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EXHIBIT 10.49
MANAGEMENT SERVICES AGREEMENT
This Agreement is entered into as of the day of , 2001, by and between
________________ HEART HOSPITAL, LLC, a North Carolina limited liability company
(the "Owner") and ___________ HOSPITAL MANAGEMENT, INC., a North Carolina
corporation ("__HMI"), both parties hereinafter collectively referred to as the
"Parties."
RECITALS:
WHEREAS, Owner desires to obtain the Contract Management Services
(defined below) of __HMI to manage its hospital specializing in the diagnosis
and treatment of cardiovascular disease and cardiovascular and vascular surgery
in the greater __________, __________ area (the "Hospital");
WHEREAS, affiliates of __HMI, including __HMI's sole shareholder
MedCath Incorporated ("MedCath"), have a substantial amount of experience and
expertise in developing and operating hospitals similar to the Hospital as a
result of their development and operations of heart hospitals throughout the
United States;
WHEREAS, Owner and __HMI mutually desire that such Contract Management
Services be made available to Owner.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Parties agree as follows:
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DEFINITIONS
1.1 ACT.
The term "Act" shall mean the North Carolina Limited Liability Company
Act, as in effect in North Carolina and set forth at N.C. Gen.
Stat. xx.xx. 57C-1-01 through 57C-10-07, as amended.
1.2 AGREEMENT.
The term "Agreement" shall mean this Management Services Agreement and
any amendment thereto as may be from time to time adopted in writing as
hereinafter provided.
1.3 AT OWNER'S EXPENSE.
The term "At Owner's Expense" shall mean an expense incurred by __HMI
on behalf of Owner either pursuant to an approved budget or as otherwise
authorized herein.
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1.4 BOARD OF DIRECTORS.
The term "Board of Directors" means and shall refer to the Board of
Directors designated pursuant to the Operating Agreement of Owner (the
"Operating Agreement").
1.5 CONTRACT MANAGEMENT SERVICES.
The term "Contract Management Services" shall mean the services which
are authorized to be furnished by __HMI under this Agreement. The term "Contract
Management Services" shall not mean or be construed to include physician
services. It is hereby acknowledged that Contract Management Services shall be
provided to the Owner hereunder by __HMI and its Affiliates (such terms and
other capitalized terms not defined herein shall have the same meaning as set
forth in the Operating Agreement).
1.6 EQUIPMENT.
The term "Equipment" shall mean the appropriate equipment and supplies
acquired in connection with the development and operation of the Hospital.
1.7 GAAP.
The term "GAAP" or "Generally Accepted Accounting Principles" shall
mean the accounting and financial reporting principles as promulgated from time
to time by the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board.
1.8 HOSPITAL POLICIES.
The term "Hospital Policies" shall mean and include the Operating
Agreement, the written policies of Owner and other reasonable policies and
procedures of the Hospital, all as are from time to time adopted, revised,
authorized or approved by the Board of Directors and communicated in writing by
Owner to __HMI.
1.9 MEDCATH.
The term MedCath shall mean MedCath Incorporated, the sole shareholder
of __HMI.
1.10 OWNER.
The term "Owner" shall mean _________ Heart Hospital, LLC, a North
Carolina limited liability company.
1.11 PERSONNEL.
The term "Personnel" shall mean all persons (including supervisors,
nurses, technicians, support personnel and other individuals) hired pursuant to
this Agreement by __HMI as employees of Owner to furnish services to Owner, each
of which persons must hold such
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currently valid licenses, certifications and/or registrations as may be required
by local, State or federal laws or authorities (including the Medicare and
Medicaid programs) for the operation of the Hospital. Except as provided herein,
all Personnel shall be on the payroll of Hospital and Hospital shall bear all
salary and employee benefits expenses for such personnel. The term "Employee
Benefits" shall include (as applicable) the employer's contribution to F.I.C.A.,
unemployment compensation and other employment taxes, all bonuses, pension or
profit sharing plan contributions, worker's compensation, group life, accident
and health insurance premiums, disability and other benefits when applicable.
1.12 STATE.
The term "State" shall mean the State of __________.
1.13 TERM.
The term "Term" shall mean the contract period provided for under this
Agreement.
II
APPOINTMENT AND AUTHORITY
2.1 APPOINTMENT OF __HMI.
Owner hereby retains __HMI and __HMI hereby accepts such retention to
provide Contract Management Services.
2.2 AUTHORITY OF __HMI.
The Board of Directors hereby delegates to __HMI the authority to
manage the Hospital as set forth below, subject, however, in all cases to the
authority and approval of the Board of Directors as set forth in the Operating
Agreement, which provides that the Board of Directors shall be responsible for
making all Material Decisions and approving all Material Agreements (as defined
in the Operating Agreement).
Subject to the terms and conditions of this Agreement, __HMI shall have
the exclusive right and commensurate authority, express or implied, to provide
Contract Management Services to the Owner, which shall also include, subject to
the terms and conditions of this Agreement and the Operating Agreement, all
services and actions which __HMI determines to be reasonably necessary or
appropriate for the development and operation of the Hospital. The Parties
acknowledge and agree that individual physicians who treat patients at the
Hospital (the "Physicians"), shall have complete freedom and control over the
provision of all professional medical services and the charges for their
services, subject only to the Medical Staff Bylaws and Rules and Regulations of
the Hospital. The Parties expressly agree and acknowledge that: (i) performance
of this Agreement shall not require or permit __HMI to become engaged in the
practice of medicine, nursing or other medical services whatsoever; (ii) this
Agreement shall not interfere with or inhibit the private physician-patient
relationship between the Physicians and
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their patients; and (iii) this Agreement shall not require nor permit any
illegal or unethical division of physician's fees.
Subject in all cases to the foregoing and to the other terms and
conditions of this Agreement, __HMI shall have the right and the power, if, as,
and when it, from time to time, deems necessary or appropriate on behalf of the
Owner and the Hospital:
(a) To negotiate and execute on behalf of the Owner all
documents, instruments and agreements reasonably necessary or
appropriate to lease or acquire for fair market value, as approved by
both Members, the real property located near the site on which the
Hospital will be located, and to borrow funds to finance such
acquisition and/or construction (it being acknowledged that the
Hospital will partially consist of a newly constructed building);
(b) To prepare a budget for the development of the Hospital
and thereafter, annual operating budgets;
(c) To acquire in the name of the Owner the Equipment, as
approved by the Board of Directors or as further described at Section
3.4 below, and enter into loans or other financing arrangements
therefor;
(d) To handle the negotiation and execution of all such other
agreements regarding the purchase of goods or services for the
Hospital;
(e) To establish procedures for quality assurance, peer review
and granting privileges to physicians with other specialties at the
Hospital, subject to the terms of the Hospital and Medical Staff Bylaws
approved by the Board of Directors and adopted for the Hospital;
(f) To expend all or portions of the Owner's capital and
income in furtherance of or relating to the Owner's business and
purposes in accordance with the budget established for Hospital and
other reasonable cash management guidelines reasonably established by
the Board of Directors in accordance with the terms of the Operating
Agreement, including, but not limited to, payment of all ongoing
operational expenses, payment of commissions, organization expenses,
professional fees, rental fees, and operating and licensing fees and
development fees, and to invest in short-term debt obligations
(including, but not limited to, obligations of federal and State
governments and their agencies, commercial paper, and certificates of
deposit of commercial banks, or savings banks or savings and loan
associations) such of the Owner's funds as are temporarily not required
for the development or operation of the Owner and the payment of Owner
obligations;
(g) To employ or retain on such terms and for such
compensation as __HMI may reasonably determine, such persons, firms, or
corporations as __HMI may deem advisable, including without limitation
qualified medical and other employees necessary
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or appropriate to operate the Hospital, attorneys, accountants,
financial and technical consultants, supervisory managing agents,
insurance brokers, brokers and loan brokers, appraisers, architects and
engineers, who may also provide such services to __HMI, provided that
the selection of the President of the Hospital shall be a Material
Decision (as defined in the Operating Agreement) to be made by the
Board of Directors;
(h) To execute leases, deeds, contracts, rental agreements,
construction contracts, sales agreements, and management contracts;
(i) To exercise all rights, powers, and privileges of the
Owner as lessee with respect to the Hospital or rights held by the
Owner;
(j) To consent to the modification, renewal, or extension of
any obligations to the Owner of any Person or of any agreement to which
the Owner is a party or of which it is a beneficiary;
(k) To execute in furtherance of any or all of the purposes of
the Owner, any deed, lease, deed of trust, security interest, mortgage,
promissory note, xxxx of sale, assignment, contract, or other
instrument or to encumber in whole or in part the Equipment or the
Hospital or other real or personal property of the Owner for the
purpose and reasons approved by the Board of Directors;
(l) To prepay in whole or in part, refinance, recast,
increase, modify, or extend any security interest, deed of trust, or
mortgage affecting the Hospital and in connection therewith to execute
any extensions or renewals thereof on the Hospital and to grant
security interests in any of the Equipment or the Hospital;
(m) To adjust, compromise, settle, or refer to arbitration any
claim against or in favor of the Owner, and to institute, prosecute,
and defend any actions or proceedings relating to the Owner, its
business, and properties provided, however, that __HMI will consult
with the Board of Directors regarding such claims;
(n) To acquire and enter into any contract of insurance which
__HMI deems necessary or appropriate for the protection of the Owner
and __HMI, for the conservation of the Owner or its assets, or for any
purpose beneficial to the Owner; however, neither __HMI nor its
Affiliates shall be compensated for providing insurance brokerage
services relating to obtaining such insurance;
(o) To prepare or cause to be prepared reports, statements,
and other relevant information for distribution to the Members,
including annual reports;
(p) To open accounts and deposit and maintain funds in the
name of the Owner in banks or savings and loan associations; provided,
however, that the Owner's funds shall not be commingled with the funds
of any other Person;
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(q) To cause the Owner to make or revoke any of the elections
referred to in Section 754 of the Internal Revenue Code of 1986 as
amended or any similar provisions enacted in lieu thereof;
(r) To make all decisions related to generally accepted
principles of accounting to be applied on a consistent basis and
federal income tax elections;
(s) To possess and exercise, subject to the restrictions
contained in this Agreement, any and all of the rights, powers and
privileges of a manager under the Act;
(t) To modify or otherwise improve the Hospital, subject to
the restrictions contained in this Agreement or in the Operating
Agreement;
(u) To manage, direct, and guide the operation of the
Hospital, including all necessary acts relating thereto, other than
medical or clinical matters which shall be under the direction of the
Medical Director (as defined in the Operating Agreement) and other
agreed upon qualified medical personnel;
(v) To establish minimum insurance requirements for all
physicians practicing at the Hospital;
(w) To file and publish all certificates, statements, or other
instruments required by law for the formation and operation of the
Owner as a limited liability company in all appropriate jurisdictions;
(x) To cause the Owner to obtain and keep in force during the
term of the Owner fire and extended coverage and public liability and
professional liability insurance with such issuers and in such amounts
as __HMI shall deem advisable, but in amounts not less (and deductible
amounts not greater) than those customarily maintained with respect to
the business equipment and property comparable to the Owner's;
(y) To deliver to the Secretary of State of North Carolina for
filing an annual statement in accordance with the Act and make any
similar filings required under __________ law.
(z) To cause tax returns (income tax, sales tax, etc.) for the
Owner to be prepared, at Owner expense, and timely filed with the
appropriate authorities. As soon as is reasonably practicable, and in
any event on or before the expiration of 75 days following the end of
each Fiscal Year, each Member (as defined in the Operating Agreement)
shall be furnished with a statement to be used in the preparation of
the Member's tax returns, showing the amounts of any Profits or Losses
allocated to the Member, and the amount of any distributions made to
the Member, pursuant to this
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Agreement, along with a reconciliation of the annual report with
information furnished to Members for tax purposes.
(aa) To open and maintain, on behalf of the Owner, a
bank account or accounts in a federally insured bank or savings
institution as it shall determine, in which all monies received by or
on behalf of the Owner shall be deposited. All withdrawals from such
accounts shall be made upon the signature of those representatives of
__HMI who __HMI may from time to time designate. Any funds of the Owner
which __HMI may determine are not currently required for the conduct of
the Owner's business may be deposited with a federally insured bank or
savings institution or invested in short-term debt obligations
(including obligations of federal or State governments and their
agencies, commercial paper, certificates of deposit of commercial
banks, savings banks or savings and loan associations) as shall be
determined by __HMI in its sole discretion.
(bb) To execute, acknowledge, and deliver any and all
documents or instruments in connection with any or all of the
foregoing.
2.3 RESERVED POWERS OF OWNER.
Subject to the terms of this Agreement, Owner reserves the right to
direct that __HMI operate the Hospital in accordance with the terms and
conditions of the Operating Agreement. At any time during the term of this
Agreement, Owner may change its policies, subject to the terms of its Operating
Agreement.
2.4 RELIANCE ON __HMI'S AUTHORITY.
Any party dealing with or entering into any agreement with Owner may
rely on __HMI's execution of any such agreement without further inquiry, and
such signature by __HMI shall be binding upon the Owner hereunder.
III
COVENANTS OF __HMI
__HMI makes the following covenants with respect to this Agreement, the
performance of which shall be subject to the authority and approval of the Board
of Directors as set forth in the Operating Agreement:
3.1 DEVELOPMENT OF HOSPITAL.
__HMI shall propose a plan for the development of the Hospital which
sets forth a timeline and the development budget approved pursuant to the
Operating Agreement which will include all material costs as may be necessary
for the Hospital to be planned, constructed, licensed, accredited and
operational (the "Development Plan") for approval by the Board of Directors.
Once approved by the Board of Directors, __HMI shall use commercially reasonable
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best efforts to cause the Hospital to be constructed and become operational in
accordance with the Development Plan, subject to the obligation of the Hospital
to approve reasonable amendments to the Development Plan as plans for the
Hospital are finalized and changes to such plans are thereafter made by the
Owner.
3.2 PERFORMANCE OF CONTRACT MANAGEMENT SERVICES.
During the term of this Agreement, __HMI shall perform necessary
Contract Management Services for Hospital at all times and in all places as
required pursuant to this Agreement.
3.3 SELECTION, RETENTION, SUPERVISION, TRAINING AND SCHEDULING OF
PERSONNEL.
Except as otherwise provided herein and except for certain senior
management personnel of the Hospital who shall be hired by and be employees of
MedCath and be assigned to the Hospital by MedCath, __HMI or MedCath shall hire
for Owner all Personnel who may be required for the proper operation of the
Hospital and shall have responsibility for the selection, retention,
supervision, training and termination of such Personnel. __HMI shall cause
appropriate Personnel to be scheduled and available as required to meet the
reasonable business needs of Owner in carrying out the Hospital business.
3.4 SELECTION, PROVISION AND MAINTENANCE OF FACILITIES AND EQUIPMENT.
__HMI shall recommend for lease or purchase by Owner such facilities
and Equipment as may be required to meet the reasonable business needs of Owner
in carrying out the Hospital's business, including appropriate maintenance
contracts. __HMI shall periodically inspect and evaluate, or arrange therefor,
all such facilities and Equipment so that they are being maintained in a safe
and efficient manner and shall assure that all facilities and Equipment are in
good repair, ordinary wear and tear excepted. __HMI shall also maintain a
current level of knowledge with respect to new and innovative technology in the
field of the diagnosis and treatment of cardiac disease and vascular and
cardiovascular surgery and shall make recommendations to Owner with respect
thereto as appropriate.
3.5 SUPPLIES AND SUPPORT SERVICES.
__HMI shall assure the availability of all supplies and support
services that may be reasonably required for the proper and efficient operation
of the Hospital. __HMI may purchase goods and services for the Owner from
Members of the Owner or their Affiliates as long as they are of substantially
the same quality and price as could be obtained from an unrelated third party.
It is intended that __HMI and its Affiliates shall have the first opportunity to
provide information and accounting services to be purchased by the Hospital.
3.6 QUALITY ASSURANCE.
__HMI shall use its commercially reasonable best efforts to assure that
the Hospital is operated in accordance with the standards established by the
JCAHO and shall make regular
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reports to the Board of Directors relative thereto. In order to facilitate this
covenant, __HMI shall prepare, update and maintain from time to time a quality
assurance plan in writing and shall submit it to Owner for review and approval.
3.7 BUSINESS MANAGEMENT POLICIES, PROCEDURES, RECORDS AND REPORTS.
__HMI shall arrange for the maintenance of such records and make or
arrange for the making of such reports as are reasonably necessary and
appropriate for the conduct of the Hospital. Such business records and reports
shall include those applicable to a system of transaction approvals, revenue and
statistical accounting (including revenue analysis by customer and customer
group) and accounts receivable, payrolls, purchasing and accounts payable, bank
accounts, lines of credit, cash receipts and disbursements, general ledger,
property records for plant and equipment, statistical records, budgeted expenses
by department, tax matters and other journals, ledgers and records generally
required to be kept in order to effectuate the financial record keeping and
reporting for a business of the size and complexity of the Hospital. __HMI shall
report to Owner monthly on the financial position and results of operations of
the Hospital. Such interim reports shall be on an accrual basis. __HMI shall
prepare or arrange for the preparation of all tax reports and other filings and
shall assure the timely and accurate filing thereof. __HMI shall arrange for the
timely completion of annual financial audits by an independent certified public
accountant. __HMI shall use the same audit firm as used by MedCath Incorporated.
__HMI shall prepare and submit to the Board of Directors for consideration and
approval annual budgets and proposed capital expenditures including proposed
financing arrangements therefor in accordance with the terms of the Operating
Agreement. Subject to Section 3.7-1 below, in the event exceptions to the
approved budget are required, __HMI shall submit proposals therefor to the Board
of Directors.
3.7-1 EXPENDITURE APPROVAL.
Once a budget has been approved by the Board of Directors as set forth
in Section 3.7, __HMI shall have the authority to expend up to one hundred and
ten percent (110%) of any and all funds which are included in the budget and
sign all agreements related thereto, including reimbursement to __HMI and its
Affiliates for goods and services provided to the Owner. __HMI agrees to make
available for the Board's review on a monthly basis summaries of Owner's
financial information for the applicable month. __HMI shall have the right to
recast the budget by transferring all or part of the funds approved for specific
line items to another category or line item by an aggregate amount not to exceed
ten percent (10%) of the total budgeted funds. __HMI is further authorized to
make additional expenditures reasonably related to additional revenues or
increased patient or procedural volumes. __HMI shall report to the Board of
Directors from time to time on variances between the Hospital's budget and
actual operating results.
3.8 BOOKS AND RECORDS AVAILABLE.
__HMI shall perform the obligations as may be from time to time
specified for subcontractors in Social Security Act, Sec. 1861(v)(1)(I) and the
regulations promulgated in implementation thereof (initially codified at 42
C.F.R., Sec. 420.300, et seq.). __HMI further
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agrees that if this Agreement is determined to be an agreement with a provider
under which a physician or other entity assumes some or all of the costs of the
provider department pursuant to 42 C.F.R., Sec. 405.550(e), __HMI shall make its
books and records available to the provider and Medicare fiscal intermediary as
necessary to verify the nature and extent of the costs of the services furnished
by __HMI or its Affiliates pursuant to this Agreement.
In the event any request for __HMI's or a related subcontractor's
books, documents and records is made pursuant to Social Security Act, Sec.
1861(v)(1)(I), 42 C.F.R., Sec. 420.300, et seq., or 42 C.F.R., Sec. 405.550(e),
__HMI or any subcontractor related to __HMI shall promptly give notice of such
request to Owner and provide Owner with a copy of such request and, thereafter,
consult and cooperate with Owner concerning the proper response to such request.
Additionally, __HMI or any subcontractor related to __HMI shall provide Owner
with a copy of each book, document and record made available to one or more of
the persons and agencies above or shall identify each such book, document and
record to Owner and shall grant Owner access thereto for review and copying.
In addition, __HMI agrees to make available to Owner such information
and records as Owner may reasonably request to facilitate Owner's compliance
with the requirements of the Medicare Conditions of Participation and the
Medicaid State Plan and to facilitate Owner's substantiation of its reasonable
costs or other claim for reimbursement or payment in accordance with the
requirements applicable to Owner pursuant to the Medicare and Medicaid programs
including, without limitation, the requirements contained in 42 C.F.R., Subpart
D of Part 405; 42 C.F.R., Subpart C of Part 420 and 42 C.F.R., Subpart B of Part
455.
3.9 MEDICAL RECORDS AND REPORTS.
__HMI shall arrange for an appropriate system for the maintenance of
medical records, including form and content reasonably acceptable to Owner, and
shall ensure that necessary and appropriate medical reports arising from
Hospital services are promptly and accurately prepared, issued and filed in
accordance with Owner's reasonable requirement. __HMI shall not, however, be
held responsible for any physician's failure to perform his or her record
keeping duties.
3.10 PRESIDENT.
__HMI (or MedCath) shall hire as its employee and designate a specific
individual to serve as President of the Hospital and shall, in the temporary
absence of such individual, assure the availability of one or more appropriately
skilled individuals to assume the duties of President. The President shall be
the individual to whom Owner will first look to for specific performance of the
Contract Management Services provided pursuant to this Agreement. The selection,
compensation, appointment, retention and replacement of the President shall be
subject to the approval of the Board of Directors, not to be unreasonably
withheld. The base salary and benefits of the President will be reimbursed to
__HMI in addition to the fees to be paid to __HMI under Article V of this
Agreement. __HMI and the Board of Directors shall confer regarding severance pay
and/or benefits to be paid to the President and Owner shall reimburse __HMI for
such severance pay and benefits as are agreed to by the Board of Directors.
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3.11 STATUS AS MEDICARE-CERTIFIED HOSPITAL.
__HMI shall use its commercially reasonable best efforts to assist the
Hospital in achieving and maintaining the status of a Medicare-certified
hospital.
3.12 OTHER LICENSES AND PERMITS.
__HMI shall use its commercially reasonable best efforts to obtain and
maintain in force all licenses and permits required for conduct of the business.
3.13 __HMI ORGANIZATIONAL REQUIREMENTS.
__HMI shall at all times during the term of this Agreement be and
remain legally organized and operated to provide Contract Management Services to
the Hospital in a manner consistent with all applicable state and federal laws.
3.14 INSURANCE.
3.14-1 FOR OWNER.
__HMI shall, upon approval of Owner and At Owner's Expense, obtain and
continue worker's compensation coverage for all of Owner's employees; employment
practices liability (if reasonably available), comprehensive general liability,
automobile liability and professional liability insurance with such coverages
sufficient to insure against the risks attendant to the Hospital in an amount
sufficient to meet the reasonable needs of the Owner. __HMI shall, At Owner's
Expense, obtain and continue coverage appropriate to insure Owner's property
from fire, flood, theft or other risks; business interruption insurance
coverage; director's and officer's liability; and employee honesty.
3.14-2 FOR __HMI.
__HMI shall, at its own expense, obtain worker's compensation coverage
for its other employees and comprehensive general liability coverage equivalent
to that provided herein for Owner.
3.14-3 INSURANCE COMPANIES AND POLICIES.
All insurance coverage specified herein shall be placed with companies
acceptable to Owner. If the liability policies are of a claims made form, __HMI
shall either renew the policies with the same company or shall purchase an
equivalent reporting endorsement at each anniversary of the effective date of a
claims made policy relating to the policy year then ended. Such insurance may be
included in master insurance policies obtained by Affiliates of __HMI for its
other hospitals as long as such policies comply with the terms of this Agreement
and are on terms and conditions which are substantially as favorable as could
otherwise be obtained by Owner. In connection with __HMI's position as Manager
of Owner, __HMI and its Affiliates shall be listed as additional insureds on
insurance policies obtained by and for Owner.
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3.14-4 EVIDENCE OF INSURANCE.
__HMI shall furnish Owner with copies of each insurance policy
specified herein and all amendments, endorsements and renewals to each policy,
so long as this Agreement is in effect. In addition, __HMI shall cause to be
issued annually to Owner a Certificate or Certificates of Insurance reflecting
such coverages with the insurers agreeing to provide ten (10) days, notice to
Owner of the cancellation or modification of the policies.
3.15 BILLING AND COLLECTION OF ACCOUNTS.
__HMI shall, At Owner's Expense, provide or arrange for the provision
of a billing and collections service for Hospital and shall diligently attempt
to collect all amounts due including the referral of overdue accounts to outside
collection agencies and/or attorneys as appropriate.
3.16 EQUAL EMPLOYMENT OPPORTUNITY.
Without limitation of any provision herein set forth, __HMI expressly
agrees to abide by applicable Federal and/or State equal employment opportunity
statutes, rules and regulations.
3.17 PROFESSIONAL SERVICES.
__HMI shall, At Owner's Expense, retain and make appropriate use of
attorneys, accountants and other advisors and consultants on behalf of Hospital.
3.18 ADMINISTRATIVE MANAGEMENT.
__HMI shall apply its administrative knowledge and experience to
management of Hospital in order to train nurses, technicians, monitor
operations, evaluate technical competence of staff, educate the public and
assist the marketing efforts of the Hospital by devoting time to outside
contacts with existing and potential clients and to preparation and presentation
of proposals.
3.19 MEDICAL STAFF AFFAIRS.
__HMI shall provide appropriate support and facilitate the organization
and functioning of a medical staff for the Hospital as contemplated to be
authorized in the Medical Staff Bylaws for the Hospital, including appropriate
administrative and record keeping support.
3.20 COMPLIANCE PROGRAM.
__HMI shall, At Owner's Expense, prepare a compliance program (the
"Compliance Program") for the Hospital that is consistent with and similar to
compliance programs adopted by hospitals affiliated with MedCath. __HMI shall
submit the Compliance Program to the Board of Directors for approval, which
approval shall not be unreasonably withheld or delayed.
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IV
COVENANTS OF OWNER
Owner makes the following covenants with respect to this Agreement:
4.1 PAYMENT OF AUTHORIZED EXPENDITURES.
Owner shall, at its own expense, provide financial resources for the
payment of expenditures and reimbursements authorized pursuant to this
Agreement. Owner shall reimburse __HMI or its Affiliates for expenses or goods
and services reasonably incurred by __HMI or its Affiliates for the benefit of
Owner where such expenses have been approved in advance by the Board of
Directors either in a budget or otherwise.
4.2 PAYMENT OF FEES TO __HMI.
Owner shall, at its own expense, pay all fees due to __HMI pursuant to
this Agreement.
4.3 OWNER COOPERATION.
Owner shall exercise reasonable efforts to insure its cooperation with
__HMI in the performance of __HMI's duties and obligations hereunder. Owner
shall make decisions requested by __HMI in a reasonably timely manner.
V
FINANCIAL ARRANGEMENTS
Owner shall compensate __HMI for Contract Management Services of its
Hospital as set forth herein.
5.1 EXPENSES.
The parties specifically recognize that __HMI and its Affiliates have
incurred legal fees, filing fees, and other out-of-pocket costs for the benefit
of the Owner, including costs connected with the preparation of applicable
agreements, securities law and health care law compliance documentation and
filings, real estate acquisition matters and formation and registration of the
Owner (collectively, the "Organization Expenses"), and agree that __HMI shall be
reimbursed for these amounts.
In general, the Owner's expenses shall be billed directly to and paid
by the Owner. The Owner shall reimburse __HMI and its Affiliates for (i) the
Organization Expenses; (ii) the actual costs to __HMI or its Affiliates of
goods, services, and materials used for and by the Owner; and (iii) all
reasonable travel and other out-of-pocket expenses incurred by __HMI in the
development and management of the Owner and its business. The reimbursement for
expenses provided for in this Section 5.1 shall be made to __HMI and its
Affiliates regardless of whether
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any distributions are made to the Members under Article VI and Article VII of
the Operating Agreement.
Goods and services may be purchased from __HMI or its Affiliates as
long as they are of a substantially the same quality and price as could be
obtained from an unrelated third party. It is intended that __HMI and its
Affiliates shall have the first opportunity to provide information and
accounting and human resource services to be purchased by the Owner. Any such
purchase of goods and services by the Owner from __HMI is further subject to the
following:
(a) Other than for reimbursement for out-of-pocket travel
costs and expenses (airfare, lodging and other similar expenses), the
Owner shall not be charged for the time of senior management of
MedCath, which includes the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, Senior Vice President of Development,
the Division Presidents, and the Vice President of Disease Management
of MedCath;
(b) Reimbursement shall include the expenses for each
full-time equivalent, or a portion thereof, performing work directly on
behalf of or for the benefit of the Hospital even though such person
may be employed outside of the _____________ , _____________ area;
(c) The actual costs of the information system (hardware and
software, including installation and maintenance) incurred by __HMI and
its Affiliates for the direct benefit of the Owner shall be reimbursed
by the Owner.
5.2 DEVELOPMENT FEE.
Owner shall pay __HMI a fee of _____________________ Dollars
($__________) annually in equal monthly installments beginning on the date
hereof for __HMI's services for development of the Hospital (the "Development
Fee"). The obligation to pay the Development Fee shall end at such time as Owner
becomes obligated to pay the Operating and Licensing Fee set forth below.
5.3 OPERATING AND LICENSING FEE.
Commencing as of the opening of the Hospital, Owner shall pay __HMI an
annual operating and licensing fee (the "Operating and Licensing Fee"), to be
paid monthly, equal to __________ percent (__%) of annual net patient revenues.
Such amounts shall be paid within fifteen (15) days of the end of each month.
The Operating and Licensing Fee shall be determined on an accrual basis in
accordance with GAAP.
5.4 ANNUAL AUDIT OF OPERATING AND LICENSING FEE.
Owner, at its own expense, may obtain a special audit report from an
independent certified public accountant who is reasonably acceptable to __HMI as
to final determination of the Operating and Licensing Fee for each fiscal year
of Owner's Hospital and such determination
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shall be binding on the parties. Upon receipt of such audit report, the parties
shall make a final cash settlement within ten (10) days of the time that __HMI
receives from Owner a copy thereof.
5.5 INDEMNITY BY __HMI.
To the extent Owner is not otherwise covered by insurance, __HMI agrees
to indemnify, defend and hold Owner, its members, officers, employees and
agents, harmless from and against any and all loss, claim, demand, cause of
action, penalty, liability, damage or deficiency, lawsuits, or other proceedings
resulting or arising (a) from any gross negligence or willful misconduct or
violation of law or of this Agreement by __HMI or its officers, directors,
employees or agents unless __HMI or its employee's or agents were acting upon
the express instructions or directions of the Board of Directors; or (b) from
the nonfulfillment of any covenants or agreements on the part of __HMI contained
in this Agreement: and (c) any loss or damage, reasonable attorney fees or other
costs or expenses incident to (a) or (b).
5.6 INDEMNITY BY OWNER.
Owner agrees to indemnify, defend and hold __HMI, its directors,
officers, employees and agents, harmless from and against any and all loss,
claim, cause of action, demand, penalty, liability, action, damage or
deficiency, lawsuit or other proceeding, resulting or arising from (a) acts or
omission of the Owner, its members, officers, employees (unless due to the gross
negligence or willful misconduct of __HMI); (b) any liability or obligation of
Owner, except those which __HMI created in violation of this Agreement; (c) any
nonfulfillment of Owner of any of its covenants or agreements hereunder; (d) any
violation of law by Owner; and (e) any loss or damage, reasonable attorney's
fees and other costs and expenses incident to any of (a) through (d).
5.7 SURVIVAL OF INDEMNITY COVENANTS.
The indemnity covenants set forth in Sections 5.5 and 5.6 shall survive
the termination of this Agreement for any reason.
VI
TERM AND TERMINATION OF AGREEMENT
6.1 INITIAL.
The term of this Agreement shall begin upon the filing of the Articles
of Organization of Owner in the office of the Secretary of State of North
Carolina and continue until December 31, 2061, unless sooner terminated as
provided herein; provided, however, that the termination date may be extended
for up to an additional forty (40) years in five (5) year increments upon the
mutual election of __HMI and the Owner.
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6.2 TERMINATION.
This Agreement may be sooner terminated only on the first to occur of
the following:
6.2-1 TERMINATION BY AGREEMENT.
In the event Owner and __HMI shall mutually agree in writing, this
Agreement may be terminated on the terms and date stipulated therein.
6.2-2 TERMINATION BY __HMI.
This Agreement may be terminated by __HMI, in the event that Owner
fails to pay any amount due to __HMI within fifteen (15) days after notice in
writing of the unpaid amount.
6.2-3 LEGISLATIVE OR ADMINISTRATIVE CHANGES.
If, as a result of any new law, rule or regulation, or as a result of a
change in the interpretation or enforcement of any existing law, rule or
regulation (the "Applicable Law"), health care counsel, who has not separately
represented Owner or its Members prior to the date of being retained to provide
such opinion, selected by __HMI, and reasonably agreed to by Owner, determines
in writing that it is reasonably likely that, as a result of this Agreement or
the performance of __HMI's responsibilities hereunder, the reimbursement which
Owner receives for its medical services will be materially and adversely
affected as a result of the Applicable Law, then the parties agree to attempt to
negotiate in good faith to amend the Agreement to avoid the material and adverse
affects of the Applicable Law while, at the same time, preserving as fully as
possible the material benefits of this Agreement to each of the parties hereto.
6.3 EFFECTS OF TERMINATION.
Upon termination of this Agreement as hereinabove provided, neither
party shall have any further obligation hereunder except for (a) obligations
accruing prior to the date of termination and (b) obligations, promises or
covenants contained herein which are expressly made to extend beyond the term of
this Agreement.
VII
MISCELLANEOUS
7.1 STATUS OF __HMI.
It is expressly acknowledged by the parties hereto that with respect to
the subject matter of this Agreement, __HMI is an "independent contractor" and
nothing in this Agreement is intended nor shall be construed to create an
employer/employee relationship, a joint venture relationship or a lease or
landlord/tenant relationship or to allow Owner to exercise control or direction
over the manner or method by which __HMI perform the contract services which are
the subject matter of this Agreement; provided, always, that the services to be
provided
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hereunder by __HMI shall be provided in a manner consistent with the standards
governing such services and the provisions of this Agreement. __HMI understands
and agrees that (a) employees of __HMI will not be treated as employees of Owner
for federal tax purposes; (b) Owner will not withhold on behalf of __HMI
pursuant to this Agreement any sums for income tax, unemployment insurance,
social security or any other withholding pursuant to any law or requirement of
any governmental body relating to __HMI or __HMI's personnel or make available
to __HMI any of the benefits afforded to employees of Owner; (c) all of such
payments, withholdings and benefits, if any, are the responsibility of __HMI;
and (d) __HMI will indemnify and hold Owner harmless from any and all loss or
liability arising with respect to such payments, withholdings and benefits, if
any. In the event the Internal Revenue Service or any other governmental agency
should question or challenge the independent contractor status of __HMI, the
parties hereto mutually agree that both __HMI and Owner shall have the right to
participate in any discussion or negotiation occurring with such agency or
agencies, irrespective of whom or by whom such discussion or negotiation is
initiated.
7.2 REPRESENTATIVES.
7.2-1 OWNER REPRESENTATIVE.
Except as may be herein more specifically provided, Owner shall act
with respect to all matters hereunder through the Board of Directors.
7.2-2 __HMI REPRESENTATIVE.
Except as may be herein more specifically provided, __HMI shall act
with respect to all matters hereunder through the President of __HMI or an
authorized designee.
7.3 NOTICES.
Any notice, demand or communication required, permitted or desired to
be given hereunder shall be deemed effectively given when personally delivered,
sent by overnight courier or mailed by prepaid certified mail, return receipt
requested, addressed as follows:
__HMI: _________ Hospital Management, Inc.
00000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: President
With a copy to: Xxx X. Xxxxxxxx, Esq.
Xxxxx & Xxx Xxxxx, PLLC
000 X. Xxxxx Xxxxxx, Xxxxx 00
Xxxxxxxxx, XX 00000-0000
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Owner: _________ Heart Hospital, LLC
__________________________________
__________________________________
Attn: President
With a copy to: __________________________________
__________________________________
__________________________________
__________________________________
or to such other address and to the attention of such other person or officer as
either party may designate by written notice.
7.4 GOVERNING LAW.
This Agreement has been executed and delivered in and shall be
interpreted, construed and enforced pursuant to and in accordance with the laws
of the State of North Carolina without regard to the conflict of laws
provisions.
7.5 ASSIGNMENT.
No assignment of this Agreement or the rights and obligations hereunder
shall be valid without the specific written consent of both parties hereto,
except that __HMI shall be allowed to assign this Agreement to MedCath or its
wholly-owned subsidiaries or it may assign the revenue from this contract to
their lenders.
7.6 WAIVER OF BREACH.
The waiver by either party of a breach or violation of any provision of
this Agreement shall not operate as or be construed to be a waiver of any
subsequent breach of the same or other provision hereof.
7.7 ENFORCEMENT.
In the event that either party resorts to legal action to enforce the
terms and provisions of this Agreement, the successful party shall be entitled
to recover the costs of such action so incurred including, without limitation,
reasonable attorneys, fees.
7.8 GENDER AND NUMBER.
Whenever the context hereof requires, the gender of all words shall
include the masculine, feminine and neuter and the number of all words shall
include the singular and plural.
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7.9 ADDITIONAL ASSURANCES.
The provisions of this Agreement shall be self-operative and shall not
require further agreement by the parties except as may be herein specifically
provided to the contrary; provided, however, at the request of Owner, __HMI
shall execute such additional instruments and take such additional acts as Owner
may deem necessary to effectuate this Agreement.
7.10 FORCE MAJEURE.
Neither party shall be liable nor deemed to be in default for any delay
or failure in performance under this Agreement or other interruption of service
or employment deemed resulting directly or indirectly from Acts of God, civil or
military authority, acts of public enemy, war, accidents, fires, explosions,
earthquakes, floods, failure of transportation, strikes or other work
interruptions by either party's employees or any similar or dissimilar cause
beyond the reasonable control of either party. Further, __HMI shall not be in
default hereunder if the default resulted from actions taken at the request or
direction of the Board of Directors or if the Board of Directors failed to take
reasonable action recommended by __HMI to enable it to meet its obligations
hereunder.
7.11 SEVERABILITY.
In the event any provision of this Agreement is held to be
unenforceable for any reason, the unenforceability thereof shall not affect the
remainder of this Agreement, which shall remain in full force and effect and
enforceable in accordance with its terms, unless such would frustrate the
original purposes hereof.
7.12 ARTICLES AND OTHER HEADINGS.
The articles and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.13 AMENDMENTS AND AGREEMENT EXECUTION.
This Agreement and amendments thereto shall be in writing and executed
in multiple copies on behalf of Owner by any official of Owner specifically
authorized by the Board of Directors with respect to such execution and on
behalf of __HMI by any official authorized to act on behalf of __HMI. Each
multiple copy shall be deemed an original, but all multiple copies together
shall constitute one and the same instrument.
7.14 CONFIDENTIALITY.
The Parties recognize that it is to their mutual interest that the
terms of this Agreement be maintained as confidential. Therefore, __HMI and
Owner agree that without their mutual consent, not to be unreasonably withheld,
they will direct their respective directors, officers, employees or agents not
to disclose the terms of this Agreement to third parties, except to their
respective advisors and consultants and other parties who have a need to know
the terms of this
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Agreement in order to complete the transaction contemplated herein, and as
required by disclosure requirements applicable to any affiliate of __HMI as a
publicly traded company and as otherwise required by law.
7.15 ENTIRE AGREEMENT.
With respect to the subject matter hereof, this Agreement, together
with the Operating Agreement of the Owner to the extent referenced herein,
constitutes the entire agreement between the parties. __HMI shall be entitled to
no benefits other than those specified herein. No oral statements or prior
written material not specifically incorporated herein shall be of any force and
effect and no change in or additions to this Agreement shall be recognized
unless incorporated herein by amendment as provided herein, such amendment to
become effective on the date stipulated in such amendment. The parties
specifically acknowledge that in entering into and executing this Agreement,
they rely solely upon the representations and agreements contained in this
Agreement and no others.
7.16 ARBITRATION.
Subject to the right of any party to seek an injunction or other
equitable relief from a court with applicable authority, in the event of a
dispute between the parties arising out of any provision of this Agreement, then
such dispute shall be resolved by binding arbitration to be held in __________,
__________ in accordance with the Arbitration Rules of the American Health
Lawyers Association Alternative Dispute Resolution Service (the "Rules"). Such
arbitration shall be conducted by a panel of three (3) arbitrators none of which
shall reside in or practice primarily in __________. The decision of the
arbitrators shall be final and binding on the parties and shall be enforceable
in any court of applicable jurisdiction. The arbitrators shall have the
authority to award to the losing party all costs associated with such
arbitration, including expenses and fees of the arbitrators.
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IN WITNESS WHEREOF, the parties have executed this Agreement in
multiple originals as of the date above first written.
___________ HEART HOSPITAL, LLC
By:
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Title:
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By:
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Title:
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___________ HOSPITAL MANAGEMENT, INC.
By:
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Title:
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