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CONFIDENTIAL TREATMENT REQUESTED AS TO PORTIONS OF THIS DOCUMENT,
AND SUCH OMITTED INFORMATION HAS BEEN SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS IN THIS DOCUMENT
WHERE INFORMATION HAS BEEN OMITTED ARE MARKED WITH THE SYMBOL "[.]."
INTERIM SERVICE AGREEMENT
By and Between
PROMEDCO OF ABILENE, INC.
and
ABILENE DIAGNOSTIC CLINIC, P.L.L.C.
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Table of Contents
Page No.
INTERIM SERVICE AGREEMENT................................ 1
RECITALS................................................. 1
1 - RESPONSIBILITIES OF THE PARTIES...................... 1
1.1 General Responsibilities of the Parties............. 1
1.2 ADC's Matters....................................... 2
1.3 Patient Referrals................................... 2
2. POLICY COUNCIL........................................ 2
2.1 Formation and Operation of the Policy Council....... 2
2.2 Duties and Responsibilities of the Policy Council... 2
3. OBLIGATIONS OF PROMEDCO............................... 4
3.1 Management and Administration....................... 4
3.2 Administrator....................................... 7
3.3 Expansion of Clinic................................. 8
3.4 Events Excusing Performance......................... 8
3.5 Compliance With Applicable Laws..................... 8
4. OBLIGATIONS OF ADC................................... 8
4.1 Professional Services............................... 8
4.2 Employment Of Physician Employees................... 9
4.3 Non-Clinic Expenses................................. 9
4.4 Medical Practice.................................... 9
4.5 Professional Insurance Eligibility.................. 9
4.6 Employment Of Non-Physician Employees............... 9
4.7 Events Excusing Performance......................... 9
4.8 Compliance With Applicable Laws..................... 9
4.9 Restrictions on Use of Clinic Facility.............. 10
4.10 ADC Employee Benefit Plans.......................... 10
4.11 Physician Powers of Attorney........................ 10
4.12 Spokesperson........................................ 10
4.13 Delegation of ADC Responsibilities.................. 10
5. RECORDS............................................... 10
5.1 Patient Records..................................... 10
5.2 Other Records....................................... 11
5.3 Access to Records................................... 11
6. FACILITIES TO BE PROVIDED BY PROMEDCO................ 11
6.1 Facilities.......................................... 11
6.2 Use of Facilities................................... 11
7. FINANCIAL ARRANGEMENTS................................ 11
7.1 Payments to ProMedCo................................ 11
7.2 Clinic Expenses..................................... 11
7.3 Accounts Receivables................................ 12
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8. INSURANCE AND INDEMNITY.............................. 12
8.1 Insurance to Be Maintained by ProMedCo.............. 12
8.2 Insurance to be Maintained by ADC................... 12
8.3 Taff Insurance Coverage............................. 12
8.4 Additional Insured.................................. 12
8.5 Indemnification..................................... 13
9. RESTRICTIVE COVENANTS AND LIQUIDATED DAMAGES.......... 13
9.1 Restrictive Covenants by ADC........................ 13
9.2 Restrictive Covenants By Current Physician Members
and Physician Employees............................ 13
9.3 Restrictive Covenants By Future Physician
Employees.......................................... 14
9.4 Physician Shareholder and Physician Employee
Liquidated Damages................................. 14
9.5 Enforcement......................................... 14
9.6 Temination of Restrictive Covenants................. 15
10. TERM; RENEWAL; TERMINATION.......................... 15
10.1 Effect of Execution................................ 15
10.2 Term and Renewal................................... 15
10.3 Extension Period................................... 15
10.4 Termination by ADC................................. 15
10.5 Termination by ProMedCo............................ 16
10.6 Actions After Termination.......................... 16
I I - DEFINITIONS
11.1 Net Clinic Revenues................................ 17
11.2 Dignbution Funds................................... 17
11.3 ProMedCo Distribution.............................. 17
11.4 Clinic............................................. 17
11.5 Clinic Facility.................................... 17
11.6 Clinic Expenses.................................... 17
11.7 Clinic Expenses shall not include.................. 18
11.8 Risk Pool Surpluses................................ 19
11.9 Risk Pool Cost of Care............................. 19
11-10 Opening Balance Sheet.............................. 19
11-11 Technical Employees................................ 19
11.12 Physician Members.................................. 19
11.13 Physician Employees................................ 19
11.15 ADC Employees...................................... 19
11-16 Adjustments........................................ 19
12. GENERAL PROVISIONS.................................. 20
12.1 Independent Contractor............................. 20
12.2 Other Contractual Arrangement...................... 20
12.3 Proprietary property............................... 20
12.4 Cooperation........................................ 21
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12.5 Licenses, Permits and Certificates................. 21
12.6 Compliance with Rules, Regulations and Laws........ 21
12.7 Generally Accepted Accounting Principles (GAAP).... 21
12.8 Notices............................................ 21
12.9 Attorneys' Fees.................................... 21
12.10 Severability....................................... 22
12.11 Arbitration........................................ 22
12.12 Construction of Agreement.......................... 22
12.13 Assignment and Delegation.......................... 22
12.14 Confidentiality.................................... 22
12.15 Waiver............................................. 22
12.16 Headings........................................... 23
12.17 No Third Party Beneficiaries....................... 23
12.18 Time is of the Essence............................. 23
12.19 Modifications of Agreement for
Prospective Legal Events........................ 23
12.20 Whole Agreement; Modification...................... 23
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INTERIM SERVICE AGREEMENT
This Interim Service Agreement ("Agreement") dated as of January 19,
1996, between ProMedCo of Abilene, Inc., a Texas corporation ("ProMedCo") which
is an affiliate of ProMedCo, Inc., a Texas corporation ("Parent") and Abilene
Diagnostic Clinic, P.L.L.C., a Texas professional limited liability company
("ADC").
RECITALS:
WHEREAS, ADC is a multi-specialty group medical practice in Abilene,
Texas which provides professional medical care to the general public;
WHEREAS, ProMedCo is in the business of owning certain assets of and
managing and administering medical clinics, and providing non-professional
support services to and furnishing medical practices with the necessary
facilities, equipment, personnel, supplies and support staff;
WHEREAS, Abilene Diagnostic Clinic Associates, P.A. ("PA"), a Texas
professional association, has previously entered into that certain Practice
Management Agreement dated as of October 13, 1993, with Southwestern Health
Development Corporation (" SHDC ") and that certain Practice Management
Agreement dated the 20th day of June, 1994, with Abilene Medical Management
Services ("AMMS") (collectively the "Hospital Agreements") whereby SHDC and AMMS
provide certain clerical, medical records, billing and collection, receptionist,
transcription, and switchboard services to PA;
WHEREAS, ADC desires and intends to assume the Hospital Agreements and
to be bound by the terms of the Hospital Agreements and that ProMedCo intends to
enter into this Agreement subject to the Hospital Agreements and not to
interfere with the Hospital Agreements; and
WHEREAS, subject to the terms and conditions hereof, ADC desires to
engage ProMedCo to provide to ADC management services, facilities, personnel,
equipment and supplies necessary to operate the clinic (as defined herein) and
ProMedCo desires to accept such engagement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, ADC and ProMedCo hereby agree as follows:
1. RESPONSIBILITIES OF THE PARTIES
1.1 General Responsibilities of the Parties. ProMedCo shall provide ADC with
offices, facilities, equipment, supplies, non-professional support personnel,
and management and financial advisory services. ADC shall be responsible for the
recruitment and hiring of physicians, Technical Employees and all issues related
to patient care and documentation thereof.
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ProMedCo shall neither exercise control over nor interfere with the
physician-patient relationship, which shall be maintained strictly between the
physicians of ADC and their patients.
1.2 ADC's Matters. ADC shall maintain sole discretion and authority
over the financial matters relative to it's own professional limited liability
company. It shall set compensation levels for ADC Employees. ADC will also be
responsible for all other matters pertaining to the operation of ADC.
1.3 Patient Referrals. The parties agree that the benefits to ADC do
not require, are not payment 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 ProMedCo to any of ADC's patients in any facility or
laboratory controlled, managed or operated by ProMedCo.
2. POLICY COUNCIL
2.1 Formation and Operation of the Policy Council. A Policy Council
will be established which shall be responsible for the major policies which will
serve as the basis for operations of the clinic (the "Clinic"). The Policy
Council shall consist of eight (8) members. ProMedCo shall designate, at it's
sole discretion, four (4) members of the Policy Council. ADC at it's sole
discretion shall designate four (4) members. Members of the Policy Council shall
be entitled to attend and vote by proxy at any meetings of the Policy Council so
long as at least one such representative from each party is present in person.
Except as may otherwise be provided, the act of a majority of the members of the
Policy Council shall be the act of the Policy Council.
2.2 Duties and Responsibilities of the Policy Council. Subject to the
terms of the Hospital Agreements, the Policy Council shall have the following
duties and responsibilities:
2.2.1 Physician Hiring. The Policy Council, with information and
analysis provided by ProMedCo, shall determine the number and type of physicians
and Physician Extenders required for the efficient operation of the Clinic and
ADC shall determine the individual physicians to be hired to fill such
positions. The approval of the Policy Council shall be required for any
variations to the restrictive covenants in any physician employment contract.
2.2.2 Patient Fees. As a part of the annual operating budget,
in consultation with ADC and ProMedCo, the Policy Council shall review
and adopt the fee schedule for all physician and ancillary services
rendered by the Clinic.
2.2.3 Administrator. The selection, retention, and termination of the
Administrator pursuant to Section 3.1 shall be the responsibility of the Policy
Council. If either party is dissatisfied with the services provided by the
Administrator, it shall refer the matter to the Policy Council. The Policy
Council shall in good faith determine whether the performance of the
Administrator could be brought to acceptable levels through counsel and
assistance, or whether the Administrator should be terminated. The Policy
Council shall be responsible for approving and
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amending the Employment Agreement of the Administrator.
2.2.4 Ancillary Services. The Policy Council shall approve Clinic
provided ancillary services based upon the pricing, access to and quality
of such services.
2.2.5 Provider and Payor Relationships. The Policy Council shall have
responsibility regarding the establishment and maintenance of relationships with
institutional health care providers and payors. The Policy Council shall be
responsible for approving the allocation of capitation risk pools between the
professional and institutional components of these pools to the extent
applicable under a payor agreement. ProMedCo and ADC shall use actuarial data
from a nationally recognized actuarial firm as agreed to by both parties, for
the purposes of allocating capitation funds for those professional services
provided directly by ADC.
2.2.6 Capital Improvements and Expansion. The Policy Council shall
determine the priority for any renovation, expansion plans and major equipment
expenditures with respect to the Clinic based upon economic feasibility,
physician support, productivity and market conditions. Final authorization of
capital expenditures shall require the approval of ADC.
2.2.7 Annual Budgets. All annual capital and operating budgets prepared
by ProMedCo, as set forth in Section 3 and employing ProMedCo's financial
expertise, shall be subject to the review and approval of the Policy Council,
provided, however, ProMedCo shall have final approval of any capital required by
ProMedCo.
2.2.8 Strategic Planning. The Policy Council, with the assistance
of ProMedCo, shall develop long-term strategic planning objectives.
2.2.9 Exceptions to Inclusion in the Net Revenue Calculation. The
exclusion of any revenue from Net Revenue, including any medical director fees,
whether now or in the future, shall be subject to the approval of the Policy
Council.
2.2.10 Advertising. All advertising and marketing of the services
performed at the Clinic shall be subject to the prior review and approval of the
Policy Council, in compliance with applicable laws and regulations governing
professional advertising and in accordance with the standards and medical ethics
of the American Medical Association and the Texas Medical Association.
2.2.11 Grievance Issues. Subject to the provisions of Section 1.2 of
this Agreement, the Policy Council shall consider and make final decisions
regarding grievances pertaining to matters not specifically addressed in this
Agreement as referred to it by ADC or ProMedCo.
2.2.12 Amendment of Hospital Agreements. The Policy Council shall
approve any amendments to either of the Hospital Agreements.
3. OBLIGATIONS OF PROMEDCO
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Subject to the terms of the Hospital Agreements, during the term of
this Agreement, ProMedCo shall provide or arrange for the services set forth in
this Section 3, the cost of all of which shall be included in Clinic Expenses.
ProMedCo is hereby expressly authorized to perform its services in whatever
manner it deems reasonably appropriate, in accordance with policies approved by
the Policy Council, and including without limitation, performance of some
functions at locations other than the Clinic Facility. ADC will not act in a
manner which would prevent ProMedCo from efficiently managing the Clinic
Facility operations in accordance with the terms of this Agreement and the
policies of the Policy Council. ADC, through its ADC Employees, will provide all
medical services. ProMedCo will have no authority, directly or indirectly, to
perform, and will not perform any medical function. ProMedCo may, however,
advise ADC as to the relationship between its performance of medical functions
and the overall administrative and business functioning of the Clinic.
3.1 Management and Administration. Subject to the terms of the Hospital
Agreements, ADC hereby appoints ProMedCo as the sole and exclusive manager and
administrator of all non-medical functions and services related to ADC's
services at the Clinic. ADC shall perform all medical services, and ProMedCo
shall have no authority, directly or indirectly, to perform, and will not
perform any medical function. Without limiting the generality of the foregoing,
ProMedCo shall provide the following administrative, management and marketing
services as may be required in conjunction with ADC's services at the Clinic.
ProMedCo shall hire and supervise an Administrator, subject to the approval of
the Policy Council, to manage and administer all of the day-to-day business
functions of ProMedCo subject to the terms of the Hospital Agreements, including
without limitation:
3.1.1 Annual Budgets. Financial planning and preparation of annual
budgets. Annually and at least thirty (30) days prior to the commencement of
each fiscal year, ProMedCo shall prepare and deliver to ADC capital and
operating budgets reflecting in reasonable detail anticipated revenues and
expenses, sources and uses of capital for growth of ADC's practice and Clinic
services.
3.1.2 Financial Statements. ProMedCo shall prepare monthly and fiscal
year unaudited financial statements containing a balance sheet and a statement
of income for Clinic operations, which shall be delivered to ADC within thirty
(30) days after the close of each calendar month. The fiscal year statement
shall be reviewed by a certified public accountant as selected by ProMedCo in
connection with the audit of the financial statements of Parent. If ADC desires
an audit in addition to the audit provided by ProMedCo, such an audit would be
at ADC's expense.
3.1.3 Non-Physician Personnel. ProMedCo will provide all personnel
reasonably necessary for the conduct of Clinic operations with the exception of
Technical Employees. ProMedCo shall determine and cause to be paid the salaries,
fringe benefits and any sums for income taxes, unemployment insurance, social
security taxes or any other withholding amounts required by applicable law or
governmental authority, of all such personnel. Such personnel shall be under the
direction, supervision and control of ProMedCo, with those personnel performing
patient care
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services subject to the professional supervision of ADC. If ADC is dissatisfied
with the services of any person, ADC shall consult with ProMedCo. ProMedCo 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 terminated. All of ProMedCo's obligations regarding staff
shall be governed by the overriding principle and goal of providing high quality
medical care.
3.1.4 Quality and Utilization Management. ProMedCo will assist ADC in
fulfilling its obligation to its patients to maintain high quality and efficient
medical and professional services, including patient satisfaction programs,
employee education, outcomes analysis, utilization programs, clinical protocol
development and to implement a risk management program.
3.1.5 Facilities and Equipment. ProMedCo will ensure the
proper cleanliness of the premises, maintenance and cleanliness of the
equipment, furniture and furnishings located on the premises.
3.1.6 Inventory Control and Purchasing Supplies. ProMedCo shall order
and purchase inventory and supplies, and such other ordinary, necessary or
appropriate materials which are reasonably necessary to deliver quality Clinic
services in a cost effective manner.
3.1.7 Managed Care Contracting. ProMedCo will be responsible for
marketing, negotiation, and administering all managed care contracts, subject to
the provisions of Section 2.2.5; provided, however, no contract or arrangement
regarding the provision of Clinical services shall be entered into without ADC's
consent.
3.1.8 Billing and Collections. ProMedCo shall xxxx patients and collect
all fees for services performed inside or outside the Clinic Facility or arrange
for such billing and collection. ADC hereby appoints ProMedCo, for the term
hereof, to be its true and lawful attorney-in-fact for the following purposes
(i) to xxxx patients in ADC's name and on its behalf, (ii) to collect accounts
receivable resulting from such billing in ADC's name and on its behalf, (iii) to
receive payments from Blue Shield, Medicare, Medicaid, payments from health
plans, and all other third party payors; (iv) to receive the cash proceeds of
any accounts receivable subject to the Hospital Agreements; (v) to take
possession of and endorse in the name of ADC (and/or in the name of an
individual physician, such payment intended for purpose of payment of a
physician's xxxx) any notes, checks, money orders, insurance payments and other
instruments received in payment of accounts receivable; and (vi) in accordance
with policies adopted by the Policy Council, to initiate legal proceedings in
the name of ADC to collect any accounts and monies owed to the Clinic, to
enforce the rights of ADC as creditors under any contract or in connection with
the rendering of any service, and to contest Adjustments and denials by
governmental agencies (or its fiscal intermediaries) as third-party payors. All
adjustments made for uncollectible accounts, professional courtesies and other
activities that do not generate a collectible fee shall be done in a reasonable
and consistent manner.
3.1.9 Deposit of Net Clinic Revenues. During the term of
this
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Agreement, all Net Clinic Revenues collected resulting from the operations of
the Clinic shall be deposited directly into a bank account of which ADC shall be
the owner ("Account"). ProMedCo and ADC shall maintain their accounting records
in such a way as to clearly segregate Net Clinic Revenues from other funds of
ProMedCo or ADC. ADC hereby appoints ProMedCo as its true and lawful
attorney-in-fact to deposit in the Account all revenues collected. ADC
covenants, and shall cause all ADC Employees to covenant, to forward any
payments received with respect to Net Clinic Revenues for services provided by
ADC and ADC Employees to ProMedCo for deposit. ADC and ProMedCo hereby agree to
execute from time to time such documents and instructions as shall be required
by the bank maintaining the Account and mutually agreed upon to effectuate the
foregoing provisions and to extend or amend such documents and instructions.
3.1.10 Management information Systems/Computer Systems. ProMedCo shall
supervise and provide for information systems that are necessary and appropriate
for the operation of the Clinic as determined by the Policy Council.
3.1.11 Legal and Accounting Services. ProMedCo shall arrange for or
render to ADC such business, legal and financial management consultation and
advice as may be reasonably required or requested by ADC and directly related to
the operations of the Clinic. ProMedCo shall not be responsible for rendering
any legal or tax advice or services or personal financial services to ADC or any
employee or agent of ADC.
3.1.12 Insurance Products. ProMedCo shall negotiate for and cause
premiums to be paid with respect to the insurance which is necessary and
appropriate for the operation of the Clinic as determined by the Policy Council.
Premiums and deductibles with respect to such policies shall be a Clinic
Expense.
3.1.13 Physician Recruiting. ProMedCo shall assist ADC in recruiting
additional physicians, carrying out such administrative functions as may be
appropriate such as advertising for and identifying potential candidates,
checking credentials, and arranging interviews; provided, however, ADC shall
interview and make the ultimate decision as to the suitability of any physician
to become associated with the Clinic. All physicians recruited by ProMedCo and
accepted by ADC shall be the sole employees of ADC to the extent such physicians
are hired as employees. Any expenses incurred in the recruitment of physicians,
including, but not limited to, employment agency fees, relocation and
interviewing expenses shall be Clinic Expenses approved by the Policy Council.
3.1.14 Supervision of Ancillary Services. ProMedCo shall operate
and supervise such ancillary services as approved by the Policy Council.
3.1.15 Strategic Planning Assistance. ProMedCo shall assist with
and implement the strategic plan as approved by the Policy Council.
3.1.16 Advertising and Public Relations. ProMedCo shall
implement all advertising and public relations activities which are
approved by the Policy Council.
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3.1.17 Files and Records. ProMedCo shall supervise and maintain custody
of an files and records relating to the operation of the Clinic, including but
not limited to accounting, billing, patient medical records, and collection
records. Patient medical records shall at all times be and remain the property
of ADC and shall be located at Clinic facilities so that they are readily
accessible for patient care. The management of all files and records shall
comply with applicable state and federal statutes. ProMedCo shall use its
reasonable efforts to preserve the confidentiality of patients medical records
and use information contained in such records only for the limited purpose
necessary to perform the services set forth herein, provided, however, in no
event shall a breach of said confidentiality be deemed a default under this
Agreement.
3.1.18 Payments. ProMedCo shall make the payments required under
Section 7 "Financial Arrangements" of this Agreement.
3.2 Administrator. ProMedCo shall hire and employ the Administrator,
pursuant to the instructions of the Policy Council as described in Section
2.2.3.
3.3 Expansion of Clinic. ProMedCo will pursue various programs to
increase revenue and profitability including assisting ADC in adding additional
office based procedures, ancillary services and adding additional satellite
office(s) as determined by the Policy Council to be beneficial to the Clinic.
ProMedCo will also assist in recruiting new physicians and developing
relationships and affiliations with other physicians, hospitals, networks, HMOs,
etc. To assist in the continued growth and development of the Clinic, ProMedCo
may acquire other physician practices for integration into ADC as approved by
the Policy Council. ADC will cooperate with ProMedCo in such efforts and use its
best efforts to assist ProMedCo with respect thereto. Without limiting the
generality of the foregoing, ADC will not enter into any agreements with respect
to any such matter without the prior consent of ProMedCo. ProMedCo shall not
establish, operate, manage, or in any way own or operate any medical facility,
clinic, or other health care facility providing services within a radius of
twenty-five (25) miles of the Xxxxxx County Courthouse in Abilene, Texas, or
within a radius of twenty-five (25) miles of any current or future medical
office, clinic, or other health care facility from which ADC provides medical
services, without the consent of ADC.
3.4 Events Excusing Performance. ProMedCo shall not be liable to ADC
for failure to perform any of the services required herein in the event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies, or
other events over which ProMedCo has no control for so long as such events
continue, and for a reasonable amount of time thereafter.
3.5 Compliance With Applicable Laws. ProMedCo shall comply with
all applicable federal, state and local laws, regulations and
restrictions in the conduct of its obligations under this Agreement.
4. OBLIGATIONS OF ADC
4.1 Professional Services. ADC shall provide professional
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services to patients in compliance at all times with ethical standards, laws and
regulations applying to the medical profession. ADC shall also ensure that each
physician associated with ADC is licensed by the State of Texas. In the event
that any disciplinary actions or medical malpractice actions are initiated
against any such physician, ADC shall immediately inform the Administrator of
such action and the underlying facts and circumstances. ADC shall carry out a
program to monitor the quality of medical care practiced, with ProMedCo's
assistance. ADC will cooperate with ProMedCo in taking steps to resolve any
utilization or quality management issues which may arise in connection with the
Clinic. The costs of any such utilization or quality management programs shall
be a Clinic Expense.
4.2 Employment Of Physician Employees. ADC shall have complete control
of and responsibility for the hiring, compensation, supervision, evaluation and
termination of its Physician Members and Physician Employees, although at the
request of ADC, ProMedCo shall consult with ADC regarding such matters. ADC
shall enforce formal employee agreements from each of its Physician Members and
Physician Employees, hired or contracted, substantially in the form attached
hereto as Exhibit "C".
4.3 Non-Clinic Expenses. Non-Clinic Expenses shall include salaries and
benefits; retirement plan contributions; health, disability and life insurance
premiums; and payroll taxes of Physician Members, Physician Employees,'and those
Physician Extenders who are not under the direct supervision of a Physician
Member or Physician Employee.
4.4 Medical Practice. ADC shall use and occupy the Clinic
Facility exclusively for the practice of medicine, and shall comply with
all applicable local rules, ordinances and all standards of medical care.
It is expressly acknowledged by the parties that the medical practice or
practices conducted at the Clinic Facility shall be conducted solely by
physicians associated with ADC, and no other physician or medical
practitioner shall be permitted to use or occupy the Clinic Facility
without the prior written consent of the Policy Council.
4.5 Professional Insurance Eligibility. ADC shall cooperate in
the obtaining and retaining of professional liability insurance by
assuring that its Physician Members and Physician Employees are
insurable, and participating in an ongoing risk management program.
4.6 Employment Of Non-Physician Employees. There will be certain
Technical Employees that perform technical functions for ADC. These Technical
Employees will remain in the employ of ADC. As provided in Section 3.1.3.,
ProMedCo win provide payroll and administrative services for such Technical
Employees.
4.7 Events Excusing Performance. ADC shall not be liable to ProMedCo
for failure to perform any of the services required herein in the event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies, or
other events over which ADC has no control for so long as such events continue,
and for a reasonable amount of time thereafter.
4.8 Compliance With Applicable Laws. ADC shall comply with all
applicable federal, state and local laws, regulations and restrictions
13
in the conduct of its obligations under this Agreement.
4.9 Restrictions on Use of Clinic Facility. ADC shall at all times
during the term of this Agreement comply with the policy of ProMedCo stated in
Section 6 herein.
4.10 ADC Employee Benefit Plans.
(a) As of the Effective Date of this Agreement, ADC has in effect the
employee welfare benefit plans (as such term is defined in Section 3(l) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and the
employee pension benefit plans (as such term is defined in Section 3(2) of
ERISA), as set forth in Exhibit "D" to this Agreement.
(b) ADC shall not enter into any new "employee benefit plan" (as
defined in Section 3(3) of ERISA) without the express written consent of
ProMedCo. Except as otherwise required by law, ADC shall not materially amend,
freeze, terminate or merge any ADC Plan without the express written consent of
ProMedCo. ADC agrees to make such changes to ADC's Plan, including the freeze,
termination, or merger of such ADC Plan, as may be approved by ProMedCo.
(c) Expenses incurred in connection with any ADC Plan or other employee
benefit plan maintained by ADC, including without limitation the compensation of
counsel, accountants, corporate trustees and other agents shall be included in
Clinic Expenses.
(d) The contribution and administration expenses for Physician Members
and Physician Employees shall be an expense of ADC. ProMedCo shall make
contributions or payments with respect to any ADC Plan, as a Clinic Expense, on
behalf of eligible Technical Employees.
(e) ProMedCo shall have the sole and exclusive authority to adopt,
amend, or terminate any employee benefit plan for the benefit of its employees.
ProMedCo shall have the sole and exclusive authority to appoint the trustee,
custodian, and administrator of any such plan.
4.11 Physician Powers of Attorney. ADC shall require all ADC Employees
to execute and deliver to ProMedCo powers of attorney, satisfactory in form and
substance to ProMedCo and ADC, appointing ProMedCo as attorney-in-fact for each
for the purposes set forth in Sections 3.1.8 and 3.1.9, which powers of attorney
shall immediately terminate upon termination of this Agreement.
4.12 Spokesperson. ADC shall serve as spokesperson for ProMedCo, Parent
and Clinic regarding sales and development activities. The parties agree that
Drs. Arthur, Bailey, and Headstream, or such other Physician Members as the
Policy Council shall appoint, shall serve in this capacity on behalf of ADC.
4.13 Delegation of ADC Responsibilities. ADC shall delegate to
ProMedCo all duties and responsibilities it may have for the management
and administration of the Hospital Agreements, including, but not limited
to, those duties, powers, and responsibilities vested in ADC pursuant to
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the Hospital Agreements. ADC shall inform the Hospitals of this
delegation of responsibilities to ProMedCo and shall fully cooperate with
ProMedCo in effecting such delegation.
5.RECORDS
5.1 Patient Records. Upon termination of this Agreement, ADC shall
retain all patient medical records maintained by ADC or ProMedCo in the name of
ADC. ADC shall, at its option, be entitled to retain copies of financial and
accounting records relating to all services performed by ADC.
5.2 Other Records. All records relating in any way to the
operation of the Clinic shall at all times be the property of ADC. ProMedCo
shall be authorized to obtain copies of all records, other than patient records,
relating to the operation of ADC at any reasonable time during business hours.
5.3 Access to Records. During the term of this Agreement, and
thereafter, ADC or its accountant or other designee shall upon 24 hours notice
have reasonable access during normal business hours to ADC's and ProMedCo's
financial records, including, but not limited to, records of collections,
expenses and disbursements as kept by ProMedCo in performing ProMedCo's
obligations under this Agreement, and ADC may copy any or all such records.
6. FACILITIES TO BE PROVEDED BY PROMEDCO
6.1 Facilities. ProMedCo hereby agrees to provide or arrange as a
Clinic Expense the offices and facilities for Clinic operations, including but
not limited to, the Clinic Facility and all costs of repairs, maintenance and
improvements, utility (telephone, electric, gas, water) expenses, normal
janitorial services, related real or personal property lease cost payments and
expenses, taxes and insurance, refuse disposal and all other costs and expenses
reasonable incurred in conducting operations in the Clinic Facility during the
term of this Agreement.
6.2 Use of Facilities. Voluntary abortions will not be performed in
facilities that are owned or leased by ProMedCo or any of its affiliates in
whole or in part. ProMedCo and ADC agree that ADC, as an independent contractor,
is a separate organization that retains the authority to direct the medical,
professional, and ethical aspects of its medical practice. If a Physician Member
or a Physician Employee performs abortion procedures in any facility, ProMedCo
shall not receive any ProMedCo Distribution from the revenue generated from such
procedures.
7. FINANCIAL ARRANGEMENTS
7.1 Payments to ProMedCo. ADC and ProMedCo agree that the compensation
set forth herein is being paid to ProMedCo in consideration of a substantial
commitment made by ProMedCo hereunder and that such fees are fair and
reasonable. Upon execution of this Agreement, but in no event not later than the
Effective Date of this Agreement, ADC will pay ProMedCo an estimate of the
monthly amount of all Clinic Expenses paid
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in the first month of this Agreement. As payment for its services rendered to
ADC, each month beginning on the 15th day of the month following the Effective
Date of this Agreement ProMedCo shall be paid the amount of all Clinic Expenses
and the ProMedCo Distribution.
7.2 Clinic Expenses. Commencing on the Effective Date, ProMedCo shall
pay all Clinic Expenses as they fall due, provided, however, that ProMedCo may,
in the name of and on behalf of ADC, contest in good faith any claimed Clinic
Expenses as to which there is any dispute regarding the nature, existence or
validity of such claimed Clinic Expenses. ProMedCo hereby agrees to indemnify
and hold ADC harmless from and against any liability, loss, damages, claims,
causes of action and reasonable expenses of ADC resulting from the contest of
any Clinic Expenses. Any Clinic Expenses incurred and not paid by ADC prior to
the effective date of this Agreement, and not specifically included in the
estimate pursuant to Section 7.1 above and paid by ProMedCo, shall be reimbursed
to ProMedCo by ADC within 30 days of payment by ProMedCo.
7.3 Accounts Receivables. ADC shall pledge its accounts
receivable to ProMedCo as security for payment of the amounts due to
ProMedCo from ADC.
8. INSURANCE AND INDEMNITY
8.1 Insurance to Be Maintained by ProMedCo. Throughout the term of this
Agreement, ProMedCo will use reasonable efforts to provide and maintain, as a
Clinic Expense, all necessary insurance, including, but not limited to,
comprehensive professional liability insurance for all professional employees of
ProMedCo and ADC with limits as determined reasonable by ProMedCo in its
national program, comprehensive general liability insurance and property
insurance covering the Clinic Facility and operations.
8.2 Insurance to be Maintained by ADC. Unless otherwise determined by
the Policy Council, throughout the term of this Agreement, subject to the
provisions of Section 4.5 and Section 8. 1, ADC shall maintain comprehensive
professional liability insurance with limits of not less than $300,000 per claim
and with aggregate policy limits of not less than $600,000 per physician and a
separate limit for ADC. ADC shall be responsible for all liabilities (including
without limitation deductibles and excess liabilities) not paid within the
limits of such policies. ProMedCo shall have the option, with Policy Council
approval, of providing such professional liability insurance through an
alternative program, provided such program meets the requirements of the
Insurance Commissioner of the State of Texas.
8.3 Tail Insurance Coverage. Unless covered by an "occurrence"
malpractice policy, ADC will cause each individual physician associated with the
Clinic to enter into an agreement with ADC that upon termination of such
physician's relationship with ADC, for any reason, tail insurance coverage will
be purchased by the individual physician. Such provisions may be contained in
employment agreements, restrictive covenant agreements or other agreements
entered into by ADC and the individual physicians, and ADC hereby covenants with
ProMedCo to enforce such provisions relating to the tail insurance coverage or
to provide such
16
cover-age at the expense of ADC.
8.4 Additional Insured. ADC and ProMedCo agree to use their best
efforts to have each other named as an additional insured on the other's
respective professional liability insurance programs at ProMedCo's
expense.
8.5 Indemnification. ADC shall indemnify, hold harmless and defend
ProMedCo, its officers, directors and employees, from and against any and all
liability, loss, damage, claim, causes of action, and expenses (including
reasonable attorneys' fees), to the extent not covered by insurance, caused or
asserted to have been caused, directly or indirectly, by or as a result of (i)
the performance of medical services or any other acts or omissions by ADC and/or
its members, agents, employees and/or subcontractors (other than ProMedCo)
during the term hereof, including any claim against ProMedCo by an ADC Employee,
which claim arises out of such ADC Employees' employment relationship with ADC
or as a result of services performed by such ADC Employee, and which claim would
typically be covered by worker's compensation and (ii) any claims made by
Hospitals against ProMedCo because of ProMedCo's entering into and its
performance of the terms and conditions of this Agreement, including, but not
limited to, any and all liability, loss, damage, claim, causes of action, and
expenses (including reasonable attorneys' fees) for alleged breach of or
tortious interference with the Hospital Agreements. ProMedCo shall indemnify,
hold harmless and defend ADC, its officers, directors and employees, from and
against any and all liability, loss, damage, claim, causes of action, and
expenses (including reasonable attorneys' fees), to the extent not covered by
insurance, 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 ProMedCo and/or its members, agents, employees and/or
subcontractors (other than ADC) during the term of this Agreement, except for
any liability, loss, damage, claim, causes of action, and expenses which might
arise in connection with the Hospital Agreements.
9. RESTRICTIVE COVENANTS AND LIQUIDATED DAMAGES
The parties recognize that the services to be provided by ProMedCo
shall be feasible only if ADC operates an active medical practice to which the
physicians associated with ADC devote their full time and attention. To that
end:
9.1 Restrictive Covenants by ADC. During the term of this Agreement,
ADC shall not establish, operate or provide physician services at any medical
office, clinic or other health care facility providing services substantially
similar to those provided by ADC pursuant to this Agreement anywhere within a
radius of twenty-five (25) miles of the Xxxxxx County Courthouse in Abilene,
Texas, or within a radius of twenty-five (25) miles of any current or future
medical office, clinic or other health care facility from which ADC provides
medical services.
9.2 Restrictive Covenants By Current Physician Members and
Physician Employees. ADC shall enforce the employment agreements with its
current Physician Members and Physician Employees in a form satisfactory
to ProMedCo, pursuant to which the Physician Members and Physician
17
Employees agree not to establish, operate or provide physician services at any
medical office, clinic or outpatient and/or ambulatory treatment or diagnostic
facility providing services substantially similar to those provided by ADC
pursuant to this Agreement within a radius of twenty-five (25) miles of the
Xxxxxx County Courthouse in Abilene, Texas, or within a radius of twenty-five
(25) miles of any current or future medical office, clinic or other health care
facility from which ADC provides medical services, and for a period of
thirty-six (36) months after the first date of such Physician Shareholder's or
such Physician Employee's employment with ADC. ProMedCo shall have third-party
rights to enforce such agreements.
9.3 Restrictive Covenants By Future Physician Employees. ADC shall
obtain and enforce formal employment agreements from each of its future
Physician Members and Physician Employees in a form satisfactory to ProMedCo,
pursuant to which such physicians agree not to establish, operate or provide
physician services at any medical office, clinic or outpatient and/or ambulatory
treatment or diagnostic facility providing services substantially similar to
those provided by ADC pursuant to this Agreement within a radius of twenty-five
(25) miles of the Xxxxxx County Courthouse in Abilene, Texas, or within a radius
of twenty-five (25) miles of any current or future medical office, clinic or
other health care facility from which ADC provides medical services during the
term of said Physician Employee's employment with ADC and for a period of
thirty-six (36) months after the date of their first employment with ADC.
ProMedCo shall have third-party rights to enforce such agreements.
9.4 Physician Shareholder and Physician Employee Liquidated Damages.
The restrictive covenants described in Sections 9.2 and 9.3 of this Agreement
shall provide that the Physician Members and Physician Employees (existing or
future) may be released from their restrictive covenants by paying Liquidated
Damages in the amount of Two Hundred Thousand Dollars ($200,000.00) or such
physician's income from the practice of medicine, as reported to the Internal
Revenue Service for the previous twelve (12) months, whichever is less. The
accounting treatment of such funds shall be consistently applied and approved by
ProMedCo's independent certified public accountants and the Policy Council.
9.5 Enforcement. ProMedCo and ADC acknowledge and agree that since a
remedy at law for any breach or attempted breach of the provisions of this
Section 9 shall be inadequate, either party shall be entitled to specific
performance and injunctive or other equitable relief in case of any such breach
or attempted breach, in addition to whatever other remedies may exist by law.
All parties hereto also waive 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 Section 9 relating to 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 deemed to be reasonable and
enforceable by the court shall thereafter be the time period, scope of activity,
restricted and/or area of restriction applicable to the restrictive covenant
provisions in this Section 9. The invalidity of non-enforceability of this
Section 9 in any respect shall
18
not affect the validity of enforceability of the remainder of this Section 9 or
of any other provisions of this Agreement unless the invalid or non-enforceable
provisions materially affect the benefits either party would otherwise be
entitled to receive under this Section 9 or any other provision of this
Agreement.
9.6 Termination of Restrictive Covenants. Notwithstanding anything to
the contrary contained herein, if this Agreement is terminated, the rights of
ProMedCo under these restrictive covenants contained in this Section 9 shall be
null and void and of no force or effect.
10. TERM; RENEWAL; TERMINATION
10.1 Effect of Execution. By executing this Agreement, the parties
agree that the effective date of that certain Service Agreement (the "Service
Agreement") between ProMedCo and ADC executed on January 19, 1996, shall be the
later date of: (a) one year from the first day of the month following January
19, 1996; or (b) the first day of the month following the date of the initial
public offering ("IPO") of ProMedCo.
10.2 Term and Renewal. The term of this Agreement shall commence on
January 19, 1996 (the "Effective Date"), and shall continue until February 1,
1997. ProMedCo shall have the option, in its sole discretion, to extend this
Agreement for five (5) additional one (1) year periods. Upon the effective date
of that certain Service Agreement by and between ProMedCo and ADC, dated January
19, 1996 (the "Service Agreement") this Agreement shall terminate.
10.3 Extension Period. Upon the first extension of this Agreement,
ProMedCo shall be required to pay in cash the amount set forth on Exhibit E
extending this Agreement and the Effective Date of the Service Agreement, as
defined therein, shall be concurrently extended to the earlier of (i) the first
day of the month following the date of the initial public offering of Parent, or
(ii) four (4) years from the second anniversary of this Agreement. ADC shall
have the option to receive stock valued at $7 per share in lieu of the cash
amount set forth on Exhibit E, if any. Upon the second extension of this
Agreement, ProMedCo shall be required to pay in cash the amount set forth in
Exhibit E upon extending this Agreement and the Effective Date of the Service
Agreement, as defined therein, shall be concurrently extended to the earlier of
(i) the first day of the month following the date of the initial public offering
of Parent, or (ii) four (4) years from the second anniversary of this Agreement.
ADC shall have the option to receive stock valued at $7 per share in lieu of the
cash amount set forth on Exhibit E, if any.
10.4 Termination by ADC. ADC may terminate this Agreement as
follows:
10.4.1 In the event of the filing of a petition in voluntary bankruptcy
or an assignment for the benefit of creditors by ProMedCo, or upon other action
taken or suffered, voluntarily or involuntarily, under any federal or state law
for the benefit of debtors by ProMedCo, except for the filing of a petition in
involuntary bankruptcy against ProMedCo which is dismissed within 30 days
thereafter, ADC may give notice of the
19
immediate termination of this Agreement.
10.4.2 In the event ProMedCo shall materially default in the
performance of any duty or obligation imposed upon it by this Agreement and such
default shall continue for a period of 90 days after written notice thereof has
been given to ProMedCo by ADC; or ProMedCo shall fail to remit the payments due
as provided in Section 7 hereof and such failure to remit shall continue for a
period of 15 days after written notice thereof, ADC may terminate this
Agreement. Termination of this Agreement pursuant to this subsection (2) by ADC
shall require the affirmative vote of 75 % of the Physician Members.
10.4.3 In the event any person or persons (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) acquires or
acquires the right to vote, through acquisition, tender offer, proxy
solicitation, merger or consolidation, fifty percent (50%) or more of ProMedCo,
Inc. then issued and outstanding Common Stock, or securities representing fifty
percent (50 %) or more of the combined voting power of ProMedCo, Inc. then
issued and outstanding securities, then ADC shall have the option to terminate
this Agreement, provided however, that ADC must exercise this option within
thirty (30) days following this change in ownership. Termination of this
Agreement pursuant to this Section by ADC shall require the affirmative vote of
75 % of ADC's Physician Members.
10.4.4 In the event ProMedCo shall default on any of its payments due
under any agreement between ADC and ProMedCo, and such failure to remit shall
continue 15 days after notice thereof.
10.5 Termination by ProMedCo. ProMedCo may terminate this
Agreement as follows:
10.5.1 In the event of the filing of a petition in voluntary bankruptcy
or an assignment for the benefit of creditors by ADC, or upon other action taken
or suffered, voluntarily or involuntarily, under any federal or state law for
the benefit of debtors by ADC, except for the filing of a petition in
involuntary bankruptcy against ADC which is dismissed within 30 days thereafter,
ProMedCo may give notice of the immediate termination of this Agreement.
10.5.2 In the event ADC shall materially default in the performance of
any duty or obligation imposed upon it by this Agreement or in the event a
majority of the Physician Members shall materially default in the performance of
any duty or obligation imposed upon them by this Agreement or by their
employment agreements with ADC, and such default shall continue for a period of
90 days after written notice thereof has been given to ADC and such Physician
Members by ProMedCo, ProMedCo may terminate this Agreement.
10.6 Actions After Termination. In the event that this Agreement shall
be terminated, the ProMedCo Distribution shall be paid through the effective
date of termination. In addition, the various rights and remedies herein granted
to the aggrieved party shall be cumulative and in addition to any others such
party may be entitled to by law. The exercise of one or more rights or remedies
shall not impair the right of
20
the aggrieved party to exercise any other right or remedy, at law.
11. DEFINITIONS
For the purposes of this Agreement, the following definitions shall
apply:
11.1 Net Clinic Revenues shall mean ADC's gross xxxxxxxx, including
ancillaries and any other revenues that have historically been recorded by ADC,
less Adjustments and less any Risk Pool Surpluses.
11.2 Distribution Funds shall mean those amounts remaining after Clinic
Expenses have been deducted from Net Clinic Revenue.
11.3 ProMedCo Distribution shall mean 15% of Distribution Funds plus a
percentage of Risk Pool Surpluses established by Exhibit A.
11.4 Clinic shall mean the medical care services, including, but not
limited to the practice of medicine, and all related health care services
provided by ADC and the ADC Employees, utilizing the management services of
ProMedCo and the Clinic Facility, regardless of the location where such services
are rendered.
11.5 Clinic Facility shall mean the clinic facilities located at 0000
Xxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx and 0000 X. 00xx, Xxxxx 000, Xxxxxxx,
Xxxxx, and any substitute facility or additional facility location, whether
within or without Xxxxxx County, as approved by the
Policy Council.
11.6 Clinic Expenses shall mean the amount of all expenses incurred in
the operation of the Clinic including, without limitation:
11.6.1 Salaries, benefits (including contributions under any Parent
benefit plan), and other direct costs of all Technical Employees, Physician
Extenders who are under the direct supervision of Physician Members or Physician
Employees and all employees of ProMedCo and Technical Employees attributable to
ADC;
11.6.2 Direct costs, including benefits, of all employees or
consultants of Parent or affiliate of ProMedCo who, with approval of the Policy
Council, provides services at or in connection with ADC required for improved
performance, such as work management, purchasing, information systems, charge
and coding analysis, managed care sales, negotiating and contracting, financial
analysis, and business office consultation; provided, however, only that portion
of such employee's or consultant's costs without xxxx-up by Parent that is
allocable to Clinic will be a Clinic Expense;
11.6.3 Obligations of ProMedCo or Parent under leases or subleases
related to Clinic operations;
11.6.4 Interest Expense on indebtedness incurred by ProMedCo or
Parent to finance or refinance any of its obligations hereunder or
services provided hereunder;
21
11.6.5 Personal property and intangible taxes assessed against
ProMedCo's assets used in connection with the operation of Clinic commencing on
the date of this Agreement;
11.6.6 Malpractice insurance expenses for ProMedCo's operations
and for the ADC Employees, as well as any deductibles and non-insured
expenses relating to malpractice claims;
11.6.7 AR management fees paid under the Hospital Agreements;
11.6.8 AU expenses of providing equipment and supplies or performing
all management or other services listed in Section 3 "Obligations of ProMedCo, "
as well as any other expenses which are described as "Clinic Expenses" elsewhere
in this Agreement;
11.6.9 All professional fees, including, but not limited to, legal and
accounting fees attributable to the business of ADC.
11.6.10 Other expenses incurred by ProMedCo in carrying out its
obligations under this Agreement; including all usual and customary business
expenses of ADC, other than those defined in Section 4.3 above.
11.7 Clinic Expenses shall not include:
11.7.1 Corporate overhead charges or any other expenses of Parent or
any corporation affiliated with Parent other than the kind of items listed
above;
11.7.2 Any federal or state income taxes;
11.7.3 Those expenses defined in Section 4.3 of this Agreement;
11.7.4 Any liabilities, judgments, or settlements assessed
against ADC or Physician Members in excess of any insurance policy
limits; and
11.7.5 Expenses incurred specifically for the management of risk
pools.
11.8 Risk Pool Surpluses shall mean all hospital risk funds, specialist
risk funds, and funds from risk pools under any risk bearing or risk sharing
arrangement, after deduction of Risk Pool Cost of Care, and after making any
deductions for capitation or other risk pools that are in a deficit position.
11.9 Risk Pool Cost Of Care shall mean all claims, capitation payments,
and Incurred But Not Reported (IBNR) calculations charged against any risk pool
(defined as any hospital risk fund, specialist risk fund, and funds from risk
pools under any risk bearing or risk sharing arrangement). Risk Pool Cost Of
Care shall also include the expenses incurred specifically for the management of
risk pools.
11.10 Opening Balance Sheet shall mean the balance sheet of ProMedCo as
of the Effective Date prepared in accordance with GAAP
22
(except for the absence of certain note information), and substantially in the
form of the attached Exhibit B.
11.11 Technical Employees shall mean technicians who provide services
in the diagnostic areas of ADC's practice, such as employees of the Clinic
laboratory, radiology technicians and cardiology technicians.
AU Technical Employees shall be ADC employees.
11.12 Physician Members shall mean any physician who is a member of
ADC, both as of the, date of this Agreement and at any future point in time.
11.13 Physician Employees shall mean any physician employed by ADC and
providing medical services to patients on behalf of ADC, who are not Physician
Members.
11.14 Physician Extenders shall mean all nonphysician professional
employees who provide direct patient care for which a billed charge is
generated.
11.15 ADC Employees shall mean all Physician Members, Physician
Employees and Technical Employees at the relevant date.
11.16 Adjustments "adjustments" shall mean any Adjustments to ADC's
gross xxxxxxxx for uncollectible accounts, discounts, Medicare and Medicaid
disallowances, workers' compensation discount, employee/ dependent health care
benefit programs, professional courtesies, and other activities that do not
generate a collectible fee. Any Adjustments made shall be based on a reasonable
historical basis, or a reasonable prospective basis should a new payor agreement
apply, and shall be periodically modified during the year to reflect the actual
Adjustments. Final Adjustments and any resulting payments owed by one party to
the other shall be made within (30) days after completion of the fiscal year
audit.
12. GENERAL PROVISIONS
12.1 Independent Contractor. It is acknowledged and agreed that ADC and
ProMedCo are at all times acting and performing hereunder as independent
contractors. ProMedCo shall neither have nor exercise any control or direction
over the methods by which ADC or the ADC Employees practice medicine. The sole
function of ProMedCo hereunder is to provide all management services in a
competent, efficient and satisfactory manner. ProMedCo shall not, by entering
into and performing its obligations under this Agreement, become liable for any
of the existing obligations, liabilities or debts of ADC unless otherwise
specifically provided for under the terms of this Agreement. ADC shall not, by
entering into and performing its obligations under this Agreement, become liable
for any of the existing obligations, liabilities, or debts of ProMedCo unless
otherwise specifically provided for under the terms of this Agreement. ProMedCo
will in its management role have only an obligation to exercise reasonable care
in the performance of the management services. Neither party shall have any
liability whatsoever for damages suffered on account of the willful misconduct
or negligence of any employee, agent or independent contractor of the other
party.
23
Each party shall be solely responsible for compliance with all state and federal
laws pertaining to employment taxes, income withholding, unemployment
compensation contributions and other employment related statutes regarding their
respective employees, agents and servants.
12.2 Other Contractual Arrangement. The parties acknowledge and agree
that they have been advised and consent to the fact that ProMedCo, or it's
affiliates (i) may have, prior to the date of this Agreement, discussed
proposals with respect to, or (ii) may, from time to time hereafter, enter into
agreements with one or more ADC Employees to provide consulting, medical
direction, advisory or similar services relating to activities of ProMedCo or
its affiliates in clinical areas. The parties agree that such agreement, if any,
shall be entered into at the sole discretion of the parties thereto and subject
to such terms and conditions to which such parties may agree, and any
compensation payable to or by ProMedCo, on the one hand, and such ADC Employees,
on the other hand, shall not constitute Net Clinic Revenues, or ADC
Compensation, and shall otherwise not be subject to the provisions of this
Agreement.
12.3 Proprietary Property.
12.3.1 Each party agrees that the other party's proprietary property
shall not be possessed, used or disclosed otherwise than may be necessary for
the performance of this Agreement. Each party acknowledges that its violation of
this Agreement would cause the other party irreparable harm, and may (without
limiting the other party's remedies for such breach) be enjoined at the instance
of the other party. Each party agrees that upon termination of this Agreement
for any reason, absent the prior written consent of the other party, it shall
have no right to and shall cease all use of the other party's proprietary
property, and shall return all such proprietary property of the other party in
its possession to the other party.
12.3.2 ProMedCo shall be the sole owner and holder of all right, title
and interest, to all intellectual property furnished by it under this Agreement,
including all computer software, copyright, services xxxx and trademark right to
any material or documents acquired, prepared, purchased or furnished by ProMedCo
pursuant to this Agreement. ADC shall have no right, title or interest in or to
such material and shall not, in any manner, distribute or use the same without
the prior written authorization of ProMedCo, provided, however, that the
foregoing shall not restrict ADC fi-om distributing managed care information
brochures and materials without the prior written approval of ProMedCo provided
no Proprietary Property of ProMedCo is contained therein.
12.4 Cooperation. Each of the parties shall cooperate fully with the
other in connection with the performance of their respective duties and
obligations under this Agreement.
12.5 Licenses, Permits and Certificates. ProMedCo and ADC shall each
obtain and maintain in effect, during the term of this Agreement, all licenses,
permits and certificates required by law which are applicable to their
respective performance pursuant to this Agreement.
12.6 Compliance with Rules, Regulations and Laws. ProMedCo and ADC
24
shall comply with all federal and state laws and regulations in performance of
their duties and obligations hereunder. Neither party, nor their employees or
agents, shall take any action that would jeopardize the other party's
participation, if applicable, in any federal or state health program including
Medicare and Medicaid. ProMedCo and ADC shall take particular care to ensure
that no employee or agent of either party takes any action intended to violate
Section 1128B of the Social Security Act with respect to soliciting, receiving,
offering or paying any remuneration (including any kickback, bribe, or rebate)
directly or indirectly, overtly or covertly, in cash or in kind 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 under Title XVIII or XIX of the Social Security Act, or for purchasing,
leasing, 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 under Title XVIII or XIX of the Social Security Act.
12.7 Generally Accepted Accounting Principles (GAAP). All financial
statements and calculations contemplated by this Agreement will be prepared or
made in accordance with generally accepted accounting principles consistently
applied unless the parties agree otherwise in writing.
12.8 Notices. Any notices required or permitted to be given hereunder
by either party to the other may be given by personal delivery in writing or by
registered or certified mail, postage prepaid, with return receipt requested.
Notices shall be addressed to the parties at the addresses appearing on the
signature page of the Agreement, but each party may change such party's address
by written notice given in accordance with this Section. Notices delivered
personally will be deemed communicated as of actual receipt; mailed notices will
be deemed communicated as of three days after mailing.
12.9 Attomeys' Fees. ProMedCo and ADC agree that the prevailing
party in any legal dispute among the parties hereto shall be entitled to
payment of its attorneys' fees by the other party.
12.10 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction or applicable state or federal law and their
implementing regulations to be invalid, void or unenforceable, the remaining
provisions will nevertheless continue in full force and effect.
12.11 Arbitration. Any controversy or claim arising out of or relating
to this Agreement or the breach thereof will be settled by binding arbitration
in accordance with the rules of commercial arbitration of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Such
arbitration shall occur within the County of Xxxxxx, State of Texas, unless the
parties mutually agree to have such proceedings in some other locale. The
arbitrator(s) may in any such proceeding award attorneys' fees and costs to the
prevailing party.
12.12 Construction of Agreement. This Agreement shall be
25
governed by and construed in accordance with the laws of the State of Texas. The
parties agree that the terms and provisions of this Agreement embody their
mutual interest and agreement and that they are not to be construed more
liberally in favor of, nor more strictly against, any party hereto.
12.13 Assignment and Delegation. ProMedCo shall have the right to
assign its rights hereunder to any person, firm or corporation controlling,
controller by or under common control with ProMedCo and to any lending
institution, for security purposes or as collateral, from which ProMedCo or the
Parent obtains financing for itself and as agent. Except as set forth above,
ProMedCo shall not have the right to assign its rights and obligations hereunder
without the written consent of ADC. ADC shall have the obligation hereunder to
assign this Agreement to a successor entity, provided ProMedCo shall have given
its prior written consent to such assignment. Except as forth above, ADC shall
not have the right to assign its rights and obligations hereunder without the
written consent of ProMedCo. ADC may not delegate any of ADC's duties hereunder,
except as expressly contemplated herein; however, ProMedCo may delegate some of
all of ProMedCo's duties hereunder to the extent it concludes, in its sole
discretion, that such delegation is in the mutual interest of the parties
hereto.
12.14 Confidentiality. The terms of this Agreement and in particular
the provisions regarding compensation, are confidential and shall not be
disclosed except as necessary to the performance of this Agreement or as
required by law.
12.15 Waiver. The waiver of any provision, or of the breach of any
provision of this Agreement must be set forth specifically in writing and signed
by the waiving party. Any such waiver shall not operate or be deemed to be a
waiver of any prior or future breach of such provision or of any other
provision.
12.16 Headings. The subject headings of the articles and sections of
this Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.
12.17 No Third Party Beneficiaries. Nothing in this Agreement, express
or implied, is intended or shall be construed to confer upon any person, firm or
corporation other than the parties hereto and their respective successors or
assigns, any remedy or claim under or by reason of this Agreement or any term,
covenant or condition hereof, as third party beneficiaries or otherwise, and all
of the terms, covenants and conditions hereof shall be for the sole and
exclusive benefit of the parties hereto and their successors and assigns.
12.18 Time is of the Essence. Time is hereby expressly declared to
be of the essence in this Agreement.
12.19 Modifications of Agreement for Prospective Legal Events.
In the event any state or federal laws or regulations, now existing or
enacted or promulgated after the effective date of this Agreement, are
interpreted by judicial decision, a regulatory agency or legal counsel
26
for both parties in such a manner as to indicate that the structure of this
Agreement may be in violation of such laws or regulations, or in the event the
Texas State Board of Medical Examiners or other authority with legal
jurisdiction shall, solely by virtue of this Agreement, initiate an action to
revoke, suspend, or restrict the license of any physician retained by ADC to
practice medicine in the State of Texas, ADC and ProMedCo shall amend this
Agreement as necessary. To the maximum extent possible, any such amendment shall
preserve the underlying economic and financial arrangements between ADC and
ProMedCo. In the event it is not possible to amend this Agreement to preserve in
all material respects the underlying economic and financial arrangements between
ADC and ProMedCo, this Agreement may be terminated by written notice by either
party within 90 days from date of such interpretation or action, termination to
be effective no sooner than the earlier of 180 days from the date notice of
termination is given or the latest possible date specified for such termination
in any regulatory order or notice. Termination pursuant to this Section 12.19 by
ADC shall require the affirmative vote of a majority of Physician Members.
12.20 Whole Agreement; Modification. A contract in which the amount
involved exceeds $50,000 in value is not enforceable unless the Agreement is in
writing and signed by the party to be bound or by that part's authorized
representative. The rights and obligations of the parties hereto shall be
determined solely from written agreements. Documents and instruments, and any
prior oral agreements between the parties are superseded by and merged into such
writings. This Agreement (As amended in writing from time to time), the
exhibits, and the schedules delivered pursuant hereto represent the final
agreement between the parties hereto and may not be contradicted by; evidence of
prior, contemporaneous, or subsequent oral agreements by the parties. There are
no unwritten oral agreements between the parties. This paragraph is included
herein pursuant to Section 26.02 of the Texas Business and Commerce Code, as
amended from time to time.
IN WITNESS WBEREOF, the parties hereto have executed this Agreement as of the
date and year first above written,
PROMEEDCO OF ABILENE, INC.,
Address: 000 Xxxxxx Xxxxxx - Xxxxx 0000 Xxxx Xxxxx, Xxxxx 00000
ABILENE DIAGNOSTIC CLINIC, P.L.L.C.
By:
Name:
Title:
Address:
27
0000 Xxxxxxxx Xxxx - Xxxxx 000
Xxxxxxx, Xxxxx 00000
28
Allocation of Risk Pool Surpluses
ProMedCo shall receive a percentage of the Risk Pool Surpluses, or
shall be responsible for a percentage of any deficits if the Risk Pool Surpluses
are in a deficit position pursuant to Section 11.9. ProMedCo's percentage shall
be based on the cumulative risk pool savings that have occurred during the
entire term of this Agreement, including any renewals. The percentage shall be
based on the graduated scale as shown below:
Cumulative Risk Pool Surplus ProMedCo %
[*]
The distribution of Risk Pool Surpluses shall be made on an annual
basis no later than 90 days after the conclusion of each contract year of this
Agreement, and after a full analysis of an Incurred But Not Reported (IBNR)
liabilities. Once the final balance of Risk Pool Surpluses has been calculated,
[*]% of that amount shall be distributed, with the final [*]% held for
an additional 6 months to pay for any unanticipated claims. At the end of
that 6 months, any funds remaining from the [*]% reserved shall be distributed.
CERFTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATIONS ON
THIS PAGE WHERE INFORMATION HAS BEEN OMITTED ARE MARKED WITH THE SYMBOL
"[*]."
29
Qpening Balance Sheet
Current Assets
Cash
Accounts Receivable
Prepaid
Other Current Assets
Total Current Assets
Other Assets
Investments
Deposits
Other Assets
Total Other Assets
Property and Equipment
Land
Buildings
Building Fixed Equipment
Equipment
Capitalized Lease Equipment
Accrued Depreciation
Total Property and Equipment
Intangibles
Organization Cost
Loan Cost
Non-Compete Covenants
Other Intangibles
Total Intangibles
TOTAL ASSETS
Current Liabilities
Accounts Payable
Notes Payable
Payroll & Taxes Payable
Accrued Expenses
Accrued Interest
Current Maturities- Leases
Current Maturities - Notes
Other Current Liabilities
Total Current Liabilities
Other Liabilities
Deficit in Limited Liability Company
Deferred Credits
Total Other Liabilities
30
Long Term Payables Mortgages
Notes Payable
Lease Obligations
Total Long Term Payables
Members Capital Account
Contributed Capital
Accumulated Income or Deficit
Total Members Equity
TOTAL LIABILITIES AND CAPITAL ACCOUNT
