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SERVICE AGREEMENT
Dated as of the 1st day of January, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.,
COMMUNITY IMAGING PARTNERS, INC.,
COMMUNITY RADIOLOGY ASSOCIATES, INC.
and
DRS. KORSOWER AND PION RADIOLOGY, P.A.
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TABLE OF CONTENTS
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ARTICLE I - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - Relationship of the Parties . . . . . . . . . . . . . . . . . 8
Section 2.1 Independent Contractors . . . . . . . . . . . . . . . 8
Section 2.2 Practice of Medicine . . . . . . . . . . . . . . . . 8
Section 2.3 No Payment or Other Compensation for Referrals . . . 8
Section 2.4 Group's Internal Matters . . . . . . . . . . . . . . 8
ARTICLE III - Services to be Provided by Administrator . . . . . . . . . . 9
Section 3.1 General . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2 General Administrative Services . . . . . . . . . . . 9
Section 3.3 Facilities . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4 Acquisition and Assistance . . . . . . . . . . . . . 14
Section 3.5 Financial Planning and Budgeting . . . . . . . . . . 15
Section 3.6 Personnel . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.7 Provider and Payor Relationships . . . . . . . . . . 16
Section 3.8 Inventory and Supplies . . . . . . . . . . . . . . . 17
Section 3.9 Advertising and Public Relations . . . . . . . . . . 17
Section 3.10 Quality Assurance . . . . . . . . . . . . . . . . . . 17
Section 3.11 Other Consulting and Advisory Services . . . . . . . 17
Section 3.12 Events Excusing Performance . . . . . . . . . . . . . 17
ARTICLE IV - Obligations of the Group . . . . . . . . . . . . . . . . . . . 18
Section 4.1 Employment of Physician Employees and
Physician Extender Employees . . . . . . . . . . . . . 18
Section 4.2 Professional Services . . . . . . . . . . . . . . . . 18
Section 4.3 Medical Practice . . . . . . . . . . . . . . . . . . 19
Section 4.4 Group's Internal Matters . . . . . . . . . . . . . . 19
Section 4.5 Name . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.6 Compliance with Laws . . . . . . . . . . . . . . . . 19
Section 4.7 Ancillary Services . . . . . . . . . . . . . . . . . 20
Section 4.8 Premises and Personal Property . . . . . . . . . . . 21
Section 4.9 Practice Employee Benefit Plans . . . . . . . . . . . 21
Section 4.10 Events Excusing Performance . . . . . . . . . . . . . 21
ARTICLE V - Joint Planning Board . . . . . . . . . . . . . . . . . . . . . 21
Section 5.1 Formation and Operation of the Joint Planning Board . 21
Section 5.2 Duties and Responsibilities of the Joint
Planning Board . . . . . . . . . . . . . . . . . . . . 22
Section 5.3 Acts of the Joint Planning Board . . . . . . . . . . 23
Section 5.4 Joint Planning Board Meetings . . . . . . . . . . . . 24
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ARTICLE VI - Restrictive Covenants . . . . . . . . . . . . . . . . . . . . 25
Section 6.1 Restrictive Covenants of the Group . . . . . . . . . 25
Section 6.2 Restrictive Covenants . . . . . . . . . . . . . . . . 28
Section 6.3 Enforcement of Restrictive Covenants and Other
Provisions . . . . . . . . . . . . . . . . . . . . . 29
Section 6.4 Remedies . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.5 Condition Precedent to Release of Obligations . . . . 30
Section 6.6 Survival of Certain Covenants . . . . . . . . . . . . 30
Section 6.7 Definition . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII - Financial and Security Arrangements . . . . . . . . . . . . . 31
Section 7.1 Service Fee . . . . . . . . . . . . . . . . . . . . . 31
Section 7.2 Payments . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.3 Advances . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.4 Security Agreement . . . . . . . . . . . . . . . . . 32
Section 7.5 Adjustment of Fees . . . . . . . . . . . . . . . . . 32
Section 7.6 Priority of Payments . . . . . . . . . . . . . . . . 32
ARTICLE VIII - Records . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.1 Records . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IX - Insurance and Indemnification . . . . . . . . . . . . . . . . 34
Section 9.1 Insurance to be Maintained by the Group . . . . . . . 34
Section 9.2 Insurance to be Maintained by Administrator . . . . . 34
Section 9.3 Continuing Liability Insurance Coverage . . . . . . . 34
Section 9.4 Additional Insureds . . . . . . . . . . . . . . . . . 35
Section 9.5 Indemnification . . . . . . . . . . . . . . . . . . . 35
ARTICLE X - Term and Termination . . . . . . . . . . . . . . . . . . . . . 36
Section 10.1 Term of Agreement . . . . . . . . . . . . . . . . . . 36
Section 10.2 Extended Term . . . . . . . . . . . . . . . . . . . . 36
Section 10.3 Termination by the Group . . . . . . . . . . . . . . 36
Section 10.4 Termination by Administrator . . . . . . . . . . . . 37
Section 10.5 Effective Date of Termination . . . . . . . . . . . . 38
Section 10.6 Purchase of Assets . . . . . . . . . . . . . . . . . 38
Section 10.7 Terms of Purchase . . . . . . . . . . . . . . . . . . 40
Section 10.8 Exception to Purchase . . . . . . . . . . . . . . . . 40
Section 10.9 Effect Upon Termination . . . . . . . . . . . . . . . 41
ARTICLE XI - Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.1 Informal Dispute Resolution . . . . . . . . . . . . . 41
ARTICLE XII - General Provisions . . . . . . . . . . . . . . . . . . . . . 42
Section 12.1 Assignment . . . . . . . . . . . . . . . . . . . . . 42
Section 12.2 Amendments . . . . . . . . . . . . . . . . . . . . . 42
Section 12.3 Waiver of Provisions . . . . . . . . . . . . . . . . 42
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Section 12.4 Additional Documents . . . . . . . . . . . . . . . . 42
Section 12.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . 42
Section 12.6 Contract Modifications for Prospective Legal Events . 42
Section 12.7 Parties In Interest; No Third Party Beneficiaries . . 43
Section 12.8 Entire Agreement . . . . . . . . . . . . . . . . . . 43
Section 12.9 Severability . . . . . . . . . . . . . . . . . . . . 43
Section 12.10 Governing Law . . . . . . . . . . . . . . . . . . . . 43
Section 12.11 No Waiver; Remedies Cumulative . . . . . . . . . . . 43
Section 12.12 Communications . . . . . . . . . . . . . . . . . . . 43
Section 12.13 Captions . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.14 Gender and Number . . . . . . . . . . . . . . . . . . 44
Section 12.15 Reference to Agreement . . . . . . . . . . . . . . . 44
Section 12.16 Notice . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.17 [Intentionally omitted] . . . . . . . . . . . . . . . 45
Section 12.18 Counterparts . . . . . . . . . . . . . . . . . . . . 45
Section 12.19 Defined Terms . . . . . . . . . . . . . . . . . . . . 45
Section 12.20 Parent Obligations. . . . . . . . . . . . . . . . . . 45
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LIST OF EXHIBITS
Exhibit Description
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1.1 Allocation of Practice Expenses
3.3(a) Premises
7.1 Services Fee
7.4 Security Agreement
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SERVICE AGREEMENT
This Service Agreement (this "Agreement"), dated effective as of January
1, 1998, is entered into by and among American Physician Partners, Inc., a
Delaware corporation ("Parent"), Community Imaging Partners, Inc., a Delaware
corporation ("Administrator"), and Community Radiology Associates, Inc. a
Maryland professional corporation and Drs. Korsower and Pion Radiology , P.A.,
a Maryland professional association (collectively, the "Group").
R E C I T A L S:
A. The Group owns and operates a radiology medical practice in
Maryland and provides professional and technical radiology services to the
general public through individual physicians who are licensed to practice
medicine in the State of Maryland and who are employed or otherwise retained by
the Group.
B. Administrator is in the business of owning certain assets of
medical practices and providing management, administrative, and other non-
medical radiological support services to radiological and radiation oncology
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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"Acquisition" shall mean the acquisition described in the Acquisition
Agreement.
"Acquisition Agreement" shall mean the Asset Purchase Agreement dated
January 1, 1998, by and among Parent and the Group.
"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 as 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: (A) any legal, accounting or other
professional expenses incurred by Administrator, Parent or any of their
Affiliates including those in connection with the Acquisition, (B) 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 (C) all taxes of Administrator, Parent or any
Affiliate not incurred for the benefit 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).
"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.
"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.
"APPI 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.
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"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 or requires 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 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.
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"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.
"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, $.0001 par value per
share, of Parent.
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"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 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), on an accrual basis and without markup, 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.
"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 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 [solely - to be determined by APPM] for the Professional
Operations; (ii) direct costs of all employees of Administrator engaged to
provide services to improve performance of the Professional Operations; (iii)
leases for assets utilized for the benefit of the Professional Operations; (iv)
personal and property taxes assessed against Administrator's assets utilized
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[solely - to be determined by APPM] 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; (ix) any depreciation of assets to the extent used in connection
with the Professional Operations; and (x) other 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.
"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.
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"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 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;
(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; (ix) any depreciation of
assets to the extent used in connection with the Technical Operations; and (x)
other 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.
"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.
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"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
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. Administrator and the Group agree that the
Group shall retain the exclusive authority to direct the medical, professional,
and ethical aspects of its medical practice. Administrator shall neither
exercise control or direction over the medical methods, procedures or decisions
nor interfere with the physician-patient relationships of the Group, which
shall be maintained strictly between the physicians of the Group, Physician
Employees and/or Physician Extender Employees and their patients.
Section 2.2 Practice of Medicine. The parties hereto acknowledge that
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 that 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
parties hereby agree that 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 or any of its
Affiliates to any of the Group's patients in any facility controlled, managed
or operated by Administrator.
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 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.
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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 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. Except as
provided in Exhibit 3.2(a), 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.
(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:
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(A) to 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;
(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;
(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 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 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.
(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
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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 shall comply with all
applicable Managed Care Contracts and all applicable laws, rules and
regulations.
(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 account of Administrator and to use
such cash for purposes as Administrator deems appropriate, subject to and
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 contractual
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.
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(f) Obligations of Administrator. Administrator shall supply to the
Group all ordinary, necessary or appropriate services for the efficient
operation of the Practice, including without limitation, 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 Returns in excess of $2,500 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 shall be included in Excluded Practice Expenses unless
such audit discloses a material discrepancy, equal to or greater than ten
percent (10%) of the residual amount to which the Group is entitled following
application of the priority of payment set forth in Section 7.6 below in which
case the cost shall be an Administrator Expense.
(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 patient medical
records and 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 in the state of
Maryland (unless the Group shall consent to the transfer of such records to
another state, which consent shall not be unreasonably withheld) 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.
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.
(ii) The Practice's Business and Financial 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 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.
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(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
request and with reasonable advance notice, to obtain access (within not more
than 30 days following 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 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"). 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
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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 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
and shall not eliminate or diminish Administrator's obligations hereunder.
(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 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 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, and
any decision to make such affiliation or acquisition shall be subject to prior
approval of Administrator, which decision of the Administrator shall be
provided to the Group in a reasonable and timely manner following 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 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
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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,
the Group may seek from Administrator, and 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 Board of Directors of Parent or a committee
designated by such Board of Directors. For purposes of developing the initial
annual operating budget, the Joint Planning Board shall take into account the
categories of expenses determined by Administrator and 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 purposes of developing the annual
capital budget, the Joint Planning Board will include budgeted 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.
(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 either $50,000 individually or an
aggregate amount equivalent to $2,500 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 $100,000 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.
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(c) 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.
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. 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. If the Group is dissatisfied with the services of any such
personnel who provide services primarily for the Practice at the Premises, the
Group shall consult with Administrator, and Administrator shall in good faith
determine whether the performance of that employee could be brought to
acceptable levels through counsel and assistance, or whether such employee
should be considered for termination. If Administrator determines to retain
such employee and the Group is still dissatisfied with the services provided by
such employee after a reasonable period of time, Administrator shall either
relocate such employee or otherwise cease to utilize such employee in providing
services to the Practice hereunder. Administrator shall maintain established
working relationships wherever possible and Administrator shall make every
effort consistent with sound business practices to honor the specific requests
of the Group with regard to the assignment of Administrator's employees.
Section 3.7 Provider and Payor Relationships. 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 the Joint Planning Board,
be the 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
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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.]
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. In consultation with
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, laws and regulations.
Section 3.10 Quality Assurance. Subject to Article II, Administrator
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 or other events
over which Administrator has
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no control, Administrator shall not be liable to the Group for failure to
perform any of the services required hereunder 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.
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, 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 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; provided, however, that the preceding language shall not limit the
Group's obligation to participate in or comply with any programs established by
Administrator or Parent for purposes of ensuring that the Group complies with
applicable law. The Group shall employ Physician Employees and Physician
Extender Employees as is necessary to provide efficient medical care to
patients of the Practice.
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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 Administrator, 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 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 Group's facilities and at such outpatient
surgery centers, acute care hospitals and other facilities as the Group may
deem appropriate from time to time. 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 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
for review 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. Administrator agrees that the 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 Schedule 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, and shall use its
[reasonable] efforts 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 Practice's business. Without limiting the generality of the
foregoing, the Group shall comply and shall cause each Physician Employee,
Physician Extender
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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 not, and 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;
(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.
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 Administrator.
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Section 4.8 Premises and Personal Property. The Group shall use its
[reasonable] 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.
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 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
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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 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 collaborate with
Administrator on all annual capital and operating budgets prepared by
Administrator, as set forth in Section 3.5(b) and after the annual capital and
operating budgets have been approved as provided in Section 3.5(b), 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 of the services
performed by or for 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.
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(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.
(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 and such act of the Joint Planning Board includes the
approval by both of the members designated by Administrator, 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. Except as provided in the prior sentence, the Group and
Administrator hereby agree to be bound by the act of the Joint Planning Board
if such act was approved by the members holding at least a majority of the
voting power of the Joint Planning Board. No action of the Joint Planning
Board shall be effective unless 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 of the Joint Planning Board, present in person, by
telephone, or by proxy and the quorum must remain for the duration of the
meeting.
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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.
(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.
(iii) 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.
(iv) 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.
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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 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 APPI Group anywhere within 15
miles of any location at which any member of the APPI 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 APPI 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 APPI Group; (iii) directly
or indirectly solicit, or induce any party to solicit, any contractors of any
member of the APPI 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 APPI 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.
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(d) Administration's Obligations Regarding Proprietary Interest.
(i) Acknowledgement of Proprietary Interest. Administrator,
Parent or 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, 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 Administrator,
Parent or their Affiliates and their counsel, committing themselves to maintain
the Group's
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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, 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 Interest.
(i) Acknowledgement of Proprietary Interest. 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
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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 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 APPI 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 APPI
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,
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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.
Except as otherwise approved by the Joint Planning Board, each Group Physician
Stockholder or Full-time Physician Employee shall agree that 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
Administrator; 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, the
obligation of the Group to enforce Restrictive Covenants shall be limited to
enforcement of 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 or any other provision of the
Stockholder Employment Agreements 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
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recovered thereby. In the event the Purchase Assets are acquired by the Group
pursuant to Article X, the obligation of the Group to enforce Restrictive
Covenants shall be limited to enforcement of 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
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 Administrator in its sole and absolute discretion)
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 pursuant to
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
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Section 6.1(d),(e),(f) and (g) 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 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.
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.
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
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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 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 contractual 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 proviso in the preceding sentence);
(b) payment of the accrued Service Fee for the prior month;
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(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
Records
Section 8.1 Records. All records relating in any way to the operation
of the Practice (other than Group Records) shall, subject to the obligations of
the Practice to maintain patient medical records pursuant to Section 3.2(g), at
all times be the property of Administrator as set forth in Section 3.2(g).
During the term of this Agreement, and for a reasonable time thereafter, the
Group or its agents shall have reasonable access during normal business hours
to the Group's and Administrator's personnel and financial records relating to
the Practice, including, but not limited to, records of collections, expenses
and disbursements as kept by Administrator in performing Administrator's
obligations under this Agreement, and the Group may copy any or all such
records.
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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 jointly by Administrator and the Group with minimum legal
limits or such higher limits as shall be required under the 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
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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 cost, if any, associated therewith shall be a Practice Expense.
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), 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,
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 (other than in connection with
the activities of the Joint Planning Board), 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), 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,
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 (other than in connection with the
activities of the Joint Planning Board), 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.
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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 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.
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(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 11.6 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 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 or any
Physician Employee (1) fails 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)
engages in any conduct or is formally accused of conduct for which the Group's
ability or license, or a 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) is notified in writing of any
adverse action by any state or federal department or agency that has the effect
of either excluding that 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)
is otherwise disciplined by any licensing, regulatory or professional entity or
institution, the result of any of which event does or is reasonably expected to
materially adversely affect the Practice, 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
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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 11.6 hereof to cure such
violation.
(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 to respond to a reasonable proposal to extend the
term of such contract or (iv) voluntary closing of facilities by Administrator.
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 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,
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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.
(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
10.3(c), 10.4(b) or 10.4(c) and (ii) at any time in the event of a termination
pursuant to Section 10.4(a).
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(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 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.
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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
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, 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.
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ARTICLE XII
General Provisions
Section 12.1 Assignment.
Administrator shall have the right to assign its rights hereunder to
Parent or any direct or indirect 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 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.
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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 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.
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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.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx
with a copy to: Xxxxxx and Xxxxx, L.L.P.
0000 XxxxxxxXxxx Xxxxx
000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
If to the Group: Community Radiology Associates, Inc.
0000 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
Attn: Xxxxxx X. Xxxx, M.D.
with a copy to: Siskind, Grady, Xxxxx & Xxxxxx
Xxxxxxxxx Xxxxxxxx
Xxx Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
Attn: Xxxxx Xxxxx, Esq.
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Section 12.17 [Intentionally Omitted]
Section 12.18 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 12.19 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 12.20 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:
COMMUNITY RADIOLOGY ASSOCIATES, INC.
By: /s/ XXXXXX X. XXXX, M.D.
----------------------------------------
Xxxxxx X. Xxxx, M.D., President
DRS. KORSOWER AND PION RADIOLOGY, P.A.
By: /s/ XXXXXX X. XXXX, M.D.
----------------------------------------
Xxxxxx X. Xxxx, M.D., President
Administrator:
COMMUNITY IMAGING PARTNERS, INC.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxx, President
Parent:
AMERICAN PHYSICIAN PARTNERS, INC.
By: /s/ XXXXXXX X. XXXXXXX
----------------------------------------
Xxxxxxx X. Xxxxxxx, President
