SERVICE AGREEMENT
BY AND BETWEEN
TOC SPECIALISTS, P.L.,
(d/b/a Tallahassee Orthopedic Clinic)
TOC SERVICES, INC.
(f/k/a Tallahassee Orthopedic Clinic, P.A.)
AND
Xxxx X. Xxxxxxxxx, M.D.
Xxxxx X. Xxxx, M.D.
Xxxxxxx X. Xxxxxxxxx, M.D.
Xxxxxx Xxxxx, M.D.
Xxxx X. Xxxxx, M.D.
Xxx X. Xxxxx, M.D.
Xxxxxxx X. Xxxxxxxxx, Xx., M.D.
Xxxxx X. Xxxxxx, M.D.
J. Xxxx Xxxx, M.D.
Xxxx X. Xxxxxxx, M.D.
Xxxxxx X. Xxxxxxxxxx, M.D.
Xxxxx X. Xxxxxxxxx, M.D.
Xxxxxxx X. Xxxxx, M.D.
Dated as of November 12, 1996
TABLE OF CONTENTS Page
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ARTICLE I.
RELATIONSHIP OF THE PARTIES
1.1. Independent Relationship........................................ 1
1.2. Responsibilities of the Parties................................. 2
1.3. TOC Matters..................................................... 2
1.4. Patient Referrals............................................... 2
1.5. Professional Judgment........................................... 2
ARTICLE II.
DEFINITIONS
2.1. Definitions..................................................... 2
ARTICLE III.
PRACTICE OFFICES FURNISHINGS, EQUIPMENT AND TRADE NAME
TO BE PROVIDED BY COMPANY
3.1. Practice Offices................................................ 7
3.2. Use of Practice Offices......................................... 8
3.3. Furniture, Fixtures and Equipment............................... 8
3.4. Tradename....................................................... 8
4.1. Formation and Operation of the Policy Board..................... 8
4.2. Duties and Responsibilities of the Policy Board................. 8
ARTICLE V.
ADMINISTRATIVE SERVICES TO BE PROVIDED BY COMPANY
5.1. Performance of Management Functions............................. 9
5.2. Financial Planning and Goals................................... 10
5.3. Audits and Financial Statements................................ 10
5.4. Inventory and Supplies......................................... 10
5.5. Management Services and Administration......................... 10
5.6. Personnel...................................................... 13
5.7. Events Excusing Performance.................................... 13
5.8. Compliance with Law and Business Standards..................... 13
5.9. Quality Assurance.............................................. 13
5.10. New Medical Services and Additional Practice Offices........... 13
5.11. Collection of Certain Patient Receipts and Payment
of Clinic Expenses ............................................ 14
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5.12. Other TOC Accounts............................................. 14
5.13. Discounts...................................................... 14
5.14 MRI Services................................................... 14
ARTICLE VI.
OBLIGATIONS OF TOC AND PHYSICIAN OWNERS
6.1. Professional Services.......................................... 15
6.2. Medical Practice............................................... 15
6.3. Employment of Physician Employees.............................. 15
6.4. Professional Dues and Education Expenses....................... 16
6.5. Professional Insurance Eligibility............................. 16
6.6. Events Excusing Performance.................................... 16
6.7. Fees for Professional Services................................. 16
6.8. Peer Review.................................................... 16
6.9. TOC Employee Benefit Plans..................................... 17
6.10. Credentialing.................................................. 18
ARTICLE VII.
RESTRICTIVE COVENANTS AND ENFORCEMENT
7.1. Exclusive Arrangement.......................................... 19
7.2. Restrictive Covenants.......................................... 19
7.3. Restrictive Covenants By Future Physician Employees............ 20
7.4. Rights of Company.............................................. 21
7.5. Enforcement.................................................... 21
7.6. Modification of Restrictive Covenants.......................... 21
ARTICLE VIII.
FINANCIAL ARRANGEMENTS
8.1. Service Fees................................................... 22
8.2. Payment of Service Fee......................................... 25
8.3. Purchase of Accounts Receivable................................ 26
8.4. Payment of Clinic Expenses..................................... 27
ARTICLE IX.
RECORDS
9.1. Patient Records................................................ 27
9.2. Records Owned by Company....................................... 27
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9.3. Access to Records.............................................. 28
9.4. Government Access to Records................................... 28
ARTICLE X.
INSURANCE AND INDEMNITY
10.1. Insurance to be Maintained by TOC.............................. 28
10.2. Insurance to be Maintained by Company.......................... 28
10.3. Additional Insureds............................................ 29
10.4. Indemnification................................................ 29
ARTICLE XI.
TERM, TERMINATION AND RETIREMENT
11.1. Term of Agreement.............................................. 30
11.2. Extended Term.................................................. 30
11.3. Termination by TOC for Cause................................... 30
11.4. Termination by Company for Cause............................... 31
11.5. Early Termination by TOC or Company Without Cause Upon
Eighteenth (18th) Month Anniversary of Agreement............... 32
11.6. Consequences of TOC Termination................................ 32
11.7. Closing of Purchase by TOC and Effective Date of Termination... 33
11.8. Tail Policy.................................................... 33
11.9. Restrictions Applicable to Physician Owners.................... 33
ARTICLE XII.
DAMAGE AND LOSS; CONDEMNATION
12.1. Use of Insurance Proceeds...................................... 36
12.2. Temporary Space................................................ 36
ARTICLE XIII.
REPRESENTATIONS AND WARRANTIES OF TOC AND PHYSICIAN OWNERS
13.1. Validity....................................................... 37
13.2. Litigation..................................................... 37
13.3. Permits........................................................ 37
13.4. Authority...................................................... 37
13.5. Compliance with Applicable Law................................. 38
13.6. Health Care Compliance......................................... 38
13.7. Fraud and Abuse................................................ 38
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13.8. TOC Compliance................................................. 38
13.9. Rates and Reimbursement Policies............................... 39
13.10.Accounts Receivable............................................ 39
13.11.Full Disclosure................................................ 41
13.12.Exhibits....................................................... 41
ARTICLE XIV.
REPRESENTATIONS AND WARRANTIES OF COMPANY
14.1. Organization................................................... 42
14.2. Authority...................................................... 42
14.3. Absence of Litigation.......................................... 42
14.4. Transactions with Affiliates................................... 42
ARTICLE XV.
COVENANTS OF TOC AND PHYSICIAN OWNERS
15.1. Merger, Consolidation and Other Arrangements................... 42
15.2. Necessary Authorizations/Assignment of Licenses and Permit..... 42
15.3. Transaction with Affiliates.................................... 43
15.4. Compliance with All Laws....................................... 43
15.5. Third-Party Payor Programs..................................... 43
15.6. Change in Business or Credit and Collection Policy............. 43
15.7. Treatment of Accounts Receivable............................... 43
15.8. Security Interest.............................................. 44
ARTICLE XVI.
GENERAL PROVISIONS
16.1. Assignment..................................................... 44
16.2. Whole Agreement; Modification.................................. 45
16.3. Notices........................................................ 45
16.4. Binding on Successors.......................................... 46
16.5. Waiver of Provisions........................................... 46
16.6. Governing Law.................................................. 46
16.7. No Practice of Medicine........................................ 46
16.8. Severability................................................... 46
16.9. Additional Documents........................................... 46
16.10.Attorneys' Fees................................................ 46
16.11.Time is of the Essence......................................... 46
16.12.Confidentiality................................................ 46
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16.13.Contract Modifications for Prospective Legal Events............ 47
16.14.Remedies Cumulative............................................ 47
16.15.Language Construction.......................................... 47
00.00.Xx Obligation to Third Parties................................. 47
16.17.Communications................................................. 47
EXHIBIT 3.1 LEASE AGREEMENT................................... 3.1-1
EXHIBIT 4.1 POLICY BOARD GOVERNANCE RULES..................... 4.1-1
EXHIBIT 6.9.1 TOC PLAN........................................ 6.9.1-1
EXHIBIT 8.1.8(d) EXCLUDED EXPENSES........................... 8.1.8.(d)-1
EXHIBIT 8.3.6 ACCOUNTS RECEIVABLE COLLECTION.................. 8.3.6-1
EXHIBIT 11 NON-COMPETITION
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SERVICE AGREEMENT
THIS SERVICE AGREEMENT ("Agreement") dated as of November 12, 1996, by and
between TOC SERVICES, INC. (f/k/a Tallahassee Orthopedic Clinic, P.A.), a
Florida corporation ("Company"), TOC SPECIALISTS, P.L. (d/b/a Tallahassee
Orthopaedic Clinic), a Florida professional limited liability company, ("TOC")
and XXXX X. XXXXXXXXX, M.D., XXXXX X. XXXX, M.D., XXXXXXX X. XXXXXXXXX, M.D.,
XXXXXX XXXXX, M.D., XXXX X. XXXXX, M.D., XXX X. XXXXX, M.D., XXXXXXX X.
XXXXXXXXX, XX., M.D., XXXXX X. XXXXXX, M.D., J. XXXX XXXX, M.D., XXXX X.
XXXXXXX, M.D., XXXXXX X. XXXXXXXXXX, M.D., XXXXX X. XXXXXXXXX, M.D. AND XXXXXXX
X. XXXXX, M.D ("Physician Owner[s]"), citizens and residents of Florida.
W I T N E S S E T H:
WHEREAS, Company has been formed to engage in the business of managing
medical clinics and providing support services to and furnishing orthopedic care
medical practices with the necessary equipment, personnel, supplies and support
staff; and
WHEREAS, TOC and Physician Owners desire to obtain the services of Company
in performing such management functions so as to permit TOC and Physician Owners
to devote TOC's and Physician Owners' efforts on a concentrated and continuous
basis to the rendering of medical services to patients.
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements herein set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is agreed by the parties as follows:
ARTICLE I.
RELATIONSHIP OF THE PARTIES
1.1. Independent Relationship. TOC, Physician Owners and Company intend to
act and perform as independent contractors, and the provisions hereof are not
intended to create any partnership, joint venture, agency or employment
relationship between the parties. Notwithstanding the authority granted to
Company herein, Company, TOC, and Physician Owners agree that TOC and Physician
Owners shall retain all authority to direct the medical, professional, and
ethical aspects of TOC's and Physician Owners' medical practice including but
not limited to the admission of new patients and providing care to indigent
patients. Each party shall be solely responsible for and shall comply with all
state and federal laws pertaining to employment taxes, income withholding,
unemployment compensation contributions and other employment related statutes
applicable to that party.
1.2. Responsibilities of the Parties. As more specifically set forth
herein, Company shall provide TOC with offices and facilities, equipment,
supplies, certain support personnel, management and financial advisory services.
As more specifically set forth herein, TOC shall be responsible for the
recruitment and hiring of physicians and all issues related to the professional
practice of medicine, medical practice patterns and documentation thereof.
Notwithstanding anything herein to the contrary, no "designated health service,"
as defined in 42 U.S.C. ss. 1395nn, including any amendments or successors
thereto, shall be provided by Company under this Agreement.
1.3. TOC Matters. Matters involving the internal agreements and finances
of TOC, including the disposition of professional fee income, tax planning, and
investment planning (and expenses relating solely to these internal business
matters) shall remain the sole responsibility of TOC.
1.4. Patient Referrals. The parties agree that the benefits to TOC and
Physician Owners hereunder 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 Company to any of TOC's patients in
any facility operated by Company.
1.5. Professional Judgment. Each of the parties acknowledges and agrees
that the terms and conditions of this Agreement pertain to and control the
business and financial relationship between and among the parties but do not
pertain to and do not control the professional and clinical relationship between
and among TOC, Physician Employees, TOC Employees, and TOC's patients. Nothing
in this Agreement shall be construed to alter or in any way affect the legal,
ethical, and professional relationship between and among TOC, Physician Owners,
Physician Employees, and TOC's patients, nor shall anything contained in this
Agreement abrogate any right, privilege, or obligation arising out of or
applicable to the physician-patient relationship.
ARTICLE II.
DEFINITIONS
2.1. Definitions. For the purpose of this Agreement, the following
definitions shall apply:
"Account Debtor" means an account debtor or any other Person obligated in
respect of an Account Receivable.
"Accounts Receivable" means, with respect to TOC and except as noted
below, all accounts and any and all rights to payment of money or other forms of
consideration of any kind now owned or hereafter acquired (whether classified
under the Uniform Commercial Code as accounts, chattel paper, general
intangibles or otherwise) for goods sold or leased or for services rendered by
TOC, including, but not limited to, accounts receivable, proceeds of any letters
of credit naming TOC as beneficiary, chattel paper, insurance proceeds, contract
rights, notes, drafts, instruments, documents, acceptances and all other debts,
obligations and liabilities in whatever form from any other Person;
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provided that, cash, checks and credit card purchases are not included in the
definition of Accounts Receivable.
Accounts Receivable do not include any receivables arising from facility
fees earned from the use and operation of TOC's magnetic resonating imaging
facilities. All such receivables shall be referred to as "MRI Receivables", and
all revenue resulting from such activities shall be deemed "MRI Revenue."
Accounts Receivable shall also not include (i) any facility fees arising out of
TOC's direct or indirect ownership interest in Tallahassee Orthopaedic Surgery
Center, (ii) any revenues or fees generated by any Physician Owner for services
provided outside of TOC, including medical directorships, research and
development activities, sports affiliations and literary works, or (iii) any
revenues generated by any new medical service or additional practice office not
acquired by Company pursuant to Section 5.10 below.
"Affiliate" means, with respect to any Person, any entity which directly
or indirectly controls, is controlled by, or is under common control with, such
Person or any Subsidiary of such Person or any Person who is a director, officer
or partner of such Person or any Subsidiary of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to (a) vote ten percent (10%) or more of the securities having ordinary voting
power for the election of directors of such Person, or (b) direct or cause the
direction of management and policies of a business, whether through the
ownership of voting securities, by contract or otherwise and either alone or in
conjunction with others or any group.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations, ordinances and orders of all Governmental
Authorities and all orders and decrees of all courts, tribunals and arbitrators,
and shall include, without limitation, Health Care Law.
"Base Service Fee" shall equal [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxx]per year, payable in monthly payments of [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxx] in arrears on or before the 15th day of the following month.
"CHAMPUS" means the Civilian Health and Medical Program of the Uniformed
Services.
"Change in Control" shall mean any transaction pursuant to which Company
(a) consummates the sale of substantially all of the assets of Company to an
entity which is publicly traded in exchange for voting stock in such publicly
traded entity or (b) merges with a publicly traded corporation, entity or
corporation or entity controlled by a publicly traded corporation or entity in a
transaction where unrelated persons own at least fifty-one percent (51%) of the
issued and outstanding securities of the surviving entity or corporation
controlling the merged entity.
"Clinic Expenses" shall have the meaning as defined in Section 8.1.3.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Company" shall mean TOC Services, Inc. a Florida corporation, together
with its permitted successors and assigns.
"Company Expenses" shall have the meaning as defined in Section 8.1.7.
"Designated Leased Employees" shall have the meaning as defined in Section
6.9.1.
"Disabled" or "Disability" shall mean that a Physician suffers from a
mental or physical condition resulting in such Physician Employee's inability to
perform the essential functions of his job as required by Section 6.1.1 (and as
may be described with greater specificity in written job descriptions prepared
and maintained by TOC and approved by the Policy Board) without significant risk
to the health or safety of others, even with such reasonable accommodation as
may be available under the circumstances, and the Policy Board may reasonably
anticipate that such Physician Employee will remain disabled for at least two
years following the commencement of such disability.
"Excluded Expenses" shall have the meaning as defined in Section 8.1.8.
"Fair Market Value" with respect to Company common stock means (i) the
average closing price for the Company common stock as reported on a securities
exchange or quoted on a national quotation system, if any, upon which the
Company common stock is traded or quoted or (ii) in the event Company's common
stock is not traded on any exchange or quoted on a national quotation system,
the fair market value of the Company common stock shall be determined by an
independent appraiser or investment banker selected by two (2) independent
appraisers or investment bankers (one (1) such firm selected by Company and one
(1) such firm selected by the Physician Owner or the Physician Owners as a group
(as the case may be)). Such valuation may include the consideration of discounts
for marketability, minority ownership and other discounts usual and customary in
the valuation process. Unless otherwise specified herein, the cost of any
appraisal shall be borne equally by Company and the Physician Owner or the
Physician Owners as a group (as the case may be).
"GAAP" shall mean generally accepted accounting principles as set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession. For purposes of
this Agreement, GAAP shall be applied in a manner consistent with the historic
practices used by Company or TOC as applicable.
"Governmental Authority" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, board, body, agency, bureau or entity or any arbitrator with
authority to bind a party at law.
"Governmental Receivables" means an Account Receivable of TOC which (i)
arises in the ordinary course of business of TOC, (ii) has as its Third-Party
Payor the United States of America
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or any state or any agency or instrumentality of the United States of America or
any state which makes any payments with respect to Medicare or Medicaid or with
respect to any other program (including CHAMPUS) established by federal or state
law, and (iii) is required by federal or state law to be paid or to be made to
TOC as a healthcare provider. Governmental Receivables shall not, however, refer
to amounts payable by private insurers under contract to provide benefits under
the Federal Employee Health Benefit Program.
"Governmental Rules and Regulations" shall have the meaning as defined in
Section 13.7.
"Health Care Law" means any Applicable Law regulating the acquisition,
construction, operation, maintenance or management of a health care practice,
facility, provider or payor, including without limitation, 42 U.S.C. ss.1395nn
and 42 U.S.C. ss. 1320a-7b.
"Lease" shall mean the Leases and the New Leases, including all amendments
thereto, described in Section 3.1 hereof.
"Leased Premises" shall mean the real property described in the Lease.
"Lender" shall have the meaning as defined in Section 7.2.1.
"Main Office" shall mean the Leased Premises at 0000 Xxxxxxx Xxxxxxx
Xxxx., Xxxxxxxxxxx, Xxxxxxx 00000 and all equipment and facilities owned or
operated by Company and utilized by TOC or any of its employees within said
Leased Premises.
"Medicaid" means any state program pursuant to which health care providers
are paid or reimbursed for care given or goods afforded to indigent persons and
administered pursuant to a plan approved by the Health Care Financing
Administration under Title XIX of the Social Security Act.
"Medicare" means any medical program established under Title XVIII of the
Social Security Act and administered by the Health Care Financing
Administration.
"Merger" shall mean the acquisition of Company pursuant to the Merger
Agreement.
"Merger Agreement" means that certain Merger Agreement, dated November 12,
1996 by and between Company, Special Care Network, Inc. ("SCN") and Physician
Owners.
"Merger A/R" means the accounts receivable acquired from Company by SCN
pursuant to the Merger Agreement.
"Necessary Authorizations" means with respect to TOC, all certificates of
need, authorization, certifications, consents, approvals, permits, licenses,
notices, accreditations and exemptions, filings and registrations, and reports
required by Applicable Law, including, without limitation, Health Care
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Law, which are required, necessary or reasonably useful to the lawful ownership
and operation of TOC's business.
"New Lease" shall have the meaning as defined in Section 3.1.
"Office Locations" shall have the meaning as defined in Section 3.1.
"Person" shall mean an individual, corporation, partnership, association,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof including, without limitation, Third-Party Payors.
"Physician Employees" shall mean the term as defined in Section 8.1.6.
"Physician Extender Employees" shall mean the term as defined in Section
8.1.5.
"Physician Owners" shall mean those Physician Employees who own an
interest, directly or indirectly, in the equity of TOC.
"Plans" shall have the meaning as defined in Section 6.9.1.
"Policy Board" shall mean a board established pursuant to Section 4.1.
"Practice Net Revenue" shall mean the term as defined in Section 8.1.1.
"Practice Offices" shall mean (i) the Main Office and (ii) the Satellite
Offices.
"Professional Services Revenue" shall mean the term as defined in Section
8.1.2.
"Purchase Price" shall mean the term as defined in Section 8.4.2.
"Purchased A/R" means, with respect to TOC, the Accounts Receivable
purchased pursuant to Section 8.3 of this Agreement.
"TOC Operating Account" shall mean that certain operating account
established by TOC at a bank selected by TOC in TOC's sole discretion as more
fully described in Section 5.11.
"TOC Plan" shall mean the term as defined in Section 6.9.1.
"Satellite Office" shall mean the location at which one or more of TOC's
employees provide services as described on Exhibit 2.1 and all equipment and
facilities owned or operated by Company and utilized by any of said persons at
such location.
"Settlement Date" shall mean the term as defined in Section 8.3.3.
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"Service Agreement" means this Agreement.
"Subsidiary" means a Person of which an aggregate of 51% or more of the
voting stock of any class or classes or 51% or more of other voting or equity
interests is owned of record or beneficially by another Person, or by one or
more Subsidiaries of such Person.
"Substitute Physician(s)" shall mean the term as defined in Section
11.9.1(b).
"Technical Employees" shall mean the term as defined in Section 8.1.4.
"Third-Party Payors" means each Person which makes payment under a
Third-Party Payor Program, and each Person which administers a Third-Party Payor
Program.
"Third-Party Payor Programs" means Medicare, Medicaid, CHAMPUS, insurance
provided by Blue Cross and/or Blue Shield, managed care plans, and any other
private health care insurance programs and employee assistance programs as well
as any future similar programs.
ARTICLE III.
PRACTICE OFFICES FURNISHINGS, EQUIPMENT AND TRADE NAME
TO BE PROVIDED BY COMPANY
3.1. Practice Offices. (a) Company has leasehold interests as lessee
arising out of the leases described on Exhibit 3.1 (the "Leases") and relating
to certain offices and locations which comprise the principal location of TOC's
administrative and medical offices ("Main Office") and a satellite office
("Satellite Office") as identified on Exhibit 3.1 (collectively the "Office
Locations"). Copies of the Leases are attached hereto as Exhibit 3.1.
(b) Company agrees to provide offices and facilities necessary and
suitable for an orthopedic, neurology and family medicine medical practice at
the Office Locations (or at comparable facilities on the termination of the
Leases) to TOC. If any Leases are terminated by their terms, Company shall enter
into a lease of a new facility comparable to the Office Location whose lease is
terminated (the "New Lease") with the consent of the Policy Board. Company shall
not enter into a lease for a new Main Office or Satellite Office for TOC without
the approval of the Policy Board.
(c) TOC agrees to comply with all terms and provisions of the Leases.
3.2. Use of Practice Offices. Neither Company nor TOC shall use or occupy
the Main Office or Satellite Offices for any purpose which is prohibited by the
Leases, by this Agreement or which is directly or indirectly forbidden by law,
ordinance, or governmental or municipal regulation or order, or which may be
dangerous to life, limb or property, or which would increase the fire and
extending coverage insurance rate in any Practice Office or contents.
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3.3. Furniture, Fixtures and Equipment. Company agrees to provide all
furniture, furnishings, fixtures, medical and other equipment necessary and
suitable for an orthopaedic, neurology and family medicine medical practice at
each Office Location.
3.4. Tradename. Company shall license to TOC during the term of this
Agreement the trade name "Tallahassee Orthopaedic Clinic."
ARTICLE IV.
DUTIES OF THE POLICY BOARD
4.1. Formation and Operation of the Policy Board. The parties shall
establish a Policy Board which shall be responsible for developing management
and administrative policies for the overall operation of any Practice Office.
The Policy Board shall consist of six (6) members. Company shall designate, in
its sole discretion, three (3) members of the Policy Board. TOC shall designate,
in TOC's sole discretion, three (3) members of the Policy Board. Any matter
decided by a majority of the members of the Policy Board shall constitute the
decision of the Policy Board with respect to the matter. Governance issues
affecting the Policy Board shall be addressed in accordance with the rules set
forth in Exhibit 4.1.
4.2. Duties and Responsibilities of the Policy Board. The Policy Board
shall have the following duties and obligations:
4.2.1. Capital Improvements and Expansion. The Policy Board shall review
all requests by TOC for any renovations, capital improvements, expansions and
new and replacement equipment purchases or leases. The Policy Board shall
determine whether such expenditures are appropriate based upon economic
feasibility, physician support, productivity, market conditions, and the annual
budget formulated pursuant to this Agreement. If the Policy Board determines
that the acquisition of additional or replacement equipment or facilities is
appropriate, then Company shall use its best efforts to arrange for the
financing and acquisition of the property.
4.2.2. Annual Budgets. All annual capital and operating budgets prepared
by Company in accordance with Section 5.2 of this Agreement, shall be subject to
the prior review and approval of the Policy Board.
4.2.3. Marketing. All advertising and other marketing of the services
performed at any Practice Office shall be subject to the prior review and
approval of the Policy Board.
4.2.4. Patient Fees; Collection Policies. As a part of the annual
operating budget in consultation with TOC and Company, to the extent allowed by
Applicable Law, the Policy Board shall review and advise TOC as to an
appropriate fee schedule for all physician and ancillary services rendered by
TOC, which fee schedule shall ultimately be determined by TOC in TOC's sole
discretion. In addition, the Policy Board shall approve the credit collection
policies of TOC.
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4.2.5. TOC and Payor Relationships. Decisions regarding the establishment
or maintenance of relationships with institutional health care providers and
payors, or with parties under arrangements for setting up new Satellite Offices
of TOC in the future, shall be made by the Policy Board in consultation with
TOC.
4.2.6. Strategic Planning. The Policy Board shall develop long-term
strategic planning objectives.
4.2.7. Capital Expenditures. The Policy Board shall determine the priority
of major capital expenditures including the procurement of any new or additional
office space for Practice Offices.
4.2.8. Restrictive Covenants for Physician. The approval of the Policy
Board shall be required for any variations to the restrictive covenants
prescribed for any physician employment contract as set forth in Article VII or
Exhibit 11 of this Agreement.
4.2.9. Grievance Referrals. The Policy Board shall consider and make final
decisions regarding grievances pertaining to matters not specifically addressed
in this Agreement as referred to it by the Physician Employees.
ARTICLE V.
ADMINISTRATIVE SERVICES TO BE PROVIDED BY COMPANY
5.1. Performance of Management Functions. Company shall manage the
day-to-day operations of the Main Practice Office and any Satellite Offices in a
business-like manner. Company shall provide or arrange for the services set
forth in this Article V, the cost of all of which shall be included in Clinic
Expenses. Company is hereby expressly authorized to perform its services
hereunder in whatever manner it deems reasonably appropriate to meet the
day-to-day requirements of Practice Office operations in accordance with the
general standards approved by the Policy Board and to maintain the lease
agreements for each of the Practice Offices, including, without limitation,
performance of some of the business office functions at locations other than the
Main Practice Office. TOC will not act in a manner which would prevent Company
from efficiently managing the day-to-day operations of the Main Practice Office
and maintaining the operations of the Satellite Offices in a business-like
manner.
5.2. Financial Planning and Goals. Subject to Section 4.2.2. of this
Agreement, Company shall prepare annual capital and operating budgets reflecting
in reasonable detail anticipated revenues and expenses, and sources and uses of
capital for growth in TOC's practice and medical services rendered at the
Practice Office. Said budgets shall reflect amounts, if any, allocated for
capital purchases, improvements, expansion and any new leasing arrangements.
Thereafter, but no later than thirty (30) days prior to the end of the fiscal
year, the Policy Board shall approve a budget for the upcoming fiscal year. The
budget, as described in Section 4.2.2., shall be binding upon Company and TOC.
Company shall consult with TOC and the Policy Board in the preparation of all
budgets.
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Company and TOC acknowledge and agree that once a budget has been approved,
neither Company nor TOC shall make expenditures or incur expenses in excess of
budgeted amounts without the prior approval of the Policy Board.
5.3. Audits and Financial Statements. Company shall prepare annual
financial statements for the operations of TOC and, in its sole discretion, may
cause the financial statements to be audited by a certified public accountant
selected by Company. TOC shall cooperate fully in such audit. The cost of such
audit shall be included in Clinic Expenses. If Company elects to have the
financial statements audited by a certified public accountant with a big six
accounting firm, the resulting audited financial statements shall be binding on
TOC and Company. If Company elects not to have TOC's financial statements so
audited, TOC shall have the option to obtain such an audit, by a certified
public accountant with a mutually acceptable accounting firm. Company shall
fully cooperate in such audit. The cost of such audit shall be included in
Clinic Expenses. In such event, Company and TOC shall be bound by the resulting
audited financial statements. All parties shall be entitled to copies of any
information provided to or by the auditors by or to any party. Additionally,
Company shall prepare monthly unaudited financial statements containing a
balance sheet and statements of income from Practice Office operations, and such
other matters as TOC may reasonably request which shall be delivered to TOC
within thirty (30) business days after the close of each calendar month.
5.4. Inventory and Supplies. Except as limited by Section 5.11, Company
shall order and purchase inventory and supplies and such other ordinary,
necessary or appropriate materials which Company shall deem to be necessary in
the operation of the Practice Offices and which are requested by TOC and are
within the budget for the applicable fiscal period. Company shall not purchase
inventory, goods or supplies from any Affiliate of Company without approval of
the Policy Board and after full disclosure of all terms to the Policy Board.
5.5. Management Services and Administration.
5.5.1. TOC hereby appoints Company as TOC's sole and exclusive manager and
administrator of all day-to-day business functions. TOC agrees that the purpose
and intent of this Agreement is to relieve TOC and Physician Employees to the
maximum extent possible of the administrative, accounting, personnel and
business aspects of their practice, with Company assuming responsibility and
being given all necessary authority to perform these functions. Company agrees
that TOC and only TOC will perform the medical functions of TOC's practice.
Company will have no authority, directly or indirectly, to perform, and will not
perform, any medical function. Company may, however, advise TOC as to the
relationship between TOC's performance of medical functions and the overall
administrative and business functioning of TOC's practice. To the extent that a
Company employee assists Physician Employees in performing medical functions,
such employees shall be subject to the professional direction and supervision of
Physician Employees and in the performance of such medical functions shall not
be subject to any direction or control by, or liability to, Company, except as
may be specifically authorized by Company.
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5.5.2. Subject to the restrictions of any Health Care Law, Company shall,
on behalf of TOC, xxxx patients and collect the professional fees for medical
services rendered by TOC, any Physician Employee, any Technical Employee and any
Physician Extender Employee, regardless of when or where such services are
rendered. All xxxxxxxx for Physician Employee's services shall be made in the
name of and under the provider number of TOC. TOC hereby appoints Company to be
TOC's true and lawful attorney-in-fact, for the following purposes: (i) to xxxx
patients, insurers, healthcare plans, and other third-party payors on behalf of
patients in TOC's name and on TOC's behalf; (ii) to collect Accounts Receivable
resulting from such billing in TOC's name and on TOC's behalf; (iii) to receive
payments from insurance companies, prepayments from health care plans, and all
other Third-Party Payors; (iv) to take possession of and endorse in the name of
TOC (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 (v) to initiate legal proceedings in the name of TOC to collect
any accounts and monies owed to TOC or any Physician Employee, to enforce the
rights of TOC as creditors under any contract or in connection with the
rendering of any service, and to contest adjustments and denials by any
Governmental Authority (or its fiscal intermediaries) as Third-Party Payors.
Except for cash proceeds from the collection of Accounts Receivable purchased
from TOC by Company, Company shall deposit any cash receipts collected on behalf
of TOC into the TOC Operating Account described in Section 5.11.
5.5.3. Company shall design, supervise and maintain possession of all
files and records relating to the operation of TOC, including but not limited to
accounting, billing, patient medical records (which patient medical records
shall remain the property of TOC), and collection records. While the Company
shall maintain custody, patient medical records shall at all times be and remain
the property of TOC and shall be located at the Practice Offices so that they
are readily accessible for patient care. The Physician Employees shall have the
obligation to oversee the preparation and maintenance of patient medical
records, and to provide such medical information as shall be necessary and
appropriate to the records' clinical function and to sustain and ensure the
availability of Third-Party Payor reimbursement for services rendered. The
management of all files and records shall comply with applicable state and
federal statutes. Company shall preserve the confidentiality of patient medical
records and use information contained in such records only as permitted by law,
to the extent necessary to perform the services set forth herein.
5.5.4. Company shall supply to TOC necessary clerical, accounting,
bookkeeping and computer services, printing, postage and duplication services,
medical transcribing services and any other ordinary, necessary or appropriate
service for the operation of the Practice Offices.
5.5.5. Subject to the approval of the Policy Board, Company shall design
and implement an adequate and appropriate public relations program on behalf of
TOC, with appropriate emphasis on public awareness of the availability of
services at the Practice Offices. The public relations program shall be
conducted in compliance with Applicable Law and regulations governing
advertising by the
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medical profession and applicable canons of principles of professional ethics of
TOC and Physician Employees of TOC.
5.5.6. Company shall provide the data necessary for TOC to prepare TOC's
annual income tax returns. Company shall have no responsibility for the
preparation of TOC's federal or state income tax returns or the payment of such
income taxes. Company shall prepare or cause to be prepared on TOC's behalf,
necessary employment tax returns. TOC shall be obligated to pay any taxes due on
such employment tax returns with respect to the Physician Owners.
5.5.7. Company shall assist TOC in recruiting additional physicians,
carrying out such administrative functions as may be appropriate, such as
advertising for and identifying potential candidates, obtaining credentials, and
arranging interviews; provided, however, TOC shall interview and make the
ultimate decision as to the suitability of any physician or other professional
clinical employee to become employed and to remain associated with TOC. All
physicians recruited by Company and accepted by TOC shall be the sole employees
of TOC, to the extent such physicians are hired as employees.
5.5.8. Company shall negotiate managed care contracts on behalf of TOC and
shall administer all managed care contracts in which TOC participates. TOC, at
its discretion, shall have the right to enter into or reject such contracts
negotiated by Company.
5.5.9. TOC shall have the authority to arrange for legal and accounting
services relating to matters other than day-to-day management of TOC; such other
matters including but not limited to issues relating to TOC governance issues,
compensation of Physician Owners, and issues which arise between TOC and
Company; provided, however, such fees shall be considered Excluded Expenses.
5.5.10. Company shall provide for the proper cleanliness of the Leased
Premises, and maintenance and cleanliness of the equipment, furniture and
furnishings located upon such Leased Premises.
5.5.11. Upon receipt of dues, statements or license notices from the
Physician Employees, Company shall make payment for the cost of professional
licensure fees and board certification fees of physicians associated with TOC.
5.5.12. Company shall negotiate for and cause premiums to be paid with
respect to the insurance provided for in Section 10.1.
5.6. Personnel. After Company (or a subsidiary of Company) has obtained a
license from the Florida Department of Business and Professional Regulation to
offer staff leasing services pursuant to Chapter 402 of the Florida Statutes
Annotated (prior to Company having obtained such license, the employees
referenced in this sentence shall be employees of TOC), Company shall provide
non-physician professional support (administrative personnel, clerical,
secretarial, bookkeeping and collection personnel) reasonably necessary for the
conduct of the operations at the Practice Offices.
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Company shall determine and cause to be paid the salaries and fringe benefits of
all such personnel. Such personnel shall be employees of Company, with those
personnel performing patient care services subject to the professional direction
and supervision of Physician Employees. If TOC is dissatisfied with the services
of any person, TOC shall consult with Company. Company 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 Company's obligations regarding staff shall be
governed by the overriding principle and goal of providing quality medical care.
Employee assignments shall be made to assure consistent and continued rendering
of quality medical support services and to ensure prompt availability and
accessibility of individual medical support staff to physicians in order to
develop constant, familiar and routine working relationships between individual
physicians and individual members of the medical support staff. If TOC disagrees
with an assignment, TOC may appeal such assignment to the Policy Board. Company
shall maintain established working relationships wherever possible and Company
shall make every effort consistent with sound business practices to honor the
specific requests of TOC with regard to the assignment of Company's employees.
5.7. Events Excusing Performance. Company shall not be liable to TOC or
Physician Owners 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 Company has no control for so long as such
events continue, and for a reasonable period of time thereafter.
5.8. Compliance with Law and Business Standards. Company shall comply with
Applicable Law, including without limitation, Health Care Law, including without
limitation, federal, state, and local laws and regulations affecting billing and
reimbursement, referrals, patient privacy and confidentiality, and management of
hazardous materials and infectious waste. Company shall discharge its
obligations under this Agreement consistent with applicable business and
industry standards and practices.
5.9. Quality Assurance. Company shall assist TOC in fulfilling TOC's
obligations to patients to maintain professionally recognized quality of medical
and professional services.
5.10. New Medical Services and Additional Practice Offices. If TOC desires
to have a new medical service provided at any of the Practice Offices or desires
to establish a new clinic, a proposal of such service or the establishment of
such new clinic shall be submitted to the Policy Board. Should the Policy Board
approve the expansion of service or the establishment of such new clinic,
Company, at its option, shall have the exclusive right to provide services
necessary to support TOC in TOC's delivery of such new medical services at the
Practice Office or new clinic, as applicable; provided, however, if the type of
service is an ancillary service that would be improper under any rules,
regulations or laws for Company to offer to TOC patients, then Company shall not
have the option to provide such service. Should Company decline to provide the
necessary support service for the new service or new clinic, TOC shall be
entitled to perform such service at TOC's own expense and the revenues therefrom
shall not be included in the calculation of Company's service fees under Article
VIII of this Agreement; provided, however, that Company shall have the option to
assume
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performance of the necessary support services for providing such new service or
new clinic by buying out TOC's investment in the service, at an amount equal to
the greater of: (i) TOC's Book Value as of the date of such purchase of all of
the assets owned by TOC and used in connection with the operation of such new
service or new clinic, or (ii) an amount equal to TOC's net income from the
investment, based on the twelve (12) months' operations immediately preceding
the date of purchase (and if less than twelve (12) months of operations have
occurred the actual net income from the investment on an annualized basis)
multiplied by five (5). For purposes of this Section 5.10, Book Value and net
income shall be determined on the basis of GAAP.
5.11. Collection of Certain Patient Receipts and Payment of Clinic
Expenses. TOC agrees to establish and maintain a bank account, which shall be
referred to as the TOC Operating Account, for the purpose of (a) depositing
proceeds from the sale of TOC's Accounts Receivable pursuant to Section 8.3 and
(b) paying (i) any Service Fees owed pursuant to Article VIII of this Agreement,
(ii) expenses which are solely the obligation of TOC (Excluded Expenses), and
(iii) compensation or distributions to Physician Owners, and the distributions
shall be made in that order of payment. TOC shall retain control of the account
but shall designate a Company employee as a signatory on the TOC Operating
Account. After the payment of any Service Fees owed pursuant to Article VIII of
this Agreement, and expenses which are solely the obligation of TOC, TOC may
withdraw amounts for distributions to Physician Owners.
5.12. Other TOC Accounts. TOC shall have the right to open or create bank
accounts in addition to the TOC Operating Account described in Section 5.11 of
this Agreement.
5.13. Discounts. All discounts on purchases made by Company on behalf of
TOC shall be passed on to TOC.
5.14 MRI Services. At the request of TOC, Company will xxxx and collect
the MRI Receivables. All such collections shall be deposited in a separate bank
account of TOC designated as the "MRI Account." Also, at the request of TOC,
Company will provide services to maintain the payroll records and accounting for
all full-time Technical Employees who provide only MRI Services and will pay all
employee related expenses thereto from funds deposited in the MRI Account.
Company shall also furnish to TOC a portion of the Main Office sufficient for
TOC to provide MRI Services. In exchange for these services, TOC will pay to
Company, in arrears, on the 15th day of each month, a fee equal to
[xxxxxxxxxxxxxxxxxxxxxxx] of the prior month's collection of MRI Receivables.
TOC Revenue and fees generated from MRI Services and collections of MRI
Receivables shall be kept separate from, and not commingled with, TOC's other
practice revenues and collections and TOC's Accounts Receivable.
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ARTICLE VI.
OBLIGATIONS OF TOC AND PHYSICIAN OWNERS
6.1. Professional Services.
6.1.1. TOC, its Physician Owners and Physician Employees shall provide
professional services to patients.
6.1.2. TOC, its Physician Owners and Physician Employees shall provide the
professional services to patients in compliance at all times with ethical
standards, laws and regulations applying to TOC's professional practice. TOC
shall also make all reports and inquiries to any state or federal data bank
(including the National Practitioners Data Bank) required by Applicable Law. TOC
shall use its best efforts to determine that each Physician Employee, each
Physician Extender Employee and Technical Employee associated with TOC who
provides medical care to patients of TOC is licensed by the state or states in
which he or she renders professional services. If any disciplinary or medical
malpractice action is initiated against any such individual, TOC shall
immediately provide Company with copies of any third-party documents (not
otherwise privileged) served on TOC or letters delivered to TOC. Such
information shall be deemed confidential information and shall, notwithstanding
such disclosure, remain subject to all privileges and immunities provided by
Applicable Law. Company shall take all steps reasonably necessary to assure that
such privileges and immunities remain intact. TOC shall carry out a program to
monitor the quality of medical care practiced at the Practice Offices to promote
a high quality of medical care.
6.2. Medical Practice. TOC shall use and occupy the Practice Offices
exclusively for the practice of medicine and shall comply with all Applicable
Law and standards of medical care. It is expressly acknowledged by the parties
that the medical practice or practices conducted at the Main Office shall be
conducted solely by physicians or medical practitioner associated with TOC, and
no other physician or medical practitioner shall be permitted to use or occupy
the Main Office without the prior written consent of Company.
6.3. Employment of Physician Employees. TOC shall have complete control of
and responsibility for the hiring, compensation, supervision, evaluation and
termination of Physician Employees, although at the request of TOC, Company
shall consult with TOC respecting such matters. TOC shall be responsible,
subject to Section 8.4, for the payment of such Physician Employees' salaries
and wages, payroll taxes, Physician Employee benefits and all other taxes and
charges now or hereafter applicable to them. With respect to physicians, TOC
shall only employ and contract with licensed physicians meeting applicable
credentialing guidelines established by TOC.
6.4. Professional Dues and Education Expenses. Except to the extent
provided in Section 8.1.3(k), Physician Owners shall be solely responsible for
the cost of membership in professional associations and the cost of continuing
professional education. TOC shall ensure that
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each Physician Employee participates in such continuing medical education as is
necessary for such physician to remain licensed.
6.5. Professional Insurance Eligibility. TOC shall cooperate in the
obtaining and retaining of professional liability insurance by assuring that all
Physician Employees are insurable and participating in an on-going risk
management program.
6.6. Events Excusing Performance. TOC and Physician Owners shall not be
liable to Company 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 TOC has no control for so long as such
events continue, and for a reasonable period of time thereafter.
6.7. Fees for Professional Services. TOC shall be solely responsible for
legal, accounting and other professional services fees (Excluded Expenses)
incurred by TOC, except for legal, accounting, and other professional service
fees incurred by TOC in the ordinary course of its business as determined by the
Policy Board.
6.8. Peer Review. TOC agrees to cooperate with Company in establishing a
system of peer review within and among the provider practices as necessary to
obtain provider contracts. In connection therewith, TOC agrees to assist in the
formulation of provider guidelines for each treatment or surgical modality, and
agrees to abide by said guidelines, and further agrees to submit to periodic
reviews by a third party to monitor compliance with said guidelines. TOC
acknowledges that the establishment of provider guidelines may be necessary to
obtain PPO, HMO, IPA and other similar provider contracts, both private and
government funded. To the extent that said provider guidelines must be filed or
registered with any Third-Party Payor, TOC agrees to cooperate with Company in
making such filings or registrations. It is agreed and acknowledged that all
such peer review guidelines shall be established and monitored by medical
personnel on the staff of TOC and other practices that are part of the peer
review process, and shall not be promulgated, established or enforced
independently by Company. To the extent possible, all information obtained
through the peer review process shall remain confidential and the parties shall
take all steps reasonably necessary to assure that all privileges and immunities
provided by Applicable Law remain intact.
6.9. TOC Employee Benefit Plans.
6.9.1. Effective as of the date of the closing under the Merger Agreement,
TOC shall assume the tax-qualified retirement plan(s) described on Exhibit 6.9.1
(the "TOC Plan") and amend the TOC Plan to provide that employees of Company who
are classified as "leased employees" (as defined in Code Section 414(n)) of TOC
shall be treated as TOC employees for purposes described in Code Section
414(n)(3). Not less often than annually, TOC and Company shall agree upon and
identify in writing those individuals to be classified as leased employees of
TOC (the "Designated Leased Employees"). TOC and Company shall establish
mutually agreeable procedures with respect to the participation of Designated
Leased Employees in the TOC Plan. Such procedures shall be designed
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to avoid the tax disqualification of the TOC Plan, similar plans of any other
practices managed by Company similarly situated and any plan adopted by Company
(collectively, the "Plans").
6.9.2. If the Policy Board determines that the relationship between
Company and TOC (and any other practices managed by Company similarly situated)
constitutes an "affiliated service group" (as defined in Code Section 414(m)),
Company and TOC shall take such actions as may be necessary to avoid the tax
disqualification of the Plans. Such actions may include the amendment, freeze,
termination or merger of the TOC Plan. Company and TOC intend that all possible
actions be taken by Company and TOC to retain the TOC Plan, including, but not
limited to, applying applicable tax qualification testing to the TOC Plan as
part of an affiliated service group including Company.
Company and TOC intend that all reasonable actions be taken by Company and
TOC to retain the TOC Plan as an active plan, including, but not limited to,
applying applicable tax qualification testing to the TOC Plan as part of an
affiliated service group including Company. Company agrees to explore such
options as may be suggested by TOC's advisors to retain the TOC Plan as an
active plan. The TOC Plan shall be converted to a non-active plan either by
amendment, freeze, termination or merger, only if no other reasonable option
exists for retaining the TOC Plan as an active plan. In the event Company and
TOC disagree with respect to any proposed action regarding the TOC Plan, the
Policy Board must approve such action before TOC shall be required to take such
action.
6.9.3. The Plans described on Exhibit 6.9.1 attached hereto are approved
by Company. TOC shall not enter into any new "employee benefit plan" (as defined
in Section 3(3) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA") without the consent of Company. In addition, TOC shall not
offer any retirement benefits or make any material retirement payments other
than under the TOC Plan to any stockholder of TOC without the express written
consent of Company. Except as otherwise required by law, TOC shall not
materially amend, freeze, terminate or merge the TOC Plan without the express
written consent of Company. In the event of either of the foregoing, Company's
consent shall not be withheld if such action would not jeopardize the
qualification of any of the Plans. TOC agrees to make such changes to the TOC
Plan, including the amendment freeze, termination or merger of the TOC Plan, as
may be approved by the Policy Board and Company but only if such changes are
necessary to prevent the disqualification of any of the Plans, and only if such
changes comply with Section 6.9.2 if TOC and Company are members of an
affiliated service group.
6.9.4. Expenses incurred in connection with the TOC Plan or other TOC
employee benefit plans, including, without limitation, the compensation of
counsel, accountants, corporate trustees, and other agents shall be included in
Clinic Expenses.
6.9.5. The contribution and administration expenses for the Designated
Leased Employees shall be included in TOC's operating budget. TOC and Company
shall not make employee benefit plan contributions or payments to TOC for their
respective employees in excess of such budgeted amounts unless required by law
or the terms of the TOC Plan. Company shall make contributions or payments with
respect to the TOC Plan or other TOC employee benefit plans, as a Clinic
Expense,
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on behalf of eligible Designated Leased Employees, and other eligible TOC
employees. In the event a TOC Plan or other TOC employee benefit plan is
terminated, Company shall be responsible, as a Clinic Expense, for any funding
liabilities related to eligible Designated Leased Employees; provided, however,
Company shall only be responsible for the funding of any liability accruing
after the date of the Merger Agreement.
6.9.6. Company shall have the sole and exclusive authority to adopt, amend
or terminate any employee benefit plan for the benefit of its employees,
regardless of whether such employees are Designated Leased Employees, unless
such actions would require the amendment, freeze or termination of the TOC Plan
to avoid disqualification of the TOC Plan, in which case any such action would
be subject to the express prior written consent of the Policy Board. Company
shall have the sole and exclusive authority to appoint the trustee, custodian
and administrator of any such plan.
6.9.7. In the event that any "employee welfare benefit plan" (as defined
in ERISA Section 3(l)) maintained or sponsored by TOC must be amended,
terminated, modified or changed as a result of TOC or Company being deemed to be
a part of an affiliated service group, the Policy Board will replace such plan
or plans with a plan or plans that provides those benefits approved by the
Policy Board. It shall be the goal of the Policy Board in such event to provide
substantially similar or comparable benefits if the same can be provided at a
substantially similar cost to the replaced plan.
6.10. Credentialing. To the extent permitted by applicable law, Company
shall assist TOC in the credentialing of each Physician Employee, each Technical
Employee and each Physician Extender Employee.
ARTICLE VII.
RESTRICTIVE COVENANTS AND ENFORCEMENT
The parties recognize that the services to be provided by Company shall be
feasible only if TOC operates an active medical practice to which both TOC and
the physicians associated with TOC devote their full time and attention. To that
end:
7.1. Exclusive Arrangement. During the term of this Agreement, Company
shall be TOC's and Physician Owners' sole provider of the management services
described in this Agreement and neither TOC, Physician Owners nor any of TOC's
or Physician Owners' employees shall provide such management services during the
term of this Agreement. TOC and the Physician Owners agree that during the term
of this Agreement, neither TOC nor Physician Owners will enter into any similar
agreements with any physician practice management company or entity. TOC and the
Physician Owners further agree that during the term of this Agreement, they will
not engage, directly or indirectly, as a principal owner, shareholder (other
than a holder of fewer than 5% of the outstanding shares of a publicly-traded
company), partner, joint venturer, agent, equity owner, or in any other capacity
whatsoever, in any corporation, partnership, joint venture, or other business
association or
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entity that provides management services of the nature provided by Company
pursuant to this Agreement, within Xxxx County, Florida or contiguous counties
or any location within seventy-five (75) miles of the Main Clinic or any future
facility that replaces the Main Clinic (wherever located) or any Satellite
Office utilized by TOC at any time during the term of this Agreement.
7.2. Restrictive Covenants.
7.2.1. By Current Physician Employees. TOC shall obtain and enforce formal
agreements from current Physician Employees, other than Physician Extender
Employees and Technical Employees, pursuant to which the Physician Employees
agree not to establish, operate or provide professional medical services at any
medical office, clinic or outpatient and/or ambulatory treatment or diagnostic
facility providing services substantially similar to those provided by TOC,
except on TOC's behalf, within Xxxx County, Florida or contiguous counties or
any location within seventy-five (75) miles during the first five (5) years of
the term of this Agreement or fifty (50) miles thereafter of the Main Office or
any future facility that replaces the Main Office (wherever located at such
time) or any Satellite Office at the time of termination of employment with TOC
and for a period of twenty-four (24) months after any termination of employment
with TOC. Such agreements shall be a condition to employment and shall be in a
form satisfactory to Company and shall provide that Company is a third-party
beneficiary to such agreements and that such third-party beneficiary rights may
be assigned to Company's lender ("Lender"). This Section 7.2 shall relate solely
to Physician Employees who are not also Physician Owners.
7.2.2. By Current and Future Physician Owners. On the earlier of one
hundred eighty (180) days from the effective date of this Agreement, or on
thirty (30) days after written request by Company, which written request
includes a reasonable explanation or basis for the request, TOC shall obtain and
enforce formal restrictive covenants with current and future Physician Owners,
the terms of which shall be substantially similar to the provisions of Exhibit
11. Such agreements shall provide that Company is a third-party beneficiary to
such agreements. TOC agrees to enforce the restrictive covenants. The cost and
expense of such enforcement shall be a Clinic Expense, and all damages and other
amounts recovered thereby shall be included in Professional Services Revenue. In
the event that after a request by Company, TOC does not pursue any remedy that
may be available to it by reason of a breach or default of a restrictive
covenant, upon the request of Company, TOC shall assign to Company such causes
of action and/or other rights it has related to such breach or default and shall
cooperate with and provide reasonable assistance to Company with respect
thereto; in which case, all costs and expenses incurred in connection therewith
shall be borne by Company and shall be included in Company Expenses, and Company
shall be entitled to all damages and other amounts recovered thereby. The above
described restrictive covenants between TOC and Physician Owners shall be in
addition to and not in place of the restrictive covenants described in Exhibit
11 between Company and the Physician Owners.
7.2.3. Limitation on Restrictive Covenants. Neither the foregoing
restrictive covenants nor the restrictive covenants set forth in Exhibit 11
shall limit or prevent Physician Owners or Physician Employees from (i) teaching
at any educational institution and from attending patients as a part of
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Physician Owner's duties as are normal and customary for such faculty position;
provided, however, such services must be incident to the academic/teaching
aspects of the institution and not incident to the regular examination of
patients for a fee whether billed in the name of the institution or the name of
the Physician Owner; (ii) authoring text books, research papers, newspaper,
radio, television, or other medical advice; (iii) engaging in research and
development the material components of which do not constitute medical practice
management; (iv) providing medical services, other than surgery, on behalf of
and as an employee or agent of a qualified I.R.C. ss. 501(c)(3) nonprofit
organization, governmental agency or educational institution (other than a
hospital or health care provider of any type); (v) providing professional
medical services in fields other than neurology or orthopedics, and (vi) serving
as a medical director of any organization offering medical care, but not
providing clinical services involving surgery.
7.3. Restrictive Covenants By Future Physician Employees. TOC shall obtain
and enforce formal agreements from each future Physician Employee other than
Physician Extender Employees and Technical Employees, hired or contracted,
pursuant to which such physicians agree not to establish, operate or provide
professional medical services at any medical office, clinic or outpatient and/or
ambulatory treatment or diagnostic facility providing services substantially
similar to those provided by TOC except on TOC's behalf, within Xxxx County,
Florida or contiguous counties or any location within seventy-five (75) miles
during the first five (5) years of the term of this Agreement or fifty (50)
miles thereafter of the Main Office or any future facility that replaces the
Main Office (wherever located at such time) or any Satellite Office at the time
of termination of said Physician Employee's contract with TOC and for a period
of twenty-four (24) months thereafter. Such agreements shall be a condition to
employment and shall be in a form satisfactory to Company and shall provide that
Company is a third-party beneficiary to such agreements and that such
third-party beneficiary rights may be assigned to any Lender. This Section 7.3
shall relate solely to Physician Employees who are not also Physician Owners.
The terms and conditions of Exhibit 11 shall govern restrictive covenants
relating to Physician Owners.
7.4. Rights of Company. Except as limited below, Company shall at all
times during the term of this Agreement and thereafter have the right to enter
into additional service agreements with other physicians and practices
regardless of where such physicians and/or practices are located providing for
management services and facilities to such physicians and/or practices.
Notwithstanding the foregoing, and except as set forth in Section 11.9.3, in the
event that Company desires to enter into a Service Agreement with another
practice located within seventy-five (75) miles during the first five (5) years
of the term of this Agreement or fifty (50) miles thereafter of TOC's Main
Office or any Satellite Office or any new office established pursuant to Section
5.10 above, or develop, purchase, own or operate a surgery center or MRI
facility or new service established pursuant to Section 5.12 above within such
radius, then the Policy Board must first approve Company entering into such
agreement or developing a surgery center or MRI facility or new service
established pursuant to Section 5.12 above.
7.5. Enforcement. TOC and the Company acknowledge and agree that since a
remedy at law for any breach or attempted breach of the provisions of this
Article VII shall be inadequate, offended
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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
Article VII relating to the restrictive period, scope of activity restricted
and/or the territory described therein shall be declared by a court of competent
jurisdiction to exceed the maximum time period, scope of activity restricted or
geographical area such court deems reasonable and enforceable under Applicable
Law, the time period, scope of activity restricted and/or area of restriction
held reasonable and enforceable by the court shall thereafter be the restrictive
period, scope of activity restricted and/or the territory applicable to the
restrictive covenant provisions in this Article VII. In addition, breach of the
provisions of this Article VII may trigger certain rights of Company to redeem a
Physician Owner's Company common stock pursuant to the terms of Article VIII of
that certain stockholders agreement between Company and its stockholders (the
"Stockholders Agreement").
7.6. Modification of Restrictive Covenants. Upon the termination of
employment of a Physician Owner or Physician Employee, the Policy Board shall
have the authority to release or reduce in whole or in part the terms of the
restrictive covenants, including but not limited to the mileage radius
limitations set forth above in Sections 7.2 and 7.3. In the event that the
individuals representing TOC on the Policy Board can reasonably demonstrate that
a modification to the restrictive covenant will not have a material adverse
effect on Company's or TOC's practice operations, earnings or cash flow, then
the individuals representing Company shall consent to the proposed
modifications.
ARTICLE VIII.
FINANCIAL ARRANGEMENTS
8.1. Service Fees. During the first thirty-six (36) months of the term of
this Agreement, Company shall receive a service fee equal to the sum of (a) the
greater of (i) [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]or (ii) the Base
Service Fee, plus (b) the amount of Clinic Expenses. Upon the expiration of the
first thirty-six (36) months of the term of this Agreement, Company shall
receive a service fee equal to [xxxxxxxxxxxxxxxxxxx]of Practice Net Revenue plus
the amount of Clinic Expenses. In the event that a Physician Owner ceases to
practice medicine during the first thirty-six (36) months of the term of this
Agreement, such Physician Owner shall be personally liable for any reduction in
TOC's service fees payable as further described under Section 11.9.1 of this
Agreement. In the event that a Physician Owner either dies or becomes Disabled
during such thirty-six (36) month period, TOC, or the applicable Physician
Owner, as the case may be, shall be entitled to satisfy the amount owed by
transferring to Company an amount of Company common stock having a Fair Market
Value equal to the amount owed or pay to Company cash in the amount owed (or a
combination thereof).
8.1.1. "Practice Net Revenue" shall mean Professional Services Revenue,
less Clinic Expenses.
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8.1.2. "Professional Services Revenue" shall mean all fees actually
recorded each month (net of any amounts reimbursed to any patients or
Third-Party Payors during the applicable month and net of any adjustments for
contractual allowances, Medicaid, worker's compensation, employee/dependent
health care benefit programs, professional courtesies and other activities that
do not generate a collectible fee) by or on behalf of TOC as a result of
professional medical services personally furnished to patients and other fees or
income generated in their capacity as Physician Employees and Technical
Employees, other than MRI Revenue, and any revenue from the sale of any goods.
8.1.3. "Clinic Expenses" shall mean all operating and non-operating
expenses of TOC arising hereunder unless expressly provided otherwise,
including, without limitation:
(a) salaries, benefits and other direct costs of all Clinic
employees including Company's employees and Physician Extender Employees
as defined in Section 8.1.5 working at the Practice Offices and salaries,
payroll taxes and employee benefits paid to Physician Employees (other
than Physician Owners) under Section 6.3 and to Technical Employees as
defined in Section 8.1.4,
(b) obligations of Company under Leases provided for herein under
Article III,
(c) the expenses and charges incurred for the Practice Offices,
including without limitation utilities, telephone, etc.,
(d) personal property and intangible taxes assessed against
Company's assets utilized by TOC in the Practice Offices from and after
the date of this Agreement,
(e) interest expense on indebtedness incurred by Company to (i)
satisfy the obligations of TOC, if any, assumed under the Merger
Agreement, (ii) provide working capital for Company's performance of any
of its obligations to TOC hereunder, or (iii) purchase equipment,
(f) malpractice insurance premiums, disability insurance premiums to
cover accommodations to the Practice Offices under the definition of
"Disabled" or "Disability," and fire, workers compensation and general
liability insurance premiums, and life insurance premiums, during the
first three (3) years of this Agreement, for life insurance on the lives
of Physician Owners, with TOC as the death beneficiary,
(g) the cost of any goods purchased for resale,
(h) the depreciation, as determined under GAAP, for any equipment or
depreciable property owned by Company and used in TOC's Facility by TOC to
be billed to TOC on a monthly basis and paid to Company at the same time
Company pays for TOC's Accounts Receivable pursuant to Section 8.3,
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(i) direct costs of all employees or consultants of Company engaged
to provide services at or in connection with TOC or who actually provide
services at or in connection with the Clinic for improved performance,
such as quality assurance, reasonable expenses required for physician
accommodations under the definition of "Disabled" or "Disability,"
materials management, purchasing program, change in coding analysis,
physician recruitment; provided, however, only the portion of expenses
related to such employee or consultant, without xxxx-up, that is allocable
in a fair and reasonable manner to work approved by the Policy Board which
is performed at or for the benefit of TOC shall be included in Clinic
Expenses,
(j) expenses related to professional meetings, seminars, dues,
medical books and professional licensing fees for Physician Employees
(other than Physician Owners) provided, however, that such amount shall
not exceed $10,000 during any calendar year for any Physician Employee
(other than Physician Owners). If the cost incurred for such professional
meetings, seminars, dues, medical books and professional licensing fees
exceeds $10,000 during any calendar year, then the Physician Employee
incurring such cost shall be solely liable for the overage;
(k) expenses related to professional meetings, seminars, dues,
medical books and professional licensing fees for Physician Owners;
provided, however, that such amount shall not exceed $10,000 during any
calendar year for any Physician Owner. If the cost incurred for such
professional meetings, seminars, dues, medical books and professional
licensing fees exceeds $10,000 during any calendar year, then the
Physician Owner incurring such cost shall be solely liable for the
overage;
(l) any health, life, dental and accident premiums paid on behalf of
Physician Employees to the extent deductible under the Code and to the
extent comparable benefits are paid to Physician Extender Employees and
Technical Employees;
(m) the cost of administering retirement plans; and
(n) any and all other ordinary and necessary expenses incurred by
TOC or approved by the Policy Board and reasonably incurred by the Company
for the direct benefit of TOC in carrying out their respective obligations
under this Agreement.
Clinic Expenses shall not include Excluded Expenses or Company Expenses.
Excluded Expenses shall be the sole obligation of TOC. Company Expenses shall be
the sole obligation of Company.
8.1.4. "Technical Employees" shall mean individuals who provide diagnostic
services and who are required by Applicable Law or Third-Party Payors to be
employees of TOC. All Technical Employees shall be employed by TOC.
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8.1.5. "Physician Extender Employees" shall mean Physician Assistants,
Nurse Practitioners, and other such persons providing services under the
supervision of Physician Employees and who are employees of Company, but
excluding any Technical Employees.
8.1.6. "Physician Employees" shall mean only those individuals who are
doctors of medicine (including Physician Owners) and who are employed by TOC or
are otherwise under contract with TOC to provide professional services to
patients seen in the Main Office or Satellite Offices and are duly licensed to
provide professional medical services in the state or states in which he or she
renders professional services under this Agreement.
8.1.7. "Company Expenses" shall mean, pursuant to GAAP applied on a
consistent basis:
(a) Any corporate overhead charges of Company and other items
incurred by Company that are not incurred specifically for the purpose of
providing services to TOC or are not directly attributable to TOC, as
reasonably determined by Company, including, without limitation, salaries
and benefits of executive officers of Company, except as otherwise
provided for in the definition of Clinic Expenses;
(b) Any amortization of any intangible asset resulting from the
Merger;
(c) Any depreciation attributable to increases in the book value of
tangible depreciable assets resulting from the Merger;
(d) Any legal and accounting expenses incurred by Company in
connection with the Merger; and
(e) All taxes of Company, including, but not limited to, state and
federal income taxes and franchise taxes, but excluding state and federal
employee taxes related to employees who provide services for TOC, property
taxes on assets used by TOC and other taxes specifically included in
Clinic Expenses.
8.1.8. "Excluded Expenses" shall be the sole obligation of TOC and shall
mean, pursuant to GAAP applied on a consistent basis:
(a) Any salaries or other distributions made to Physician Owners
whether for professional fee income or otherwise;
(b) Any federal, state or other taxes associated therewith;
(c) Except as provided in Section 8.1.3(k), expenses of Physician
Owner's to maintain licensure or meet continuing education requirements,
including related travel expense; and
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(d) Any expenses directly related to MRI Revenue; and
(e) Any other items specifically designated as Excluded Expenses
elsewhere in this Agreement including but not limited to those items
listed on Exhibit 8.1.8(d).
8.2. Payment of Service Fee. The amounts to be paid to Company under this
Article VIII shall be payable monthly, at the time that Company pays TOC for the
Accounts Receivable previously purchased by Company as described in Section 8.3
below. The amount payable shall be estimated based upon the previous month's
operating results of TOC. Adjustments to the estimated payments shall be made to
reconcile actual cumulative amounts due under this Article VIII, by the end of
the following month during each calendar year. Upon preparation of annual
financial statements as provided in Section 5.3, final adjustments to the
service fee for the preceding year shall be made and any additional payments
owing to Company or TOC shall then be made to the party owed the additional sum
of money. The adjustment and any amount owed shall be calculated and paid within
ninety (90) days following the close of Company's fiscal year.
8.3. Purchase of Accounts Receivable.
8.3.1. TOC hereby agrees to sell and assign to Company and Company agrees
to buy, all of TOC's Accounts Receivable each month during which this Agreement
is in existence which are owing to TOC arising out of the delivery of medical,
surgical, diagnostic or other professional medical goods or services. Accounts
Receivable shall not include, and Company shall not purchase, any cash, checks
or receivables created by credit cards. Company shall bear the risk of
collection and any overage or underage resulting from any purchased Accounts
Receivable.
8.3.2. The purchase price for each Accounts Receivable (the "Purchase
Price") will be equal to the face amount of the Accounts Receivable recorded
each month, less any non-allowed contractual adjustments and net of any reserve
for uncollectible Accounts Receivables based on the historical experience of the
practice as determined by the Policy Board. It is the intent of the parties that
the Purchase Price reflect the actual net realizable value of the Accounts
Receivable.
8.3.3. TOC will sell all Accounts Receivable to Company, such purchase to
be deemed to be made on the fifteenth (15th) day of the month following the
month in which such Accounts Receivable are created. Company shall pay for the
Accounts Receivable not later than the fifteenth (15th) day of each month
following the month in which the Accounts Receivable is created (the "Settlement
Date"). Company shall pay to TOC for all Accounts Receivable purchased by check,
wire transfer or intrabank transfer to the TOC Operating Account described in
Section 5.11. The purchase of Accounts Receivable shall be evidenced by sending
Company (i) a copy of each invoice with respect to each Third-Party Payor on the
Accounts Receivable then being purchased; and (ii) any other information or
documentation (including all required Uniform Commercial Code releases or
financing statements) Company may reasonably need to identify the Accounts
Receivable and obtain payment from the Account Debtors; provided that such
failure to send such documents shall not affect the obligation of TOC to sell
such Accounts Receivable or Company to buy such Accounts
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Receivable. As consideration for the purchase of Accounts Receivable by Company
pursuant to this Section 8.3, Company promises to pay and shall be obligated to
pay for such Accounts Receivable at the time and in the manner provided below.
To the extent permissible by Applicable Law, TOC will be deemed to have sold to
Company all of TOC's right, title and interest in such Accounts Receivable and
in any proceeds thereof, and Company will be the sole and absolute owner thereof
and will own all of TOC's rights and remedies represented by such Accounts
Receivable (including, without limitation, rights to payment from the respective
Account Debtors on such Accounts Receivable), and Company will have obtained all
of TOC's rights under all guarantees, assignments and securities with respect to
each such Accounts Receivable.
8.3.4. Upon expiration or termination of this Agreement for any reason,
(i) all Accounts Receivable purchased by Company shall remain the property of
Company and (ii) all Accounts Receivable purchased and not paid for at such
expiration or termination shall be paid for by the 10th of the following month
but effective as of the effective date of such expiration or termination date,
less the amount of any service fee earned by Company pursuant to Section 8.1 of
this Agreement.
8.3.5. In connection with the initial purchase of Accounts Receivable by
Company, TOC will execute such financing statements or amendments under the UCC
(naming Company as secured party and Lender as assignee) as Company may
reasonably request with respect to any Accounts Receivable that may be purchased
pursuant to this Agreement.
8.3.6. TOC agrees to cooperate with Company in the collection of the
Accounts Receivable sold by TOC, transferred pursuant to Section 8.3. At the
option of and upon the request of Company, TOC shall execute any and all
documentation necessary for the transfer of amounts constituting Accounts
Receivables and/or the establishment of lockboxes in accordance with the
provisions of Exhibit 8.3.6 attached hereto.
8.3.7. All Accounts Receivable of TOC purchased by Company ("Purchased
A/R") pursuant to this Section 8.3 hereof will, as such Purchased A/R are
purchased, be treated as Professional Service Revenues for accounting and
financial purposes.
8.4. Payment of Clinic Expenses. All Clinic Expenses shall be incurred in
the name of Company, unless TOC is required by law to incur such expenses, in
which case Company shall indemnify TOC against any such expenses. Company shall
pay all Clinic Expenses as they become due; provided, however, that Company may,
in the name and on behalf of TOC, contest in good faith any claimed Clinic
Expense to which there is any dispute regarding the nature, existence or
validity of such claimed Clinic Expense. Upon receipt of TOC's service fee,
Company shall be required to deposit into the TOC Operating Account described in
Section 5.11 an amount of money necessary for TOC to pay the compensation and
benefits associated with the Technical Employees and Physician Employees (other
than Physician Owners) employed by TOC.
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ARTICLE IX.
RECORDS
9.1. Patient Records. Upon termination of this Agreement and unless
otherwise provided herein, TOC shall retain all patient medical records
maintained by TOC or Company in the name of TOC. TOC shall, at TOC's option, be
entitled to retain copies of financial and accounting records relating to all
services performed by TOC. All parties agree to maintain the confidentiality of
patient identifying information and not to disclose such information except as
may be required or permitted by Applicable Law.
9.2. Records Owned by Company. All records relating in any way to the
operation of the Practice Offices which are not the property of TOC under the
provisions of Section 9.1 above, shall at all times be the property of Company.
9.3. Access to Records. During the term of this Agreement, and thereafter,
TOC or TOC's designee shall have reasonable access during normal business hours
to TOC's and Company's financial records, which relate to the operation of TOC
including, but not limited to, records of collections, expenses and
disbursements as kept by Company in performing Company's obligations under this
Agreement, and TOC may copy at TOC's expense any or all such records.
9.4. Government Access to Records. To the extent required by Section
1861(v)(1)(I) of the Social Security Act, each party shall, upon proper request,
allow the United States Department of Health and Human Services, the Comptroller
General of the United States, and their duly authorized representatives access
to this Agreement and to all books, documents, and records necessary to verify
the nature and extent of the costs of services provided by either party under
this Agreement, at any time during the term of this Agreement and for an
additional period of four (4) years following the last date services are
furnished under this Agreement. If either party carries out any of its duties
under this Agreement through an agreement between it and an individual or
organization related to it or through a subcontract with an unrelated party,
that party to this Agreement shall require that a clause be included in such
agreement to the effect that until the expiration of four (4) years after the
furnishing of services pursuant to such agreement, the related organization
shall make available, upon request by the United States Department of Health and
Human Services, the Comptroller General of the United States, or any of their
duly authorized representatives, all agreements, books, documents, and records
of such related organization that are necessary to verify the nature and extent
of the costs of services provided under that agreement.
ARTICLE X.
INSURANCE AND INDEMNITY
10.1. Insurance to be Maintained by TOC. Throughout the term of this
Agreement, TOC shall maintain comprehensive professional liability and worker's
compensation insurance for TOC and
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all employees of TOC in amounts approved by the Policy Board. Not in limitation
of the foregoing, TOC shall maintain excess general liability umbrella coverage
with a One Million Dollars ($1,000,000) limit as currently maintained by TOC
(with deductible provisions not to exceed $25,000 per occurrence), the cost of
which shall be paid by Company as a Clinic Expense. In lieu of the foregoing,
Company may provide as a Clinic Expense group insurance for malpractice and/or
worker's compensation insurance. Notwithstanding the foregoing, in the event
that Company procures such group insurance for malpractice and/or worker's
compensation insurance, TOC must first approve the amount of coverage, the
carrier and the terms of any such coverage for TOC.
10.2. Insurance to be Maintained by Company. Throughout the term of this
Agreement, Company shall provide and maintain, as a Clinic Expense,
comprehensive professional liability insurance and worker's compensation
insurance as required by Applicable Law for all professional employees of
Company who work at the Practice Offices with limits as determined reasonable by
the Policy Board, comprehensive general liability and property insurance
covering the Practice Offices' premises and operations. The deductible
provisions on the personal liability shall not exceed $25,000 per occurrence and
the commercial general liability insurance shall be in amounts customarily
maintained by other businesses in the same or similar business as Company.
10.3. Additional Insureds. TOC and Company 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 Company's expense. Further, on any
insurance where Company will be named as an additional insured, TOC will assist
Company to obtain appropriate riders to insure payment of any party indemnified
by Company.
10.4. Indemnification as to Third Party Claims. TOC shall indemnify, hold
harmless and defend Company, its officers, directors and employees, from and
against any and all liability, loss, damage, claim, causes of action, and
expenses (including reasonable attorneys' fees), 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 negligent omissions (other than for any
claims for (or in connection with) malpractice arising from the performance or
nonperformance of medical services) by TOC and/or TOC's Physician Owners,
agents, employees and/or subcontractors (other than Company) during the term
hereof. Company shall indemnify, hold harmless and defend TOC, the Physician
Owners, TOC's officers, directors and employees, from and against any and all
liability, loss, damage, claim, causes of action, and expenses (including
reasonable attorneys' fees), 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 negligent omissions by Company and/or its shareholders,
agents, employees and/or subcontractors (other than TOC and the Physician
Owners) during the term of this Agreement. Neither Company nor TOC shall have
any obligation to indemnify the other party unless the claim for indemnification
is based upon a liability, loss or damages resulting in the indemnified party
making payments to a third party. Pursuant to the terms of the Stockholders
Agreement, Company may have the right to redeem a Physician Owner's Company
common stock to satisfy a Physician Owner's indemnification obligations.
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In the event that either party makes a claim for indemnification under
either the Merger Agreement or this Service Agreement, then the other party
shall have the right to pay the amount claimed under this Agreement into an
escrow account (established pursuant to an escrow agreement to be agreed upon by
the parties) to be held by the escrow agent in an interest bearing account until
a determination by either (i) the parties, (ii) a court of proper jurisdiction
or (iii) agreed upon panel of arbitrators, has been made regarding the claiming
party's right to indemnification. In the event that the claiming party is
entitled to indemnification, then such escrowed funds shall be paid to the
claiming party in partial or complete satisfaction of such indemnification
obligation. Any excess funds remaining in the escrow account after the payment
of the indemnification obligation or any funds held in the escrow account if it
is determined that no indemnification obligation is owed shall be paid to the
other party.
ARTICLE XI.
TERM, TERMINATION AND RETIREMENT
11.1. Term of Agreement. This Service Agreement shall be effective upon
the closing of the Merger Agreement and shall expire on October 31, 2036, unless
earlier terminated pursuant to the terms hereof. Notwithstanding the foregoing,
for purposes of computing the Service Fee for the month of November of 1996
only, the Service Agreement shall be effective upon November 1, 1996.
11.2. Extended Term. Unless earlier terminated as provided for in this
Agreement, the term of this Agreement shall be automatically extended for
additional terms of five (5) years each, unless either party delivers to the
other party, at least one hundred eighty (180) days prior to the expiration of
the preceding term, written notice of such party's intention not to extend the
term of this Agreement.
11.3. Termination by TOC for Cause. TOC may terminate this Agreement
without breach as follows:
11.3.1. In the event of the filing of a petition in voluntary bankruptcy
or an assignment for the benefit of creditors by Company, or upon other action
taken or suffered, voluntarily or involuntarily, under any federal or state law
for the benefit of debtors by Company, except for the filing of a petition in
involuntary bankruptcy against Company which is dismissed within thirty (30)
days thereafter, TOC may give notice of the immediate termination of this
Agreement.
11.3.2. In the event Company 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 sixty (60) days after written notice thereof has
been given to Company by TOC; or Company shall fail to remit the payments due as
provided in Article VIII hereof and such failure to remit shall continue for a
period of thirty (30) days after written notice thereof, TOC may terminate this
Agreement.
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11.3.3. In the event Company shall, intentionally or in bad faith,
misapply funds or assets of TOC or commit a similar act which cause material
harm to TOC, TOC may terminate this Agreement.
11.3.4. In the event that Company shall intentionally or in bad faith
violate Applicable Law resulting in a direct, continuing material adverse effect
on the operations, earnings and cash flow of TOC, TOC may terminate this
Agreement.
11.4. Termination by Company for Cause. Company may terminate this
Agreement without breach as follows:
11.4.1. In the event of the filing of a petition in voluntary bankruptcy
or an assignment for the benefit of creditors by TOC, or upon other action taken
or suffered, voluntarily or involuntarily, under any federal or state law for
the benefit of debtors by TOC, except for the filing of a petition in
involuntary bankruptcy against TOC which is dismissed within thirty (30) days
thereafter, Company may give notice of the immediate termination of this
Agreement.
11.4.2. In the event TOC 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 ninety (90) days after written notice thereof has been
given to TOC by Company, Company may terminate this Agreement.
11.4.3. In the event TOC's Medicare or Medicaid Number shall be terminated
or suspended as a result of the action or inaction of TOC or a Physician
Employee, and such termination or suspension shall continue for thirty (30)
days, Company may give notice of the immediate termination of this Agreement,
unless TOC shall at that time be acting in good faith (and shall provide
reasonable evidence of the action being taken) to reverse such termination or
suspension. Notwithstanding any good faith effort on the part of TOC to reverse
such termination or suspension, if such termination or suspension shall not be
reversed within ninety (90) days after occurrence, Company shall have the right
to terminate this Agreement immediately.
11.4.4. In the event this Agreement is terminated by Company pursuant to
Section 11.4.1, Section 11.4.2, or Section 11.4.3, Company, at its option, may
require TOC to purchase from Company all assets, both tangible and intangible,
owned by Company and used or made available for TOC's use for the fair market
value of such assets on a going concern basis, without regard to this Agreement.
In addition thereto, TOC shall assume all debt (including any balance of any
remaining debt incurred by the Company to acquire the assets under the Merger
Agreement) and all contracts, payables and leases which are obligations of
Company which relate to the Company's obligations which are performed at the
Office Locations under this Agreement. The fair market value of the assets shall
be determined by an independent appraiser selected by two (2) independent
accountants practicing with "big six" accounting firms, one (1) selected by TOC
and one (1) selected by Company and neither of which is providing or has for a
period of two (2) years provided services to Company or TOC. In addition to the
payment for the practice assets, in the event Company terminates this Agreement
pursuant to Section 11.4.1, Section 11.4.2 or Section 11.4.3 within the first
five (5) years
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of the term of this Agreement, then TOC's Physician Owners shall (i) pay to
Company an amount of money equal to the Fair Market Value, as of the date of
termination, of one-third (1/3) of the shares of stock and cash consideration
issued by Company to TOC pursuant to the Merger Agreement or (ii) surrender to
Company for cancellation one-third (1/3) of the shares of stock and cash
consideration issued by Company to TOC pursuant to the Merger Agreement. All
expenses of any appraisal shall be paid by TOC. In the event that Company
terminates this Agreement pursuant to Sections 11.4.1 through 11.4.3, inclusive,
and Company requires TOC to purchase the practice assets, then upon the closing
of the purchase of the assets, TOC and its Physician Employees shall be released
from the restrictive covenants provided for under Exhibit 11 of this Agreement.
In addition, termination of this Agreement may trigger certain rights of Company
to redeem a Physician Owner's Company common stock pursuant to the terms of
Article VIII of the Stockholders Agreement.
11.5. Early Termination by TOC or Company Without Cause Upon Eighteenth
(18th) Month Anniversary of Agreement. Either party may terminate this Agreement
without cause upon written notice delivered to the other party not less than six
(6) months or more than nine (9) months or more prior to the end of the
eighteenth (18th) month anniversary of the date of this Agreement if the Company
has not filed a registration statement with the United States Securities and
Exchange Commission; provided, however, if the Company files a registration
statement, for an underwritten public offering, with the United States
Securities and Exchange Commission before the end of the date of the eighteenth
(18th) month anniversary of this Agreement, then such termination shall be
ineffective, and this Agreement shall continue in force unless otherwise
terminated pursuant to the other provisions of Article XI of this Agreement. In
the event that such registration statement is not effective within one hundred
twenty (120) days from filing, then the early termination rights described in
the first sentence of this Section 11.5 shall be again exercisable; provided,
further, that if such registration statement was filed during the above
described notice period for early termination, then such period shall be
extended for thirty (30) days from and after the date such early termination
rights again become exercisable. Notwithstanding any other provision of this
Agreement to the contrary, the termination rights set forth in this Section 11.5
shall immediately terminate and no longer be effective upon a Change in Control
of the Company. Upon a termination pursuant to this Section 11.5, TOC shall
tender to Company all of the stock issued to TOC by Company pursuant to the
Merger Agreement, and Company shall return to TOC the facilities and all assets,
both tangible and intangible, used or made available for TOC's use in the
Practice Office or acquired pursuant to the Merger Agreement. TOC shall assume
all debt secured by a purchase money security interest in assets or equipment
located at the TOC Office Locations and all contracts, payables and leases which
are obligations of Company and which relate to Company's obligations which are
performed at the Office Locations under this Agreement. For purposes of this
Section 11.5, the term purchase money security interest shall mean any debt, the
proceeds of which were used to acquire the asset secured by such indebtedness.
The Company and TOC shall cooperate to structure any exchange consummated
pursuant to this Section 11.5 in a manner designed to minimize the aggregate tax
consequences to the parties arising from the exchange. Closing of the exchange
pursuant to this Section 11.5 shall occur effective as of the third (3rd)
anniversary of this Agreement.
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11.6. Consequences of TOC Termination. In the event that this Agreement is
terminated by TOC under the terms of Section 11.3 or is terminated on any other
basis (other than (i) because of the normal expiration of its term set forth in
Section 11.1, (ii) by Company for cause as set forth in Section 11.4 or (iii) by
early termination as set forth in Section 11.5), then upon such termination, TOC
shall purchase from Company all assets, both tangible and intangible, owned by
Company and used or made available for TOC's use for the fair market value of
such assets on a going concern basis, without regard to this Agreement. The
purchase price shall be paid to TOC in cash, or in stock received under the
Merger Agreement, or in both, at the election of TOC. In addition thereto, TOC
shall assume all debt (including any balance of any remaining debt incurred by
the Company to acquire the assets under the Merger Agreement) and all contracts,
payables and leases which are obligations of Company which relate to the
performance of Company's obligations which are performed at the Office Locations
under this Agreement. The fair market value of the assets shall be determined by
an independent appraiser selected by two (2) independent accountants practicing
with "big six" accounting firms, one (1) selected by TOC and one (1) selected by
Company and neither of which is providing or has for a period of two (2) years
provided services to Company or TOC. Termination of this Agreement by TOC or a
Physician Owner may trigger Company's right to redeem all of Company common
stock owned by the Physician Owner as provided for in Section 8.1 (a) of the
Stockholders Agreement.
11.7. Closing of Purchase by TOC and Effective Date of Termination. TOC
shall, except as provided below in this Section 11.7 or in Sections 11.5 or 11.6
above, pay cash for the assets purchased pursuant to the provisions of this
Section 11. The amount of the purchase price shall be reduced, but not below
zero (0), by the amount of debt and liabilities of Company assumed by TOC and
shall also be reduced by any payment Company has failed to make under this
Agreement, provided that such payments or obligations are not otherwise
accounted for in the liabilities assumed by TOC in connection with the purchase
described herein. The closing date for the purchase shall be determined by TOC,
but shall in no event occur later than one hundred eighty (180) days from the
date of the notice of termination. The termination of this Agreement shall
become effective upon the closing of the sale of the assets and TOC and Company
shall be released from the restrictive covenants provided for in Article VII on
the closing date. Company shall give TOC credit towards the purchase price of
the assets for the Fair Market Value of any Company common stock tendered to the
Company in exchange for such assets. In the event that TOC terminates this
Agreement pursuant to Sections 11.3.1 through 11.3.4, inclusive, or Sections
11.5, 11.6 or 11.7, then upon the closing of the purchase of the assets, TOC and
its Physician Employees shall, except as TOC may so elect to limit through
separate agreements with Physician Owners and Physician Employees, be released
from the restrictive covenants provided for under Article VII or Exhibit 11 of
this Agreement.
11.8. Tail Policy. TOC shall obtain continuing liability insurance
coverage under either a "tail policy" or a "prior acts policy" with the same
limits and deductibles as set forth in Section 10.1 upon the termination of this
Agreement, or upon a physician's termination of his or her affiliation with TOC.
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11.9. Restrictions Applicable to Physician Owners. The Physician Owners
hereby acknowledge that the Merger and the terms and conditions of this
Agreement were determined based upon numerous factors, including the Physician
Owners continuing to practice medicine in the future. In connection therewith,
each Physician Owner agrees as follows:
11.9.1. Early Retirement. If at any time prior to the fifth (5th)
anniversary of this Agreement, a Physician Owner desires to retire from the
practice of medicine, such Physician Owner shall be obligated as follows:
(a) to give Company at least twelve (12) months prior written notice
of the intent to retire; provided, however, that once such retiring
physician has located a replacement physician satisfying the requirements
of Section 11.9.1(b), Company shall waive the remaining months of said
twelve (12) month notice period, and such retirement shall be effective
upon the earlier of twelve (12) months from the date of notice or
commencement of the replacement physician's employment;
(b) to locate a physician or physicians (which may be Physician
Employees), reasonably acceptable to the Policy Board, to replace such
Physician Owner under this Agreement (all costs of locating such
replacement physicians shall be paid by such Physician Owner (the
"Substitute Physician(s)");
(c) to pay to Company any loss of service fees payable under this
Agreement for the remainder of the first five (5) years of this Agreement.
Any loss for any periods of less than twelve (12) months shall be
calculated on an annualized and prorated basis. For purposes of this
Section 11.9.1(c), the amount of the loss shall be calculated as follows:
(i) The Policy Board shall calculate the retiring Physician
Owner's contribution to the payment of TOC's service fees
during the twelve (12) month period preceding the retiring
Physician Owner's notice of intent to retire.
(ii) In the event the Substitute Physician(s) were Physician
Employees prior to the date upon which notice of intent to
retire was given pursuant to Section 11.9.1(a), the Policy
Board shall calculate such Physician Employee(s) contribution
to the payment of TOC's service fees during the twelve month
period preceding the notice of intent to retire.
(iii) On each successive anniversary date of this Agreement (through
the fifth anniversary date) following the effective date of
such retirement, the Policy Board shall determine the amount
of service fees generated by the Substitute Physicians between
either (x) the effective date of retirement or (y) the
immediately preceding anniversary date, as applicable, and
such successive anniversary date.
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(iv) If the Substitute Physician(s) were Physician Employees prior
to date upon which the notice of intent to retire was given,
the amount of loss shall equal the difference between (i) the
amount calculated pursuant to Section 11.9.1(c)(i) plus the
amount calculated pursuant to Section 11.9.1(c)(ii) and (ii)
the amount calculated pursuant to Section 11.9.1(c)(iii).
(v) If the Substitute Physician(s) were not Physician Employees
prior to the date upon which the notice of intent to retire
was given, the amount of loss shall equal the difference
between (i) the amount calculated pursuant to Section
11.9.1(c)(i) and (ii) the amount calculated pursuant to
Section 11.9.1(c)(iii).
The Policy Board will provide the amount of the loss to the retiring Physician
Owner within thirty (30) days of the applicable anniversary date of this
Agreement and such amount shall be paid by such retiring Physician Owner to
Company within fifteen (15) days of the date of the delivery of the notice of
the amount of loss;
(d) to (i) pay to Company an amount of money equal to the Fair
Market Value, as of the date of retirement, of one-third (1/3) of the
shares of stock issued by the Company to the retiring Physician Owner
pursuant to the Merger Agreement or (ii) surrender to Company for
cancellation one-third (1/3) of the stock issued by Company to the
retiring Physician Owner pursuant to the Merger Agreement. (All expenses
of any appraisal shall be paid by such Physician Owner); and
(e) to honor and comply with the restrictive covenants for a period
of thirty-six (36) months, in accordance with the restrictions contained
in Exhibit 11.
11.9.2. Retirement. If at any time after the fifth (5th) anniversary of
this Agreement, a Physician Owner desires to retire, or assume full-time
teaching responsibilities, such Physician Owner shall notify Company in writing
at least twelve (12) months prior to the effective date of such retirement or
start of teaching position; provided, however, that no more than twenty percent
(20%) of the Physician Owners can retire or assume full time teaching
responsibilities within any twelve (12) month period; provided, further, that if
such retiring physician elects to, and has located a replacement physician,
Company shall waive the remaining months of said twelve (12) month notice
period, and such retirement shall be effective upon the earlier of twelve (12)
months from the date of notice or commencement of the replacement physician's
employment. Upon such retirement or start of teaching position, such Physician
Owner shall have no further obligations under this Agreement; provided, however,
the restrictive covenants provided for under Section 11.9.1(e) shall remain in
force. In fulfilling any such full-time teaching responsibilities, such
Physician Owner would be permitted to attend patients in a manner normal and
customary for such faculty position, provided, however, such services must be
incident to the academic/teaching aspects of the institution, and not incident
to the regular examination of patients for a fee whether billed in the name of
the institution or the name of the attending physician. It is not
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the intent of the Parties to permit a retired physician to conduct a medical
practice through an academic institution.
11.9.3. Physician Owner Change in Practice/Group Affiliation. In the event
that a Physician Owner leaves the employment of or terminates his or her
affiliation with TOC, then the terminating Physician Owner may, but shall not be
obligated to, join or establish another group/practice which has or will enter
into a Service Agreement with Company upon such terminating Physician Owner's
affiliation with such new group/practice. Upon entering into such new Service
Agreement, the terminating Physician Owner shall, except as limited by separate
employment agreements between TOC and Physician Owners, be released from any
obligation under this Service Agreement. Company shall have the right to enter
into such new Service Agreement without satisfying the requirements of paragraph
G of Exhibit 11. In the event that (i) TOC consents to the Company entering into
the new Service Agreement, (ii) entering into the new Service Agreement will not
adversely affect the operations and earnings of the Company, and (iii) the new
group/practice can satisfy the representations and warranties set forth in
Article XIII of this Agreement, then Company will not unreasonably withhold or
refrain from entering into a new Service Agreement with the terminating
Physician Owner's new group/practice. Except as set forth in the event that the
Physician Owner affiliates with a new group/practice that is not a party to a
Service Agreement with Company, then Company, at its option, may terminate this
Agreement solely with respect to the terminating Physician Owner, and the
provisions of Exhibit 11 shall apply. In the event that Company does not enter
into a new Service Agreement, then Company shall terminate this Agreement with
respect to such Physician Owner, and the terminating Physician Owner shall be
obligated as described in Sections 11.9.1 (a) and 11.9.1(e) of this Agreement;
provided, however, if such termination is within the first five (5) years of the
term of this Agreement, the terminating Physician Owner shall also be obligated
as described in Sections 11.9.1.(a), 11.9.1(b), 11.9.1(c), 11.9.1(d) and
11.9.1(e).
11.9.4. Death or Disability. In the event that a Physician Owner dies or
becomes disabled, then this Agreement shall be terminated with respect to such
Physician Owner; provided, however, in the event of disability, the restrictive
covenants described in Exhibit 11 shall remain in force for a period of
thirty-six (36) months from such termination.
ARTICLE XII.
DAMAGE AND LOSS; CONDEMNATION
12.1. Use of Insurance Proceeds. All insurance or condemnation proceeds
payable by reason of any physical loss of any of the improvements comprising the
facilities or the furniture, fixtures and equipment used by the Practice
Offices, shall be available for the reconstruction, repair or replacement, as
the case may be, of any damage, destruction or loss. The Policy Board, in
consultation with TOC, shall review and approve such reconstruction, repair or
replacement.
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12.2. Temporary Space. In the event of substantial damage to or the
condemnation of a significant portion of the facilities, Company shall use its
best efforts to provide temporary facilities until such time as the facilities
can be restored or replaced.
ARTICLE XIII.
REPRESENTATIONS AND WARRANTIES OF TOC AND PHYSICIAN OWNERS
TOC and Physician Owners represent, warrant, covenant and agree with
Company that:
13.1. Validity. TOC is a Florida corporation. TOC has the full power and
authority to own TOC's property, to carry on TOC's business as presently being
conducted, to enter into this Agreement, and to consummate the transactions
contemplated hereby. Each Physician Owner is an adult citizen and resident of
the State of Florida. Each Physician Owner has the full power and authority to
own his or her property, carry on his or her business as presently being
conducted, to enter into this Agreement, and to consummate the transactions
contemplated hereby.
13.2. Litigation. Except as disclosed pursuant to the Merger Agreement,
there is no suit, action, proceeding at law or in equity, arbitration,
administrative proceeding or other proceeding pending, or threatened against, or
affecting TOC or any Physician Employee, or to the best of TOC's and each
Physician Owner's knowledge, any provider or other health care professional
associated with or employed by TOC as pertains to any claim involving the
providing of health care related services, and to the best of TOC's and each
Physician Owner's knowledge there is no basis for any of the foregoing.
13.3. Permits. TOC and all health care professionals associated with or
employed by TOC have all permits and licenses and other Necessary Authorizations
required by all Applicable Law, except where failure to secure such licenses,
permits and other Necessary Authorizations does not have a material adverse
effect; have made all regulatory filings necessary for the conduct of TOC's
business; and are not in violation of any of said permitting or licensing
requirements.
13.4. Authority. The execution of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action, and this Agreement is a valid and binding Agreement of TOC and each
Physician Owner, enforceable in accordance with its terms. TOC and each
Physician Owner have obtained all third-party consents necessary to enter into
and consummate the transaction contemplated by this Agreement. Neither the
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby, nor compliance by TOC or any Physician Owner with any of
the provisions hereof, will:
13.4.1. violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under any license, agreement or other
instrument or obligation to which either TOC or any Physician Owner is a party;
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13.4.2. violate any order, writ, injunction, decree, statute, rule or
regulation applicable to either TOC or any Physician Owner.
13.5. Compliance with Applicable Law. To the best of TOC's and each
Physician Owner's knowledge and belief, TOC and each Physician Owner has
operated in compliance with all federal, state, county and municipal laws,
ordinances and regulations applicable thereto and neither TOC nor any provider
associated with or employed by TOC has received payment or any remuneration
whatsoever to induce or encourage the referral of patients or the purchase of
goods and/or services as prohibited under 42 U.S.C. ss. 1320a-7b(b), or
otherwise perpetrated any Medicare or Medicaid fraud or abuse, nor has any fraud
or abuse been alleged within the last five (5) years by any Governmental
Authority, a carrier or a Third-Party Payor.
13.6. Health Care Compliance. TOC is presently participating in or
otherwise authorized to receive reimbursement from or is a party to Medicare,
Medicaid, and other Third-Party Payor Programs. All necessary certifications and
contracts required for participation in such programs are in full force and
effect and have not been amended or otherwise modified, rescinded, revoked or
assigned as of the date hereof, and no condition exists or to the knowledge of
TOC no event has occurred which in itself or with the giving of notice or the
lapse of time or both would result in the suspension, revocation, impairment,
forfeiture or non-renewal of any such Third-Party Payor Program. TOC is in full
compliance with the material requirements of all such Third-Party Payor Programs
applicable thereto.
13.7. Fraud and Abuse. TOC and persons and entities providing professional
services for TOC, have not, to the knowledge of TOC and each Physician Owner,
after due inquiry, engaged in any activities which are prohibited by or are in
violation of the rules, regulations, policies, contracts or laws pertaining to
any Third-Party Payor Program, or which are prohibited by rules of professional
conduct ("Governmental Rules and Regulations"), including but not limited to the
following: (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failing to disclose knowledge by a
claimant of the occurrence of any event affecting the initial or continued right
to any benefit or payment on TOC's own behalf or on behalf of another, with
intent to fraudulently secure such benefit or payment; or (d) knowingly and
willfully soliciting or receiving any remuneration (including any kickback,
bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in
kind or offering to pay or receive such remuneration (i) in return for referring
an individual to a person for the furnishing or arranging for the furnishing or
any item or service for which payment may be made in whole or in part by
Medicare or Medicaid, or (ii) in return for purchasing, leasing, or ordering or
arranging for or recommending purchasing, leasing, or ordering any good,
facility, service or item for which payment may be made in whole or in part by
Medicare or Medicaid.
13.8. TOC Compliance. TOC has all licenses necessary to operate the
Practice Offices in accordance with the requirements of all Applicable Law and
has all Necessary Authorizations for the
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use and operation, all of which are in full force and effect. There are no
outstanding notices of deficiencies relating to TOC issued by any Governmental
Authority or Third-Party Payor requiring conformity or compliance with any
Applicable Law or condition for participation of such Governmental Authority or
Third-Party Payor, and after reasonable and independent inquiry and due
diligence and investigation, TOC has neither received notice nor has any
knowledge or reason to believe that such Necessary Authorizations may be revoked
or not renewed in the ordinary course.
13.9. Rates and Reimbursement Policies. The jurisdiction in which TOC is
located does not currently impose any restrictions or limitations on rates which
may be charged to private pay patients receiving services provided by TOC. TOC
does not have any rate appeal currently pending before any Governmental
Authority or any administrator of any Third-Party Payor Program. TOC has no
knowledge of any Applicable Law which has been enacted, promulgated or issued
within the eighteen (18) months preceding the date of this Agreement or any such
legal requirement proposed or currently pending in the jurisdiction in which TOC
is located which could have a material adverse effect on TOC or may result in
the imposition of additional Medicaid, Medicare, charity, free care, welfare, or
other discounted or government assisted patients at TOC or require TOC to obtain
any necessary authorization which TOC does not currently possess.
13.10. Accounts Receivable. With respect to the Purchased A/R, as of the
date of purchase:
13.10.1. All documents and agreements relating to the Purchased A/R that
have been delivered to Company with respect to such Accounts Receivable are true
and correct; TOC has billed the applicable Account Debtor and TOC has delivered
or caused to be delivered to such Account Debtor all requested supporting claim
documents with respect to such Accounts Receivable; all information set forth in
the xxxx and supporting claim documents is true and correct, and, if any error
has been made, TOC will promptly correct the same and, if necessary, rebill or,
if requested by Company, cooperate with Company to rebill such Accounts
Receivable.
13.10.2. The Purchased A/R are exclusively owned by TOC and there is no
security interest or lien in favor of any third party, or the recording or
filing against TOC, as debtor, covering or purporting to cover any interest of
any kind in any Accounts Receivable, except as has been released by each party
holding such adverse interest in the Accounts Receivable. Upon payment of the
Purchase Price with respect to the Purchased A/R and with respect to
Governmental Receivables, to the extent permissible by law, all right, title and
interest of TOC with respect thereto shall be vested in Company, free and clear
of any lien, security interest, claim or encumbrance of any kind, and TOC agrees
to defend the same against the claims of all Persons.
13.10.3. The Purchased A/R (i) are payable, in an amount not less than
their face amount, as adjusted pursuant to the provisions of Section 8.3.2, by
the Account Debtor identified by TOC as being obligated to do so, (ii) are based
on an actual and bona fide rendition of services or sale of goods to the patient
by TOC in the ordinary course of business, (iii) are denominated and payable
only in lawful currency of the United States, and (iv) are accounts or general
intangibles within the meaning of the UCC of the state in which TOC has its
principal place of business, or are rights to
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payment under a policy of insurance or proceeds thereof, and are not evidenced
by any instrument or chattel paper. There are no payors other than the Account
Debtor identified by TOC as the payor primarily liable on any Purchased A/R.
13.10.4. The Purchased A/R are not (i) subject to any action, suit,
proceeding or dispute (pending or threatened), set-off, counterclaim, defense,
abatement, suspension, deferment, deductible, reduction or termination by the
Account Debtors other than routine adjustments and disallowances made in the
ordinary course of business, to the extent of such adjustments and
disallowances, (ii) past or within sixty (60) days of, the statutory limit for
collection applicable to the Account Debtor, (iii) subject to an invoice which
provides for payment more than forty-five (45) days from the date of such
invoice, (iv) an account which arises out of a sale or other transaction by or
between TOC to an Affiliate of TOC, (v) from an Account Debtor who is also a
creditor of TOC, (vi) an account in which the Account Debtor has commenced a
voluntary case, or an involuntary proceeding has been instituted, under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit or creditors, or if a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect to the
Account Debtor, (vii) an account of which the goods giving rise to such Accounts
Receivable have not been shipped and delivered to and accepted by the Account
Debtor or the services giving rise to such Accounts Receivable have not been
performed by TOC and accepted by the Account Debtor or the Accounts Receivable
otherwise does not represent a final sale, (viii) is evidenced by an instrument
or chattel paper unless such instrument or chattel paper is delivered to Company
with all appropriate endorsements in favor of Company, or (ix) other than a
complete bona fide transaction which requires no further act under any
circumstances on the part of TOC to make the Accounts Receivable payable by the
Account Debtor.
13.10.5. TOC does not have any guaranty of, letter of credit providing
credit support for, or collateral security for, the Purchased A/R, other than
any such guaranty, letter of credit or collateral security as has been assigned
to Company, and any such guaranty, letter of credit or collateral security is
not subject to any lien in favor of any other person.
13.10.6. The goods or services provided and reflected by the Purchased A/R
were medically necessary for the patient in the opinion of TOC and the patient
received such goods or services.
13.10.7. The face amount of the Accounts Receivable for the services
constituting the basis for the Purchased A/R are consistent with the usual,
customary and reasonable fees charged by other similar medical service providers
in TOC's community for the same or similar service.
13.10.8. Each Account Debtor with respect to the Purchased A/R (i) is not
currently the subject of any bankruptcy, insolvency or receivership proceeding,
nor is it generally unable to make payments on its obligations when due, (ii) is
located in the United States, and (iii) is one of the following: (x) a party
which in the ordinary course of its business or activities agrees to pay for
healthcare services received by individuals, including, without limitation,
Medicare, Medicaid, governmental bodies, commercial insurance companies and
non-profit insurance companies (such as Blue Cross and Blue Shield entities)
issuing health, personal injury, workers compensation or other
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types of insurance; (y) employers or unions which self-insure for employee or
member health insurance, prepaid healthcare organizations, preferred provider
organizations, health maintenance organizations or any other similar person, or
(z) a Third-Party Payor of the type described in the definition of Governmental
Receivables.
13.10.9. The proceeds of the sale of the Purchased A/R will be used for
the business and commercial purposes of TOC. The sale of the Purchased A/R
hereunder is made in good faith and without actual intent to hinder, delay or
defraud present or future creditors of TOC.
13.10.10. Except with respect to Governmental Receivables, the insurance
policy, contract or other instrument obligating an Account Debtor to make
payment with respect to the Purchased A/R (i) does not contain any provision
prohibiting the transfer of such payment obligation from the patient to TOC, or
from TOC to Company, (ii) has been duly authorized by TOC and to the knowledge
of TOC has been duly authorized by the Account Debtor and, together, with the
Purchased A/R, constitutes the legal, valid and binding obligation of the
Account Debtor in accordance with its terms, (iii) together with the applicable
Purchased A/R, does not contravene in any material respect any requirement of
law applicable thereto, and (iv) was in full force and effect and applicable to
the patient at the time the services constituting the basis for the Purchased
A/R were performed.
The Purchased A/R are purchased without recourse, except for the
representations, warranties and covenants made by TOC and the Physician Owners
with respect thereto. None of the foregoing representations and warranties with
respect to the Purchased A/R shall be deemed to constitute a guaranty by TOC
that the Purchased A/R will be collected by Company. TOC shall not be
responsible for any damages for any breach of a representation or warranty under
this Section 13.10 until Company has suffered a loss on the purchase of TOC's
Accounts Receivable. Damages for such breach shall be limited to the amount of
Company's loss on the purchase of such Accounts Receivable.
13.11. Full Disclosure. When considered in the context of all information
contained herein, to the knowledge of TOC no representation or warranty made by
TOC in this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading.
13.12. Exhibits. All the facts recited in Exhibits annexed hereto shall be
deemed to be representations of fact by TOC as though recited in this Article
XIII.
ARTICLE XIV.
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents, warrants, covenants and agrees with TOC as follows:
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14.1. Organization. Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Company
has the full power to own its property, to carry on its business as presently
conducted, to enter into this Agreement and to consummate the transactions
contemplated hereby.
14.2. Authority. Company has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, as well as the
consummation of the transactions contemplated hereby. The execution and delivery
of this Agreement do not, and the consummation of the transactions contemplated
hereby will not, violate any provisions of the charter or the bylaws of Company
or any indenture, mortgage, deed of trust, lien, lease, agreement, arrangement,
contract, instrument, license, order, judgment or decree or result in the
acceleration of any obligation thereunder to which Company is a party or by
which it is bound.
14.3. Absence of Litigation. No action or proceeding by or before any
court or other Governmental Authority has been instituted or is, to the best of
Company's knowledge, threatened with respect to the transactions contemplated by
this Agreement.
14.4. Transactions with Affiliates. Company shall not enter into any
transaction or series of transactions, whether or not related or in the ordinary
course of business, with any Affiliate of TOC or Company, other than on terms
and conditions substantially as favorable to Company as would be obtainable by
Company at the time in a comparable arm's-length transaction with a person not
an Affiliate.
ARTICLE XV.
COVENANTS OF TOC AND PHYSICIAN OWNERS
15.1. Merger, Consolidation and Other Arrangements. TOC shall not
incorporate, merge or consolidate with any other entity or individual or
liquidate or dissolve or wind-up TOC's affairs or enter into any partnerships,
joint ventures or sale-leaseback transactions or purchase or otherwise acquire
(in one or a series of related transactions) any part of the property or assets
(other than purchases or other acquisitions of inventory, materials and
equipment in the ordinary course of business) of any other person or entity.
15.2. Necessary Authorizations/Assignment of Licenses and Permits. TOC and
each Physician Owner shall maintain all licenses, permits, certifications, or
other Necessary Authorizations and shall not assign or transfer any interest in
any license, permit, certificate or other Necessary Authorization granted to it
by any Governmental Authority, nor shall TOC or any Physician Owner assign,
transfer, or remove or permit any other individual or entity to assign, transfer
or remove any records of TOC or any Physician Owner, including without
limitation, patient records, medical and clinical records (except for removal of
such patient records as required under any Applicable Law).
- 41 -
15.3. Transaction with Affiliates. Neither TOC nor any Physician Owner
shall enter into any transaction or series of transactions, whether or not
related or in the ordinary course of business, with any Affiliate of TOC or
Company, other than on terms and conditions substantially as favorable to TOC or
the Physician Owner, as would be obtainable by TOC or the Physician Owner at the
time in a comparable arms-length transaction with a person not an Affiliate.
15.4. Compliance with All Laws. TOC and each Physician Owner shall use
their best efforts to comply with all laws and regulations relating to TOC's
practice and the operation of any facility, including, but not limited to, all
state, federal and local laws relating to the acquisition or operation of a
health care practice. Furthermore, neither TOC nor any Physician Owner shall
intentionally violate any Governmental Rules and Regulations.
15.5. Third-Party Payor Programs. TOC shall maintain TOC's compliance with
the requirements of all Third-Party Payor Programs in which TOC is currently
participating or authorized to participate.
15.6. Change in Business or Credit and Collection Policy. TOC shall not
make any change in the character of TOC's business or in the credit and
collection policy, which change would, in either case, impair the collectibility
of any Purchased A/R or any Merger A/R or otherwise modify, amend or extend the
terms of any such account other than in the ordinary course of business.
15.7. Treatment of Accounts Receivable. TOC will (i) treat transfers to
Company of Accounts Receivable hereunder as a sale for all purposes, including
tax and accounting (and shall accurately reflect such sale in its financial
statements), and will advise all persons who inquire about the ownership of such
Accounts Receivable that they have been sold to Company; (ii) not treat any such
Accounts Receivable as an asset on TOC's books and records; (iii) record in
TOC's books, records and computer files pertaining thereto that such Accounts
Receivable have been sold to Company; (iv) pay all taxes, if any, relating to
the transfer of such Accounts Receivable after the same have been purchased by
Company; (v) not impede or interfere with Company's collection of such Accounts
Receivable; (vii) not amend, waive or otherwise permit or agree to any deviation
from the terms or conditions of such purchased Accounts Receivable; (viii) use
all reasonable efforts to obtain all consents from patients which are required
by law in order for Company, or any servicing entity retained by Company, to
secure information needed to obtain or to expedite payment from the respective
Account Debtors; and (ix) have billed such Accounts Receivable on the same bases
and using the same policies and practices that it has used in the past unless
Company has been advised in writing of a change prior to the purchase of such
Accounts Receivable. Company or its designated representatives from time to time
may verify the Accounts Receivable, inspect, check, take copies or extracts from
TOC's books, records and files, and TOC will make the same available to Company
or such representatives at any reasonable time for such purposes.
15.8. Security Interest. If, contrary to the mutual intent of TOC and
Company, any purchase of Purchased A/R is characterized as a loan and not as a
sale, TOC shall, effective as of the date hereof, be deemed to have granted (and
TOC does hereby grant) to Company a first priority security
- 42 -
interest in and to any and all of the Purchased A/R and the proceeds thereof to
secure the repayment of all amounts advanced to TOC hereunder with accrued
interest thereon, and this Agreement shall be deemed to be a security agreement.
With respect to such grant of a security interest, Company may at its option
exercise from time to time any and all rights and remedies available to it under
the UCC or otherwise. TOC agrees that five (5) days shall be reasonable prior
notice of the date of any public or private sale or other disposition of all or
part of the Purchased A/R. TOC represents and warrants that the location of
TOC's principal place of business, and all locations where TOC maintains records
with respect to its accounts are set forth under its name in Section 16.3
hereof. TOC agrees to notify Company in writing thirty (30) days prior to any
change in any such location. The exact name of TOC is as set forth at the
beginning of this Agreement, and except as set forth on the signature page
hereof, TOC has not changed its name in the last five (5) years, and during such
period TOC did not use, nor does TOC now use, any fictitious or trade name other
than the former name of Company. TOC shall notify Company in writing thirty (30)
days prior to any change in any such name.
ARTICLE XVI.
GENERAL PROVISIONS
16.1. Assignment. Company shall have the right to assign its rights
hereunder to Specialty Care Network, Inc. and to any person, firm or corporation
under common control with Company and to any lending institution from which
Company obtains financing, including but not limiting the restrictive covenants
included in Article VII (covenant not to compete), for security purposes or as
collateral. TOC agrees to, and acknowledges, Company's right to assign Company's
rights under this Agreement to any Lender and further agrees that upon receipt
of written notice from such Lender, TOC shall pay to Lender or cause to be paid
to Lender all amounts which are otherwise payable to Company pursuant to the
terms of this Agreement, including, without limitation, all service fees, and
other Clinic Expenses and, until such amounts are delivered to Lender, hold
payments in trust for Lender. Except as set forth above, neither Company nor TOC
shall have the right to assign their respective rights and obligations hereunder
without the written consent of the other party. Without limiting the foregoing,
TOC acknowledges that, as collateral for certain obligations, Company has
assigned all of its rights hereunder to NationsBank of Tennessee, N.A. as Agent
(the "Agent") for itself and other banks and institutional lenders from time to
time (collectively the "Banks") and has granted the Agent for the benefit of the
Banks a lien and security interest upon all real and personal property used in
the operation of the Office Locations (the "Pledged Assets"). As an inducement
for the Banks to extend or continue the extension of credit to Company, TOC (i)
acknowledges that the collateral assignment to the Agent covers all rights of
Company hereunder, including, but not limited to, rights arising from warranties
and representations made by TOC, rights to enforce covenants made by TOC, and
rights to receive all payments due Company; (ii) agrees to regard the Agent as
the owner of any or all of the assigned rights upon written notice to TOC of
this election from the Agent; (iii) agrees that neither the Agent nor any of the
Banks has obligation for the performance of the duties of Company hereunder, and
shall not assume any such duty by the exercise of rights as a secured lender;
(iv) agrees to give the Agent written notice of any material default hereunder
on
- 43 -
Company's part at the address of 0 XxxxxxxXxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxx
00000, Attn: Xxxxx Xxxxx, and to allow at least thirty (30) days thereafter for
the cure of such default before TOC terminates this Agreement; (v) agrees that
the rights of TOC under this Agreement, including, but not limited to, the right
to the use of the Pledged Assets, are and shall be junior to any security
interest that the Agent and the Banks, their successors or assigns may have in
the Pledged Assets at any time; (vi) agrees that the benefits of the above
undertakings in favor of the Agent and Banks shall further extend to all
successors and assigns of the Agents and Banks, provided that any notices given
by TOC under this Section shall be given to the Agent at the foregoing address
unless TOC has received written notice of a change thereof; and (vii) agrees
that this Section may not be modified, and no provision of this Section may be
waived, absent the written approval of the Agent.
16.2. Whole Agreement; Modification. This Agreement supersedes all prior
agreements between the parties and there are no other agreements or
understandings, written or oral, between the parties regarding this Agreement,
the Exhibits and the Schedules, other than as set forth herein. This Agreement
shall not be modified or amended except by a written document executed by both
parties to this Agreement.
16.3. Notices. All notices required or permitted by this Agreement shall
be in writing and shall be deemed to have been given (i) when received if given
in person, (ii) on the date of acknowledgment of receipt if sent by telex,
facsimile or other wire transmission, (iii) one business day after being sent by
overnight delivery service, or (iv) three days after being deposited in the
United States mail, certified or registered mail, postage prepaid, addressed as
follows:
To Company: TOC Services, Inc.
0000 Xxxxxxx Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxxx, Xxxxxxx 00000
To TOC: TOC Specialists, L.C.
0000 Xxxxxxx Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxxx, Xxxxxxx 00000
or to such other address as either party shall notify the other.
16.4. Binding on Successors. Subject to Section 16.1, this Agreement shall
be binding upon the parties hereto, and their successors, assigns, heirs and
beneficiaries.
16.5. Waiver of Provisions. Any waiver of any terms and conditions hereof
must be in writing, and signed by the parties hereto. The waiver of any of the
terms and conditions of this Agreement shall not be construed as a waiver of any
other terms and conditions hereof.
16.6. Governing Law. The validity, interpretation and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of Florida.
- 44 -
16.7. No Practice of Medicine. The parties acknowledge that Company is not
authorized or qualified to engage in any activity which may be construed or
deemed to constitute the practice of medicine. To the extent any act or service
required of Company in this Agreement should be construed or deemed by any
Governmental Authority or court to constitute the practice of medicine, the
performance of said act or service by Company shall be deemed waived and
unenforceable to the minimum extent required to comply with Applicable Law.
16.8. Severability. The provisions of this Agreement shall be deemed
severable and if any portion shall be held invalid, illegal or unenforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties.
16.9. Additional Documents. Each of the parties hereto agrees to execute
any document or documents that may be requested from time to time by any other
party to implement or complete such party's obligations pursuant to this
Agreement.
16.10. Attorneys' Fees. If legal action is commenced by any party to
enforce or defend its rights under this Agreement, the prevailing party in such
action shall be entitled to recover its costs and reasonable attorneys' fees in
addition to any other relief granted.
16.11. Time is of the Essence. Time is hereby expressly declared to be of
the essence in this Agreement.
16.12. Confidentiality. No party hereto shall disseminate or release to
any third party any information regarding any provision of this Agreement, or
any financial information regarding the other (past, present or future) that was
obtained by the other in the course of the negotiations of this Agreement or in
the course of the performance of this Agreement, including, but not limited to,
any information relating to the internal operations of TOC, TOC fees or the
terms of any of the managed care contracts, without the other party's written
approval; provided, however, the foregoing shall not apply to information which
(i) is generally available to the public other than as a result of a breach of
confidentiality provisions; (ii) becomes available on a non-confidential basis
from a source other than the other party or its affiliates or agents, which
source was not itself bound by a confidentiality agreement; (iii) which is
required to be disclosed by law or pursuant to court order; or (iv) except for
disclosure to its banks, underwriters or lenders, or its advisors to the extent
required by Section 9.4, or as required in connection with reports on filings
with the SEC or State Departments of Securities. Company shall provide TOC with
copies of any information regarding TOC provided by Company to any third party.
16.13. Contract Modifications for Prospective Legal Events. If 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 in such a manner as to indicate that the
structure of this Agreement may be in violation of such laws or regulations, TOC
and Company shall amend this Agreement as necessary. To the maximum extent
possible, any such
- 45 -
amendment shall preserve the underlying economic and financial arrangements
between and among TOC and Company.
16.14. Remedies Cumulative. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party shall be considered exclusive
of any other remedy available to any party, but the same shall be distinct,
separate and cumulative and may be exercised from time to time as often as
occasion may arise or as may be deemed expedient.
16.15. Language Construction. The language in all parts of this Agreement
shall be construed, in all cases, according to TOC's fair meaning, and not for
or against either party hereto. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
16.16. No Obligation to Third Parties. Except as provided in Section 16.1,
none of the obligations and duties of Company or TOC under this Agreement shall
in any way or in any manner be deemed to create any obligation of Company or of
TOC to, or any rights in, any person or entity not a party to this Agreement.
16.17. Communications. TOC and Company agree that good communication
between the parties is essential to the successful performance of this
Agreement, and each
- 46 -
pledges to communicate fully and clearly with the other on matters relating to
the successful operation of TOC's practice at the Practice Offices.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
TOC:
TOC SPECIALISTS, P.L.
(d/b/a Tallahassee Orthopedic Clinic)
By:_________________________________________
Title:______________________________________
COMPANY:
TOC SERVICES, INC.
(f/k/a Tallahassee Orthopedic Clinic, P.A.)
By:_________________________________________
Title:______________________________________
- 47 -
PHYSICIAN OWNERS:
________________________________________
Xxxx X. Xxxxxxxxx, M.D.
________________________________________
Xxxxx X. Xxxx, M.D., M.D.
________________________________________
Xxxxxxx X. Xxxxxxxxx, M.D.
________________________________________
Xxxxxx Xxxxx, M.D.
________________________________________
Xxxx X. Xxxxx, M.D.
________________________________________
Xxx X. Xxxxx, M.D.
________________________________________
Xxxxxxx X. Xxxxxxxxx, Xx., M.D.
________________________________________
Xxxxx X. Xxxxxx, M.D.
________________________________________
J. Xxxx Xxxx, M.D.
________________________________________
Xxxx X. Xxxxxxx, M.D.
________________________________________
Xxxxxx X. Xxxxxxxxxx, M.D.
________________________________________
Xxxxx X. Xxxxxxxxx, M.D.
________________________________________
Xxxxxxx X. Xxxxx, M.D.
- 48 -
EXHIBIT 3.1
LEASE AGREEMENT
3.1-1
EXHIBIT 4.1
POLICY BOARD GOVERNANCE RULES
A. Number, Tenure and Qualifications. The Policy Board shall consist of six (6)
members. Company shall designate, in its sole discretion, three (3) members of
the Policy Board. TOC shall designate, in TOC's sole discretion, three (3)
members of the Policy Board. The initial Policy board shall be chosen at the
time of the closing of the Exchange. Thereafter, the respective Policy Board
Members shall be chosen at such time and in such manner as shall be determined
by the respective party making the appointment.
B. Duties and Responsibilities of the Policy Board. The Policy Board shall
have the duties and responsibilities more particularly described in Section 4.2
of this Agreement.
C. Regular Meetings of the Policy Board. Regular meetings of the Policy
Board shall be held on the first Monday of each calendar quarter at such times
and places as the Policy Board by resolution may determine and specify, and if
so determined no notice thereof need be given.
D. Special Meetings. Special meetings of the Policy Board may be held at
any time or place whenever called by written request of at least two (2) Policy
Board Members, notice thereof being given to each Policy Board Member by the
Policy Board Members calling the meeting, or they may be held at any time
without formal notice provided all of the Policy Board Members are present or
those not present shall at any time waive or have waived notice thereof.
E. Notice. Notice of any special meeting shall be given at least ten (10)
days previously thereto by written notice delivered personally, by telegram, or
facsimile. If mailed, such notice shall be mailed to each Policy Board Member at
his business address no less than ten (10) days previously thereto, and shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to the telegraph
company. If notice be given by facsimile, such notice shall be deemed to be
delivered when information of the transmission is received.
F. Meetings by any Form of Communication. The Policy Board shall have the
power to permit any and all Policy Board Members to participate in a regular or
special meeting by, or conduct the meeting through the use of any means of
communication by which all Policy Board Members participating may simultaneously
hear each other during the meeting. A Policy Board Member participating in a
meeting by this means is deemed to be present in person at the meeting.
G. Quorum. All of the members of the Policy Board as constituted from time
to time shall constitute a quorum for the transaction of business, but a lesser
number may adjourn any meeting and the meeting may be held as adjourned without
further notice. When a quorum is present
4.1-1
at any meeting, a majority of the members present thereat shall decide any
question brought before such meeting, except as otherwise provided by this
Agreement or by these Governance Rules. The fact that a Policy Board Member has
an interest in a matter to be voted on at the meeting shall not prevent his
being counted for purposes of a quorum.
H. Vacancies. Any vacancy occurring in the Policy Board shall be filled by
the Party which chose such vacated Policy Board Member(s).
I. Removal. Any Policy Board Member may be removed without cause by the
Party which chose such Policy Board Member.
J. Committees. The majority of the Policy Board may appoint an executive
committee or such other committees as it may deem advisable, composed of one (1)
or more Policy Board Members, and may delegate authority to such committees as
is not inconsistent with this Agreement. The members of such committee shall
serve at the pleasure of the Policy Board.
K. Presumption of Assent. A Policy Board Member who is present at a
meeting of the Policy Board at which action on any matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the secretaries of the Company and TOC immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a Policy Board Member who
voted in favor of such action.
L. Informal Action by Board Members. Any action required to be taken at a
meeting of the Policy Board, or any other action which may be taken at a meeting
of the Policy Board, may be taken without a meeting if all Policy Board Members
consent to taking such action without a meeting. If all Policy Board Members
consent to taking such action without a meeting, the affirmative vote of a
majority of the Policy Board Members is the act of the Policy Board. The action
must be evidenced by one or more written consents describing the action taken,
signed by each Policy Board Member, indicating each signing Policy Board
Member's vote or abstention on the action, and shall be included in the minutes
or filed with the Policy Board records reflecting the action taken.
4.1-2
EXHIBIT 6.9.1
TOC PLAN
6.9.1-1
EXHIBIT 8.1.8(d)
EXCLUDED EXPENSES
Excluded Expenses include, but are not limited to the following items:
a. Accounting, legal and other professional fees attributed to TOC or
to Physician Employees; provided, however, legal and accounting
expenses incurred in the ordinary course of TOC's business, approved
by the Policy Board will be Clinic Expenses.
b. Contribution expenses, cash or non-cash, which include, but are not
limited to costs of sponsoring sports teams, political
contributions, unapproved marketing expenses, and contributions to
hospitals and staff.
c. Automobile expenses including payments, repairs and maintenance,
mileage, depreciation, etc.
d. Entertainment expenses of any kind.
e. Physician benefits for Physician Owners including insurance (health,
life [except to the extent allowed under Section 8.1.3(f)], dental,
disability [except to the extent allowed under Section 8.1.3(f)],
etc., but not including malpractice insurance), vacation time, sick
time, paid leave of absence, contributions to and administration of
physician retirement plans (pension, 401(k), XXX, others), etc.
f. Employment tax expenses including Federal and State Unemployment
taxes, FICA taxes, Medicare taxes, etc. of Physician Owners.
g. Home office expenses including the acquisition costs, depreciation,
repairs and maintenance, and ongoing operating expenses of:
computers, software, copying machines, fax machines, telephones and
telephone lines, cellular telephones, etc.; and the costs of having
an office in one's home including allocated rent, utility and
depreciation expenses.
h. Meal expenses of Physician Employees.
i. Medical supplies and drugs either used or distributed by a Physician
Employee without billing for such supplies and drugs at standard
rates.
j. Presentation expenses of any kind including professional services,
slide production, travel, meals, entertainment, etc.
k. Personal postage expenses.
l. Personal laundry expenses.
m. Personal assistant expenses (including the time staff spends on
personal errands for Physician Employees).
8.1.8.(d)-1
EXHIBIT 8.3.6
1. ACCOUNTS RECEIVABLE COLLECTION
1.1 Collection of Accounts Receivable. TOC agrees to cooperate with
Company in the collection of the Accounts Receivables sold by TOC, transferred
pursuant to Section 8.3.
1.2 Definitions. In addition to the definitions contained in Article II of
the Agreement, for purposes of this Exhibit 8.3.6., the following terms shall be
applicable:
"Accounts" means, with respect to TOC, all Accounts Receivable including
any and all rights to payment of money or other forms of consideration of
any kind (whether classified under the Uniform Commercial Code as
accounts, chattel paper, general intangibles, or otherwise) for goods sold
or leased or for services rendered by TOC, including, but not limited to,
accounts receivable, proceeds of any letters of credit naming TOC as
beneficiary, chattel paper, insurance proceeds, contract rights, notes,
drafts, instruments, documents, acceptances, and all other debts,
obligations and liabilities in whatever form from any other Person, other
than MRI Receivables.
"Collecting Bank" means the main office of ______________________________
located at ___________________________________, or such other financial
institution agreed to by Company.
"Finance Charge Rate" means a rate of interest equal to the lesser of (i)
eighteen percent (18%) per annum or (ii) the maximum rate of interest
allowed by applicable law from time to time in effect.
"Governmental Lockbox Account" means an account established at the
Collecting Bank by TOC into which all proceeds of TOC's Governmental
Receivables are remitted.
"Lender" shall mean any lender to Company that has a security interest in
the Accounts from time to time.
"Lockbox Agreements" means that certain Lockbox Operating Procedural
Agreements -- Governmental Receivables to be entered into between the
Collecting Bank as to Governmental Receivables and that certain Lockbox
Operating Procedural Agreement -- Non-Governmental Receivables to be
entered between the Collecting Bank, Lender and TOC as to Accounts which
are not Governmental Receivables, in a form acceptable to counsel for
Company.
"Main Account" means Company's operating account established and
maintained at the Collecting Bank.
"Non-Governmental Lockbox Account" means the account established by the
Company with the Collecting Bank into which all proceeds from TOC's
Accounts under which a Third-Party Payor is the Account Debtor (other than
Governmental Receivables) are remitted.
8.3.6-1
"Non-Governmental Receivables" means the Accounts which are not
Governmental Receivables.
"Notification Letter" means a written notification from TOC to Third-Party
Payors informing such Third-Party Payors that all proceeds due under TOC's
Accounts are to be remitted to the Non-Governmental Lockbox Account or the
Governmental Lockbox Account, as the case may be, substantially in a form
acceptable to counsel for Company.
1.3 Collection of Governmental Receivables. With respect to payments on
Governmental Receivables, at the request and option of Company, TOC agrees that
the following procedures shall apply:
(a) TOC shall enter into a Lockbox Agreement applicable to Governmental
Receivables in a form acceptable to counsel for Company and reasonably
acceptable to TOC and establish a Governmental Lockbox Account. Governmental
Lockbox Account shall be an account in the name of TOC. All payments in respect
of TOC's Governmental Receivables are to be made directly to such account. In
the event Company exercises this option, TOC shall instruct each Account Debtor
in respect of TOC's Governmental Receivables to remit all such payments directly
to such Governmental Lockbox Account pursuant to a Notification Letter. In
addition, TOC shall attach written instructions to each invoice representing
such Governmental Receivable generated subsequent to the date of this Agreement
instructing such Third-Party Payor or Account Debtor that payment under such
invoice is to be paid to the Governmental Lockbox Account. TOC agrees that it
shall not deposit any funds other than payments on Governmental Receivables
into, nor make any withdrawals from, the Governmental Lockbox Account without
the prior written consent of Company. TOC further agrees that it shall not
during the term of this Agreement terminate, modify or amend in any manner the
Lockbox Agreement applicable to the Governmental Lockbox Account.
(b) In accordance with the Lockbox Agreement pertaining to Governmental
Receivables, TOC shall instruct the Collecting Bank to transfer automatically
all amounts deposited in Governmental Lockbox Account constituting good funds to
Company's Main Account. TOC shall have no right or interest in the Main Account.
TOC shall not, so long as any purchased Account remains unpaid, change or cancel
such automatic transfer order at any time, or, without the prior written consent
of Company, change either the identity of Governmental Lockbox Account or the
instructions to each Account Debtor on the related Governmental Receivable to
make its payments to such account. Any such action shall be considered a breach
of this Agreement for which Company shall be entitled to all remedies at law and
in equity, including obtaining an injunction.
(c) TOC will cooperate with Company and its agents in the identification
of sums deposited into Governmental Lockbox Account, which cooperation shall
continue until all purchased Accounts sold hereunder have been collected.
(d) TOC agrees to pay, on demand, a finance charge equal to the Finance
Charge Rate, on any payment on a Governmental Receivable received by TOC that is
not deposited in Governmental Lockbox Account within forty-eight (48) hours
after receipt by TOC, unless the failure to make such deposit is attributable to
Company.
8.3.6-2
1.4 Collection of Non-Governmental Receivables. With respect to payments
on Non-Governmental Receivables, if requested by Company and at Company's
option, TOC agrees that the following procedures shall apply:
(a) Prior to the sale of any Non-Governmental Receivable hereunder,
Company, the Collecting Bank and Lender (if requested by Lender) shall enter
into a Lockbox Agreement applicable to Non-Governmental Receivables in a form
acceptable to counsel for Company and Company shall establish Non-Governmental
Lockbox Account. The Non-Governmental Lockbox Account shall be an account in the
name of Company. All payments in respect of TOC's Non-Governmental Receivables
are to be made directly to such account. If Company exercises its option herein,
at request of Company, TOC shall instruct each Account Debtor in respect of
TOC's Non-Governmental Receivables to remit all such payments directly to such
Non-Governmental Lockbox Account pursuant to a Notification Letter. In addition,
TOC shall attach written instructions to each invoice representing such
Non-Governmental Receivable generated subsequent to the date of this Agreement
instructing such Third-Party Payor or Account Debtor that payment under such
invoice is to be paid to the Non-Governmental Lockbox Account. TOC and Company
agree that neither of them shall deposit any funds other than Non-Governmental
Receivables into, nor make any withdrawals from, the Non-Governmental Lockbox
Account without the prior written consent of Company. TOC further agrees that it
shall not during the term of this Agreement terminate, modify or amend in any
manner the Lockbox Agreement applicable to the Non-Governmental Lockbox Account.
(b) In accordance with the Lockbox Agreement pertaining to
Non-Governmental Receivables, Company shall instruct the Collecting Bank to
transfer automatically all amounts deposited in the Non-Governmental Lockbox
Account constituting good funds to Company's Main Account. TOC shall have no
right or interest in the Non-Governmental Lockbox Account nor to the Main
Account and such accounts shall be in the name of and under the control of
Company. TOC shall not, so long as any purchased Account remains unpaid, and in
any event, during the term of this Agreement, at any time, or, without the prior
written consent of Company, change the instructions to each Account Debtor on
the related Non-Governmental Receivable to make its payments to such account.
Any such action shall be considered a breach of this Agreement for which Company
shall be entitled to all remedies at law and in equity, including obtaining an
injunction.
(c) TOC will cooperate with Company and its agents in the identification
of sums deposited into Non-Governmental Lockbox Account, which cooperation shall
continue until all purchased Accounts sold hereunder have been collected.
(d) TOC agrees to pay, on demand, a finance charge equal to the Finance
Charge Rate, on any Non-Governmental Receivable received by TOC that is not
deposited in Non-Governmental Lockbox Account within forty-eight (48) hours
after receipt by TOC.
1.5 Procedures Without Lockbox. In the event that Company elects to forego
the procedures established in Sections 1.3 and 1.4, TOC shall instruct the
Collecting Bank to transfer automatically all amounts constituting good funds in
the account or accounts of TOC established for the collection of Governmental
Receivables and Non-Governmental Receivables to Company's Main Account at
_____________ __________, ____________________________, Account ______________
(the "Main Account") pursuant to a standing order in a form acceptable to
Company's legal counsel. TOC
8.3.6-3
shall have no right or interest in Company's Main Account and such account shall
be in the name of and under the control of Company. TOC shall not, so long as
any purchased account remains unpaid, change or cancel such standing order at
any time, or, without the prior written consent of Company, change the
instructions to each Account Debtor on each Governmental Receivable and
Non-Governmental Receivable to make its payments to such account. Any such
action shall be considered a breach of this Agreement for which Company shall be
entitled to all remedies at law and in equity, including obtaining an
injunction.
1.6 Misdirected Payments. (a) If after the date of this Agreement, an
Account Debtor shall make payment of a purchased Account to a location other
than is provided in the Notification Letter or TOC otherwise receives payments
on Accounts that are purchased by Company under the terms of this Agreement
("Misdirected Payments"), TOC (at its own cost and expense) shall promptly take
all necessary steps to effect collection of such Misdirected Payment from any
other party claiming an interest therein or having possession thereof and (i)
hold such payment in trust for Company, (ii) segregate such payment, (iii) use
its best efforts not to commingle such payment with TOC's own funds or other
assets, and (iv) deliver such payment no later than forty-eight (48) hours from
the day of receipt to the Governmental Lockbox Account or the Non-Governmental
Lockbox Account, as applicable.
(b) TOC agrees to pay, on demand, the Finance Charge Rate on any
Misdirected Payment received by TOC that is not deposited in the Company Main
Account within forty-eight (48) hours after receipt by TOC, unless the failure
to make such deposit is attributable to Company.
8.3.6-4
EXHIBIT 11
NON-COMPETITION
A. TOC and/or each of the Physician Owners agree and covenant that, during
the term of this Agreement and for a period of thirty-six (36) months after
termination of this Agreement (other than a termination pursuant to Section
11.3.1 through 11.3.4, inclusive, or Section 11.5, of the Service Agreement),
TOC and/or the Physician Owner(s), as applicable, shall not, either directly as
a partner, employer, agent, independent contractor, employee or indirectly
through a corporation, partnership, affiliate, subsidiary or otherwise:
(i) Subject to the provisions of paragraph G below, establish,
operate or provide professional medical services at any medical office,
clinic or other health care facility at any location within seventy-five
(75) miles of (i) the Main Office location; (ii) any of the Satellite
Offices; or (iii) any location at which Company provides services to any
practice at the time of such termination;
(ii) Subject to the provisions of paragraph G below, publicly
announce or offer (by any method) to provide professional medical services
at any medical office, clinic or other health care facility at any
location within seventy-five (75) miles during the first five (5) years of
the term of this Agreement or fifty (50) miles thereafter of (i) the Main
Office; (ii) any of the Satellite Offices; or (iii) any location at which
Company provides services to any practice at the time of such termination;
(iii) Solicit, induce or attempt to induce, in connection with any
business competitive with that being serviced by Company, patients of any
physician (including TOC and/or the Physician Owner(s)) associated or
affiliated with Company to leave the care of physicians associated or
affiliated with Company; or
(iv) Solicit, induce or attempt to induce any employee, consultant
or other persons associated or affiliated with Company or any Affiliate of
Company to leave the employment of, or to discontinue their association
with, Company or such Affiliate of Company.
B. If TOC and/or the Physician Owner(s) violate the covenants set forth in
paragraph A of this Exhibit 11, then the duration of the restrictions contained
in paragraph A shall be extended an additional month for each month during which
such violation occurred but was not discovered by Company, beginning upon the
date that Company learns of the violation and so notifies TOC and/or the
Physician Owners in writing. In addition, breach of the covenants set forth in
paragraph A above may trigger certain rights of Company to redeem a Physician
Owner's Company common stock pursuant to the terms of Article VIII of the
Stockholders Agreement.
C. TOC and/or the Physician Owner(s) acknowledge and agree that the
covenants contained in this Exhibit 11 are necessary to protect the business and
goodwill of Company and that a breach of these covenants will result in
irreparable harm and continuing damage to Company. As a result, TOC and/or the
Physician Owner(s) agree that if TOC and/or the Physician Owner(s) breach or
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threaten to breach these covenants, Company shall be entitled to specific
performance and/or injunctive or other equitable relief in order to prevent the
continuation of such harm, as well as money damages. TOC and/or the Physician
Owner(s) waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such equitable relief.
D. TOC and the Physician Owner(s) acknowledge and agree that if TOC and/or
the Physician Owner(s) breach the covenants contained in this Exhibit 11 and
Company is unable for any reason to obtain a restraining order from a court of
competent jurisdiction within thirty (30) days after application to enjoin the
breach by TOC and/or the Physician Owner(s), it will be difficult to calculate
the precise amount of Company's damages. As a result, the parties have
determined that, in the event of such a breach, Company's damages shall be equal
to 300% of the total amount of Professional Service Revenues attributable to TOC
and/or the applicable Physician Owner(s) during the twelve (12) months prior to
the termination of the Agreement.
E. The parties have attempted to limit the provisions of this Exhibit 11
only to the extent necessary to protect each party's interests. However, the
parties hereby agree that, in the event that any provision, section or
subsection of this Exhibit 11 is adjudged by any court of competent jurisdiction
to be void or unenforceable, in whole or part, such court shall modify and
enforce any such provision, section or subsection to the extent that it believes
to be reasonable under the circumstances.
F. In the event that the Service Agreement has been in effect for at least
five (5) years, a Physician Owner may buy-out the noncompetition restriction
applicable to him or her by paying to Company an amount equal to (A)(i) the
after tax amount (based upon the actual tax rate applied for any shares
previously sold and the long-term capital gains rate then in effect for any
shares held at the time of termination) of appreciation in value (from the date
of Merger to the earlier of the date of sale of any common stock sold or the
date of termination of affiliation with Company for any common stock then held)
of the Company common stock received by the applicable Physician Owner at the
time of the Merger, less (ii) the after tax amount (based upon the terminating
Physician Owner's effective federal income tax rate during the years in which
this Agreement was in effect) of the terminating Physician Owner's pro rata
share (based on the terminating Physician Owner's proportionate share of all
Professional Services Revenues collected by TOC during the term of the
Agreement) of service fees paid to Company during the period of the Service
Agreement (but not less than zero), plus (B) one-third of the Fair Market Value
of the Company common stock and cash consideration received by the terminating
Physician Owner at the time of the Merger (valued at the time of the Merger);
provided, however, in the event that at the time of termination, if the Fair
Market Value per share of the Company common stock is less than one-third (1/3)
of the value per share of the Company common stock at time of the Merger, then
the maximum amount payable to Company to buy out the noncompetition restriction
shall equal the total Fair Market Value of the Company common stock then held by
the terminating Physician Owner plus one-third (1/3) of the cash consideration
(acquired in the Merger) plus the amount of any gains realized by the
terminating Physician Owner from the prior sale of Company common stock. The
terminating Physician Owner may pay the amount owed by transferring to Company
an amount of Company common stock having a Fair Market Value equal to the amount
owed or pay to Company cash in the amount owed (or a combination of cash and
common stock). The above references to Company common stock (except
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for the immediately preceding sentence) shall not include any Company common
stock purchased for cash or acquired pursuant to the conversion of the Company's
convertible debentures.
G. Upon the termination of this Agreement, the Policy Board shall have the
authority to modify the terms of the restrictive covenants, including but not
limited to the mileage radius limitations set forth above in paragraph A. In the
event that the individuals representing TOC or Company, as the case may be, on
the Policy Board can reasonably demonstrate that a modification to the
restrictive covenant will not have a material adverse effect on Company's or
TOC's practice operations, earnings or cash flow, then the individuals
representing Company or TOC, as the case may be, shall consent to the proposed
modification.
H. Neither the foregoing restrictive covenants nor the restrictive
covenants set forth in Section 7.2 shall limit or prevent Physician Owners or
Physician Employees from (i) teaching at any educational institution and from
attending patients as a part of Physician Owner's duties as are normal and
customary for such faculty position; provided, however, such services must be
incident to the academic/teaching aspects of the institution and not incident to
the regular examination of patients for a fee whether billed in the name of the
institution or the name of the Physician Owner; (ii) authoring text books,
research papers, newspaper, radio, television, or other medical advice; (iii)
engaging in research and development the material components of which do not
constitute medical practice management; (iv) providing medical services, other
than surgery, on behalf of and as an employee or agent of a qualified I.R.C. ss.
501(c)(3) nonprofit organization, governmental agency or educational institution
(other than a hospital or health care provider of any type); (v) providing
professional medical services in fields other than neurology or orthopedics, and
(vi) serving as a medical director of any organization offering medical care,
but not providing clinical services involving surgery.
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