Payment Date"). Except
as otherwise set forth on Exhibit 7.1, such amounts paid shall be estimates
based upon available information for such month, and adjustments to the
estimated payments shall be made to reconcile final amounts due under Section
7.1 on the next Payment Date.
Section 7.3 Advances. The Group shall be entitled to an advance
from Administrator of such additional sums, over and above the Group's right to
the amounts otherwise set forth in this Article VII, as shall be required by
the Group to pay Practice Expenses (excluding Technical Expenses) consistent
with the annual capital and operating budgets of the Practice (prepared as
provided in Section 3.5 hereof), the Service Fee as provided in Exhibit 7.1
hereto and Excluded Practice Expenses at the discretion of Administrator. Any
amounts advanced to the Group pursuant to this Section 7.3 shall be repaid by
the Group in such priority as set forth in Section 7.6 below and shall bear
interest at Parent's then available, borrowing rate offered by Administrator's
or Parent's senior lender (which rate shall be charged consistently to each
physician group who enters into a Service Agreement with Administrator) until
all such amounts of principal and interest are repaid to Administrator as
provided herein. Notwithstanding the foregoing, no interest shall accrue or be
paid by the Group for amounts advanced to the Group pursuant to this Section
7.3 during the forty-five (45)-day period immediately following the Acquisition
Effective Date.
Section 7.4 Security Agreement. In order to enforce its rights
granted hereunder and subject to applicable law, the Group shall execute a
Security Agreement in substantially the form attached hereto as Exhibit 7.4
(the "Security Agreement"), which Security Agreement grants a security interest
in all of the Group's accounts receivable (as more fully described in the
Security Agreement) to Administrator. In addition, the Group shall cooperate
with Administrator and execute all necessary documents in connection with the
pledge of such accounts receivable to Administrator or at Administrator's
option, its lenders.
Section 7.5 Adjustment of Fees. In addition to the adjustments
provided for in Section 7.2, Service Fees payable by Group pursuant to this
Article VII shall be adjusted as appropriate upon agreement of the parties upon
the divestiture or acquisition by the Group of, or affiliation with, a
radiology or diagnostic practice group. Whether or not Parent capital stock or
funds are utilized to fund the acquisition or affiliation, the Service Fee and
other related provisions of this Agreement shall be adjusted as agreed upon by
the parties on a case by case basis. Under either acquisition or affiliation
model, the precise adjustment to the Service Fee and to other related
provisions of this Agreement shall be a joint decision of the parties, shall be
memorialized in a written amendment to
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this Agreement, and shall be based upon the methodology used to generally
determine Services Fees hereunder.
Section 7.6 Priority of Payments. Administrator shall administer
and make disbursements from amounts deposited into the Deposit Account or
transferred from the Deposit Account to pay (including, without limitation the
making of advances as provided in Section 7.3) the Practice Expenses and
Excluded Practice Expenses as the same become due and payable, and for which
the Group shall remain responsible; provided, however, that if Technical
Expenses exceed Technical Revenues, then the amount by which Technical Expenses
exceed Technical Revenues shall be excluded for purposes of the priority of
payments set forth below and the Group shall not be responsible for such
amount. In performing its obligations pursuant to Article III, on the
fifteenth (15th) day following the end of each calendar month, Administrator
shall apply an amount equal to the aggregate face amount of the prior month's
accounts receivables, less Adjustments and estimated allowances for bad debt as
determined in accordance with Section 3.2(e), in the following order of
priority:
(a) payment of all accrued Practice Expenses for the prior month
(subject to the provision in the preceding sentence);
(b) payment of the accrued Service Fee for the prior month;
(c) payment of outstanding balance of all amounts advanced to the
Group through the end of the prior month, and applicable
interest thereon (as contemplated in Section 7.3); and
(d) payment of all Excluded Practice Expenses.
Any amounts which remain following the payment of the items set forth in
subparagraphs (a) through (d) above shall be deposited into the Group Account
on the fifteenth (15th) day following the end of each calendar month (or the
first preceding day if the 15th day is not a business day).
ARTICLE VIII
[Intentionally Omitted]
ARTICLE IX
Insurance and Indemnification
Section 9.1 Insurance to be Maintained by the Group.
(a) During the term of this Agreement, the Group shall
maintain comprehensive professional medical/malpractice liability insurance
with such carrier as determined by the Joint Planning Board with minimum legal
limits or such higher limits as shall be required under the
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Group's contracts with hospitals or other third parties. Such insurance shall
be on a per claim and per physician basis and a separate limit for the Group to
the extent available and permitted by law with such deductible as is mutually
agreeable by Administrator and the Group. All comprehensive professional
medical/malpractice liability insurance premiums and deductibles shall be
included in Practice Expenses; provided, that if the Group elects to maintain
coverage that exceeds minimum requirements, such additional premiums shall be
included in Excluded Practice Expenses. All costs, expenses and liabilities
incurred by the Group in excess of the limits of such policies identified in
the preceding sentence shall be included in Excluded Practice Expenses.
Administrator, Parent or their Affiliates shall attempt to secure excess
liability for the types of coverages contemplated by this Section 9.1(a). If
successful, the Group shall have the opportunity to purchase at Administrator's
cost, as an Excluded Practice Expense, such coverage to the extent permitted by
the then-applicable restrictions set forth in such policy.
(b) The Group, Administrator and Parent each waives any
right one may have against the other, to the extent allowed by the waiving
party's insurance coverage, on account of any loss or damage occasioned to any
party by another party, their respective real and personal property, the
Premises or its contents, arising from any risk generally covered by fire and
extended coverage insurance or from vandalism or malicious mischief; and the
parties, on behalf of their respective insurance companies, waive any right to
subrogation, except when such loss or damage is due to the gross negligence or
willful misconduct of the other party.
Section 9.2 Insurance to be Maintained by Administrator. During
the term of this Agreement, Administrator will provide and maintain (i) as a
Technical Expense, comprehensive professional medical/malpractice liability
insurance for all applicable employees of Administrator and (ii) as a Practice
Expense, comprehensive general liability and property insurance covering the
Practice's premises (including, without limitation, the Premises), personal
property and operations with such limits and coverages as a reasonable business
person under similar circumstances would maintain. All costs, expenses and
liabilities incurred by Administrator in excess of the limits of such policies
identified in subsections (i) and (ii) hereof shall be included in
Administrator Expenses.
Section 9.3 Continuing Liability Insurance Coverage. The Group
shall obtain or require each of its Physician Employees and Physician Extender
Employees to obtain continuing liability insurance coverage under either a
"tail policy" or a "prior acts policy," with the same limits and deductibles as
the insurance coverage provided pursuant to Section 9.1 upon the termination of
such physician's relationship with the Group for any reason, unless such
physician was covered with an occurrence-based policy while employed or
retained by the Group. In the event that the Group, any Physician Employee or
Physician Extender Employees fails to obtain such continuing liability
insurance coverage, Administrator may do so. The cost of such continuing
liability insurance coverage shall be included in Practice Expenses unless such
cost is borne by the Physician Employee.
Section 9.4 Additional Insureds. The Group and Administrator
agree to use their reasonable efforts to have each other named as an additional
insured on the other's respective professional liability insurance programs.
The additional costs, if any, associated therewith shall be a Practice Expense.
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Section 9.5 Indemnification.
(a) By the Group. The Group shall indemnify, defend and
hold Administrator, Parent, their Affiliates and their respective officers,
directors, shareholders, employees, agents, attorneys and consultants (other
than such persons who are also officers, directors, shareholders, employees,
agents or consultants of the Group) harmless, from and against any and all
liabilities, losses, damages, claims, causes of action and expenses (including
reasonable attorneys' fees), not covered by insurance (including self-insured
insurance and reserves), maintained or required to be maintained pursuant to
this Agreement, whenever arising or incurred, that are caused or asserted to
have been caused, directly or indirectly, by or as a result of the performance
of medical services or the performance of any intentional acts, or negligent
acts or omissions by the Group and/or its shareholders, employees and/or
subcontractors (other than Administrator, Parent, Affiliates or their
employees, officers, directors, agents, attorneys and consultants) during the
term of this Agreement. Provided, however, that in the event an
indemnification obligation under the preceding sentence arises as of the result
of any act or omission of a person who is an officer, shareholder or other
equity holder, director, employee, agent, attorney or consultant of
Administrator, Parent or any of their Affiliates such person shall not be
entitled to indemnification in connection therewith and any other adjustment as
is equitable shall be made to the Group's indemnification obligation arising
thereby.
(b) By the Administrator. Administrator and Parent,
jointly and severally, shall indemnify, defend and hold the Group and its
officers, shareholders, directors, employees, agents, attorneys and
consultants, harmless from and against any and all liabilities, losses,
damages, claims, causes of action and expenses (including reasonable attorneys'
fees), not covered by insurance (including self-insured insurance and
reserves), maintained or to be maintained pursuant to this Agreement, whenever
arising or incurred, that are caused or asserted to have been caused, directly
or indirectly, by or as a result of the performance of any intentional acts, or
negligent acts or omissions by Administrator, Parent or Affiliates and/or any
of their respective shareholders, employees and/or subcontractors (other than
the Group or its employees) during the term of this Agreement. Provided,
however that in the event an indemnification obligation under the preceding
sentence arises as a result of any act or omission of a person who is an
officer, shareholder or other equity holder, director, employee, agent,
attorney or consultant of the Group such person shall not be entitled to
indemnification in connection therewith and any other adjustment as is
equitable shall be made to Administrator's or Parent's indemnification
obligation arising thereby.
ARTICLE X
Term and Termination
Section 10.1 Term of Agreement. This Agreement shall commence on
the date hereof and shall expire on the 40th anniversary hereof unless earlier
terminated pursuant to the terms of either Section 10.3 or Section 10.4 or
automatically extended pursuant to the terms of Section 10.2.
Section 10.2 Extended Term. Unless earlier terminated as provided
for in either Section 10.3 or Section 10.4, the term of this Agreement shall be
automatically extended for additional terms of five (5) years each, unless
either party delivers to the other party, not less than twelve (12) months
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nor earlier than fifteen (15) months prior to the expiration of the preceding
term, written notice of such party's intention not to extend the term of this
Agreement.
Section 10.3 Termination by the Group. The Group may, in its sole
discretion, terminate this Agreement by giving written notice thereof to
Administrator (after the giving of any required notices and the expiration of
any applicable waiting periods set forth below) upon the occurrence of any the
following events:
(a) Administrator or Parent shall admit in writing its
inability to generally pay its debts when due, apply for or consent to the
appointment of a receiver, trustee or liquidator of all or substantially all of
its assets, file a petition in bankruptcy or make an assignment for the benefit
of creditors, or upon other action taken or suffered by Administrator or
Parent, voluntarily or involuntarily, under any federal or state law for the
benefit of creditors, except for the filing of a petition in involuntary
bankruptcy against Administrator or Parent which is dismissed within ninety
(90) days thereafter.
(b) Administrator or Parent shall default in the
performance of any material duty or material obligation imposed upon it by this
Agreement (a "Material Administrator Default") and such default shall continue
for a period of sixty (60) days after written notice thereof has been given to
Administrator by the Group with a copy to the financial institution
contemplated in Section 12.1(a) at the address provided by Administrator,
provided that the Group may terminate this Agreement if, and only if, such
termination shall have been approved by the affirmative vote of the holders of
two-thirds of the interests of the equity holders of the Group. The Group
agrees that the financial institution contemplated in Section 12.1(a) shall
have the right, but not the obligation, to cure any Material Administrator
Default. Notwithstanding anything to the contrary in this Agreement, following
receipt by Administrator of the notice of a Material Administrator Default and
until such Material Administrator Default shall be cured, the Group may take
such action as may be reasonably required to cover such Material Administrator
Default so as to maintain for the Group the same level of service as before the
Material Administrator Default, without prejudicing in any way the Group's
other rights and remedies, and may offset all of its costs from the amounts
which may otherwise be due to Administrator under this Agreement.
(c) An independent law firm with nationally recognized
expertise in health care law and acceptable to the parties hereto renders an
opinion to the parties hereto that (i) a material provision of this Agreement
is in violation of applicable law or any court or regulatory agency enters an
order finding a material provision of this Agreement is in violation of
applicable law and (ii) this Agreement can not be amended pursuant to Section
12.6 hereof to cure such violation.
Section 10.4 Termination by Administrator. Administrator may, in
its sole discretion, terminate this Agreement by giving written notice thereof
to the Group (after the giving of any required notices and the expiration of
any applicable waiting periods set forth below) upon the occurrence of any of
the following events:
(a) The Group shall default in the performance of any
material duty or material obligation imposed upon it by this Agreement (a
"Material Group Default") and (i) the Group fails
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to deliver to Administrator within thirty (30) days after written notice of
such Material Group Default has been given to Group a written plan (reasonably
acceptable to Administrator) detailing the methods and procedures that the
Group shall utilize to cure such Material Group Default, (ii) the Group has
delivered a plan but has failed to utilize its best efforts to cure such
Material Group Default within sixty (60) days after written notice thereof has
been given to the Group by Administrator or (iii) the Group has delivered the
plan but, after utilizing its best efforts, is unable to cure such Material
Group Default within ninety (90) days after written notice thereof has been
given to the Group by Administrator. The term "Material Group Default" for
purposes of this Section 10.4 shall include, but not be limited to, (A) the
Group's admission in writing of its inability to generally pay its debts when
due, application for or consent to the appointment of a receiver, trustee or
liquidator of all or substantially all of its assets, filing of a petition in
bankruptcy or making an assignment for the benefit of creditors, or upon other
action taken or suffered by the Group, voluntarily or involuntarily, under any
federal or state law for the benefit of debtors, except for the filing of a
petition in involuntary bankruptcy against the Group which is dismissed within
ninety (90) days thereafter or (B) the Group's or any Physician Employee's (1)
failure to adhere to any compliance plan, policy, or manual as described in
Section 4.6 hereof that has been approved by the Group and made applicable to
all shareholders and employees of the Group, or (2) engaging in any conduct or
being formally accused of conduct for which, in the opinion of the Joint
Planning Board, based on an expedited hearing of the Joint Planning Board at
which evidence of the conduct is presented, together with an opportunity for
the accused party to rebut such evidence, the Group's license, or such
Physician Employee's license, to practice medicine reasonably would be expected
to be subject to revocation or suspension, whether or not actually revoked or
suspended, or (3) being notified in writing of any adverse action by any state
or federal department or agency that has the effect of either excluding the
Group or the individual from participating in or from receiving reimbursement
under any program funded by the federal government or by any state government,
notwithstanding any available post-sanction remedies, or (4) being otherwise
disciplined by any licensing, regulatory or professional entity or institution,
the result of any of which event described in subparagraphs (1) through (4)
above, in the absence of termination of a Physician Employee or a Physician
Extender Employee or other action of the Group to monitor and cure such act or
conduct by such employee, does or reasonably would be expected to materially
and adversely affect the Practice or the Group. Notwithstanding anything to
the contrary in this Agreement, following receipt by the Group of the notice of
a Material Group Default, and until such Material Group Default shall be cured,
the Administrator may take such action as may be reasonably required to cover
such Material Group Default so as to maintain for the Administrator the same
level of service at the Premises as before the Material Group Default, without
prejudicing in any way Administrator other rights and remedies, and may offset
all of its costs of cover from amounts which may otherwise due to the Group
under this Agreement.
(b) An independent law firm with nationally recognized
expertise in health care law and acceptable to the parties hereto renders an
opinion to the parties hereto that (i) a material provision of this Agreement
is in violation of applicable law or any court or regulatory agency enters an
order finding a material provision of this Agreement is in violation of
applicable law and (ii) this Agreement can not be amended pursuant to Section
12.6 hereof to cure such violation.
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(c) At any time during the five-year period following the
Acquisition Effective Date if more than thirty-three and one-third percent (33
1/3%) of the total number of Group Physician Stockholders and Full-time
Physician Employees retained or employed by the Group at the time of the
Acquisition Effective Date are no longer employed or retained by the Group for
reasons other than (i) death, (ii) permanent disability, (iii) loss of a
hospital contract or privileges for reasons other than voluntary resignation by
the Group or a failure to renew or a failure by the Group to respond to a
reasonable proposal to extend the term of such contract or (iv) closing of
facilities by Administrator (after consultation with the Joint Planning Board).
For purposes of this Section 10.4(c), if Parent and/or Administrator are
notified in writing by the Group at or prior to the Acquisition Effective Date
of any Physician Employee [or Physician Extender Employee] that intends to
retire prior to expiration of such five-year period, then such Physician
Employee or Physician Extender Employee shall not be counted for purposes of
determining the above percentage.
Section 10.5 Effective Date of Termination. Any termination of
this Agreement shall be effective (the "Termination Date") as follows:
(a) Immediately upon receipt of a termination notice
pursuant to Section 10.3 or Section 10.4 (a "Termination Notice") and
expiration of applicable cure periods; or
(b) Upon the expiration of this Agreement pursuant to
Sections 10.1 or 10.2.
Section 10.6 Purchase of Assets. Upon the termination of this
Agreement, subject to the provisions of subparagraphs (a) through (e) set forth
below, if Administrator and/or Parent is the defaulting party, the Group shall
have the option to require Administrator and/or Parent to sell to the Group,
and if the Group is the defaulting party, Administrator and/or Parent shall
have the option to require the Group to purchase from Administrator, and/or
Parent the Purchase Assets and assume the Practice Related Liabilities below:
(a) Purchase Assets. The Group shall purchase, free and
clear of all liens and encumbrances other than those arising from Practice
Related Liabilities (as defined below), from Administrator, and/or Parent or
its Affiliates, as the case may be, pursuant to subparagraph (c) below, all
assets, tangible or intangible real or personal, of Administrator, Parent or
their Affiliates that relate primarily to the Practice other than
Administrator's, Parent's or their Affiliates' accounting and financial records
(the "Purchase Assets"), including, but not limited to, without duplication,
(i) all equipment, furniture, fixtures, furnishings, inventory, supplies,
improvements, additions and leasehold improvements utilized by the Practice,
(ii) any real estate owned by Administrator, Parent or Affiliates that is
occupied by or used primarily for the benefit of the Practice, (iii) all
unamortized intangible assets (including, without limitation, goodwill) set
forth on the financial statements of Administrator, Parent or their Affiliates
used in connection with the Practice or otherwise resulting from the
Acquisition, (iv) all Confidential and Proprietary Information that relates
solely to the Practice, and (v) all other assets that would be set forth on a
balance sheet of Administrator, Parent or their Affiliates prepared as of the
date of the Purchase Closing relating primarily to the Practice.
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(b) Practice Related Liabilities. The Group shall assume
all of Administrator's and its Affiliates' liabilities, debt, payables and
other obligations (including lease and other contractual obligations), or
portions thereof, which relate directly or are directly attributable to the
Practice and/or the Purchase Assets other than previously accrued Practice
Expenses (the "Practice Related Liabilities").
(c) Purchase Price. The Purchase Price shall be the
lesser of (i) Fair Market Value of the Purchase Assets subject to the
assumption of the Practice Related Liabilities or (ii) the value of the Actual
Consideration (defined below) (alternatively, the "Purchase Price"); provided,
however, the Purchase Price shall not be less than the net book value of the
Purchase Assets at the Termination Date. The Purchase Price shall be paid
pursuant to Section 10.7. For purposes of this subparagraph (c), the term
"Actual Consideration" shall mean (i) cash consideration paid to the Group
pursuant to the Acquisition Agreement and (ii) an amount equal to the number of
shares of Parent Common Stock (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, or any similar transaction whereby the
Parent Common Stock is increased or decreased or exchanged for a different
number or kind of securities) issued pursuant to the Acquisition Agreement
multiplied by the fair market value of Parent Common Stock immediately prior to
the time that a Termination Notice is provided pursuant to Section 10.7. The
Purchase Price shall be appropriately adjusted to offset and account for any
monetary obligations of the Group or Administrator owing to the other as
provided herein.
(d) Exercise of Option.
(i) The Group. Upon a termination of this
Agreement, the Group shall be entitled to exercise its option to
require Administrator, Parent or their Affiliates to sell the Purchase
Assets and shall assume the Practice Related Liabilities pursuant to
this Section 10.6 at any time (unless this Agreement is terminated
pursuant to Section 10.4(a) or 10.4(c)).
(ii) Administrator. Upon termination of this
Agreement, Administrator shall be entitled to exercise its option to
require the Practice to purchase the Purchase Assets and assume the
Practice Related Liabilities pursuant to this Section 10.6 (i) during
the five-year period following the Acquisition Effective Date if this
Agreement is terminated pursuant to Sections 10.4(b) or 10.4(c) and
(ii) at any time in the event of a termination pursuant to Section
10.4(a).
(e) Notice. Each party shall exercise its option under
this Section 10.6 by giving written notice thereof in the Termination Notice,
if applicable, or prior to ninety (90) days before the Termination Date if this
Agreement expires pursuant to Sections 10.1 or 10.2.
Section 10.7 Terms of Purchase. The closing of the transactions
contemplated by Section 10.6 (the "Purchase Closing") shall occur (a) on the
Termination Date if this Agreement expires pursuant to the terms of Sections
10.1 and 10.2, or (b) on a date mutually acceptable to the parties hereto that
shall be within 180 days after receipt of a Termination Notice. The parties
shall enter into an asset purchase agreement containing representations,
warranties and conditions customary to a transaction of this size involving the
purchase and sale of similar businesses. Subject to the
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conditions set forth below, at the Purchase Closing, Administrator and/or its
Affiliates, as the case may be, shall transfer and assign the Purchase Assets
to the Group, and in consideration therefor, the Group shall (a) pay to
Administrator, Parent and/or their Affiliates an amount in cash or, at the
option of the Group (subject to the conditions set forth below), Parent Common
Stock (valued at the fair market value immediately prior to the Purchase
Closing), or some combination of cash and Parent Common Stock equal to the
Purchase Price and (b) assume the Practice Related Liabilities. Each party
shall execute such documents or instruments as are reasonably necessary, in the
opinion of each party and its counsel, to effect the foregoing transaction.
The Group shall, and shall use its best efforts to cause each shareholder of
the Group to, execute such documents or instruments as may be necessary to
cause the Group to assume the Practice Related Liabilities and to release
Administrator, Parent and/or their Affiliates, as the case may be, from any
liability or obligation with respect thereto. In the event the Group desires
to pay all or a portion of the Purchase Price in shares of Parent Common Stock,
such transaction shall be subject to the satisfaction of each of the following
conditions:
(a) The holders of such shares of Parent Common Stock
shall transfer to Administrator, Parent and/or their Affiliates good, valid and
marketable title to the shares of Parent Common Stock, free and clear of all
adverse claims, security interests, liens, claims, proxies, options,
stockholders' agreements and encumbrances (not including any applicable
securities restrictions and lock-up arrangements with the Parent or any
underwriter); and
(b) The holders of such shares of Parent Common Stock
shall make such representations and warranties as to title to the stock,
absences of security interests, liens, claims, proxies, options, stockholders'
agreements and other encumbrances and other matters as reasonably requested by
Administrator, Parent and/or their Affiliates.
Section 10.8 Exception to Purchase. Notwithstanding anything
contained herein to the contrary, Administrator, Parent and/or their Affiliates
shall not be obligated to sell the Purchase Assets to the Group as provided in
Section 10.6(d)(i) above if the Group is not able to pay the Purchase Price
pursuant to the terms set forth above and assume the Practice Related
Liabilities at the Purchase Closing. In such event, the Group shall surrender
the Purchase Assets to Administrator, Parent and/or their Affiliates as of the
Purchase Closing. If the Practice fails to so surrender the Purchase Assets,
Administrator, Parent and/or their Affiliates may, if permitted by applicable
law, without prejudice to any other remedy which it may have hereunder or
otherwise, enter the Premises and take possession of the Purchase Assets and
expel or remove the Group and any other person who may be occupying the
Premises or any part thereof, by force if necessary, without being liable for
prosecution or any claim for damages therefor.
Section 10.9 Effect Upon Termination. Upon the Termination Date,
except as provided below, this Agreement shall terminate and shall be of no
further force and effect and all further obligations of Administrator, Parent
and/or their Affiliates and the Group under this Agreement shall terminate
without further liability of the Administrator or Parent and/or their
Affiliates to the Group or the Group to the Administrator or Parent and/or
their Affiliates (including, without limitation, any liability for loss of
anticipated profits over the remaining term of this Agreement or from a sale of
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the Purchase Assets pursuant to this Article X at less than Fair Market Value),
except with respect to the obligations set forth below. The foregoing to the
contrary notwithstanding:
(a) Administrator and Parent and/or their Affiliates
shall use their best efforts to cooperate with the Group for the appropriate
transfer of management services.
(b) Each party hereto shall provide the other party with
reasonable access to books and records owned by it to permit such requesting
party to satisfy reporting and contractual obligations which may be required of
it.
(c) Any other amounts due and owing but unpaid to either
Administrator, Parent and/or their Affiliates or the Group as of the
Termination Date shall be paid promptly by the appropriate party.
(d) Any and all covenants and obligations of either party
hereto which by their terms or by reasonable implication are to be performed,
in whole or in part, after the termination of this Agreement, shall survive
such termination, including, without limitation, the obligations of the parties
pursuant to the following Sections: 6.1(b), 6.1(c), 6.1(d), 6.1(e), 6.2
(subject to the same survival terms as set forth in 6.2), 6.3 (subject to the
same survival terms as set forth in 6.3), 9.5, Article VIII and the applicable
provisions of Article X and XI.
ARTICLE XI
Dispute Resolution
Section 11.1 Informal Dispute Resolution. In the event of any
claim, controversy, dispute or disagreement between or among the parties hereto
which is not subject to the dispute resolution methodology set forth in Article
V hereof, the parties hereto agree that such other claims, controversies,
disputes or disagreements shall be presented to the Joint Planning Board for
hearing and resolution. In the event the Joint Planning Board is unable to
resolve such matter within a reasonable period following presentation to the
Joint Planning Board, such matter shall be presented to either (a) the Board of
Directors of Parent or (b) a committee designated by the Board of Directors of
Parent which contains at least one (1) physician member. The Board of
Directors of Parent or such committee shall meet within thirty (30) days to
attempt to resolve such claim, controversy, dispute or disagreement.
Section 11.2 Arbitration. If a claim, controversy, dispute or
disagreement arising out of or relating to this Agreement, which is not subject
to the alternative dispute resolution methodology contained in Article V
hereof, cannot be resolved by the informal means set forth in Section 11.1, the
parties hereto agree that any such claim, controversy, dispute or disagreement
between or among any of the parties shall be governed exclusively by the terms
and provisions of this Article XI; provided, however, that within ten (10) days
from the date which any claim, controversy, dispute or disagreement cannot be
resolved by the informal means set forth in Section 11.1 and prior to
commencing an arbitration procedure pursuant to this Article XI, the parties
shall meet to discuss and consider other alternative dispute resolution
procedures other than arbitration, provided,
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however, that if the parties hereto agree to an alternative to arbitration they
may agree to an alternative set of rules, including rules of evidence and
procedure. If at any time prior to the rendering of the decision by the
arbitrator (or pursuant to such other alternative dispute resolution procedure)
as contemplated in this Article XI to the extent a party makes a written offer
to the other party proposing a settlement of the matter(s) at issue and such
offer is rejected, then the party rejecting such offer shall be obligated to
pay the costs and expenses (excluding the amount of the award granted under the
decision) of the party that offered the settlement from the date such offer was
received by such other party if the decision is for a dollar amount that is
less than the amount of such offer to settle. Notwithstanding the foregoing,
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 or (ii) any duty,
obligation, covenant, representation or warranty, the breach of which may cause
irreparable harm or damage.
ARTICLE XII
General Provisions
Section 12.1 Assignment. Administrator shall have the right to
assign its rights hereunder to Parent or any wholly-owned subsidiary of
Administrator or Parent (that remains a wholly-owned subsidiary of
Administrator or Parent) or to a financial institution as collateral security
for the indebtedness of Parent, Administrator or their Affiliates without the
consent of the Group.
Section 12.2 Amendments. This Agreement shall not be modified or
amended except by a written document executed by all parties to this Agreement,
and such written modification(s) or amendment(s) shall be attached hereto.
Section 12.3 Waiver of Provisions. Any waiver of any terms and
conditions hereof must be in writing, and signed by the parties hereto. The
waiver of any of the terms and conditions of this Agreement shall not be
construed as a waiver of any other terms and conditions hereof.
Section 12.4 Additional Documents. Each of the parties hereto
agrees to execute any document or documents that may be reasonably requested
from time to time by the other party to implement or complete such party's
obligations pursuant to this Agreement.
Section 12.5 Attorneys' Fees. If legal action is commenced by
either party to enforce or defend its rights under this Agreement, the
prevailing party in such action shall be entitled to recover all reasonable
attorneys' fees, costs and expenses including, but not limited to, attorney's
fees, costs and expenses for trial, appellate proceedings and negotiations, in
addition to any other relief granted.
Section 12.6 Contract Modifications for Prospective Legal Events.
In the event any state or federal laws or regulations, now existing or enacted
or promulgated after the date hereof, are interpreted by judicial decision, a
regulatory agency or independent legal counsel in such a manner as to indicate
that this Agreement or any provision hereof may be in violation of such laws or
regulations, the Group and Administrator shall amend this Agreement as
necessary to preserve the
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underlying economic and financial arrangements between the Group and
Administrator and without substantial economic detriment to either party. If
this Agreement cannot be so amended, the terms of Section 10.3(c) and 10.4(b)
shall apply. To the extent any act or service required of Administrator in
this Agreement should be construed or deemed, by any governmental authority,
agency or court to constitute the practice of medicine, the performance of said
act or service by Administrator shall be deemed waived and forever
unenforceable and the provisions of this Section 12.6 shall be applicable.
Neither party shall claim or assert illegality as a defense to the enforcement
of this Agreement or any provision hereof; instead, any such purported
illegality shall be resolved pursuant to the terms of this Section 12.6 and
Section 12.9.
Section 12.7 Parties In Interest; No Third Party Beneficiaries.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto.
Except as provided in Section 6.1(g), neither this Agreement nor any other
agreement contemplated hereby shall be deemed to confer upon any person not a
party hereto or thereto any rights or remedies hereunder or thereunder.
Section 12.8 Entire Agreement. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding
the subject matter hereof, and supersede all prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
Section 12.9 Severability. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 12.10 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULE GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF MARYLAND.
Section 12.11 No Waiver; Remedies Cumulative. No party hereto shall
by any act (except by written instrument pursuant to Section 12.3 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any default in or breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any party hereto, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
remedy set forth in this Agreement or otherwise conferred upon or reserved to
any party shall be considered
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exclusive of any other remedy available to any party, but the same shall be
distinct, separate and cumulative and may be exercised from time to time as
often as occasion may arise or as may be deemed expedient.
Section 12.12 Communications. The Group and Administrator, Parent
and their Affiliates agree that good communication between the parties is
essential to the successful performance of this Agreement, and each pledges to
communicate fully and clearly with the other on matters relating to the
successful operation of the Practice.
Section 12.13 Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of
the terms or provisions hereof.
Section 12.14 Gender and Number. When the context requires, the
gender of all words used herein shall include the masculine, feminine and
neuter and the number of all words shall include the singular and plural.
Section 12.15 Reference to Agreement. Use of the words "herein",
"hereof', "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 12.16 Notice. Whenever this Agreement requires or permits
any notice, request, or demand from one party to another, the notice, request,
or demand must be in writing to be effective and shall be deemed to be
delivered and received (i) if personally delivered or if delivered by telex,
telegram, facsimile or courier service, when actually received by the party to
whom notice is sent or (ii) if delivered by mail (whether actually received or
not), at the close of business on the third business day next following the day
when placed in the mail, postage prepaid, certified or registered, addressed to
the appropriate party or parties, at the address of such party set forth below
(or at such other address as such party may designate by written notice to all
other parties in accordance herewith):
If to Administrator or Parent: American Physician Partners, Inc.
3600 Chase Tower
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: President
If to the Group: WB&A Imaging, P.C.
0000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Fax No.: (000) 000-0000
Attn: President
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Section 12.17 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
Section 12.18 Defined Terms. Terms used in the Exhibits attached
hereto with their initial letter capitalized and not otherwise defined therein
shall have the meanings assigned to such terms in this Agreement.
Section 12.19 Parent Obligations. All of the duties and
obligations of Administrator to the Group under this Agreement shall be deemed
to be the joint and several obligations of Administrator and Parent.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Service
Agreement as of the date first written above.
GROUP:
WB&A IMAGING, P.C.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
ADMINISTRATOR:
WB&A IMAGING PARTNERS, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
PARENT:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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