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EXHIBIT 10.59
MANAGEMENT SERVICES AGREEMENT
by and among
Preferred Diagnostic Service, Inc.,
PSC Management Corp., and
Physicians' Specialty Corp.
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TABLE OF CONTENTS
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SECTION 1. KEY DEFINITIONS...............................................................................2
1.1 GAAP..............................................................................................2
1.2 PDS NET REVENUES..................................................................................2
1.3 PDS SHAREHOLDERS..................................................................................2
1.4 PRACTICE EXPENSES.................................................................................2
1.5 STATE.............................................................................................3
SECTION 2. ADVISORY BOARD................................................................................3
2.1 FORMATION AND OPERATION OF THE ADVISORY BOARD.....................................................3
2.2 FUNCTIONS OF THE ADVISORY BOARD...................................................................3
SECTION 3. OBLIGATIONS OF MANAGER........................................................................5
3.1 PROVISION OF SERVICES.............................................................................5
3.2 OFFICES...........................................................................................5
3.3 FURNITURE, FIXTURES AND EQUIPMENT.................................................................5
3.4 FINANCIAL PLANNING AND GOALS......................................................................5
3.5 BUSINESS OFFICE SERVICES..........................................................................5
3.6 DEPOSIT OF PDS NET REVENUES.......................................................................7
3.7 REVENUE REPORTS...................................................................................7
3.8 SUPPORT SERVICES..................................................................................8
3.9 EXECUTIVE............................................................................................8
3.10 PERSONNEL........................................................................................8
3.11 PROFESSIONAL SERVICES............................................................................9
3.12 PATIENT AND FINANCIAL RECORDS....................................................................9
3.13 EXPANSION OF PDS.................................................................................9
3.14 PERFORMANCE OF BUSINESS OFFICE SERVICES..........................................................9
3.15 FORCE MAJEURE....................................................................................9
3.16 PAYMENT OF PDS EXPENSES.........................................................................10
3.17 BUDGETS.........................................................................................10
SECTION 4. OBLIGATIONS OF PDS...........................................................................11
4.1 PROFESSIONAL STANDARDS...........................................................................11
4.2 PROVIDER AND PAYOR RELATIONSHIPS.................................................................11
4.3 RESTRICTIVE COVENANTS............................................................................11
4.4 PROVISION OF SERVICES BY PDS.....................................................................13
SECTION 5. FINANCING MATTERS............................................................................13
5.1 MECHANICS OF DRAWS...............................................................................13
5.2 RECONCILIATION...................................................................................13
5.3 TRANSFER AND ASSIGNMENT..........................................................................13
SECTION 6. TERM AND TERMINATION.........................................................................15
6.1 TERM.............................................................................................15
6.2 TERMINATION......................................................................................15
6.3 REMEDIES UPON TERMINATION........................................................................16
6.4 REPURCHASE OF EQUIPMENT AND SUPPLIES.............................................................16
6.5 EARLY TERMINATION OF AGREEMENT...................................................................17
SECTION 7. REPRESENTATIONS AND WARRANTIES...............................................................17
7.1 REPRESENTATIONS AND WARRANTIES OF PDS............................................................17
7.2 REPRESENTATIONS AND WARRANTIES OF MANAGER........................................................18
SECTION 8. INSURANCE AND INDEMNITY......................................................................18
8.1 INSURANCE TO BE MAINTAINED BY PDS................................................................18
8.2 INDEMNIFICATION BY MANAGER.......................................................................18
8.3 INDEMNIFICATION BY PDS...........................................................................19
8.4 INDEMNIFICATION PROCEDURE........................................................................19
SECTION 9. ASSIGNMENT...................................................................................19
SECTION 10. COMPLIANCE WITH REGULATIONS.................................................................20
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SECTION 11. INDEPENDENT RELATIONSHIP....................................................................20
11.1 INDEPENDENT CONTRACTOR STATUS...................................................................20
11.2 REFERRAL ARRANGEMENTS...........................................................................21
SECTION 12. GUARANTIES BY PARENT........................................................................21
SECTION 13. NAME........................................................................................21
SECTION 14. MISCELLANEOUS...............................................................................21
14.1 NOTICES.........................................................................................21
14.2 ADDITIONAL ACTS.................................................................................22
14.3 GOVERNING LAW...................................................................................22
14.4 CAPTIONS, ETC...................................................................................22
14.5 SEVERABILITY....................................................................................22
14.6 CHANGES IN REIMBURSEMENT........................................................................22
14.7 MODIFICATIONS...................................................................................23
14.8 NO RULE OF CONSTRUCTION.........................................................................23
14.9 COUNTERPARTS....................................................................................23
14.10 BINDING EFFECT.................................................................................23
14.11 ENFORCEMENT RIGHTS.............................................................................23
14.12 COSTS OF ENFORCEMENT...........................................................................23
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MANAGEMENT SERVICES AGREEMENT
MANAGEMENT SERVICES AGREEMENT, effective as of February 1,
1999 (the "Effective Date"), by and among PREFERRED DIAGNOSTIC SERVICE, INC., a
Georgia corporation ("PDS"); PSC MANAGEMENT CORP., a Delaware corporation
("Manager") and PHYSICIANS' SPECIALTY CORP., a Delaware corporation ("Parent").
WITNESSETH:
WHEREAS, Manager is a wholly-owned subsidiary of Parent and is in the
business of managing healthcare entities and providing management services to
such entities;
WHEREAS, pursuant to an Asset Purchase Agreement dated as of even date
herewith among PDS, Xxxxxxxxxxx X. Xxxxxxxx, Xxxxx XxXxxx and Xxxxxxx Xxxxxxx,
Manager and Parent (the "Asset Purchase Agreement"), Manager is purchasing
substantially all the assets utilized by PDS in connection with the performance
of sleep diagnostic testing (the "Business");
WHEREAS, pursuant to a Stock Purchase Agreement of even date herewith
among AENT, PDS, Xxxxxxxxxxx X. Xxxxxxxx, Xxxxx XxXxxx and Xxxxxxx Xxxxxxx, all
of the issued and outstanding stock of PDS is being conveyed to AENT;
WHEREAS, subject to the terms and conditions of this Agreement, PDS
desires PDS to engage Manager to provide management services, facilities,
personnel, equipment and supplies necessary for the Business conducted by PDS,
and Manager desires to accept such engagement; and
WHEREAS, the basis for the financial considerations provided in this
Agreement are derived from the revenues to be generated by PDS, the basis for
which has been represented by PDS and delivered to Manager prior to the
formation and agreement of such financial considerations.
NOW THEREFORE, in consideration of the premises and the covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged by the
parties to this Agreement, PDS, Manager and Parent hereby agree as follows:
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SECTION 1. KEY DEFINITIONS.
For purposes of this Agreement, the following are certain important
defined terms used in this Agreement (a complete list of defined terms is set
forth on Appendix A):
1.1 GAAP. The term "GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants, in
statements and pronouncements of the Financial Accounting Standards Board, 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, which are
applicable to the circumstances as of the date of determination. For purposes of
this Agreement, GAAP shall be applied in a manner consistent with the practices
used by Parent and Manager.
1.2 PDS NET REVENUES. The term "PDS Net Revenues" shall mean all
revenues, computed on an accrual basis as defined by GAAP, (after taking into
account adjustments for uncollectible accounts, discounts, Medicare, Medicaid,
workers' compensation, professional courtesy discounts and other write-offs)
generated by or on behalf of PDS or its employees as a result of services
furnished to patients, whether generated from health maintenance organizations,
preferred provider organizations, Medicare, Medicaid or other agreements,
including, but not limited to, payments received under any capitation
arrangement and the Sleep Diagnostic Services Agreement entered into September
1, 1998 by and between PDS and AENT.
1.3 PDS SHAREHOLDER. The term "PDS Shareholders" shall mean the
owner(s) of the issued and outstanding shares of PDS.
1.4 PDS EXPENSES. The term "PDS Expenses" shall mean all expenses
incurred in the operation of PDS at the Offices (as defined in Section 3.1) or
otherwise, whether by Manager or by PDS, including, but not limited to: (a)
depreciation (including, without limitation, depreciation on the assets acquired
under the Asset Purchase Agreement), amortization, salaries, benefits and other
direct costs of all employees and independent contractors of PDS, including
employees of Manager leased to PDS to render services hereunder; (b) rent and
other obligations under leases or subleases for the Offices and equipment used
by PDS; (c) personal property taxes and intangible taxes assessed against assets
used by PDS; (d) charitable contributions budgeted and approved by Manager and
PDS; (e) interest expense on indebtedness of or specifically related to the
operation of PDS, including, without limitation, capital expenditures; (f)
utility expenses relating to the Offices; (g) twelve and one-half percent (12
1/2%) of PDS Net Revenues (as defined in Section 1.2), such amount to be
retained by Manager in payment for its services and non-allocable costs incurred
by Manager attributable to the provision of management services; (h) other
expenses incurred by PDS or Manager in carrying out their respective obligations
under this Agreement, except as otherwise provided herein; (i) any reserves
reasonably deemed prudent by Manager for anticipated costs or expenses of PDS.
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The term "PDS Expenses" shall not include, among other things: (1) any
federal, state or local income taxes of PDS or Manager, or the costs of
preparing federal, state or local tax returns; (2) costs associated with legal,
accounting and professional services incurred by or on behalf of PDS other than
as described in the first sentence of Section 3.11; (3) capital expenditures
except to the extent of depreciation and amortization; or (4) any costs or
expenses not designated in this Agreement as being PDS Expenses or costs and
expenses designated as the responsibility of Manager.
1.5 STATE. The term "State" shall mean the State of Georgia, which
is where the offices are located.
SECTION 2. ADVISORY BOARD.
2.1 FORMATION AND OPERATION OF THE ADVISORY BOARD. Manager and PDS
shall establish an Advisory Board responsible for advising Manager in connection
with the development of management and administrative policies for the overall
operation of PDS. The Advisory Board shall consist of four (4) members. Manager
shall designate, in its sole discretion and from time to time, two (2) members
of the Advisory Board. PDS shall designate, in its sole discretion and from time
to time, two (2) members of the Advisory Board. Except as may otherwise be
provided, the act of a majority of the members of the Advisory Board shall be
the act of the Advisory Board.
2.2 FUNCTIONS OF THE ADVISORY BOARD. The Advisory Board shall
review, evaluate and make recommendations to PDS and Manager with respect to the
following matters:
(a) Annual Budgets. All annual capital and operating
budgets prepared by Manager, as set forth in Sections 3.4 and 3.17, shall be
subject to review and approval by the Advisory Board, which shall make
recommendations to Manager with respect to proposed changes therein.
(b) Employment. The Advisory Board shall advise Manager
and PDS with respect to the types of individuals required for the efficient
operation of PDS.
(c) Strategic Planning. The Advisory Board shall make
recommendations to Manager regarding the development of long-term strategic
planning objectives for PDS.
(d) Capital Expenditures. The Advisory Board shall make
recommendations to Manager regarding the priority of major capital expenditures
for PDS.
(e) Capital Improvements and Expansion. Any renovation
and expansion plans and capital equipment expenditures with respect to the
operations of
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PDS shall be reviewed by the Advisory Board and shall be based, in the judgment
of Manager, upon economic feasibility, productivity and then-current market
conditions.
(f) Provider and Payor Relationships. The Advisory Board
shall review and advise Manager and PDS with respect to the establishment or
maintenance of relationships with healthcare providers and payors.
(g) Additional Services. The Advisory Board shall review
and make recommendations to Manager and PDS regarding the provision of
additional services based upon the pricing, access to and quality of such
services.
(h) Patient Fees, Collection Policies. At least annually,
the Advisory Board shall, based upon recommendations by Manager and PDS, review
and adopt the fee schedule for all healthcare services rendered by PDS.
(i) Advertising. The Advisory Board shall advise PDS with
respect to advertising of services including design of signage, logo and letter
head. All such advertising shall be in accordance with applicable law.
(j) Exceptions to Inclusion in PDS Net Revenues. The
Advisory Board will review and make recommendations to Manager and PDS with
respect to the proposed exclusion of any revenue from PDS Net Revenues.
(k) Grievance Referrals. The Advisory Board shall
consider, review and make recommendations to Manager and PDS with respect to any
matters arising in connection with the operations of PDS that are not
specifically addressed in this Agreement and as to which Manager or PDS requests
consideration by the Advisory Board.
(l) Quality Assurance and Utilization Review. The
Advisory Board shall advise Manager and PDS regarding all quality assurance and
utilization review programs undertaken by PDS either independently or in
connection with any managed care contracts maintained by PDS, and Manger shall
assist PDS in performing the quality assurance and utilization review functions
of PDS in consultation with the Advisory Board.
Notwithstanding any contrary provision of this Agreement, it is
acknowledged and agreed that other than as provided in Section 2.2(a),
recommendations of the Advisory Board are intended for the advice and guidance
of Manager and PDS and that the Advisory Board does not have the power to bind
Manager or PDS. Where discretion with respect to any matter is vested in Manager
under the terms of this Agreement, Manager shall have ultimate responsibility
for the exercise of such discretion, notwithstanding any recommendation of the
Advisory Board. Where discretion with respect to any matter is vested in PDS
under the terms of this Agreement, PDS shall have ultimate responsibility for
the exercise of such discretion, notwithstanding any recommendation of the
Advisory Board. Manager and PDS shall, however, take such
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recommendations of the Advisory Board into account in good faith in the exercise
of such discretion.
SECTION 3. OBLIGATIONS OF MANAGER.
3.1 PROVISION OF SERVICES. PDS hereby engages Manager for the term
of this Agreement, and Manager hereby accepts such engagement, to provide to PDS
the business management and services, personnel, equipment and supplies provided
for in this Section 3 (collectively "Management Services"). Manager shall
provide the Management Services at the offices located at those locations set
forth on Exhibit 3.1, or at such other place or places as may be agreed upon by
the parties. The offices or such other places at which the Management Services
are to be provided are referred to as the "Offices."
3.2 OFFICES. Manager shall pay out of PDS Net Revenues all rent
due from the Effective Date forward with respect to the Offices, and all costs
of repairs, maintenance and improvements, telephone, electric, gas and water
utility expenses, insurance, normal janitorial services, refuse disposal and all
other costs and expenses reasonably incurred in connection with the operations
of PDS including, but not limited to, related real or personal property lease
payments and expenses, taxes and insurance. Manager shall consult with PDS with
respect to the condition, use and needs of the Offices, as expanded, improved or
relocated from time to time. The Offices should be used by PDS and by the
Manager in providing its services under this Agreement.
3.3 FURNITURE, FIXTURES AND EQUIPMENT. Manager agrees to provide
or have provided to the Offices those supplies and items of furniture, fixtures
and equipment as are determined by Manager, after consultation with PDS, to be
necessary and/or appropriate for PDS's operations at the Offices during the term
of this Agreement (all such items of furniture, fixtures and equipment are
collectively referred to hereinafter as the "FFE") subject, however, to the
following conditions:
(a) PDS shall have the use of the FFE only during the
term of this Agreement and title to the FFE shall be and remain in Parent or
Manager at all times during such term.
(b) Manager shall be responsible for, and pay for out of
PDS Net Revenues, all repairs, maintenance and replacements of the FFE, except
for repairs, maintenance and replacements necessitated by the negligence of PDS,
its employees and agents.
3.4 FINANCIAL PLANNING AND GOALS. Manager will prepare, in
consultation with PDS, annual capital and operating budgets reflecting, in
reasonable detail anticipated revenues and sources and uses of capital for the
growth of PDS.
3.5 BUSINESS OFFICE SERVICES. PDS hereby appoints Manager as its
sole and exclusive manager and administrator of all business functions and
services related to
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PDS's services during the term of this Agreement. Without limiting the
generality of the foregoing, in providing the Management Services, Manager shall
perform the following functions:
(a) Manager shall evaluate, negotiate and administer all
managed care contracts on behalf of PDS and shall consult with PDS on all
clinical matters relating thereto.
(b) Manager shall provide ongoing assessment of business
activity including product line analysis, outcomes monitoring and patient
satisfaction.
(c) Manager shall be responsible for ordering and
purchasing all supplies reasonably required in the day-to-day operation of PDS
at the Offices.
(d) Manager shall make application and negotiate for the
procurement of professional liability insurance in the coverage amounts set
forth in Section 8.1. This coverage shall be made available to PDS. PDS,
however, shall have the right to obtain coverage from an alternative provider
reasonably acceptable to Manager.
(e) Subject to the provisions of Section 3.5(f) below,
Manager shall xxxx and collect from payors, intermediaries and patients all
professional fees for medical services and for ancillary services performed at
the Offices by PDS and PDS's employees and agents. For the term of this
Agreement, PDS hereby grants Manager power of attorney and appoints Manager as
its true and lawful attorney-in-fact for the following purposes:
(i) To xxxx payors, fiscal intermediaries or
patients in PDS's name, under its provider number(s) and on its behalf;
(ii) To collect accounts receivable and claims
for reimbursement that are generated by such xxxxxxxx in PDS's name and on PDS's
behalf,
(iii) To place such accounts for collection,
settle and compromise claims, and institute legal action for the recovery of
accounts;
(iv) Following receipt by PDS to the extent
permitted by law, to take possession of payments from patients, Blue Shield,
insurance companies, Medicare, Medicaid and all other payors with respect to
services rendered by PDS, and PDS hereby covenants to forward such payments to
Manager for deposit;
(iv) To endorse in the name of PDS any notes,
checks, money orders, insurance payments and any other instruments received by
PDS as payment of such accounts receivable;
(v) To collect in PDS's name and on its behalf
all PDS Net Revenues;
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(vi) To pledge the accounts receivable as
collateral or otherwise encumber the accounts receivable without the approval of
the Advisory Board or PDS (all actions with respect to any discounting, selling
or encumbering accounts receivable involving Medicare or Medicaid shall not be
inconsistent with applicable laws and regulations relating thereto); and
(vii) To sign checks on behalf of PDS and make
withdrawals from PDS bank accounts for payments specified in this Agreement and
as requested from time to time by PDS.
(f) All amounts received in payment of Medicare,
Medicaid, and CHAMPUS accounts receivable (if any) shall be deposited into an
account in the name of and controlled by PDS (the "PDS Deposit Account") with a
bank whose deposits are insured by the Federal Deposit Insurance Corporation.
The PDS Deposit Account shall at all times be maintained and funds withdrawn in
accordance with the provisions in the Billing Agreement for Governmental
Receivables of even date herewith between Manager and PDS in the form attached
hereto as Exhibit 3.5(f) and made a part hereof (the "Billing Agreement"). The
PDS Deposit Account shall be maintained by Manager solely for the purpose of
collecting amounts in payment of Medicare, Medicaid, and CHAMPUS accounts
receivable unless otherwise expressly agreed by Manager.
3.6 DEPOSIT OF PDS NET REVENUES. During the term of this
Agreement, all PDS Net Revenues collected shall be received directly by PDS at a
PDS location, and each business day PDS will transfer all collected PDS Net
Revenues into a bank account as specifically directed by Manager, of which
Manager or Parent shall be the owner and from which Manager or Parent shall have
the sole right to make withdrawals to pay PDS Expenses on a monthly basis and,
at the direction of PDS, to transfer pursuant to Section 5.1 remaining PDS Net
Revenues by the fifteenth day of each month in arrears to an account designated
by PDS. Manager shall maintain its accounting records in such a way as to
clearly identify PDS Net Revenues from other funds of Manager. PDS and Manager
hereby agree to execute from time to time such documents and instructions as
shall be required by the Credit Facility Lender (as defined in Section 5.3(b))
and mutually agreed upon to effectuate the foregoing provisions and to extend or
amend such documents and instructions. Any funds in the PDS Deposit Account
which are not made available to Manager due to any revocation of its authority
under the Billing Agreement shall be deemed delivered for purposes of this
section.
3.7 REVENUE REPORTS. Manager shall maintain revenue reports, as
determined by the books and records of Manager, with respect to the operations
of PDS. Revenue reports shall reflect the total gross revenues and PDS Net
Revenues generated by or on behalf of PDS. Manager shall provide PDS with
monthly revenue reports and shall provide a year-end revenue report for PDS
within ninety (90) days after the end of each calendar year.
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3.8 SUPPORT SERVICES. Manager shall provide all reasonable and
necessary computer, management information, bookkeeping, billing and collection
services, accounts receivable and accounts payable management services, laundry,
linen, janitorial and cleaning services and management services to improve
efficiency and workflow systems and procedures, as determined by Manager after
consultation with PDS.
3.9 EXECUTIVE. Manager shall provide an executive to manage and
administer all of the day-to-day business functions and services of PDS (the
"Executive"). The Executive will be selected by Manager after prior consultation
with PDS, and Manager shall determine the salary and fringe benefits of the
Executive (which shall be a PDS Expense), but shall consult with PDS with
respect thereto.
3.10 PERSONNEL. Manager shall provide such personnel, including
leased employees, as determined by Manager, after consultation with PDS, to be
reasonably necessary for the effective operation of PDS at the Offices, subject,
however, to the following:
(a) Manager shall provide to PDS all medical records
personnel and other support personnel as requested by PDS and as shall be
reasonably necessary for the operation of PDS at the Offices. As to the
personnel provided under this Section 3.10(a), Manager shall determine the
salaries and benefits of all such personnel, but shall consult with PDS with
respect thereto. Manager shall also recommend the assignment of all such
personnel to perform services at the Medical Offices; provided, however, that
PDS shall have the right to approve, based primarily on professional competence,
the assignment of all medical support personnel to provide services at the
Offices and Manager shall, at PDS's request, reassign and replace such personnel
from time to time who are not, in PDS's reasonable and good faith judgment,
adequately performing the required professional services.
(b) Manager shall provide to PDS all business office
personnel (i.e., clerical, secretarial, bookkeeping and collection personnel)
reasonably necessary for the maintenance of patient records, collection of
accounts receivable and upkeep of the financial books of account to the extent
that same are required for, and directly related to, the operation of PDS. As to
the personnel provided under this Section, Manager shall determine the salaries
and fringe benefits of all such personnel, but shall consult with PDS with
respect thereto.
(c) In exercising its judgment with regard to personnel
as provided in Section 3.9 and this Section 3.10, PDS agrees not to discriminate
against such personnel on the basis of race, religion, age, sex, disability or
national origin.
(d) In recognition of the fact that personnel provided to
PDS under this Agreement may perform services from time to time for others, this
Agreement shall not prevent Manager from performing such services for others or
restrict Manager from so using such personnel. Manager will make every effort
consistent with sound business practices to honor the specific requests of PDS
with regard to the assignment of such
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personnel; provided, however, that Manager hereby retains the sole and exclusive
decision-making authority regarding all such personnel assignments.
3.11 PROFESSIONAL SERVICES. Manager shall use reasonable efforts to
arrange for or render to PDS such business, legal and financial management
consultation and advice as may be reasonably required or requested by PDS and
directly related to the operations of PDS. Manager shall not be responsible for
any services requested by or rendered to any individual, employee or agent of
PDS not directly related to the operations of PDS nor shall Manager be
responsible for rendering any legal or tax advice or services or personal
financial services to PDS or any employee or agent of PDS.
3.12 PATIENT AND FINANCIAL RECORDS. Manager shall maintain all
files and records relating to the operation of PDS including, but not limited
to, customary financial records and patient files. The management of all files
and records shall comply in all material respects with all applicable federal,
state and local laws, statutes, rulings, orders, ordinances and regulations
("Laws"), and all files and records shall be located so that they are readily
accessible for patient care, consistent with ordinary records management
practices. PDS shall supervise the preparation of, and direct the contents of,
patient medical records, all of which shall be and remain confidential and the
property of the medical practice under whose direction PDS' services are
provided. Manager shall have reasonable access to such records and, subject to
applicable Laws and accreditation policies, Manager shall be permitted to retain
true and complete copies of such records. Manager hereby agrees to preserve the
confidentiality of such patient medical records and to use the information in
such records only for the limited purposes necessary to perform the Management
Services and, within the limits of its responsibilities hereunder, to ensure
that provision is made for appropriate care for patients of PDS.
3.13 EXPANSION OF PDS. Upon the written request of PDS, Manager
will assist PDS in establishing new satellite office(s) that are commercially
reasonable and beneficial to PDS, as determined by PDS and Manager to be
beneficial to PDS, and in developing relationships and affiliations with
physicians and other specialists, hospitals, networks, health maintenance
organizations, preferred provider organizations, and similar organizations, to
assist in the continued growth and development of PDS. PDS will cooperate with
Manager in such efforts and use its best efforts to assist Manager with respect
thereto. Without limiting the generality of the foregoing, PDS will not enter
into any agreements with respect to any such matters without the prior consent
of Manager.
3.14 PERFORMANCE OF BUSINESS OFFICE SERVICES. Manager is hereby
expressly authorized to perform its business office services hereunder in
whatever reasonable manner it deems appropriate to meet the day-to-day
requirements of the non-medical business functions of PDS at the Offices.
Manager may perform some or all of the business office functions of PDS at
locations other than at the Offices.
3.15 FORCE MAJEURE. Manager shall not be liable to PDS for failure
to perform any of the services required under this Agreement in the event of
strikes, lockouts, calamities, acts of God, unavailability of supplies or other
events which are beyond the
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reasonable control of Manager for so long as such event continues and for a
reasonable period of time thereafter.
3.16 PAYMENT OF PDS EXPENSES. Manager shall pay all PDS Expenses as
they become due out of PDS Net Revenues; provided, however, that Manager may, in
the name of and on behalf of PDS, contest in good faith any claimed PDS Expenses
as to which there is any dispute regarding the nature, existence or validity
thereof. Manager shall be entitled, on a monthly basis, as a PDS Expense payable
to itself, to retain from PDS Net Revenues the amount specified in Section
1.4(g) for providing services under this Agreement. PDS acknowledges and agrees
that the amount to be retained by Manager pursuant to Section 1.4(g) is
reasonable and fair, given the undertakings of Manager as set forth in this
Agreement and the other benefits and value that accrue to PDS as a result of
Manager's services under this Agreement.
3.17 BUDGETS.
(a) As part of the Manager's responsibilities under this
Agreement, the Manager shall prepare annual capital and operating budgets for
PDS for each budget period in accordance with the provisions of this Section
3.17. As used herein, a budget period means a fiscal year of PDS unless
otherwise provided.
With respect to each budget period following the initial
budget period, the Manager shall prepare and deliver a preliminary draft of each
such budget to the Advisory Board at least 30 days prior to the commencement of
the budget period to which such budget relates. The Advisory Board shall provide
any comments or suggested changes to such preliminary drafts to the Manager
within 15 days after receipt thereof. The Manager shall then submit a revised
budget to the Advisory Board for approval by the Advisory Board no later than 15
days after the end of the 15-day period referred to in the immediately preceding
sentence. The Advisory Board shall then approve or disapprove of, but not modify
or amend the budget within 15 days of receiving it. The foregoing time periods
during which drafts of the budget are to be delivered and approved shall be
subject to adjustment from time to time as determined appropriate by the
Advisory Board and Manager.
If prior to the commencement of any budget period, the
Advisory Board has not yet approved the budget, then the Manager and the
Advisory Board will work diligently in good faith to obtain such approvals, and
until such approvals are obtained, with respect to the budget, (i) as to any
disputed line items, the immediately preceding budget period's budget shall be
controlling until such time, if any, as agreement is reached on the amounts to
be allocated to such disputed line items, specifically as follows: (A)
non-recurring or extraordinary items shall not be continued from the budget for
the immediately preceding budget period, (B) if the previous budget was for a
budget period of less than 12 months, it shall be annualized, (C) all items
subject to an automatic increase, such as rent and taxes, shall be budgeted at
the increased rate (D) for items such as employee salaries and benefits, the
total salary and benefits number shall be adjusted to take into account changes
in the number and classifications of employees employed or
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contracted, and (ii) as to any line items which are not in dispute, the revised
budgets submitted by the Manager shall control.
(b) The parties agree that the Manager shall have the
authority and discretion to reallocate cost and expense line items within the
budget, so long as the pre-tax income targets within such budgets are not
adversely impacted.
SECTION 4. OBLIGATIONS OF PDS.
4.1 PROFESSIONAL STANDARDS. PDS shall at all times during the term
of this Agreement be and remain legally organized and authorized to provide
healthcare services in a manner consistent with all state and federal laws. PDS
will cooperate with Manager in taking steps to resolve any utilization review or
quality assurance issues which may arise in connection with the provision of
services by PDS.
4.2 PROVIDER AND PAYOR RELATIONSHIPS. PDS shall advise Manager on
matters relating to the establishment or maintenance of relationships with
institutional healthcare providers and third-party payors, including, but not
limited to, managed care programs, health maintenance organizations and
preferred provider organizations. Without limiting the generality of the
foregoing, PDS shall cooperate with Manager in the development and operation of
integrated healthcare delivery systems developed from time to time by Manager
for the benefit of Manager's affiliates. PDS shall not be required to sign up or
contract with any particular provider.
4.3 RESTRICTIVE COVENANTS.
(a) PDS acknowledges and agrees that the services to be
provided by Manager hereunder are feasible only if PDS operates thriving sleep
diagnostic centers. Accordingly, PDS agrees that, during the term of this
Agreement, it shall not, without the prior written consent of Manager,
establish, operate or provide sleep diagnostic services at any medical office,
clinic or other healthcare facility within a twenty (20) mile radius of any
Office (or any successor office) which provides services substantially similar
to those offered by PDS at the Offices other than services at healthcare
facilities in a manner consistent with past practices of PDS prior to the
Effective Date.
(b) During the term of this Agreement and for a period of
eighteen (18) months following the termination or expiration of this Agreement,
PDS shall not, in the State, alone or in conjunction with any other person or
entity, without the prior written consent of Manager, solicit or attempt to
solicit any employee, consultant, contractor or other personnel affiliated with
Manager (or who was affiliated with Manager at any point during the six months
prior to termination of this Agreement) to terminate, alter or lessen that
party's affiliation with Manager or to violate the terms of any agreement or
understanding between such employee, consultant, contractor or other person and
Manager.
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(c) If this Agreement is terminated for any reason other
than by PDS pursuant to Section 6.2 (b) below, PDS shall not for a period of
eighteen (18) months following the effective date of such termination, engage or
contract with any person, firm or entity (or group of affiliated entities) for
the provision of comprehensive management services to PDS at the Offices (or at
any new or replacement offices of PDS within 20 miles of any office)
substantially of the kind contemplated by this Agreement.
(d) The intellectual and other property rights in any
work product, discoveries or inventions developed or acquired by PDS or any
other personnel or agents of PDS during the term of this Agreement (the "PDS
IP") shall be deemed to be owned exclusively by the Manager. PDS hereby
unconditionally and irrevocably transfers and assigns to Manager all rights,
title and interest PDS may currently have (or in the future may have) by
operation of law or otherwise in or to any PDS IP, including, without
limitation, all patents, copyrights, trademarks, service marks and other
intellectual property rights. PDS agrees to execute and deliver to Manager any
transfers, assignments, documents or other instruments which Manager may deem
necessary or appropriate to vest complete title and ownership of any PDS IP, and
all associated rights, exclusively in Manager.
(e) PDS acknowledges and agrees that Manager's Trade
Secrets and Confidential Information (both as defined below) represent a
substantial investment by Manager. PDS also acknowledges and agrees that any
unauthorized disclosure or use of any of Manager's Trade Secrets or Confidential
Information would be wrongful and would likely result in immediate and
irreparable injury to Manager. Except as required in order to perform PDS's
obligations under this Agreement, PDS shall not, without the express prior
written consent of Manager, redistribute, market, publish, disclose or divulge
to any other person or entity, or use or modify for use, directly or indirectly
in any way for any person or entity: (i) any Confidential Information during the
term of this Agreement and for a period of three (3) years after the final date
of the term of this Agreement; and (ii) any Trade Secrets at any time (during or
after the term of this Agreement) during which such information or data shall
continue to constitute a "trade secret" under applicable law. PDS further agrees
to cooperate with (and require its physicians and other personnel to comply
with) any reasonable confidentiality requirements of Manager. PDS shall
immediately notify Manager of any unauthorized disclosure or use of any of the
Trade Secrets or Confidential Information of Manager of which PDS becomes aware.
For purposes of this Agreement "Confidential Information" shall mean valuable,
non-public competitively sensitive data and information relating to Manager's or
Parent's business other than Trade Secrets (which shall have the meaning given
that term under applicable law) that is not generally known by or readily
available to competitors of Manager, including, without limitations, computer
software and management information systems provided by Manager, practice
acquisition targets, strategic expansion plans, contracting and payor
negotiations, managed care contracting strategies and fees, rates, exclusions
and other payor contract features.
(f) Manager and PDS acknowledge and agree that Manager's
remedy at law for any breach or attempted breach of the foregoing provisions may
be inadequate
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and that Manager shall be entitled to specific performance, injunction or other
equitable relief in the event of any such breach or attempted breach, in
addition to any other remedies which might be available at law or in equity.
4.4 PROVISION OF SERVICES BY PDS. PDS shall maintain at least the
same quality and scope of health care services provided by PDS prior to the date
hereof and shall use its reasonable good faith efforts to enhance PDS and to
comply with all PDS budgets.
SECTION 5. FINANCING MATTERS
5.1 MECHANICS OF DRAWS. Following the end of each month, Manager
shall make an estimate of the collection percentage ("Estimated Collection
Percentage") for such month's gross PDS revenues. The Estimated Collection
Percentage may vary depending on historical collection percentages, changes in
fee schedules, changes in third party reimbursement, bad debt write-offs and
similar adjustments. The Estimated Collection Percentage will then be applied to
such month's gross PDS revenues, resulting in estimated PDS Net Revenues for
such month. An amount equal to the excess of PDS Net Revenues over PDS Expenses
will be transferred by Manager to PDS. In the event PDS Expenses exceed PDS Net
Revenues in any month, PDS shall promptly remit the amount of such excess to
Manager without setoff or reduction.
5.2 RECONCILIATION. As soon as reasonably practicable, but in any
event not later than one hundred twenty (120) days after the end of each
calendar year, Manager will adjust the Estimated Collection Percentage based on
actual net cash collections attributable to the gross PDS revenues for such year
and shall determine actual PDS Net Revenues. In the event PDS disagrees with
Manager's computation of PDS Net Revenues, it shall have the right to review,
upon reasonable notice to Manager, the documents used in determining such
amounts.
5.3 TRANSFER AND ASSIGNMENT.
(a) Except as otherwise provided in Section 3.5(f) and
Exhibit 3.5(f), PDS hereby exclusively and irrevocably assigns and sets over to
Manager all of PDS's rights to all revenue and accounts receivable and proceeds
thereof generated by PDS and PDS employees, if any, with respect to any services
rendered prior to the effective date of expiration or termination of this
Agreement, except as otherwise provided in this Agreement, and grants to Manager
the right to retain such proceeds for its own account for application in
accordance with this Agreement, and shall obtain a like assignment from all PDS
employees; provided, that in the case of revenue and accounts receivable
generated as a result of billing for services under Medicare or Medicaid such
assignment shall only be an assignment of proceeds of accounts receivable
consistent with the provisions of applicable law. PDS shall endorse any payments
received on account of such services to the order of Manager and shall take such
other actions as may be necessary to confirm to Manager the rights set forth in
this Section 5.3(a).
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Without limiting the generality of the foregoing, it is the intent of
the parties that the assignment to Manager of the rights described in Section
5.3(a) above shall be inclusive of the rights of PDS to proceeds of payment with
respect to any services rendered prior to the effective date of any expiration
or termination of this Agreement. PDS agrees and shall cause each PDS employee
to agree, that Manager shall retain the right to collect any and all accounts
receivable and claims for reimbursement relating to any such services rendered
prior to the effective date of any such expiration or termination
("Pre-Termination Accounts Receivable"), and that the proceeds thereof will be
transferred to Manager's account to be applied in accordance with Section 3.6
and the other provisions of this Agreement.
In addition and as a supplement to PDS's obligations as otherwise set
forth herein, PDS shall, with all deliberate speed, provide notice to Medicare
and Medicaid of the change in PDS's billing agent.
(b) PDS acknowledges that Manager and Parent may, to the
extent permitted by law, grant a security interest in the Pre-Termination
Accounts Receivable and proceeds thereof to their factor(s) or lender(s) who
provide senior debt financing to Manager or Parent for their general corporate
needs or for working capital (whether one or more, "Credit Facility Lender"), as
in effect from time to time. PDS agrees that such security interest of the
Credit Facility Lender is intended to be a first priority security interest and
is superior to any right, title or interest which may be asserted by PDS or any
shareholder of PDS or by any PDS employee with respect to Pre-Termination
Accounts Receivable or the proceeds thereof under this Agreement. PDS further
agrees, that, upon the occurrence of an event which, under the terms of such
working capital credit facility, would allow the Credit Facility Lender to
exercise its right to collect Pre-Termination Accounts Receivable and apply the
proceeds thereof toward amounts due under such working capital credit facility,
the Credit Facility Lender will succeed to all rights and powers of Manager
under the powers of attorney provided for in Sections 3.5 above as if such
Credit Facility Lender had been named as the attorney-in-fact therein.
(c) If, contrary to the mutual intent of Manager and PDS,
the assignment described in this Section 5.3 shall be deemed for any reason to
be ineffective, then PDS and each shareholder of PDS shall to the extent
permitted by applicable Laws, effective as of the date of this Agreement, be
deemed to have granted (and PDS does hereby grant, and shall cause each
shareholder of PDS to grant) to Manager a first priority lien on and security
interest in and to any and all interests of PDS and such shareholders of PDS in
any accounts receivable generated through the operations of PDS, and all
proceeds with respect thereto, to secure the payment to Manager hereunder of all
PDS Expenses, and this Agreement shall be deemed to be a security agreement to
the extent necessary to give effect to the foregoing. PDS shall execute and
deliver, and cause each shareholder of PDS to execute and deliver, all such
financing statements as Manager may request in order to perfect such security
interest. PDS shall not grant (and shall not suffer any shareholder of PDS to
grant) any other lien on or security interest in or to such
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accounts receivable or any proceeds thereof or in or to this Agreement to any
other person or entity.
SECTION 6. TERM AND TERMINATION.
6.1 TERM. The initial term of this Agreement shall be for a period
of forty (40) years commencing on February 1, 1999 and ending on January 31,
2039. This Agreement may be extended for separate and successive five-year
periods (each such five-year period referred to hereinafter as an "extended
term"), under such terms and conditions as stated herein with respect to any
such extended term; provided, however, that: (a) PDS and Manager mutually agree
to extend the term of this Agreement and mutually agree upon the documents to be
in effect during any such extended term hereto, not less than sixty (60) days
prior to expiration of the initial term or extended term then in effect; and (b)
PDS is not in material default hereunder on the date of commencement of the
extended term.
6.2 TERMINATION.
(a) Manager may terminate this Agreement, and have no
further liability or obligation hereunder, upon the occurrence of one or more of
the following events:
(i) PDS fails to perform in a material respect
its material obligations hereunder and such failure continues for a period of
forty-five (45) days after PDS's receipt of written notice specifying such
failure; provided, however, that if such failure cannot be cured within
forty-five (45) days, but is capable of being cured within a reasonable period
of time in excess of forty-five (45) days, then Manager shall not be entitled to
terminate this Agreement if PDS commences the cure of such failure within the
first forty-five (45) day period and thereafter diligently and in good faith
continues to prosecute such cure until completion; provided, further, that if
PDS or any shareholder of PDS shall be in breach of Section 4.5(a) of this
Agreement, Manager may terminate this Agreement immediately upon written notice
to PDS.
(ii) PDS voluntarily files a petition in
bankruptcy or makes an assignment for the benefit of creditors or otherwise
seeks relief from creditors under any federal or state bankruptcy, insolvency,
reorganization or moratorium statute, or PDS is the subject of an involuntary
petition in bankruptcy which is not set aside within sixty (60) days of its
filing.
(iii) PDS is in material breach or default under
any other written agreement with Manager, subject to any applicable notice and
cure periods provided in any such agreement.
(iv) Any representations and warranties made by
PDS in this Agreement prove to have been untrue or incorrect in any material
respect.
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(v) Manager and PDS are unable, notwithstanding
diligent efforts to do so, to agree on any modifications or amendments to the
then current capital and operating budgets for PDS which Manager reasonably
deems to be necessary in light of the circumstances then prevailing.
(b) PDS may terminate this Agreement, and have no further
liability hereunder, upon the occurrence of one or more of the following events:
(i) Manager repeatedly fails to perform in a
material respect its material obligations hereunder and such repeated failure
continues uncured for a period of forty-five (45) days after Manager's receipt
of written notice specifying such failure, provided, however, that if such
failure cannot be cured within forty-five (45) days, but is capable of being
cured within a reasonable period of time in excess of forty-five (45) days, then
PDS shall not be entitled to terminate this Agreement if Manager commences the
cure of such failure within the first forty-five (45) day period and thereafter
diligently and in good faith continues to prosecute such cure until completion.
(ii) Manager voluntarily files a petition in
bankruptcy or makes an assignment for the benefit of creditors or otherwise
seeks relief from creditors under federal or state bankruptcy, insolvency,
reorganization or moratorium statute, or Manager is the subject of an
involuntary petition in bankruptcy which is not set aside within sixty (60) days
of its filing.
6.3 REMEDIES UPON TERMINATION. If this Agreement is terminated
pursuant to Section 6.2, Manager's compensation under this Agreement shall be
deemed earned through the date of termination and shall be paid within thirty
(30) days after the effective date of termination. If this Agreement is
terminated pursuant to Sections 6.2(a)(i), 6.2(a)(iii), 6.2(a)(iv), or 6.2(b)(i)
of this Agreement, the non-breaching party may pursue such other legal or
equitable relief and remedies as may be available in addition to such proration.
6.4 REPURCHASE OF EQUIPMENT AND SUPPLIES. Upon the termination of
this Agreement prior to the end of the forty (40) year initial term (other than
a termination by PDS pursuant to Section 6.2(b)(i)), Manager shall have the
right to require PDS to repurchase all or any portion of the FFE and all then
unused supplies located at the Offices or purchased by Manager for specific use
at the Offices from Manager at a repurchase price equal to the then book value
of the FFE and such unused supplies as reflected by Manager's (or Parent's)
books and records of account, plus unamortized intangibles on Manager's or
Parent's books with respect to PDS' assets. Exercise of this right by Manager
shall be accomplished by written notice to PDS within thirty (30) days after the
termination of this Agreement. Such notice of exercise shall also specify a time
and date for a closing to be held to consummate such purchase and sale, such
closing to be within ninety (90) days after the termination of this Agreement at
the offices of Manager in Atlanta, Georgia, or such other location as Manager
shall designate in such written notice. At the closing PDS shall purchase such
FFE and unused supplies and intangibles from Manager hereunder by delivery of
cash or
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immediately available funds, against delivery of a xxxx of sale from Manager
transferring all its right, title or interest in or to same. The repurchase
requirements contained in this paragraph are in addition to, and not in lieu of,
any other rights and remedies that Manager may have under this and any other
agreements or at law.
6.5 EARLY TERMINATION OF AGREEMENT. In addition to the foregoing,
in the event of termination of this Agreement prior to the fifth (5th)
anniversary of the Closing Date (the "Threshold Date") for any reason other than
pursuant to the provisions of Section 6.2(b), then all management fees under
this Agreement which would have been paid through the Threshold Date, to the
extent not yet paid, shall be immediately due and payable to Manager by PDS.
Amounts payable pursuant to this paragraph are in addition to, and not in lieu
of, any other rights and remedies that Manager may have under any other
agreements.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
7.1 REPRESENTATIONS AND WARRANTIES OF PDS. PDS hereby represents
and warrants to Manager as follows:
(a) ORGANIZATION AND GOOD STANDING. PDS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia. PDS has all necessary power to own all of its properties and assets and
to carry on its business as now being conducted.
(b) NO VIOLATIONS. PDS has the corporate authority to execute,
deliver and perform this Agreement and all agreements executed and delivered by
it pursuant to this Agreement, and has taken all action required by law, its
Articles or Certificate of Incorporation, its Bylaws or otherwise to authorize
the execution, delivery and performance of this Agreement and such related
documents. The execution and delivery of this Agreement does not and, subject to
the consummation of the transactions contemplated hereby, will not, violate any
provisions of the Articles or Certificate of Incorporation or Bylaws of PDS or
any provisions of or result in the acceleration of, any material obligation
under any mortgage, lien, lease, agreement, instrument, order, arbitration
award, judgment or decree, to which PDS is a party, or by which it is bound.
This Agreement has been duly executed and delivered by PDS and constitutes the
legal, valid and binding obligation of PDS, enforceable in accordance with its
terms.
(c) FINANCIAL INFORMATION. PDS has hereto furnished Manager with
complete copies of financial information about PDS which information is true and
correct and presents fairly the financial results experienced by PDS for the
periods set forth in such information.
(d) PROFESSIONAL LIABILITY. PDS has not had entered against it
final judgment in, or settle without judgment, a malpractice or similar action
for an aggregate award or amount to the plaintiff in excess of Fifty Thousand
and No/100 Dollars ($50,000.00).
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7.2 REPRESENTATIONS AND WARRANTIES OF MANAGER. Manager hereby
represents and warrants as follows:
(a) ORGANIZATION AND GOOD STANDING. Manager is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Manager has all necessary power to own all of its properties and
assets and to carry on its business as now being conducted.
(b) NO VIOLATIONS. Manager has the corporate authority to execute,
deliver and perform this Agreement and has taken all action required by law, its
Articles or Certificate of Incorporation, its Bylaws or otherwise to authorize
the execution, delivery and performance of this Agreement. The execution and
delivery of this Agreement does not and, subject to the consummation of the
transactions contemplated hereby, will not, violate any provisions of the
Articles or Certificate of Incorporation or Bylaws of Manager or any provisions
of or result in the acceleration of, any material obligation under any mortgage,
lien, lease, agreement, instrument, order, arbitration award, judgment or
decree, to which Manager is a party, or by which it is bound. This Agreement has
been duly executed and delivered by Manager and constitutes the legal, valid and
binding obligation of Manager, enforceable in accordance with its terms.
SECTION 8. INSURANCE AND INDEMNITY.
8.1 INSURANCE TO BE MAINTAINED BY PDS. PDS shall provide, or shall
arrange for the provision of, and maintain throughout the entire term of this
Agreement, professional liability insurance coverage on PDS in the minimum
amount of Three Million and No/100 Dollars ($3,000,000.00) per occurrence and
Five Million and No/100 Dollars ($5,000,000.00) annual aggregate including "tail
coverage" to the extent necessary to ensure continuity of coverage. PDS shall
provide to Manager written documentation evidencing such insurance coverage. PDS
shall, at its sole cost and expense, pay the premium costs of all such
professional liability insurance coverage during the term of this Agreement. PDS
shall provide, or shall arrange for the provision of, and shall maintain
throughout the entire term of this Agreement, workers' compensation insurance
coverage on PDS and each of its employees and agents, in the amounts required by
law. PDS shall provide to Manager written documentation evidencing such
insurance coverage. PDS shall, at its sole cost and expense, pay the premium
costs of all such workers' compensation insurance coverage. Manager agrees to
administer and manage the above insurance.
8.2 INDEMNIFICATION BY MANAGER. Manager shall indemnify and hold
harmless PDS, its shareholders, directors, officers, agents, employees and other
personnel from and against any and all claims, demands, liabilities, losses,
damages, costs and expenses (including reasonable attorney's fees, court costs
and other expenses incurred in defending against claims or otherwise connected
therewith) (hereinafter a "Loss" or "Losses") resulting in any manner, directly
or indirectly, from the gross negligence or willful misconduct of Manager, its
directors, officers, employees, independent contractors or agents.
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8.3 INDEMNIFICATION BY PDS. PDS shall indemnify and hold harmless
Manager, its shareholders, directors, officers, agents, employees and other
personnel from and against any all Losses resulting in any manner, directly or
indirectly, from the gross negligence, willful misconduct or professional
malpractice of PDS, its shareholders, employees, independent contractors or
agents.
8.4 INDEMNIFICATION PROCEDURE. Within 60 days after an indemnified
person under Section 8.2 or 8.3 (an "Indemnified Person") receives written
notice of the commencement of any action or other proceeding, or otherwise
becomes aware of any claim or other circumstance, in respect of which
indemnification or reimbursement may be sought under Section 8.2 or Section 8.3,
such Indemnified Person shall notify the Party required to indemnify hereunder
(the "Indemnitor"). If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to employ
separate counsel at Indemnitor's expense and to control its own defense of such
action or proceeding if, in the reasonable opinion of counsel to such
Indemnified Person, (a) there are or may be legal defenses available to such
Indemnified Person or to other Indemnified Persons that are different from or
additional to those available to Indemnitor and which could not be adequately
advanced by counsel chosen by Indemnitor, or (b) a conflict or potential
conflict exists between Indemnitor and such Indemnified Person that would make
such separate representation advisable; provided, however, that in no event
shall Indemnitor be required to pay fees and expenses hereunder for more than
one firm of attorneys in any jurisdiction in any one action or proceeding or
group of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
SECTION 9. ASSIGNMENT.
The parties hereby agree that this Agreement shall not be assigned or
transferred by PDS without the prior written consent of Manager. This Agreement
may be assigned, in whole or in part, by Manager, in its sole discretion,
without the consent of PDS, to any parent, subsidiary or affiliate of Manager or
to any person or entity that acquires all or substantially all of the assets of
Manager or Parent. Notwithstanding the foregoing, PDS agrees and consents to the
Manager granting to the Credit Facility Lender a security interest in all of the
Manager's right, title and interest in and under
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this Agreement as security for the Manager's obligations under a guaranty of all
of the Parent's indebtedness and other obligations owing to the Credit Facility
Lender. Any such assignment shall not affect the guaranty by Parent of the
obligations of Manager hereunder.
SECTION 10. COMPLIANCE WITH REGULATIONS.
Pursuant to Title 42 of the United States Code and applicable rules and
regulations thereunder, until the expiration of four (4) years after termination
of this Agreement, Manager shall make available, upon appropriate written
request by the Secretary of the United States Department of Health and Human
Services or the Comptroller General of the United States General Accounting
Office, or any of their duly authorized representatives, a copy of this
Agreement and such books, documents and records as are necessary to certify the
nature and extent of the costs of the services provided by Manager under this
Agreement. Manager further agrees that if it carries out any of its duties under
this Agreement through a subcontract with a value or cost of Ten Thousand and
No/100 Dollars ($10,000.00) or more over a twelve (12) month period with a
related organization, such subcontract shall contain a clause to the effect that
until the expiration of four (4) years after the furnishing of such services
pursuant to such subcontract, the related organization shall make available,
upon appropriate written request by the Secretary of the United States
Department of Health and Human Services or the Comptroller General of the United
States General Accounting Office, or any of their duly authorized
representatives, a copy of such subcontract and such books, documents and
records of such organization as are necessary to verify the nature and extent of
such costs. Disclosure pursuant to this Section shall not be construed as a
waiver of any other legal right to which Manager may be entitled under law or
regulation.
SECTION 11. INDEPENDENT RELATIONSHIP.
11.1 INDEPENDENT CONTRACTOR STATUS.
It is acknowledged and agreed that PDS and Manager are at all
times acting and performing hereunder as independent contractors. Manager shall
neither have nor exercise any control or direction over the methods by which PDS
performs sleep laboratory services. The sole function of Manager hereunder is to
provide all Management Services in a competent, efficient and satisfactory
manner. Manager shall not, by entering into and performing its obligations under
this Agreement, become liable for any of the existing obligations, liabilities
or debts of PDS. In its management role, Manager will have only an obligation to
exercise reasonable care in the performance of the Management Services. Manager
shall have no liability whatsoever for damages suffered on account of the
willful misconduct or negligence of any employee, agent or independent
contractor of PDS. Each party shall be solely responsible for compliance with
all state and federal laws pertaining to employment taxes, income withholding,
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unemployment compensation contributions and other employment related statutes
regarding their respective employees, agents and servants.
11.2 REFERRAL ARRANGEMENTS. The parties hereby acknowledge and agree
that no benefits to PDS hereunder require or are in any way contingent upon the
admission, recommendation, referral or any other arrangement for the provision
of any item or service offered by Manager or any of its affiliates, to any
patients of PDS, PDS's employees or agents.
SECTION 12. GUARANTIES BY PARENT.
To induce PDS to execute and deliver this Agreement, Parent hereby
unconditionally and irrevocably guarantees to PDS the full, prompt and faithful
performance by Manager of all covenants and obligations to be performed by
Manager under this Agreement. This guaranty shall be a guaranty of payment, not
merely collection, and unaffected by any subsequent modification or amendment of
this Agreement whether or not Parent has knowledge of or consented to such
modification or amendment.
SECTION 13. NAME. PDS agrees that it shall conduct its Business under the
name of "PDS" or "Preferred Diagnostic Service."
SECTION 14. MISCELLANEOUS.
14.1 NOTICES. Any notice required or permitted by this Agreement or
any agreement or document executed and delivered in connection with this
Agreement shall be deemed to have been served properly if hand delivered or sent
by overnight express, charges prepaid and properly addressed, or by facsimile,
to the respective party to whom such notice relates at the following addresses:
If to PDS:
Preferred Diagnostic Service, Inc.
0000 Xxxxxxxx Xxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: President
Facsimile:
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If to Manager or Parent:
PSC MANAGEMENT CORP.
0000 Xxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
or such other address as shall be furnished in writing by any party to the other
party. All such notices shall be considered received when hand delivered or one
business day after delivery to the overnight courier.
14.2 ADDITIONAL ACTS. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.3 GOVERNING LAW. This Agreement shall be interpreted, construed
and enforced in accordance with the laws of the State applied without giving
effect to any conflicts-of-law principles.
14.4 CAPTIONS, ETC. The captions or headings in this Agreement are
made for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement. Whenever the context so requires, the singular number includes the
plural and the plural includes the singular, and the gender of any pronoun
includes the other gender. All Addenda and Exhibits to this Agreement are hereby
incorporated into this Agreement by this reference.
14.5 SEVERABILITY. In the event any term, covenant, condition,
agreement, section or provision hereof shall be deemed invalid or unenforceable
by a court of competent and final jurisdiction in the premises, the same shall
be severable and this Agreement shall not terminate or be deemed void or
voidable, but shall continue in full force and effect without such stricken
provision.
14.6 CHANGES IN REIMBURSEMENT. If Medicare, Medicaid, Blue
Cross/Blue Shield or any other third party payor, or any other Federal, state or
local laws, rules, regulations or interpretations, at any time during the term
of this Agreement, prohibit, restrict or in any way materially and adversely
change the method or amount of reimbursement or payment for services rendered by
PDS pursuant to this Agreement or of the method of compensation for either party
provided for in this Agreement, then the parties shall use commercially
reasonable efforts to amend this Agreement to provide for payment of
compensation in a manner consistent with any such prohibition, restriction or
limitation and which takes into account any materially adverse change in
reimbursement or payment from such third party payors for such physician
services, provided such amendments are consistent with the overall economic and
other objectives of the parties set forth in this Agreement.
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14.7 MODIFICATIONS. This instrument contains the entire agreement
of the parties and supersedes any and all prior or contemporaneous negotiations,
understandings or agreements between the parties, written or oral, with respect
to the transactions contemplated hereby. This Agreement may not be changed or
terminated orally, but may only be changed by an agreement in writing signed by
a duly authorized officer of Manager if Manager is the party against whom
enforcement of any such waiver, change, modification, extension, discharge or
termination is sought, or by PDS if PDS is the party against whom enforcement of
any such waiver, change, modification, extension, discharge or termination is
sought.
14.8 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by Manager solely as a convenience and that all
parties and their counsel have read and fully negotiated all the language used
in this Agreement. The parties acknowledge and agree that because all parties
and their counsel participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes any language,
whether ambiguous, unclear or otherwise, in favor of, or against any party by
reason of that party's role in drafting this Agreement.
14.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
14.10 BINDING EFFECT. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto, and their successors and permitted
assigns. Subject to the foregoing sentence, no person not a party hereto shall
have any right under or by virtue of this Agreement.
14.11 ENFORCEMENT RIGHTS. PDS acknowledges that both PDS and Manager
will be directly or indirectly affected by the enforcement of PDS's rights
against third parties and by PDS's enforcement of the rights of third parties
the enforcement rights of which were delegated to PDS by such third parties, and
that Manager may need from time to time to take legal action against third
parties to enforce such rights. Therefore, PDS hereby appoints Manager its
nonexclusive true and lawful attorney-in-fact to enforce any and all rights of
PDS, other than any rights PDS may have against Manager, and to enforce the
rights of third parties the enforcement rights of which were delegated to PDS by
such third parties, to the extent not contrary to applicable law. PDS agrees to
execute any instrument reasonably requested by Manager to evidence such
appointment or to reappoint Manager as such attorney-in-fact upon any
termination of the appointment made hereby. Such appointment is coupled with an
interest and irrevocable.
14.12 COSTS OF ENFORCEMENT. If either party files suit in any court
against the other party to enforce the terms of this Agreement against the other
party or to obtain performance by it hereunder, the prevailing party will be
entitled to recover all reasonable costs, including reasonable attorneys' fees,
from the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment
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after appeal (if any) is rendered with respect to the claims asserted in the
Complaint. "Reasonable attorneys' fees" are those attorneys' fees actually
incurred in obtaining a judgment in favor of the prevailing party.
IN WITNESS WHEREOF, PDS, Manager and Parent have duly executed this
Agreement on the day and year first above written.
PSC MANAGEMENT CORP. PREFERRED DIAGNOSTIC SERVICE, INC.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxxxxx
-------------------------- ----------------------------
Title: Vice President Title: President
----------------------- -------------------------
PHYSICIANS' SPECIALTY CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------
Title: Vice Chairman
-----------------------
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APPENDIX A
DEFINITIONS
Defined Term Section
------------ -------
Asset Purchase Agreement Background
Confidential Information 4.5(e)
Credit Facility Lender 5.3(b)
Effective Date Preamble
Estimated Collection Percentage 5.1
Executive 3.9
FFE 3.3
GAAP 1.2
Indemnified Person 8.4
Laws 3.12
Management Services 3.1
Manager Preamble
Offices 3.1
PDS Net Revenues 1.2
Parent Preamble
PDS Preamble
PDS IP 4.5(d)
PDS Expenses 1.6
State 1.7
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EXHIBIT 3.5(f)
BILLING AGREEMENT
for
GOVERNMENTAL RECEIVABLES
THIS BILLING AGREEMENT ("Agreement") is entered into this _____ day of
__________, 1998, by and between PSC MANAGEMENT CORP., a Delaware corporation
("Manager"), and PREFERRED DIAGNOSTIC SERVICE, INC., a Georgia corporation
("PDS").
WITNESSETH:
WHEREAS, the parties entered into a Management Services Agreement as of
even date herewith (the "Service Agreement"), under which Manager provides
certain management services to PDS, including billing and collection services
for Medicare, Medicaid and CHAMPUS receivables; and,
WHEREAS, the parties wish to set forth in detail the mechanisms under
which Manager provides and is compensated for such billing services.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree as follows:
1. Appointment and Authority. Manager shall, on behalf of PDS,
xxxx and collect from Medicare, Medicaid and CHAMPUS the professional fees for
medical services rendered by PDS to Medicare, Medicaid and CHAMPUS patients. PDS
hereby appoints Manager for the term hereof to be PDS's true and lawful
attorney-in-fact for the following purposes:
a. to xxxx Medicare, Medicaid and CHAMPUS in the name
and on behalf of PDS;
b. to collect all accounts receivable resulting from
such xxxxxxxx in the name and on behalf of PDS;
c. to take possession of and endorse in the name and on
behalf of PDS any notes, checks, money orders,
electronic payments, and other forms of payment of
such accounts receivable;
d. to deposit all such amounts collected, including
electronic payments, into an account owned by PDS
(the "PDS Deposit Account") with a bank whose
deposits are insured by the Federal Deposit Insurance
Corporation, which account shall at all times be
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maintained in accordance with the provisions of
Section 2 below; and,
e. to withdraw funds from the PDS Deposit Account in
accordance with the provisions of Section 2 below on
behalf and in the name of PDS for the payment of PDS
Expenses, and remittance of funds to PDS as provided
in Section 5.1 of the Service Agreement.
2. PDS Deposit Account.
a. Manager shall have access to the PDS Deposit Account
solely for the purpose of paying PDS Expenses
incurred by or on behalf of PDS, including the
payment of Manager's fee, in accordance with the
terms of the Service Agreement. PDS agrees to execute
and deliver to the bank any and all documents
necessary to evidence or effect the special power of
attorney granted to Manager in accordance with
Section 1 above.
b. Medicare and Medicaid payments shall be deposited
directly to the PDS Deposit Account. PDS and Manager
hereby agree that if any Medicare and Medicaid
payments are received by Manager on behalf of PDS,
such amounts shall be forwarded to the PDS Deposit
Account for deposit. Funds from the PDS Deposit
Account will only be drawn in the name of PDS. PDS
hereby agrees that this payment arrangement will
continue in effect only so long as PDS has sole
control of the PDS Deposit Account, and the bank is
subject only to PDS's instructions regarding the PDS
Deposit Account.
c. In the event that PDS revokes Manager's right to
withdraw funds from the PDS Deposit Account, or if
PDS withdraws funds from the PDS Deposit Account or
takes any other actions with respect to the PDS
Deposit Account (unless such actions are required by
applicable law) without first obtaining the approval
of the Advisory Board in accordance with the Service
Agreement (it being understood that all proceeds are
intended to be paid over to Manager to pay PDS
Expenses and repay any advances made by Manager in
accordance with the Service Agreement), and if any
such actions remain uncured after notice and ten (10)
days opportunity to cure, such actions shall
constitute grounds for immediate termination of this
Agreement and the Service Agreement as a "PDS Event
of Default" thereunder, and PDS shall immediately
reimburse and indemnify Manager for all costs and
damages sustained as a result of such breach by PDS.
PDS hereby acknowledges that PDS has granted to
Manager a security interest in PDS's cash proceeds
from all collections covered by this
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Agreement in accordance with Section 5.3 of the
Service Agreement. PDS further agrees in the event
PDS revokes Manager's right to withdraw funds from
the account that PDS shall be deemed to have received
any and all amounts retained in the PDS Deposit
Account when determining the amount to be remitted by
Manager to PDS under Section 5.1 of the Service
Agreement.
3. Compensation. As reimbursement for services provided under the
Service Agreement and this Agreement, Manager shall receive the fees set forth
in Sections 1.6(g) and 3.17 of the Service Agreement. The parties have agreed to
such fees at arms' length and have determined that such fees represent fair
market value for the services provided hereunder and under the Service
Agreement.
4. Construction of Terms. The terms of the Service Agreement
shall, to the fullest extent reasonably possible, be construed so as to be
consistent with the terms of this Agreement, and all capitalized terms herein
shall, except as otherwise expressly provided herein, have the same definitions
as set forth in the Service Agreement. In the event of any ambiguity or
inconsistency between the terms and conditions of this Agreement and the Service
Agreement, the terms and conditions of this Agreement shall govern.
5. Changes in Reimbursement Laws and Regulations. In the event of
changes in laws and regulations that would cause any portion of this Agreement
to be illegal or unenforceable, the parties shall promptly amend this Agreement
as necessary to comply with such laws and regulations.
6. Binding on Successors. This Agreement shall be binding upon
the parties hereto, and their successors, assigns, heirs and beneficiaries.
Without limitation of the foregoing, Manager shall have the same rights to
assign this Agreement as provided in Section 9 of the Service Agreement with
respect to assignment of the Service Agreement.
7. Governing Law. The validity, interpretation, and performance
of this Agreement shall be governed by the laws designated to govern the terms
of the Service Agreement.
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.
9. Amendments. This Agreement shall not be modified or amended
except by a written document executed by both parties to this Agreement, and any
such written modifications or amendments shall be attached hereto.
10. Notices. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery,
or by facsimile and
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reputable overnight courier, to the parties hereto at the following addresses,
or at such other address as either party may advise the other in writing from
time to time:
If to Manager or Parent:
PHYSICIANS' SPECIALTY CORP.
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
With a copy of each notice directed to Manager or Parent to:
Xxxxxxx X. Xxxxx
Xxxxxxxx Xxxxxxx LLP
0000 XxxxxxxXxxx Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to PDS:
Preferred Diagnostic Service, Inc.
0000 Xxxxxxxx Xxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Facsimile:
with a copy of each notice directed to PDS to:
Xxxxxx Xxxxxxxx, Esq.
Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Xxxxxx
0000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000)000-0000
Telephone: (000)000-0000
or such other address as shall be furnished in writing by any party to the other
party. All such notices shall be considered received when hand delivered or one
business day after delivery to the overnight courier.
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11. Additional Acts. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
12. Captions, etc. The captions or headings in this Agreement are
made for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement. All Addenda and Exhibits to this Agreement are hereby incorporated
into this Agreement by this reference.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PDS:
PREFERRED DIAGNOSTIC SERVICE, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxxx
------------------------------
Title: President
---------------------------
MANAGER:
PSC MANAGEMENT CORP.
By: /s/
------------------------------
Title: Vice President
---------------------------
