Exhibit 10.10
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
NOVAMED EYECARE MANAGEMENT, LLC,
a Delaware limited liability company,
AND
DOMINION EYE ASSOCIATES, P.C.,
a Virginia professional corporation
EFFECTIVE January 1, 1997
TABLE OF CONTENTS
Page No.
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ARTICLE I............................................................. 2
1.1 Adjusted Gross Revenue....................................... 2
1.2 Adjustments.................................................. 2
1.3 Affiliate.................................................... 2
1.4 Ancillary Revenue............................................ 2
1.5 Base Management Fee.......................................... 2
1.6 Budget....................................................... 2
1.9 Budgeted Practice Expense.................................... 3
1.10 Business Manager............................................ 3
1.11 Business Manager Consent.................................... 3
1.12 Business Manager Expense.................................... 3
1.13 Capitation/Case Rate Revenues............................... 3
1.14 Confidential Information.................................... 4
1.17 Designated Allied Health Professionals...................... 4
1.18 GAAP........................................................ 4
1.20 Management Fee.............................................. 5
1.21 Management Services......................................... 5
1.22 Management Services Agreement............................... 5
1.24 Medical Advisory Board...................................... 5
1.25 Medical Services............................................ 5
1.29 Office...................................................... 5
1.30 Office Expense.............................................. 5
1.31 Operating Board............................................. 7
1.32 Optometrist................................................. 7
1.33 Physician................................................... 7
1.34 Physician Discretionary Expenses............................ 7
1.35 Physician-Employee.......................................... 8
1.36 Physician-Shareholder....................................... 8
1.37 Policy Board................................................ 8
1.38 Practice.................................................... 8
1.39 Practice Consent............................................ 8
1.40 Practice Expense............................................ 8
1.41 Practice Territory.......................................... 8
1.42 Preexisting Obligation Payments............................. 8
1.43 Professional Services Revenues.............................. 8
1.44 Regional Practices.......................................... 9
1.45 Representatives............................................. 9
1.46 Xxxxx Act................................................... 9
1.48 Subcontractor Costs......................................... 9
1.49 Term........................................................ 9
ARTICLE II............................................................ 9
2.1 Appointment.................................................. 9
2.2 Authority.................................................... 9
2.3 Patient Referrals............................................ 10
2.4 Internal Practice Matters.................................... 10
2.5 Practice of Medicine......................................... 10
ARTICLE III........................................................... 10
3.1 Formation and Operation of the Policy Board.................. 10
3.2 Duties and Responsibilities of the Policy Board.............. 11
3.3 Medical Decisions............................................ 12
ARTICLE IV............................................................ 12
4.1 Office and Equipment......................................... 13
4.2 Medical Supplies............................................. 13
4.3 Support Services............................................. 13
4.4 Quality Assurance, Risk Management, and Utilization Review... 14
4.5 Licenses and Permits......................................... 14
4.6 Personnel.................................................... 14
4.7 Contract Negotiations........................................ 14
4.8 Billing and Collection....................................... 15
4.9 Priority of Payments......................................... 17
4.11 Reports and Records......................................... 19
4.12 Recruitment of Physicians and Optometrists.................. 19
4.13 Confidential and Proprietary Information.................... 19
4.14 Business Manager's Insurance................................ 20
4.15 No Warranty................................................. 21
ARTICLE V............................................................. 21
5.1 Organization and Operation................................... 21
5.2 Practice Personnel........................................... 22
5.3 Professional Standards....................................... 23
5.4 Medical Services............................................. 23
5.5 Peer Review/Quality Assurance................................ 24
5.7 Confidential and Proprietary Information..................... 24
5.8 Noncompetition............................................... 24
5.9 Name, Trademark.............................................. 26
5.10 Medical Advisory Board...................................... 26
5.11 Indemnification of Business Manager......................... 27
ARTICLE VI............................................................ 27
6.1 Definitions.................................................. 27
6.2 Monthly Practice Expense..................................... 28
6.3 Management Fee............................................... 28
6.4 Reasonable Value............................................. 28
6.5 Payment of Management Fee.................................... 29
6.6 Accounts Receivable.......................................... 29
6.7 Disputes Regarding Fees...................................... 29
ARTICLE VII........................................................... 30
7.1 Initial and Renewal Term..................................... 30
7.2 Termination.................................................. 30
7.3 Effects of Termination....................................... 31
7.4 Repurchase Obligation........................................ 32
7.5 Repurchase Option............................................ 33
7.6 Closing of Repurchase........................................ 34
7.7 Rights and Remedies.......................................... 35
7.8 Interpretation............................................... 35
ARTICLE VIII.......................................................... 35
8.1 Administrative Services Only................................. 36
8.2 Status of Contractor......................................... 36
8.3 Notices...................................................... 36
8.4 Governing Law and Consent to Jurisdiction.................... 37
8.5 Assignment................................................... 37
8.6 Arbitration.................................................. 38
8.7 Waiver of Breach............................................. 38
8.8 Enforcement.................................................. 38
8.9 Gender and Number............................................ 38
8.10 Additional Assurances....................................... 38
8.11 Consents, Approvals, and Exercise of Discretion............. 38
8.12 Force Majeure............................................... 38
8.13 Severability................................................ 39
8.14 Divisions and Headings...................................... 39
8.15 Amendments and Management Services Agreement Execution...... 39
8.16 Entire Management Services Agreement........................ 39
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made and entered into effective as of
January 1, 1997 (the "Effective Date"), by and among NovaMed Eyecare Management,
LLC, a Delaware limited liability company ("NovaMed LLC"), and Dominion Eye
Associates, P.C., a Virginia professional corporation ("Practice").
RECITALS
This Management Services Agreement is made with reference to the following
facts:
A. Business Manager is a validly existing Delaware limited liability
company which is in the business of providing physician practice management
services to medical practices.
B. Business Manager is an indirect, wholly owned subsidiary of NovaMed
Holdings Inc. ("Holdings"). In performing services hereunder, Business Manager
may utilize various resources, personnel and assets of Holdings and NovaMed of
Richmond, Inc., another wholly owned subsidiary of Holdings.
C. Practice is a validly existing Virginia professional corporation,
formed for and engaged in the conduct of a medical practice and the provision of
medical services to the general public in and around the Richmond metropolitan
area through individual physicians who are licensed to practice medicine in the
Commonwealth of Virginia and who are employed or otherwise retained by Practice.
D. Practice desires to focus its energies, expertise and time on the
practice of medicine and on the delivery of medical services to patients, and
desires to delegate the business functions of its medical practice to persons
with business expertise.
E. Practice desires to engage Business Manager to provide all management,
administrative and business services as are necessary or appropriate for the
day-to-day administration of the nonmedical aspects of Practice's medical
practice, and Business Manager desires to provide such services upon the terms
and conditions hereinafter set forth.
F. Practice and Business Manager have determined a fair market value for
the services to be rendered by Business Manager and, based on this fair market
value, have developed a formula for compensating Business Manager that will
allow the parties to establish a relationship permitting each party to devote
its skills and expertise to the appropriate responsibilities and functions.
G. Business Manager is willing to commit significant resources to
Practice based upon the representation and warranty of Practice that the current
shareholder of Practice will continue to practice medicine for Practice in the
Practice Territory (as hereinafter defined) during the term of this Management
Services Agreement pursuant to an employment agreements (the "Employment
Agreements") between Practice and Physician-Shareholder (as hereinafter
defined).
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used in this Management Services Agreement, the following terms shall
have the meanings set forth below.
1.1 Adjusted Gross Revenue. The term "Adjusted Gross Revenue" shall mean
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the sum of Professional Services Revenue and Ancillary Revenue.
1.2 Adjustments. The term "Adjustments" shall mean any adjustments on an
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accrual basis in accordance with GAAP for uncollectible accounts, Medicare,
Medicaid and other payor contractual adjustments, discounts, worker's
compensation adjustments, professional courtesies and other reductions in
collectible revenue.
1.3 Affiliate. The term "Affiliate" shall mean any person, firm or entity
---------
which directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, any other person (including
members of such person's family), firm or entity.
1.4 Ancillary Revenue. The term "Ancillary Revenue" shall mean all other
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revenue of Practice, Physicians and Optometrists actually recorded each month
(net of Adjustments) which is not Professional Services Revenue and shall
include, without limitation, any revenues of Practice or its Physicians and
Optometrists which are derived from Ancillary Services (as hereinafter defined);
provided, however, that Ancillary Revenue shall not include any non-Professional
Services Revenue of Xxxxxxx X. Xxxx, M.D. until the aggregate amount of such
revenues exceed $20,000 in any calendar year, at which time any revenues in
excess of such amount shall be deemed Ancillary Revenues.
1.4A Ancillary Services. The term "Ancillary Services" shall mean
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services, other than Medical Services, related to professionally related
activities such as expert witness fees, and any royalties, honoraria or the like
from authored documents or speeches.
1.5 Base Management Fee. The term "Base Management Fee" shall mean the
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amount determined pursuant to Section 6.1 hereof.
1.6 Budget. The term "Budget" shall mean an operating budget and capital
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expenditure budget for each fiscal year as prepared by Business Manager and
adopted by Practice in accordance with Section 4.10 hereof. The initial Budget
shall be attached hereto and incorporated herein as Exhibit 1.6. Each succeeding
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Budget subsequently adopted pursuant to Section 4.10 hereof shall also be
incorporated herein.
1.7 Budgeted Adjusted Gross Revenue. The term "Budgeted Adjusted Gross
-------------------------------
Revenue" shall have the meaning set forth in Section 6.1 hereof.
1.8 Budgeted Office Expense. The term "Budgeted Office Expense" shall
-----------------------
have the meaning set forth in Section 6.1 hereof.
1.9 Budgeted Practice Expense. The term "Budgeted Practice Expense" shall
-------------------------
have the meaning set forth in Section 6.1 hereof.
1.10 Business Manager. The term "Business Manager" shall have the meaning
----------------
described in the introductory paragraph and the recitals to this Management
Services Agreement, or any successor in interest.
1.11 Business Manager Consent. The term "Business Manager Consent" shall
------------------------
mean the consent granted by any of Business Manager's representatives to the
Policy Board. When any provision of this Management Services Agreement requires
Business Manager Consent, such consent shall not be unreasonably withheld,
conditioned or delayed and shall be binding on Business Manager.
1.12 Business Manager Expense. The term "Business Manager Expense" shall
------------------------
mean any expense or cost incurred by Business Manager which does not relate
directly to the provision of services to Practice. Such expenses or costs shall
include, without limitation:
(a) all salaries, benefits and other direct costs (including payroll
and other withholding taxes) of executive officers and management personnel of
Business Manager or employees of Business Manager who devote substantially all
of their time and effort to the operations of Business Manager rather than the
operations of Practice;
(b) the expense of using, leasing, maintaining or repairing the
offices of Business Manager;
(c) the cost of capital to finance the general business obligations
of Business Manager, and any costs associated with raising such capital;
(d) the costs of any consultants or advisors who provide services for
Business Manager in connection with its business operations, such as accounting,
financial and legal services, other than those services which constitute Office
Expense pursuant to Section 1.30 hereof; and
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(e) all income taxes relating to the general business operations of
Business Manager
1.13 Capitation/Case Rate Revenues . The term "Capitation/Case Rate
-----------------------------
Revenues" shall mean all revenues from managed care organizations, third party
payors or employers in which payments are based on a per member, case rate or
other similar basis (i.e., all payments which are not based on a fee-for-service
payment methodology or discounted fee-for-service reimbursement methodology) for
the medical needs of a subscribing patient. Capitation/Case Rate revenues shall
include any associated plan payments received such as patient co-payments,
incentive bonuses or incentive fund penalties. All Capitation/Case Rate
Revenues shall be allocated in good faith on an actuarial basis as follows:
(a) Professional Services Capitation. The portion of payments
--------------------------------
designated for physician services currently performed by Practice; Professional
Services Capitation shall be Professional Services Revenues; and
(b) Subcontractor Capitation Revenues. The portion of payments
---------------------------------
designated for physicians, optometrists or other medical or optometric services
that will be Subcontractor Costs (e.g., reinsurance, hospitalization, surgical
facility fees, optical dispensary services, etc.), including incentive bonuses
or penalties, and an estimate for incurred but not reported claims;
Subcontractor Capitation Revenues shall not be Professional Services Revenues.
Subject to the approval of the Policy Board, Business Manager shall develop and
implement an appropriate allocation methodology for each Capitation/Case Rate
Revenues contract.
1.14 Confidential Information. The term "Confidential Information"
------------------------
shall mean any and all financial, technical, commercial or other information of
Business Manager or Practice, as appropriate (whether written or oral),
including, without limitation, all information, notes, studies, patient lists
and records, reports, analyses, financial statements, compilations, studies,
forms, business or management methods, marketing data, fee schedules, peer
review information, credentialing information, quality assurance and utilization
review information, interpretations, projections, forecasts or trade secrets of
Business Manager or of Practice, as applicable, whether or not such Confidential
Information is disclosed or otherwise made available to one party by the other
party pursuant to this Management Services Agreement. Confidential Information
shall also include the terms and provisions of this Management Services
Agreement and any transactions consummated or documents executed by the parties
pursuant to this Management Services Agreement. Confidential Information does
not include any information that (i) is or becomes generally available to and
known by the public (other than as a result of an unpermitted disclosure
directly or indirectly by the receiving party or its affiliates, advisors or
Representatives); (ii) is or becomes available to the receiving party on a
nonconfidential basis from a source other than the furnishing party or its
affiliates, advisors or Representatives, provided that such source is not and
was not bound by a confidentiality agreement with or other obligation of secrecy
to the furnishing party of which the receiving party has knowledge at the time
of such disclosure; or (iii) has already been developed, or is hereafter
independently acquired or developed, by the receiving party without violating
any confidentiality agreement with or other obligation of secrecy to the
furnishing party.
1.15 Intentionally deleted.
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1.16 Depository Account. The term "Depository Account" shall mean the
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bank account referred to in Section 4.8 hereof.
1.17 Designated Allied Health Professionals. The term "Designated Allied
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Health Professionals" shall mean those medical professionals other than
Physicians and Optometrists whose services must be rendered "incident to" a
Physician's services in order to be billable under the Medicare program.
1.18 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,
statements and pronouncements of the Financial Accounting Standards Board, or
other statements, 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 the determination.
1.19 Managed Care Contract. The term "Managed Care Contract" shall
---------------------
include any Capitation/Case Rate Revenues contract, or any contracts based on a
fee-for-service payment methodology or discounted fee-for-service reimbursement
methodology and other agreements with third party payors, alternative delivery
systems or other purchasers of group health care services.
1.20 Management Fee. The term "Management Fee" shall mean Business
--------------
Manager's compensation as described in Article VI hereof.
1.21 Management Services. The term "Management Services" shall mean the
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business, administrative and management services to be provided for Practice
including, without limitation, the provision of equipment, supplies, support
services, nonphysician personnel, office space, management, administration,
financial recordkeeping and reporting, information systems and all other
business office services necessary for the nonmedical operations of Practice.
1.22 Management Services Agreement. The term "Management Services
-----------------------------
Agreement" shall mean this Management Services Agreement by and between Practice
and Business Manager and any amendments hereto.
1.23 Intentionally deleted.
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1.24 Medical Advisory Board. The term "Medical Advisory Board" shall have
----------------------
the meaning set forth in Section 5.9 hereof.
1.25 Medical Services. The term "Medical Services" shall mean the
----------------
practice of ophthalmology, optometry and other related eye care services as
provided by Practice through Physicians and Optometrists, as the case may be.
1.26 Monthly Fee. The term "Monthly Fee" shall have the meaning set forth
-----------
in Section 6.1 hereof.
1.27 Monthly Office Expense. The term "Monthly Office Expense" shall have
----------------------
the meaning set forth in Section 6.1 hereof.
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1.28 Monthly Practice Expense. The term "Monthly Practice Expense" shall
------------------------
have the meaning set forth in Section 6.1 hereof.
1.29 Office. The term "Office" shall mean any office space, clinic,
------
facility or satellite facilities that Business Manager owns, leases or otherwise
procures for the exclusive use of Practice.
1.30 Office Expense. The term "Office Expense" shall mean all expenses
--------------
incurred by Business Manager or Practice in the provision of services to
Practice in accordance with the general categories of expenses set forth in the
Budget. Except as specifically enumerated below, Office Expense shall not
include any state or federal income tax liability of Practice or Physician-
Shareholders, or any other expense that is a Practice Expense or a Business
Manager Expense. Without limitation, Office Expense shall include:
(a) the salaries, benefits and other direct costs (including payroll
and other withholding taxes) of all employees of Business Manager who are either
located at, devote substantially all of their time and effort to, or for which
time is allocated specifically for a function to support, Practice;
(b) the salaries, benefits and other direct costs (including payroll
and other withholding taxes) of all Physician-Employees and Optometrists, but
excluding the salaries, benefits and payroll and other withholding taxes of
Physician-Shareholders; provided, however, that in the event any Physician-
Shareholder shall fail, for any reason, to work full-time in the performance of
his or her duties as described in such Physician-Shareholder's Employment
Agreement for a period exceeding two (2) consecutive months, whether or not such
failure (i) gives rise to termination rights pursuant to such Employment
Agreement or (ii) occurs prior to or after the termination of the Initial Term
(as such term is defined in Section 4.1 of such Employment Agreement), then the
expenses described in this Section 1.30(b) shall thereafter be categorized as
Practice Expense;
(c) except as otherwise provided in Section 5.4 hereof, the direct or
reasonably allocated costs of providing such locum tenens coverage as may be
----- ------
necessary pursuant to Section 5.4 hereof, which costs shall include, without
limitation, the salaries, benefits and other direct costs of any Physicians or
Optometrists retained by Practice for such purposes;
(d) the direct or reasonably allocated costs of any employee or
consultant that provides services at the direction of Business Manager with
Practice Consent for improved performance of Practice, such as management,
xxxxxxxx and collections, business office consultation, training, and accounting
and legal services;
(e) reasonable recruitment costs and out-of-pocket expenses of
Business Manager or Practice associated with the recruitment, at the direction
of Practice, of additional Physician-Employees and Optometrists of Practice;
(f) all reasonable and customary business insurance expenses of
Practice, Physicians, Optometrists, Designated Allied Health Professionals and
the Office, including, without limitation, professional and general liability
insurance;
(g) without duplication of expenses included pursuant to any other
subparagraph
6
of this Section 1.30 and subject to the Budget, the expense of using, leasing,
maintaining, repairing, purchasing or otherwise procuring the Office and related
equipment (including any leasehold improvements), including, without limitation,
any depreciation expense and any and all expenses relating to the equipment
listed on Exhibit 1.30(g) attached hereto and incorporated herein, but excluding
---------------
any Preexisting Obligation Payments;
(h) without duplication of expenses included pursuant to any other
subparagraph of this Section 1.30, the cost of capital, whether as actual
interest on indebtedness incurred on behalf of Practice or as reasonable imputed
interest on capital advanced by Business Manager to finance or refinance
obligations of Practice, purchase medical or nonmedical equipment, renovate the
Office, or finance new ventures of Practice, but excluding any Preexisting
Obligation Payments;
(i) the Base Management Fee;
(j) the direct, or with Practice Consent, reasonably allocated,
costs relating to sales or marketing activities or materials, including, without
limitation, brochures, pamphlets, displays, direct mail, promotional materials,
patient screening, network directories, signs, video and audio tapes, equipment,
media, development costs and consulting services;
(k) the direct, or with Practice Consent, reasonably allocated,
costs of obtaining, maintaining and supporting Managed Care Contracts;
(l) the direct, or with Practice Consent, reasonably allocated,
costs relating to any third party service agreements for the general day-to-day
operations of Office and Practice, which services shall include, without
limitation, maintenance, patient transportation, janitorial, answering services,
landscaping, snow removal and uniform rental;
(m) the direct, or with Practice Consent, reasonably allocated,
travel expenses of Business Manager associated with attending meetings,
conferences or seminars primarily benefiting Practice;
(n) the cost of medical supplies (including, without limitation,
drugs, pharmaceuticals, products, substances or medical devices), office
supplies, inventory and utilities for Practice; and
(o) direct costs, not to exceed budgeted allowances, for
professional dues, subscriptions, continuing medical education expenses and
travel costs for continuing medical education or other business travel of
Practice employees.
1.31 Operating Board. The term "Operating Board" shall mean the
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operating board or board of directors, as the case may be, of Business Manager.
1.32 Optometrist. The term "Optometrist" shall mean each individually
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licensed doctor of optometry who is employed or otherwise retained by or
associated with Practice, each of whom shall meet at all times the
qualifications described in Sections 5.2 and 5.3 hereof.
1.33 Physician. The term "Physician" shall mean each individual
---------
licensed to practice
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medicine in the Commonwealth of Virginia and certified by the American Academy
of Ophthalmology who is employed or otherwise retained by or associated with
Practice, each of whom shall meet at all times the qualifications described in
Sections 5.2 and 5.3 hereof.
1.34 Physician Discretionary Expenses. The term "Physician Discretionary
--------------------------------
Expenses" shall mean any expenses or debt obligations of Practice or Physicians
which are not included in the Budget or approved by Business Manager and shall
include, without limitation, the following: accounting, consulting or legal
expenses incurred by Practice without coordinating such engagement through
Business Manager; professional dues, subscriptions, continuing medical education
expenses and travel costs for continuing medical education in excess of budgeted
allowances for such items and any equipment obtained by Practice without the
approval of the Policy Board as set forth in Section 4.1(d) hereof; and other
discretionary business expenses incurred directly by Physicians or Practice
which are not included in the Budget or approved by Business Manager.
1.35 Physician-Employee. The term "Physician-Employee" shall mean any
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Physician employed by Practice, but shall not include Physician-Shareholders.
1.36 Physician-Shareholder. The term "Physician-Shareholder" shall mean
---------------------
any Physician who is employed by, and a shareholder of, Practice.
1.37 Policy Board. The term "Policy Board" shall refer to the body
------------
responsible for developing and implementing management and administrative
policies for the overall operation of the Regional Practices.
1.38 Practice. The term "Practice" is defined in the introductory
--------
paragraph of this Management Services Agreement.
1.39 Practice Consent. The term "Practice Consent" shall mean the consent
----------------
granted by any of Practice's authorized Representatives who is not an officer or
employee of Business Manager. When any provision of this Management Services
Agreement requires Practice Consent, such consent shall not be unreasonably
withheld, conditioned or delayed and shall be binding on Practice.
1.40 Practice Expense. The term "Practice Expense" shall mean an expense
----------------
incurred by Business Manager or Practice and for which Practice, and not
Business Manager, is financially liable. Practice Expenses will be limited to
such items as Preexisting Obligation Payments, Physician Discretionary Expenses,
salaries, benefits and other direct costs of Physician-Shareholders, any costs
of providing locum tenens coverage designated as a Practice Expense pursuant to
----- ------
Section 5.4 hereof, and any other expenses incurred by Practice and Physician-
Shareholders which are not in the Budget or are in excess of budgeted
allowances.
1.41 Practice Territory. The term "Practice Territory" shall mean the
------------------
geographic area within a ten-mile radius of any present or future Office of
Practice.
1.42 Predecessor Professional Corporation. The term "Predecessor
------------------------------------
Professional Corporation" shall mean Xxxxxxx X. Xxxx, M.D., P.C., predecessor-
in-interest to Practice.
1.43 Preexisting Obligation Payments. The term "Preexisting Obligation
-------------------------------
Payments" shall mean (i) the expense for principal and interest amortization of
debt obligations of Practice or any
8
Physician-Shareholder relating to the operation of Practice which existed prior
to the execution of this Management Services Agreement and (ii) lease payments
and other costs relating to any outstanding debt, obligations or liabilities of
Practice or any Physician-Shareholder relating to the operation of Practice
which existed prior to the execution of this Management Services Agreement, and
which include, without limitation, the items set forth on Exhibit 1.43 attached
------------
hereto and incorporated herein.
1.44 Professional Services Revenues. The term "Professional Services
------------------------------
Revenues" shall mean the sum of (i) all professional fees actually recorded each
month on an accrual basis under GAAP (net of Adjustments) as a result of Medical
Services and related health care services rendered by Physicians, Optometrists
and Designated Allied Health Professionals, whether rendered in an outpatient or
inpatient setting, which fees shall include any revenue relating to the sale of
prescription and non-prescription eyewear, contact lenses and other related
optical products as well as customary professional fees for the fitting of
contact lenses, and (ii) Professional Services Capitation allocated to
Professional Service Revenues.
1.45 Regional Practices. The term "Regional Practices" is defined in
------------------
Section 3.1(a) hereof.
1.46 Representatives. The term "Representatives" shall mean a party's
----------------
officers, directors, employees, or other agents or representatives.
1.47 Xxxxx Act. The term "Xxxxx Act" shall refer to Section 1877 of the
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Social Security Act.
1.48 Stock Purchase Agreement. The term "Stock Purchase Agreement" shall
------------------------
mean the Stock Purchase Agreement by and between Business Manager and Xxxxxxx X.
Xxxx, M.D.
1.49 Subcontractor Costs. The term "Subcontractor Costs" shall mean the
-------------------
amounts payable to third parties for providing medical services for
Capitation/Case Rate Revenues contracts.
1.50 Term. The term "Term" shall mean the initial term and any renewal
----
terms of this Management Services Agreement as described in Section 7.1 hereof.
ARTICLE II
APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
2.1 Appointment. Practice hereby appoints Business Manager as its sole
-----------
and exclusive agent for the management and administration of the business
functions and business affairs of Practice, and Business Manager hereby accepts
such appointment, subject at all times to the terms and conditions of this
Management Services Agreement.
2.2 Authority. Consistent with the provisions of this Management
---------
Services Agreement, Business Manager shall have the responsibility and
commensurate authority to provide Management Services to Practice. Subject to
the terms and conditions of this Management Services Agreement, Practice
expressly authorizes Business Manager to provide the Management Services deemed
by
9
Business Manager to be reasonably appropriate to meet the day-to-day
requirements of the business functions of Practice. In connection with Business
Manager's provision of Management Services, Practice also expressly authorizes
Business Manager to negotiate and execute on behalf of Practice any and all
contracts related to the provision of such Management Services; provided,
however that, subject to Section 4.7 hereof, Business Manager shall have no
authority to negotiate and execute on behalf of Practice contracts that relate
specifically to the provision of Medical Services. The parties acknowledge and
agree that Practice, through its Physicians, shall be responsible for and shall
have complete authority, responsibility, supervision and control over the
provision of all Medical Services and other professional health care services
performed for patients, and that all diagnoses, treatments, procedures and other
professional health care services shall be provided and performed exclusively by
or under the supervision of Physicians in such manner as such Physicians, in
their sole discretion, deem appropriate. Business Manager shall have and
exercise absolutely no control or supervision over the provision of Medical
Services. Except as provided in Section 4.7 hereof, with respect to any
agreement relating specifically to Medical Services, and subject to the approval
of the Policy Board pursuant to Section 3.2(e), Practice shall give Business
Manager and the Policy Board thirty (30) days' prior notice of Practice's intent
to execute any such agreement obligating Practice to perform Medical Services or
otherwise creating a binding legal obligation on Practice to perform Medical
Services.
2.3 Patient Referrals. Business Manager and Practice agree that the
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benefits afforded either party hereunder are not payment for, and are not in any
way contingent upon the referral, admission or any other arrangement for, the
provision of any item or service offered by Business Manager or Practice.
2.4 Internal Practice Matters. Except as otherwise provided herein,
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matters involving the internal governance, control or finances of Practice,
including specifically the allocation of professional income among Physician-
Shareholders, Physician-Employees and Optometrists of Practice, and tax and
investment planning, shall remain the sole responsibility of Practice,
Physician-Shareholders, Physician-Employees and Optometrists.
2.5 Practice of Medicine. The parties acknowledge that Business Manager
--------------------
is not authorized or qualified to engage in any activity that may be construed
or deemed to constitute the practice of medicine. To the extent that any act or
service required to be performed by Business Manager hereunder should be
construed by a court of competent jurisdiction or by the Board of Medical
Examiners of the Commonwealth of Virginia to constitute the practice of
medicine, Business Manager's requirement to perform that act or service shall be
deemed waived and unenforceable.
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ARTICLE III
RESPONSIBILITIES OF THE POLICY BOARD
3.1 Formation and Operation of the Policy Board.
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(a) Structure of Policy Board. Practice hereby acknowledges that it
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is one of a group of ophthalmology practices located in the Richmond
metropolitan area which is affiliated with Business Manager (Practice and such
other practices shall be collectively referred to herein as "Regional
Practices"). The Regional Practices and Business Manager shall establish a
Policy Board which shall be responsible for overseeing the overall operations of
the nonmedical aspects of each Regional Practice's facilities and, subject to
Section 3.3 hereof, certain medical issues. The Policy Board shall consist of
four (4) members, each of whom shall serve a one-year term. Business Manager
shall designate, in its sole discretion, two (2) members of the Policy Board,
and the Regional Practices shall collectively designate two (2) members of the
Policy Board. The Policy Board members designated by the Regional Practices
shall be Physician-Shareholders of a Regional Practice. Except as otherwise
expressly provided herein, the act of a majority of the members of the Policy
Board shall be the act of the Policy Board.
(b) Appointment of Members. The initial Policy Board shall consist of
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the members set forth on Exhibit 3.1 attached hereto and incorporated herein.
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Thereafter, annually and at least thirty (30) days prior to the commencement of
each fiscal year of Business Manager, each of Business Manager and the Regional
Practices shall deliver to the Operating Board of Business Manager a list of two
(2) designees to the Policy Board to serve as members of the Policy Board for
the upcoming fiscal year. In the event that either Business Manager or the
Regional Practices fail to deliver the list of designees by the required date,
then such party's representatives on the Policy Board shall remain the same for
the upcoming fiscal year. Any vacancies created, whether by death, incapacity
or resignation of a designee, shall be filled by the party which appointed such
designee by no later than fifteen (15) business days after the date of receipt
by all of the Regional Practices of notice from Business Manager that such
vacancy exists and must be filled. If the applicable party shall fail to
designate a replacement member to the Policy Board within the required time
period, then the other party shall have the right to designate the replacement
member and such replacement member shall serve on the Policy Board until his or
her successor is duly appointed pursuant to this Section 3.1(b). In any case in
which the Regional Practices shall be required to designate a member or members
to the Policy Board, a previously appointed designee of the Regional Practices
shall convene a meeting or collect the written votes of the Representatives of
the Regional Practices to select such designee or designees. Each Regional
Practice shall be entitled to one vote per designee to be appointed and those
designees receiving a plurality of the votes shall serve as the representatives
of the Regional Practices on the Policy Board.
(c) Actions of the Policy Board. The Policy Board meetings shall be
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held as mutually agreed, but at least semiannually, in Richmond, Virginia.
Meetings may be called by any two (2) members of the Policy Board upon notice to
Business Manager. Notice of each such meeting, stating the place, date and hour
of the meeting, shall then be delivered by Business Manager to each member of
the Policy Board not less than seventy-two (72) hours prior to such meeting.
Meetings shall be open to any Physician-Shareholder and any officer, director or
employee (as designated by Business Manager) of Business Manager. Members of
the Policy Board may participate in a meeting by means of conference telephone.
Attendance at any meeting in person
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or by proxy, or participation in a meeting by means of conference telephone,
shall constitute a waiver of notice thereof. Any action required to be taken at
a meeting of the Policy Board may be taken without a meeting and without a vote
if a consent in writing, setting forth the action to be taken, is signed by all
of the members of the Policy Board, unless such action is medical in nature, in
which case such consent need be signed only by all of the Physician members of
the Policy Board.
3.2 Duties and Responsibilities of the Policy Board. The Policy Board
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shall have the following duties, obligations and authority:
(a) Capital Improvements and Expansion. Subject to the items
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specifically enumerated in the Budget as determined in accordance with Section
4.10(a) hereof, any renovation and expansion plans and capital expenditures with
respect to the Office, or the priority of such capital expenditures, shall be
reviewed and approved by the Policy Board and shall be based upon economic
feasibility, physician support, productivity and then-current market conditions.
(b) Marketing and Advertising. Subject to professional standards and
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the canons of professional ethics, the Policy Board shall explore potential
joint marketing and other advertising of the services performed at the Regional
Practices' facilities.
(c) Collection Policies. As a part of the annual operating budget, in
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consultation with Practice and Business Manager, the Policy Board shall review
and approve the collection policies for all Medical Services and Ancillary
Services provided by Practice.
(d) Provider and Payor Relationships. Subject to Sections 4.7 and 4.8
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hereof, decisions regarding the establishment or maintenance of relationships
with institutional health care providers and third party payors shall be
approved by the Policy Board in consultation with Practice and Business Manager.
The Policy Board shall review and approve such discounted fee schedules,
including capitated fee arrangements, and shall approve allocations of
Capitation/Case Rate Revenues.
(e) Strategic Planning. The Policy Board shall recommend long-term
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strategic planning objectives for Practice; provided, however, that the Policy
Board shall not engage in recommending any horizontal market allocations between
practices.
(f) Physician and Optometrist Hiring. Subject to the items
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specifically enumerated in the Budget as determined in accordance with Section
4.10(a) hereof, the Policy Board shall recommend to Practice the number and type
of Physicians and Optometrists required for the efficient operation of
Practice's facilities. Practice shall have the right to accept or reject any
recommendation of the Policy Board on this matter and Practice shall retain the
number and type of Physicians and Optometrists as it shall deem necessary in its
sole discretion. Although the Policy Board shall review any material variations
to the restrictive covenants in any Employment Agreement with a Physician-
Employee or Optometrist, Practice shall have the discretion to negotiate in good
faith reasonable variations to such restrictive covenants.
(g) Fee Dispute Resolution. Upon written submission by Practice of a
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dispute concerning Management Fees, the Policy Board shall consider, develop and
attempt to implement
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a resolution of such dispute.
(h) Employee Relations. Upon submission by Practice or any Physician
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or Optometrist of a written complaint or concern regarding any employee of
Business Manager performing services for Practice hereunder, the Policy Board
shall consider, develop and attempt to implement a resolution of such complaint
or concern.
(i) Grievance Referrals. The Policy Board shall consider and make
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recommendations to Practice regarding any disputes pertaining to matters not
specifically addressed in this Management Services Agreement as referred to it
by Practice.
3.3 Medical Decisions. Notwithstanding anything to the contrary
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contained in Section 3.2 above, all medical decisions addressed by the Policy
Board will be made solely by Physician members of the Policy Board.
ARTICLE IV
COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall provide all Management Services
which are necessary or appropriate for the day-to-day administration of the
nonmedical aspects of Practice's operations, including, without limitation,
those services set forth in this Article IV in accordance with all laws, rules,
regulations and guidelines applicable to the provision of Management Services.
4.1 Office and Equipment.
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(a) Subject to Section 4.1(b) hereof, as necessary or appropriate, and
after taking into consideration the professional concerns of Practice, Business
Manager shall lease, acquire or otherwise procure an Office in a location or
locations reasonably acceptable to Practice and shall permit Practice to use the
Office. Any Office procured by Business Manager for use by Practice shall be
procured at commercially reasonable rates.
(b) In the event Practice is the lessee of the Office under a lease
with an unrelated and nonaffiliated lessor, Business Manager may require
Practice to assign such lease to Business Manager upon receipt of consent from
the lessor, and, in such event, Business Manager shall assume Practice's
obligations thereunder from and after the date of such assignment. Practice
shall use its best efforts to assist in obtaining the lessor's consent to the
assignment. Upon request, Practice shall execute any instruments and shall take
any acts that Business Manager deems necessary to accomplish the assignment of
the lease. Any expenses incurred in effectuating the assignment shall be an
Office Expense.
(c) Business Manager shall provide all nonmedical equipment, fixtures,
office supplies, furniture and furnishings reasonably deemed necessary by
Business Manager for the operation of the Office and for the provision of
Medical Services.
(d) Business Manager shall provide or cause to be provided to Practice
(including financing arrangements with respect thereto) all necessary medical
equipment.
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(e) Business Manager shall be responsible for all necessary repair and
maintenance of the Office as an Office Expense, consistent with Business
Manager's responsibilities under the terms of any lease or other use
arrangement. Business Manager shall also be responsible for all necessary
repair, maintenance and replacement of all equipment relating to the Office,
except for any such repairs, maintenance and replacement necessitated by the
negligence or willful misconduct of Practice, its Physicians or other personnel
employed by Practice, in which event any such repair or replacement shall be a
Practice Expense and not an Office Expense.
4.2 Medical Supplies. Business Manager shall order, procure, purchase
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and provide on behalf of, and as agent for, Practice all necessary or reasonably
required medical supplies unless otherwise prohibited by federal and/or state
law, and shall appropriately respond to any reasonable inquiries or requests by
Physicians for the need to order or repair such supplies. Business Manager
shall ensure that the Office is adequately stocked at all times with medical
supplies that are reasonably necessary or appropriate for the operation of
Practice and required by Practice for the provision of Medical Services. The
ultimate oversight, supervision, selection and ownership of all medical supplies
is and shall remain the sole responsibility of Practice. As used in this
Section 4.2, the term "medical supplies" shall mean all drugs, pharmaceuticals,
products, substances, items or devices whose purchase, possession, maintenance,
administration, prescription or security requires the authorization or order of
a licensed health care provider or requires a permit, registration,
certification or other governmental authorization held by a licensed health care
provider as specified under any federal and/or state law.
4.3 Support Services. Business Manager shall provide or arrange for all
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printing, stationery, telephone, facsimile, office supplies, forms, postage,
duplication or photocopying services, and other support services as are
reasonably necessary or appropriate for the operation of the Office and the
provision of Medical Services therein.
4.4 Quality Assurance, Risk Management, and Utilization Review. Business
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Manager shall assist Practice in Practice's establishment and implementation of
procedures to ensure the consistency, quality, appropriateness and medical
necessity of Medical Services provided by Practice, and shall provide
administrative support for Practice's overall quality assurance, risk management
and utilization review programs. Business Manager shall use its commercially
reasonable efforts to perform these tasks in a manner to ensure the
confidentiality of, and the privileged status afforded to, these programs and
procedures to the fullest extent allowable under state and federal law.
4.5 Licenses and Permits. Business Manager shall, on behalf of and in
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the name of Practice, coordinate all development and planning processes, and
assist in the application for, and use reasonable efforts to assist Practice in
obtaining and maintaining, all federal, state and local licenses, certifications
and regulatory permits required for, or in connection with, the operation of
Practice, the equipment located at the Office, and any ambulatory surgical
treatment center, laboratory and optical dispensary of Business Manager, other
than those relating to the provision of Medical Services or the administration
of drugs by Physicians.
4.6 Personnel. Except as specifically provided in Section 5.2(b) hereof,
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Business Manager shall, consistent with the Budget, employ or otherwise retain
and shall be responsible for selecting, hiring, training, supervising and
terminating, all nonphysician personnel as Business
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Manager reasonably deems necessary and appropriate for Business Manager's
performance of its duties and obligations under this Management Services
Agreement. Business Manager shall, as practicable, consult with, and solicit the
input of, Practice and Physician-Shareholders in connection with any such
employment decisions. With respect to nonphysician personnel, Business Manager
shall have sole responsibility for determining the salaries, providing employee
benefits, and for withholding any sums for income tax, unemployment insurance,
worker's compensation coverage, social security or any other withholding
required by applicable law or governmental requirement.
4.7 Contract Negotiations. Business Manager shall advise Practice with
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respect to and negotiate, either directly or on Practice's behalf, as
appropriate, all contractual arrangements with third parties as are reasonably
necessary and appropriate for Practice's provision of Medical Services,
including, without limitation, Managed Care Contracts. Business Manager shall,
to the extent practicable, use commercially reasonable efforts to involve
Practice and Physician-Shareholders in its efforts to procure and negotiate
Managed Care Contracts on behalf of Practice. Practice hereby constitutes and
appoints Business Manager as Practice's agent for the purpose of negotiating and
executing on behalf of Practice and its Physicians any Managed Care Contract
approved by the Policy Board, as well as any modifications, extensions and
renewals of such Managed Care Contracts. Practice also designates Business
Manager as Practice's agent for the further purpose of giving and receiving
notices required or permitted to be given and received under such Managed Care
Contracts. Any notice received by Business Manager on behalf of Practice shall
be transmitted to Practice as soon as practicable. Business Manager may engage
such consultants as Business Manager deems reasonably necessary and appropriate
to pursue and negotiate Managed Care Contracts for Practice, and Practice
authorizes Business Manager to negotiate, for approval by the Policy Board,
agreements for Subcontractor Costs. Notwithstanding the foregoing, upon
approval of the Policy Board of any Managed Care Contract, Business Manager
shall deliver a copy of such contract to Practice for its review and approval.
Practice may accept or reject any Managed Care Contract by delivering written
notice to Business Manager within five (5) business days of its receipt of such
contract (or such greater time as may be given to any other Regional Practice).
Practice's failure to respond within such period shall be deemed an acceptance
of the Managed Care Contract for all purposes.
4.8 Billing and Collection. Subject to Practice's ability to establish
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its fee schedules, on behalf of and for the account of Practice, Business
Manager shall (i) establish and maintain credit, billing and collection policies
and procedures, (ii) timely xxxx and collect all professional and other fees for
all billable Medical Services provided by Practice, Physicians or Optometrists
for application solely in accordance with the Budget, and (iii) perform all cash
management services on behalf of Practice which Business Manager shall deem
commercially reasonable. Business Manager shall advise and consult with
Practice regarding the fees for Medical Services and Ancillary Services provided
by Practice; it being understood, however, that Practice shall establish the
fees to be charged for Medical Services and that Business Manager shall have no
authority whatsoever with respect to the establishment of such fees. In
connection with the billing, collection and cash management services to be
provided hereunder, and throughout the Term (and thereafter as provided in
Section 7.3 hereof), Practice hereby grants to Business Manager an exclusive
special power of attorney and appoints Business Manager as Practice's exclusive
true and lawful agent and attorney-in-fact, and Business Manager hereby accepts
such special power of attorney and appointment, for the following purposes:
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(a) To xxxx Practice's patients, in Practice's name and on Practice's
behalf, for all billable Medical Services provided or arranged by Practice to
patients, unless such billing would cause Practice to be in violation of the
Xxxxx Act, any state referral ban or any other applicable federal, state or
local law or regulation;
(b) To xxxx, in Practice's name and on Practice's behalf, all claims
for payment, reimbursement or indemnification from Blue Cross/Blue Shield,
insurance companies, Medicare, Medicaid and all other third-party payors or
fiscal intermediaries for all covered billable Medical Services provided or
arranged by Practice to patients, unless such billing would cause Practice to be
in violation of the Xxxxx Act, any state referral ban or any other applicable
federal, state or local law or regulation;
(c) Subject to applicable law, and excluding receivables for Medicare
and Medicaid services, to collect and receive in Business Manager's name and for
Business Manager's account all accounts receivable of Practice purchased by
Business Manager, and to deposit such collections in an account selected by
Business Manager and maintained in Business Manager's name;
(d) Subject to subparagraph (e) below, to collect and receive, in
Practice's name and on Practice's behalf, all accounts receivable generated by
such xxxxxxxx and claims for reimbursement that have not been purchased by
Business Manager, and to administer such accounts at its reasonable discretion
on Practice's behalf, which administration shall include, without limitation,
(i) extending the time of payment of any such accounts for cash, credit or
otherwise; (ii) with Practice Consent, discharging or releasing the obligors of
any such accounts; (iii) with Practice Consent, suing, assigning or selling at a
discount such accounts to collection agencies; or (iv) with Practice Consent,
taking other measures to require the payment of any such accounts.
(e) To collect all government program receivables after such amounts
have been received and deposited into an account maintained in Practice's name
and over which Practice has sole control. Once deposited in such account,
Practice hereby authorizes the government receivables to be automatically swept
into the Depository Account.
(f) To deposit all amounts collected into the Depository Account which
shall be in the name of Business Manager, but in which Business Manager shall
account for such funds on a separate and distinct basis from any other funds
deposited into such account by other Regional Practices; moreover, Practice
shall retain all rights in and to such deposited funds irrespective of their
deposit into the Depository Account. The parties hereto acknowledge and agree
that Business Manager is performing cash management services on behalf of
Practice by collecting all such amounts in the Depository Account and making any
distributions, withdrawals and payments therefrom as required in this Management
Services Agreement. The parties further acknowledge and agree that in
performing such services for Practice, Business Manager is acting as Practice's
agent pursuant to the power of attorney set forth in this Section 4.8, and,
except as expressly provided herein, all rights to such funds shall remain with
Practice. Practice covenants to transfer and deliver to Business Manager for
deposit into Depository Account, or covenants that Practice itself will make
such deposit of, all funds received by Practice from patients or third party
payors for Medical Services provided on or after the Effective Date. Upon
receipt by Business Manager of any funds from patients or third party payors or
from Practice pursuant hereto for Medical Services provided on or after the
Effective Date, Business Manager shall deposit same into the
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Depository Account as soon as commercially practicable. In the manner set forth
in Section 4.9 hereof, Business Manager shall disburse such deposited funds to
creditors and other persons on behalf of Practice, maintaining records of such
receipt and disbursement of funds.
(g) To take possession of, and endorse in the name of Practice, solely
for deposit into the Depository Account, any notes, checks, money orders,
insurance payments and any other instruments received as payment for Medical
Services and Ancillary Services.
(h) To sign checks, drafts, bank notes or other instruments on behalf
of Practice, and to make withdrawals from the Depository Account for payments
specified in this Management Services Agreement or as requested from time to
time by Practice.
Throughout the Term (and as provided in Section 7.3 hereof), Practice hereby
grants to Business Manager an exclusive special power of attorney for the
purposes stated herein and appoints Business Manager as Practice's exclusive
true and lawful agent and attorney-in-fact, and Business Manager hereby accepts
such special power of attorney and appointment, to deposit into the Depository
Account as and when received all funds, fees and revenues generated from
Practice's provision of Medical Services and Ancillary Services on or after the
Effective Date and collected by Business Manager, and to make withdrawals from
Depository Account solely for payments specified in this Management Services
Agreement, including any Preexisting Obligation Payments directly affecting
property used in or relating to the Office, and/or as requested from time to
time by Practice. Upon request of Business Manager, Practice shall execute and
deliver to the financial institution where the Depository Account is maintained,
such additional documents or instruments as may be necessary to evidence or
effect the special and limited power of attorney granted to Business Manager by
Practice pursuant to this Section 4.8. The special and limited power of attorney
granted herein shall be coupled with an interest and shall be irrevocable during
the term hereof, except with Business Manager Consent. The irrevocable power of
attorney shall expire on the later of the termination of this Management
Services Agreement, the collection, sale or release of all accounts receivable
purchased by Business Manager, and the payment of all Management Fees due to
Business Manager as of such date pursuant to Section 6.3 hereof. If Business
Manager assigns this Management Services Agreement in accordance with its terms,
then Practice shall execute a power of attorney in favor of the assignee and in
the form of Exhibit 4.8 attached hereto.
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4.9 Priority of Payments. As of the Effective Date, all revenue of
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Practice derived from Medical Services and Ancillary Services provided on and
after the Effective Date ("Post-Effective Date Revenues") shall be deposited
into the Depository Account (or, in the alternative, identified or segregated in
such a manner as to permit the Post-Effective Date Revenues to be deposited into
the Depository Account when and as directed by Business Manager) for
distribution in accordance with this Section 4.9. From and after the Effective
Date, each month Business Manager shall apply, or retain on behalf of Practice,
funds that are in the Depository Account in the following order of priority:
(a) to Business Manager, in satisfaction of Office Expense,
except the Base Management Fee;
(b) as directed by Practice, in satisfaction of Monthly Practice
Expense; and
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(c) to Business Manager, in satisfaction of the Base Management
Fee.
4.10 Fiscal Matters.
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(a) Annual Budget.
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(i) Initial Budget. The initial Budget shall be agreed upon by
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the parties before the execution of this Management Services Agreement and
shall be attached hereto and made a part hereof.
(ii) Process for Succeeding Budgets. Annually and at least
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forty-five (45) days prior to the commencement of each fiscal year of
Business Manager, Business Manager, in consultation with the Policy Board,
shall prepare and deliver to Practice for Practice's approval a proposed
Budget, setting forth an estimate of Practice's revenues and expenses for
the upcoming fiscal year (including, without limitation, the Budgeted
Practice Expense and the Monthly Fee). Practice shall review the proposed
Budget and either approve the proposed Budget or request any changes within
fifteen (15) days after receiving the proposed Budget. The Budget shall be
adopted upon mutual agreement of Business Manager and Practice after
reasonable review and comment, and may be revised or modified only in
consultation with Business Manager. Once approved by both Business Manager
and Practice, each succeeding Budget shall be attached hereto and made a
part hereof.
(iii) Deadlock. In the event the parties are unable to agree on
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any item in a Budget by the beginning of the fiscal year (a "Deadlock"),
then until an agreement is reached, the Budget for the prior year shall be
deemed to be adopted as the Budget for the current year. Notwithstanding
the foregoing, the Policy Board, in its judgment, may impose reductions on
a consistent basis to each of Budgeted Practice Expense and the Monthly Fee
in the event that the Policy Board makes a determination that general
economic conditions and/or regulatory developments adversely affecting the
Medical Services provided by Practice render the present levels of the
Budgeted Practice Expense and the Monthly Fee impractical. For purposes of
illustration only, and without limitation, such general economic conditions
and/or regulatory developments could include proposed or actual cuts in
Medicare/Medicaid reimbursement for procedures that are a material
component of the Medical Services performed by Practice. Following
resolution of any Deadlock, Budgeted Practice Expense and the Monthly Fee
(and the corresponding Monthly Practice Expense and Base Management Fee as
calculated in Article VI hereof) shall be recomputed retroactive to the
beginning of the fiscal year based upon the parameters agreed to in the new
Budget, and appropriate adjustments in payments owing to Practice and/or
Business Manager, as the case may be, resulting from such recomputation
shall be made promptly. Notwithstanding the foregoing, if after six months
the parties are still unable to agree on a Budget, then the dispute shall
be submitted to arbitration in accordance with Section 8.6 hereof. Until
the arbitrator renders a judgment or the dispute is otherwise resolved, the
adjustments described in this Section 4.10(a)(iii) shall continue to apply.
Notwithstanding anything to the contrary contained herein, nothing in this
Section 4.10(a)(iii) shall affect the payment of Office Expense, which
shall be paid in full in accordance with the provisions of this Agreement.
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(iv) Modifications to Budget. The Budget may be modified at any
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time by mutual agreement of Practice and Business Manager, which
modifications may include, without limitation, modifications to the Monthly
Fee and Budgeted Practice Expense in the event that additional Physicians
or Optometrists become affiliated with Practice during the calendar year.
(b) Accounting and Financial Records. Business Manager shall
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establish and administer adequate accounting procedures, controls and systems
for the development, preparation and safekeeping of administrative and financial
records in connection with the performance of its duties and responsibilities
hereunder, all of which shall be prepared and maintained in accordance with GAAP
and applicable laws and regulations. Business Manager shall provide Practice
with the following:
(i) Monthly Reports. As soon as practicable, and in any event
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no later than thirty (30) days after the end of each calendar month,
Business Manager shall furnish to Practice a monthly statement reflecting
the activity in the Depository Account for the preceding month. The monthly
statement will set forth the amount of Office Expense (excluding the Base
Management Fee), Monthly Practice Expense and Base Management Fee for such
month.
(ii) Annual Financial Statements. As soon as practicable, and in
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any event no later than one hundred twenty (120) days after the end of each
calendar year, Business Manager shall furnish to Practice audited financial
statements, consisting of a balance sheet and related statements of income,
changes in members' equity and cash flow, all of which (taken as a whole)
shall reflect the financial status of Business Manager as of the end of
such calendar year, and shall be prepared in accordance with GAAP
consistently applied.
(c) Review of Expenditures. A Representative of Practice shall have
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the right to review all expenditures related to the operation of Practice, but
Practice shall not have the power to prohibit or invalidate any expenditure that
is consistent with the Budget.
(d) Tax Matters. Business Manager and Practice acknowledge and agree
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that, to the extent that any of the services to be provided by Business Manager
hereunder may be subject to any state sales and use taxes, Business Manager may
have a legal obligation to collect such taxes from Practice and to remit same to
the appropriate tax collection authorities. Practice agrees to pay, as an
Office Expense and in addition to the payment of the Management Fee, the
applicable state sales and use taxes in respect of the portion of the Management
Fees attributable to such services.
4.11 Reports and Records.
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(a) Medical Records. Business Manager shall advise and assist
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Practice as to the establishment, monitoring and maintenance of procedures and
policies for the timely creation, preparation, filing and retrieval of all
medical records generated by Practice in connection with Practice's provision of
Medical Services; and, subject to applicable law, shall ensure that medical
records are promptly available to Physicians and any other appropriate persons.
All such medical
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records shall be retained and maintained in accordance with all applicable state
and federal laws. All medical records are, and will remain, the property and
Confidential Information of Practice and its patients.
(b) Other Reports and Records. Business Manager shall create, prepare
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and file such additional reports and records as are reasonably necessary or
appropriate for Practice's provision of Medical Services, and shall be prepared
to analyze and interpret such reports and records upon the request of Practice.
4.12 Recruitment of Physicians and Optometrists. Upon Practice's
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request, Business Manager shall perform all administrative services reasonably
necessary or appropriate to recruit potential Physicians and Optometrists to
become employees of Practice. Business Manager shall provide Practice with
model agreements to document Practice's employment, retention or other service
arrangements with such individuals. It is and will remain the sole and complete
responsibility of Practice to interview, select, contract with, supervise,
control and terminate all Physicians and Optometrists performing Medical
Services or other professional services, and Business Manager shall have no
authority whatsoever with respect to such activities.
4.13 Confidential and Proprietary Information.
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(a) Business Manager will not disclose any Confidential Information of
Practice to other persons without Practice Consent. Business Manager will not,
directly or indirectly, use such Confidential Information in a manner
detrimental to Practice, and Business Manager will keep such Confidential
Information confidential and will ensure that its affiliates and advisors who
have access to such Confidential Information comply with these nondisclosure
obligations. Notwithstanding the foregoing, Business Manager may disclose
Confidential Information to those of its Representatives who need to know
Confidential Information for the purposes of this Management Services Agreement,
it being understood and agreed to by Business Manager that such Representatives
will be informed of the confidential nature of the Confidential Information,
will agree to be bound by this Section 4.13, and will be directed by Business
Manager not to disclose to any other person any Confidential Information.
Business Manager shall be responsible for any breach of this Section 4.13 by its
affiliates, advisors or Representatives. If Business Manager is required (by
interrogatories, requests for information or documents, subpoenas, civil
investigative demands or similar legal processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Practice
or its affiliates, advisors or Representatives, Business Manager will (i)
provide Practice with prompt prior notice thereof and copies, if possible, and,
if not, a description, of the request and the Confidential Information requested
or required to be produced so that Practice may seek an appropriate protective
order or other protections to enforce the provisions of this Section 4.13, or,
alternatively, waive compliance with the provisions of this Section 4.13, and
(ii) consult with Practice as to whether Practice should attempt to resist or
narrow such request. If Business Manager is compelled by law to disclose or
produce Confidential Information concerning Practice or, in the alternative, be
liable for contempt or suffer other censure or penalty, Business Manager may
disclose or produce such Confidential Information without liability hereunder;
provided, however, that Business Manager shall give Practice written notice of
the Confidential Information to be so disclosed or produced, and a copy of the
request therefor, as far in advance of its disclosure or production as is
reasonably practicable and shall use its commercially reasonable efforts to
obtain, to the greatest extent practicable, an order or other
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reliable assurance that confidential treatment will be accorded to such
Confidential Information so required to be disclosed or produced.
(b) Notwithstanding clause (a) above, Business Manager may share,
subject to the restrictions of this Section 4.13(b), with other professional
corporations, associations, medical practices or health care delivery entities,
the statistics of Practice, including utilization review data, quality assurance
data, outcomes data or other Practice data to the extent reasonably necessary to
Business Manager's efforts to procure and negotiate Managed Care Contracts.
Business Manager may disclose such statistics to other medical groups with whom
Business Manager has a management relationship, to managed care providers or
other third party payors for the purpose of obtaining or maintaining third party
payor contracts, or to financial analysts and underwriters. In addition,
Business Manager may disclose all Practice-related information necessary or
desirable in connection with any public or private offering of any security of
Business Manager, but no such data will disclose or divulge patient identifying
information. Notwithstanding anything to the contrary contained herein,
Business Manager will not disclose or divulge any cost data of Practice to any
other medical practice.
4.14 Insurance.
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(a) Business Manager's Insurance. Throughout the Term, Business
----------------------------
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof and in a manner
consistent with good business practice, appropriate workers' compensation
coverage for Business Manager's employed personnel provided to Practice pursuant
to this Management Services Agreement, and professional, casualty and
comprehensive general and vicarious liability insurance covering Business
Manager, the Office, Business Manager's personnel and all of Business Manager's
equipment in such amounts, on such basis and upon such terms and conditions as
Business Manager deems appropriate. Upon the request of Practice, Business
Manager shall provide Practice with a certificate evidencing such insurance
coverage and Business Manager shall use commercially reasonable efforts to list
Practice and, in the case of comprehensive general liability coverage,
Physician-Shareholder, as an additional insured. Business Manager may also
carry, as an Office Expense, key person life and disability insurance on any
Physician in amounts determined reasonable and sufficient by Business Manager.
Business Manager shall be the owner and beneficiary of any such insurance.
(b) Professional and General Liability Insurance of Practice.
--------------------------------------------------------
Business Manager shall obtain and maintain, on behalf of Practice and as an
Office Expense, professional and comprehensive general liability insurance
covering Practice and each of Physicians and Optometrists. The comprehensive
general liability coverage shall be in the minimum amount of one million dollars
($1,000,000) for each occurrence and two million dollars ($2,000,000) annual
aggregate; and professional liability coverage shall be in the minimum amount of
one million dollars ($1,000,000) for each occurrence and three million dollars
($3,000,000) annual aggregate, or any other higher minimum coverage requirements
established by law. The insurance policy or policies shall provide for at least
(30) days' advance written notice to Business Manager and Practice from the
insurer as to any alteration of coverage, cancellation or proposed cancellation
for any cause. Business Manager shall cause to be issued to Practice a
certificate of such insurer or insurers reflecting such coverage and either
party hereunder shall provide written notice to the other party promptly upon
receipt of any notice canceling or proposing to cancel the insurance coverage of
21
Practice, or any Physician or Optometrist for any reason. Upon the termination
of this Management Services Agreement for any reason, Practice shall obtain and
maintain as a Practice Expense "tail" professional liability coverage, in the
amounts specified in this Section 4.14(b) for an extended reporting period of
two years, and Practice shall be responsible for paying all premiums for "tail"
insurance coverage.
(c) Health Insurance. Business Manager shall, to the extent such
----------------
coverage is available from Business Manager's current insurance carrier, make
available to, and accessible by, Physicians and Optometrists health benefits
under any health benefit program maintained by Business Manager. If any
Physician or Optometrist elects such coverage, subject to Section 1.30(b), the
cost of such coverage shall be deemed an Office Expense for any Physician-
Employee or Optometrist, and a Practice Expense for any Physician-Shareholder.
4.15 No Warranty. Practice acknowledges that Business Manager has not
-----------
made and will not make any express or implied warranties or representations that
the services provided by Business Manager will result in any particular amount
or level of revenue or income to Practice.
ARTICLE V
COVENANTS AND RESPONSIBILITY OF PRACTICE
5.1 Organization and Operation. Practice, as a continuing condition of
--------------------------
Business Manager's obligations under this Management Services Agreement, shall
at all times during the Term be and remain legally organized and operated to
provide Medical Services in a manner consistent with all state and federal laws.
(a) Employment of Physicians.
------------------------
(i) Practice shall operate and maintain within the Practice
Territory a full-time practice of medicine specializing in the provision of
Medical Services, and shall maintain and enforce employment agreements
substantially in the form of Exhibit 5.1 (the "Employment Agreements") with
-----------
Physician-Shareholders, including, without limitation, the initial
Physician-Shareholders identified in Exhibit 5.1A. Practice shall not
------------
amend the Employment Agreements in any material manner or waive any
material rights of Practice thereunder without Business Manager Consent.
Recognizing that Business Manager would not have entered into this
Management Services Agreement but for Practice's covenant to maintain
Employment Agreements with Physician-Shareholders, and subject to
subparagraph (ii) below and Section 5.7(f) hereof, Practice shall pay to
Business Manager, in addition to the Management Fee, any damages,
compensation, payment or settlement received by Practice from a Physician
who terminates his or her Employment Agreement without Physician Cause (as
defined in the Employment Agreement) or whose Employment Agreement is
terminated by Practice for Practice Cause (as defined in the Employment
Agreement) or for any other material breaches of the Employment Agreements
(such damages being collectively referred to herein as the "Business
Manager Damages").
(ii) Notwithstanding the provisions of Section 5.1(a)(i) above,
or any other provision to the contrary contained herein, Practice shall
have a period of not less than
22
forty-five (45) days following the occurrence of any event described in
Section 5.1(a)(i) above that entitles Business Manager to receive Business
Manager Damages to take such actions to cure the breach of any Employment
Agreement by a Physician-Shareholder (which actions to cure may, without
limitation, include retention of additional Physicians to replace the
levels of revenue and income previously generated by the Physician causing
such breach); provided, however, that the determination of whether or not
such breach has been cured shall be made by Business Manager in its good
faith reasonable discretion, and provided further, that Practice shall in
no event be permitted to cure any breach that results from a breach by a
Physician-Shareholder of any non-competition provision contained in any
Employment Agreement.
(b) Corporate Governance. Throughout the Term of this Management
--------------------
Services Agreement, Practice shall maintain and enforce written Buy-Sell
Agreements with Physician-Shareholders specified in Exhibit 5.1A, and shall
------------
cause all new shareholders of Practice to execute such agreements prior to
becoming a shareholder in Practice. As a condition precedent to the execution
of this Management Services Agreement, the Physician-Shareholders have amended
their existing Buy-Sell Agreement, or executed a new Buy-Sell Agreement, which
addresses the concepts set forth on Exhibit 5.1B to the reasonable satisfaction
------------
of Business Manager and its counsel. Practice will also maintain its articles
of incorporation and by-laws in accordance with applicable law, including,
without limitation, any laws governing the transferability of shares from
disqualified shareholders to qualified shareholders. Throughout the Term of this
Management Services Agreement, Practice shall not, without Business Manager
Consent, amend such documents or waive any rights thereunder in any manner.
5.2 Practice Personnel.
------------------
(a) Physician Personnel and Optometrists. Practice shall retain the
------------------------------------
number of Physicians and Optometrists as is reasonably necessary and appropriate
in the sole discretion of Practice for the provision of Medical Services. Each
Physician shall hold and maintain a valid and unrestricted license to practice
medicine in the Commonwealth of Virginia, and shall be competent, in the
reasonable opinion of Practice, in the practice of ophthalmology. Each
Optometrist shall hold and maintain a valid and unrestricted license to practice
optometry in the Commonwealth of Virginia, and shall be competent, in the
reasonable opinion of Practice, in such practice. Practice shall use its best
efforts to enter into and maintain with each such retained Physician and
Optometrist a written employment agreement substantially in the form of either
Exhibit 5.1 for Physician-Shareholders or Exhibit 5.2A for Physician-Employees.
----------- ------------
Practice will neither commit, nor permit to remain outstanding, any breach of
such employment agreement that would allow any Physician or Optometrist to
terminate for cause. Regardless of whether the compensation is a Practice
Expense or Office Expense, Practice shall be responsible for paying the
compensation and benefits, as applicable, for all Physicians, Optometrists, and
any other physician personnel or other contracted or affiliated physicians, and
for withholding any sums for income tax, unemployment insurance, social security
or any other withholding required by applicable law. If requested, Business
Manager shall, on behalf and at the direction of Practice, administer the
compensation with respect to such individuals in accordance with the written
agreement between Practice and each Physician or Optometrist. Business Manager
shall neither control nor direct any Physician or Optometrist in the performance
of Medical Services for patients.
23
(b) Nonphysician Personnel. Business Manager shall retain all
----------------------
nonphysician personnel necessary for the operation of Practice and such
nonphysician personnel shall be under Business Manager's control, supervision
and direction in the performance of their duties, except for Designated Allied
Health Professionals, who shall perform their duties under the supervision and
control of Physicians, consistent with the requirements necessary to meet the
"incident to" provisions of the Medicare program.
5.3 Professional Standards. As a continuing condition of Business
----------------------
Manager's obligations hereunder, each Physician, Optometrist and any other
physician personnel retained by Practice to provide Medical Services must comply
with, be controlled and governed by, and otherwise provide Medical Services in
accordance with, all applicable federal, state and municipal laws, rules,
regulations, ordinances and orders, and the ethical standards and standards of
care of the medical community wherein the principal office of each Physician or
Optometrist is located. In addition, except for Xxxxxxx X. Xxxx, M.D., each
Physician and any other physician personnel retained by Practice to provide
Medical Services must obtain and retain appropriate admitting privileges at
local area hospitals or health care facilities which are reasonably adequate for
Physician to perform Medical Services. Xx. Xxxx will maintain appropriate
admitting privileges at the local area hospitals or health care facilities set
forth on Exhibit 5.3. Procurement of temporary staff privileges pending the
-----------
completion of the medical staff approval process shall satisfy this provision,
provided Physician actively pursues full admitting privileges and actually
receives full admitting privileges within a reasonable time.
5.4 Medical Services. Practice shall use reasonable efforts to ensure
----------------
that Physicians and Optometrists are available to provide Medical Services to
patients. In the event that Physicians or Optometrists are not available to
provide the relevant Medical Services coverage, Practice shall engage and retain
locum tenens coverage. Physicians and Optometrists retained on a locum tenens
----- ------ ----- ------
basis shall meet all of the requirements of Section 5.3 hereof, and the cost of
providing locum tenens coverage shall be an Office Expense, unless such locum
----- ------ -----
tenens coverage is attributable to a Physician-Shareholder exceeding the maximum
------
amount of vacation, personal and educational leave days allowable under such
Physician-Shareholder's Employment Agreement, in which case the cost of such
coverage shall be a Practice Expense. With the assistance of Business Manager,
Practice, Physicians and Optometrists shall be responsible for scheduling the
relevant coverage of all medical and eye-related procedures. Practice shall use
its best efforts to develop and promote Practice.
5.5 Peer Review/Quality Assurance. Practice shall adopt a peer
-----------------------------
review/quality assurance program to monitor and evaluate the quality and cost-
effectiveness of Medical Services provided by Physicians and Optometrists of
Practice. Upon request of Practice, Business Manager shall provide
administrative assistance to Practice in performing its peer review/quality
assurance activities, but only if such assistance can be provided in a manner
consistent with maintaining the confidentiality and privileged status of the
processes and actions of the peer review/quality assurance process of Practice.
5.6 Confidential and Proprietary Information. Practice will not
----------------------------------------
disclose any Confidential Information of Business Manager without Business
Manager's express written authorization. Such Confidential Information will not
be used in any way directly or indirectly detrimental to Business Manager, and
Practice will keep such Confidential Information confidential and will ensure
that its affiliates and advisors who have access to such Confidential
Information comply with these
24
nondisclosure obligations. Notwithstanding the foregoing, Practice may disclose
Confidential Information to those of its Representatives who need to know
Confidential Information for the purposes of this Management Services Agreement,
it being understood and agreed to by Practice that such Representatives will be
informed of the confidential nature of the Confidential Information, will agree
to be bound by this Section 5.6, and will be directed by Practice not to
disclose to any other person any Confidential Information. Practice shall be
responsible for any breach of this Section 5.6 by its affiliates, advisors or
Representatives. If Practice is required (by interrogatories, requests for
information or documents, subpoenas, civil investigative demands or similar
processes) to disclose or produce any Confidential Information furnished in the
course of its dealings with Business Manager or its affiliates, advisors or
Representatives, Practice will (i) provide Business Manager with prompt prior
notice thereof and copies, if possible, and, if not, a description, of the
request and the Confidential Information requested or required to be produced so
that Business Manager may seek an appropriate protective order or other
protections to enforce the provisions of this Section 5.6, or, alternatively,
waive compliance with the provisions of this Section 5.6 and (ii) consult with
Business Manager as to the advisability of Business Manager's taking of legally
available steps to resist or narrow such request. Practice further agrees that
if, in the absence of a protective order or the receipt of a waiver hereunder,
Practice is nonetheless, in the written opinion of its legal counsel, compelled
to disclose or produce Confidential Information concerning Business Manager to
any tribunal or to stand liable for contempt or suffer other censure or penalty,
Practice may disclose or produce such Confidential Information to such tribunal
legally authorized to request and receive such Confidential Information without
liability hereunder; provided, however, that Practice shall give Business
Manager written notice of the Confidential Information to be so disclosed or
produced, and a copy of the request therefor, as far in advance of its
disclosure or production as is practicable and shall use its best efforts to
obtain, to the greatest extent practicable, an order or other reliable assurance
that confidential treatment will be accorded to such Confidential Information so
required to be disclosed or produced.
5.7 Noncompetition. Practice hereby recognizes and acknowledges that
--------------
Business Manager will incur substantial costs in providing the equipment,
support services, personnel, management, administration, and other items and
services that are the subject matter of this Management Services Agreement and
that in the process of providing services under this Management Services
Agreement, Practice will be privy to financial and Confidential Information of
Business Manager and other Regional Practices, to which Practice would not
otherwise be exposed. The parties also recognize that the services to be
provided by Business Manager will be feasible only if Practice operates an
active practice to which Physicians associated with Practice devote their full
professional time and attention. Practice agrees and acknowledges that the
noncompetition covenants described hereunder are necessary for the protection of
Business Manager, and that Business Manager would not have entered into this
Management Services Agreement without the following covenants:
(a) During the Term of this Management Services Agreement and except
for the performance of Medical Services and Ancillary Services at the Office as
contemplated by this Management Services Agreement or as expressly agreed to by
Business Manager in writing, Practice shall not establish, operate or provide
Medical Services at a medical office, clinic or other health care facility
anywhere within the Practice Territory.
(b) Except as specifically agreed to by Business Manager in writing,
Practice
25
commits and agrees that during the Term of this Management Services Agreement
and for a period of one (1) year from the termination date of this Management
Services Agreement, except in the event Practice terminates this Management
Services Agreement for cause pursuant to Section 7.2(b) hereof, Practice shall
not directly or indirectly own through a Competing Business (as defined in the
Stock Purchase Agreement) (excluding ownership of less five percent (5%) of the
equity of any publicly traded entity), manage, operate, control, or otherwise be
associated with, lend funds to, lend its name to, or maintain any interest
whatsoever in any enterprise (i) having to do with the provision, distribution,
promotion or advertising of any type of management or administrative services or
products to third parties in competition with Business Manager; and/or (ii)
offering any type of service or product in the Practice Territory to third
parties similar to those offered by Business Manager to Practice.
Notwithstanding the above restriction, nothing herein shall prohibit Practice or
any of its holders from providing management and administrative services to its
or their own medical practices after the termination of this Management Services
Agreement.
(c) The written Employment Agreements described in Section 5.1
hereof shall contain covenants of Physician-Shareholder whereby they agree not
to compete with Practice within the Practice Territory for one (1) year after
termination of the employment agreement, except in the event Physician
terminates such agreement for Physician Cause or certain buyout rights are
exercised.
(d) Practice shall obtain and enforce formal written agreements with
Physician-Employees and Optometrists in the form of Exhibit 5.2A, pursuant to
------------
which the employees agree not to compete with Practice within the Practice
Territory for one (1) year after termination of the Employment Agreement, except
in the event Physician terminates such agreement for Physician Cause.
(e) Practice understands and acknowledges that the provisions in
Section 5.6 hereof and this Section 5.7 are designed to preserve the goodwill of
Business Manager and the goodwill of the individual Physicians and Optometrists
of Practice. Accordingly, if Practice breaches any obligation of Section 5.6
hereof or this Section 5.7, in addition to any other remedies available under
this Management Services Agreement at law or in equity, Business Manager shall
be entitled to enforce this Management Services Agreement by injunctive relief
and by specific performance of the Management Services Agreement, such relief to
be without the necessity of posting a bond, cash or otherwise. Additionally,
nothing in this paragraph shall limit Business Manager's right to recover any
other damages to which it is entitled as a result of Practice's breach. If any
provision of the covenants herein is held by a court of competent jurisdiction
to be unenforceable due to an excessive time period, geographic area or
restricted activity, the covenant shall be reformed to comply with such time
period, geographic area or restricted activity that would be held enforceable.
(f) Notwithstanding anything to the contrary contained herein,
Practice shall not be bound by the restrictions set forth in this Section 5.7 in
the event an Event of Default (as defined in the Subordinated Exchangeable
Promissory Note issued by NovaMed to Practice in connection with the Stock
Purchase Agreement) occurs and is continuing uncured for a period of more than
thirty (30) days. Moreover, upon an Event of Default remaining uncured for a
period of more than thirty (30) days, Practice shall not be responsible for
pursuing, or paying to Business Manager, any Business Manager Damages in
connection with any breach of an Employment Agreement arising
26
after the date of such Event of Default.
5.8 Name, Trademark. Practice represents and warrants that Practice
---------------
conducts its professional practice under the name of, and only under the names
of "Dominion Eye Associates" that such name is the name of Practice under state
law. Practice covenants and promises that, without the prior written consent of
Business Manager, Practice will not:
(a) take any action or omit to take any action that would result in
the change or loss of the name;
(b) license, sell, give or otherwise transfer the name, or the right
to use the name, to any medical practice, physician, professional corporation or
any other entity; or
(c) cease conducting the professional practice of Practice under the
name.
5.9 Medical Advisory Board. The Operating Board of Business Manager has
----------------------
appointed a medical advisory board (the "Medical Advisory Board") to provide a
general forum for review and analysis of medical and clinical issues affecting
the Regional Practices and all other medical practices with which Business
Manager has entered into a Management Services Agreement or similar agreement.
The Medical Advisory Board consists of at least three Doctors of Ophthalmology,
one of whom is designated as the "Medical Director," and may include, at the
discretion of the Operating Board of Business Manager, one or more Doctors of
Optometry, Registered Nurses or other health care professionals. The Vice
President Clinical Operations of Business Manager, and/or such other designee as
Business Manager shall select, attends meetings of the Medical Advisory Board on
a consulting basis. Members of the Medical Advisory Board serve for one-year
terms and are appointed or re-appointed for such term during the first meeting
of the Operating Board of Business Manager held for each calendar year. The
Operating Board of Business Manager may name additional members, remove any
member, or fill any vacancy created by the resignation, death or disability of
any member, of the Medical Advisory Board during any duly called meeting of such
Operating Board. Notwithstanding anything to the contrary contained herein, the
Medical Advisory Board will serve in a solely advisory capacity and the ultimate
authority over medical decisions affecting Practice shall reside with Practice's
Physician-Shareholders.
5.10 Indemnification of Business Manager. Practice shall hold Business
-----------------------------------
Manager, its Affiliates, Representatives, successors and assigns and each of
them harmless from and against any and all losses, damages, fines, costs,
claims, judgments, proceedings, expenses or liabilities (including, without
limitation, reasonable attorneys' fees, paralegal fees, and costs and expenses
thereof) arising out of, or attributable to, or which result from: (a) any
claim of a third party with respect to Medical Services performed by Practice
(including, without limitation, malpractice claims); (b) any material breach of
this Management Services Agreement by Practice which is not cured by Practice
within the greater of any time period prescribed for such cure herein or a 30-
day period following receipt by Practice of written notice from Business Manager
(which written notice shall describe such breach in reasonable detail); or (c)
any violations of federal billing laws, rules and regulations which have a
material adverse effect on Practice and relate to acts, omissions, circumstances
or conditions arising from and after the Effective Date (excluding any such
violations which are attributable to the acts or omissions of Business Manager).
27
5.11 Indemnification of Practice. Business Manager shall hold Practice,
---------------------------
its Affiliates, Representatives, successors and assigns and each of them
harmless from and against any and all losses, damages, fines, costs, claims,
judgments, proceedings, expenses or liabilities (including, without limitation,
reasonable attorneys' fees, paralegal fees, and costs and expenses thereof)
arising out of, attributable to, or which result from: (a) the gross negligence
or willful misconduct of Business Manager or its agents or employees, except to
the extent that any damages or losses are attributable to the gross negligence
or willful misconduct of Practice or its Physicians and Optometrists; (b) any
material breach of this Management Services Agreement by Business Manager which
is not cured by Business Manager within the greater of any time period
prescribed for such cure herein or a 30-day period following receipt by Business
Manager of written notice from Practice (which written notice shall describe
such breach in reasonable detail); or (c) any violations of federal billing
laws, rules and regulations which have a material adverse effect on Practice and
relate to acts, omissions, circumstances or conditions arising from and after
the Effective Date (excluding any such violations which are attributable to the
acts or omissions of Practice or any Physician).
ARTICLE VI
FINANCIAL ARRANGEMENT
6.1 Definitions. For purposes of this Article VI, capitalized terms
-----------
used herein shall have the meanings ascribed as follows:
(a) Base Management Fee. The term "Base Management Fee" shall be *
-------------------
, except in the event the * , in which case the Base Management Fee shall
be * .
(b) Budgeted Adjusted Gross Revenue. The term "Budgeted Adjusted
-------------------------------
Gross Revenue" shall mean the monthly amount of Adjusted Gross Revenue as
established in the Budget, as adjusted from year to year pursuant to Section
4.10 hereof.
(c) Budgeted Office Expense. The term "Budgeted Office Expense" shall
-----------------------
mean the monthly amount of Office Expense as established in the Budget, as
adjusted from year to year pursuant to Section 4.10 hereof.
(d) Budgeted Practice Expense. The term "Budgeted Practice Expense"
-------------------------
shall mean the monthly amount of * .
(e) Monthly Fee. The term "Monthly Fee" shall be the * .
-----------
(f) Monthly Office Expense. The term "Monthly Office Expense" shall
----------------------
mean the amount of Budgeted Office Expense for any given month, plus or minus
any difference between (i) the actual Office Expense incurred by or on behalf of
Practice for the previous month and (ii) Budgeted Office Expense for such
previous month.
___________________________
* Confidential portions omitted and filed separately with the Commission.
28
(g) Monthly Practice Expense. The term "Monthly Practice Expense"
------------------------
shall mean *.
6.2 Monthly Practice Expense. In any given month, the Monthly Practice
------------------------
Expense shall be * , except in the event * , in which case the Monthly
Practice Expense shall be *.
6.3 Management Fee. Practice and Business Manager agree to the
--------------
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable. Each month, in the priority established by
Section 4.9 hereof, Business Manager will be paid the following:
(a) the amount of all Office Expense (other than the Base Management
Fee) paid on behalf of Practice; and
(b) the Base Management Fee.
6.4 Reasonable Value. Payment of the Base Management Fee is not
----------------
intended to be and shall not be interpreted or applied as permitting Business
Manager to share in Practice's fees for Medical Services or any other services,
but is acknowledged as the parties' negotiated agreement as to the reasonable
fair market value of the equipment, contract analysis and support, other support
services, purchasing, personnel, office space, management, administration,
strategic management and other items and services furnished by Business Manager
pursuant to this Management Services Agreement, after giving effect to the
nature and volume of the services required and the risks assumed by Business
Manager.
6.5 Payment of Management Fee. To facilitate the payment of the
-------------------------
Management Fee as provided in Section 6.3 hereof, and subject to the priority of
payment methodology set forth in Section 4.9 hereof, Practice hereby expressly
authorizes Business Manager to make withdrawals of the Management Fee from the
Depository Account as such fee becomes due and payable during the Term and
thereafter as provided in Section 7.3 hereof.
6.6 Accounts Receivable. Unless otherwise prohibited by law, to assure
-------------------
that Practice receives the entire amount of professional fees for its services
and to assist Practice in maintaining reasonable cash flow for the payment of
Office Expense, Business Manager may purchase, with recourse to Practice for the
amount of the purchase (up to the amount of Adjusted Gross Revenue for such
month), the accounts receivable of Practice arising during the previous month
(the "Purchased Receivables") by transferring the amount set forth below into
the Depository Account. The consideration for the purchase shall be an amount
equal to the Adjusted Gross Revenue with respect to the Purchased Receivables
(according to GAAP on an accrual basis net of Adjustments). Although it is the
intention of the parties that Business Manager purchase and thereby become the
owner of the Purchased Receivables of Practice, in the event such purchase shall
be ineffective for any reason, Practice is concurrently granting to Business
Manager a security interest in the Purchased Receivables, and Practice shall
cooperate with Business Manager and shall execute all documents in connection
with the pledge of the Purchased Receivables to Business Manager. All
_____________________________________
* Confidential portions omitted and filed separately with the Commission.
29
collections in respect to the Purchased Receivables by Business Manager shall be
received by Business Manager as the agent of Practice and shall be endorsed to
Business Manager and deposited in a bank account at a bank designated by
Business Manager. To the extent Practice comes into possession of any payments
in respect of the Purchased Receivables, Practice shall direct such payments to
Business Manager for deposit in bank accounts designated by Business Manager.
6.7 Disputes Regarding Fees.
-----------------------
(a) It is the parties' intent that any disputes regarding Business
Manager's performance hereunder shall be resolved to the extent possible by good
faith negotiations. To that end, the parties agree that if Practice in good
faith believes that Business Manager has failed to perform its obligations, and
that as a result of such failure, Practice is entitled to a set-off or reduction
in its Management Fees, Practice shall give Business Manager notice of the
perceived failure and may require in the notice a set-off or reduction in
Management Fees. Business Manager and Practice shall then negotiate the dispute
in good faith, and if an agreement is reached, the parties shall implement the
resolution without further action.
(b) If the parties cannot reach a resolution within thirty (30) days,
and the amount at issue is $25,000 or less, then the dispute shall be submitted
to the Policy Board. The Policy Board shall then resolve such dispute, which
resolution shall be final and binding upon Practice and Business Manager.
(c) If the amount in dispute is greater than $25,000, and Business
Manager and Practice fail to resolve the dispute, then such dispute shall be
submitted by either party to binding arbitration as described by Article IX of
the Stock Purchase Agreement.
ARTICLE VII
TERM AND TERMINATION
7.1 Initial and Renewal Term. The Term of this Management Services
------------------------
Agreement will be for an initial period of forty (40) years after the Effective
Date, and shall be automatically renewed for successive five (5) year periods
thereafter, provided that neither Business Manager nor Practice shall have given
notice of termination of this Management Services Agreement at least one hundred
twenty (120) days before the end of the initial term or any renewal term, or
unless otherwise terminated as provided in Section 7.2 hereof.
7.2 Termination.
-----------
(a) Termination By Business Manager. Business Manager may terminate
-------------------------------
this Management Services Agreement upon the occurrence of any one of the
following events which shall be deemed to be "for cause:"
(i) The suspension, restriction materially impairing
Physician's ability to practice medicine, revocation or cancellation of any
Physician-Shareholder's l icense to practice medicine in the Commonwealth
of Virginia;
30
(ii) Practice's loss or suspension of its Medicare or Medicaid
provider number (excluding any such loss or suspension which is
attributable to Business Manager's acts or omissions), and/or Practice's
restriction from treating patients of the Medicare or Medicaid programs;
(iii) The dissolution of Practice or the filing by Practice of a
petition in voluntary bankruptcy, an assignment for the benefit of
creditors, or other action taken voluntarily under any state or federal
statute for the protection of debtors;
(iv) The filing against Practice of an involuntary petition
under any bankruptcy statute, or the appointment of a custodian, receiver,
trustee or assignee for the benefit of creditors, and such condition shall
continue undischarged or undismissed for ninety (90) days; and
(v) Practice materially defaults in the performance of any of
its material duties or obligations hereunder, and shall fail to cure such
default within sixty (60) days after Practice receives notice from Business
Manager specifying the nature of such default; provided, however, that in
-------- -------
the event such breach is of a nature that it cannot reasonably be cured
within such sixty (60) day period, then Business Manager may terminate this
Agreement only if Practice shall fail to commence to cure such default
within such sixty (60) day period and thereafter to proceed diligently to
cure such default; provided further, that irrespective of Practice's
-------- -------
diligent efforts to cure such default, Business Manager may terminate this
Agreement if Practice fails to cure such default within one hundred twenty
(120) days after Practice received the original notice from Business
Manager specifying the nature of such default.
(b) Termination By Practice. Practice may terminate this Management
-----------------------
Services Agreement upon any of the following occurrences which shall be deemed
to be "for cause":
(i) In the event that an arbitrator pursuant to Section 8.6
hereof makes a final determination that Business Manager has materially
breached a fiduciary duty owed to Practice, Practice may terminate this
Management Services Agreement upon ten (10) days' notice to Business
Manager; or
(ii) With ten (10) days' written notice to Business Manager, in
the event Business Manager (A) misappropriates Practice's funds and fails
to correct such misappropriation within five (5) business days of receipt
of notice from Practice describing with particularity the error, or (B)
fails to properly account Practice's funds and fails to correct such
accounting error within thirty (30) days of receipt of notice from Practice
describing with particularity the error.
(c) Termination by Agreement. In the event Practice and Business
------------------------
Manager shall mutually agree in writing, this Management Services Agreement may
be terminated on the date specified in such written agreement.
(d) Legislative, Regulatory or Administrative Change. In the event
------------------------------------------------
there shall be a change in the Medicare or Medicaid statutes, state or federal
statutes, case law, regulations or
31
general instructions, the interpretation of any of the foregoing, the adoption
of new federal or state legislation, or a change in any third-party
reimbursement system, any of which are reasonably likely to materially and
adversely affect the manner in which either party may perform or be compensated
for its services under this Management Services Agreement or which shall make
this Management Services Agreement unlawful, the parties shall immediately enter
into good faith negotiations regarding a new service arrangement or basis for
compensation for the services furnished pursuant to this Management Services
Agreement that complies with the law, regulation or policy and that approximates
as closely as possible the economic position of the parties prior to the change.
If good faith negotiations cannot resolve the matter, it shall be submitted to
arbitration as referenced in Section 8.6 hereof. If a court of competent
jurisdiction compels or requires a party hereto to refrain from performing its
duties and obligations hereunder, or a party's performance hereunder shall be
directly violative of a court order directed at such party, then, to the extent
necessary to comply with such court order, this Management Services Agreement
shall be deemed suspended. In no event shall such suspension be construed to
relieve either party's obligation under this Section 7.2(d) and the parties will
immediately commence good faith negotiations regarding a new service arrangement
or compensation structure that is in compliance with any such court order, which
arrangement or structure will allocate the economic aspects of the relationship
between the parties in a manner as nearly as possible as that intended by this
Management Services Agreement.
7.3 Effects of Termination. Upon termination of this Management
----------------------
Services Agreement, as heretofore provided, neither party shall have any further
obligations hereunder except for (i) obligations accruing prior to the date of
termination, including, without limitation, payment of the Management Fees,
Office Expense and Practice Expense relating to services provided prior to the
termination of this Management Services Agreement, (ii) obligations, promises or
covenants set forth herein that are expressly set forth herein to extend beyond
the Term under the circumstances giving rise to such termination, including,
without limitation, indemnity, confidentiality and noncompetition provisions,
which provisions shall survive the expiration or termination of this Management
Services Agreement by Business Manager for cause, and (iii) the applicable
obligations of Practice and Business Manager described in Section 7.4 or 7.5
hereof. In effectuating the provisions of this Section 7.3, Practice
specifically acknowledges and agrees that Business Manager shall continue to
collect and receive on behalf of Practice all cash collections from accounts
receivable in existence at the time this Management Services Agreement is
terminated, it being understood that such cash collections will be applied in
accordance with Section 4.9 hereof, and will represent, in part, compensation to
Business Manager for management services already rendered and compensation on
accounts receivable purchased by Business Manager. Upon the expiration or
termination of this Management Services Agreement for any reason or cause
whatsoever, Business Manager shall surrender to Practice all books and records
pertaining to Practice's medical practice.
7.4 Repurchase Obligation. Upon termination of this Management Services
---------------------
Agreement by Business Manager for cause or by Practice without cause, Business
Manager shall have the right, but not the obligation, to require Practice to
comply with the terms and conditions of this Section 7.4. In the event Business
Manager exercises such right by delivering written notice to Practice within
sixty (60) days of such termination, then Practice shall be required to:
(a) Purchase from Business Manager at the greater of book value (as
determined in accordance with GAAP) or fair market value of the intangible
assets, deferred charges and all
32
other amounts on the books of Business Manager relating to the Management
Services Agreement as adjusted, through the last day of the month most recently
ended prior to the date of such termination in accordance with GAAP to reflect
amortization or depreciation of the intangible assets, deferred charges or
covenants;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the greater of the appraised fair market value
thereof or the then book value thereof. In the event of any repurchase of real
property, the appraised value shall be determined by Business Manager and
Practice, each selecting a duly qualified appraiser, who in turn will agree on a
third appraiser. This agreed-upon appraiser shall perform the appraisal which
shall be binding on both parties. In the event either party fails to select an
appraiser within fifteen (15) days of the selection of an appraiser by the other
party, the appraiser selected by the other party shall make the selection of the
third-party appraiser;
(c) Purchase at the greater of book value (as determined in
accordance with GAAP) or fair market value all improvements, additions, or
leasehold improvements that have been made by Business Manager at any Office and
that relate solely to the performance of Business Manager's obligations under
this Management Services Agreement;
(d) Assume all debt and all contracts, payables and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased hereunder as an Office by Business Manager;
and
(e) Purchase from Business Manager at the greater of book value (as
determined in accordance with GAAP) or fair market value of all of the equipment
which was (i) was owned by the Predecessor Professional Corporation immediately
prior to the effective date of the Stock Purchase Agreement and (ii) was
transferred to NovaMed pursuant to the terms and conditions of the Stock
Purchase Agreement (the "Predecessor PC Equipment), including all replacements
and additions thereto made by Business Manager pursuant to the performance of
its obligations under this Management Services Agreement, and all other assets,
including inventory and supplies, and tangibles and intangibles, set forth on
the books of Business Manager as adjusted through the last day of the month most
recently ended prior to the date of such termination in accordance with GAAP to
reflect operations of the Office, depreciation, amortization and other
adjustments of assets shown on the books of Business Manager.
Notwithstanding anything to the contrary contained herein, this Section 7.4
shall only require Practice to purchase from Business Manager those assets which
are used exclusively in the operation of the ophthalmology practice of Practice
in the Office. In the event Business Manager exercises its rights pursuant to
this Section 7.4, Practice shall have the obligation to purchase all, and not
less than all, of the items listed in subparagraphs (a) through (e) above. In
no event, however, shall this Section 7.4 be construed as enabling Practice to
repurchase any assets, which relate directly or indirectly to the ambulatory
surgical treatment center owned and operated by Predecessor Professional
Corporation immediately prior to the effective date of the Stock Purchase
Agreement (the "ASC Assets"). The ASC Assets are expressly excluded from the
assets enumerated in subparagraphs (a) through (e) above and Practice shall have
no right to repurchase the ASC Assets under this Section 7.4 unless Business
Manager shall so elect in writing, in which case Practice shall
33
be required to repurchase the ASC Assets at the greater of the then book or fair
market value. For purposes of this Article VII, "fair market value" of a
particular item shall be an amount mutually agreed upon by Practice and Business
Manager. If Practice and Business Manager are unable to reach agreement on such
value after ten (10) days of deliberations, then such fair market value shall be
determined by an independent, duly qualified appraiser mutually agreed upon by
Practice and Business Manager. If Practice and Business Manager cannot agree
upon an appraiser within ten (10) days, then each party shall select a duly
qualified appraiser, who in turn will select a third appraiser. This agreed-upon
appraiser shall perform the appraisal which shall be binding upon both parties.
All expenses of such appraisal shall be borne fifty percent (50%) by Business
Manager and fifty percent (50%) by Practice.
7.5 Repurchase Option. Upon termination of this Management Services
-----------------
Agreement by Practice for cause pursuant to Section 7.2(b) hereof, Practice
shall have the right, but not the obligation, to:
(a) Purchase from Business Manager at the greater of book or fair
market value the intangible assets, deferred charges and all other amounts on
the books of Business Manager relating to the Management Services Agreement as
adjusted, through the last day of the month most recently ended prior to the
date of such termination in accordance with GAAP to reflect amortization or
depreciation of the intangible assets, deferred charges or covenants;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as an Office at the greater of the appraised fair market value
or then book value thereof. In the event of any repurchase of real property,
the appraised value shall be determined in accordance with the appraisal
mechanism described in Section 7.4 hereof;
(c) Purchase at the greater of book or fair market value all
improvements, additions or leasehold improvements that have been made by
Business Manager at any Office and that relate solely to the performance of
Business Manager's obligations under this Management Services Agreement;
(d) Assume all debt and all contracts, payables and leases that are
obligations of Business Manager and that relate principally to the performance
of Business Manager's obligations under this Management Services Agreement or
the properties leased or subleased by Business Manager; and
(e) Purchase from Business Manager at the greater of book or fair
market value all of the Predecessor PC Equipment, including all replacements and
additions thereto made by Business Manager pursuant to the performance of its
obligations under this Management Services Agreement, and all other tangible
assets, including inventory and supplies, set forth on the books of Business
Manager as adjusted through the last day of the month most recently ended prior
to the date of such termination in accordance with GAAP to reflect operations of
the Office, depreciation, amortization and other adjustments of assets shown on
the books of Business Manager.
In the event Practice exercises its rights pursuant to this Section 7.5,
Practice shall have the obligation to purchase all, and not less than all, of
the items listed in subparagraphs (a) through (e). In no event, however, shall
this Section 7.5 be construed as enabling Practice to repurchase any
34
assets acquired from Predecessor Professional Corporation, which relate directly
or indirectly to the ASC Assets. The ASC Assets are expressly excluded from the
assets enumerated in subparagraphs (a) through (e) above and Practice shall have
no right to repurchase the ASC Assets under this Section 7.5 unless Business
Manager shall so elect in writing, in which case Practice shall be required to
repurchase the ASC Assets at the greater of the then book or fair market value.
In lieu of paying cash for the items described in this Section 7.5, and subject
to Section 7.6 hereof, Practice shall have the option of: (i) offsetting the
cash amount required pursuant to this Section 7.5 against the outstanding
balance due and owing under the Note (as such term is defined in the Stock
Purchase Agreement); or (ii) contributing to Business Manager that number of
Exchange shares (as such term is defined in the Stock Purchase Agreement) which,
based on the then fair market value of such shares (determined in accordance
with a consistent application of the valuation procedure established under
Section 6.01(d) of the Stock Purchase Agreement), equals the cash amount
required pursuant to this Section 7.5.
7.6 Closing of Repurchase.
---------------------
(a) Except as expressly provided in subparagraph (b) below and in
Section 7.5 hereof, Practice shall pay cash for the repurchased assets. The
amount of the purchase price shall be reduced by the amount of debt and
liabilities of Business Manager, if any, assumed by Practice. Practice and, if
required by law, any Physician associated with Practice, shall execute such
documents as may be required, (i) for Practice to assume the liabilities set
forth in Section 7.4(d) or 7.5(d) hereof, as applicable, and (ii) for Practice
to indemnify or remove Business Manager from any liability with respect to such
repurchased asset and with respect to any property leased or subleased by
Business Manager. Business Manager shall execute such documents as may be
required to convey the assets, free and clear of all liens (except for those
liens assumed by Practice). The closing date for the repurchase shall be
determined by mutual agreement of Practice and Business Manager 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 Management Services Agreement shall
become effective upon the closing of the sale of the assets under Section 7.4 or
7.5 hereof, as the case may be, and all parties shall be released from any
restrictive covenants provided for in Section 5.7 hereof on such closing date.
From and after any termination, each party shall provide the other party with
reasonable access to the books and records then owned by it to permit such
requesting party to satisfy reporting and contractual obligations that may be
required of it.
(b) Notwithstanding anything to the contrary contained herein, in
the event the cash amount required to be paid to Business Manager pursuant to
Sections 7.4 and 7.5 exceeds $50,000, then Practice shall have the option of
financing the entire cash amount over a two-year period. This financing shall be
evidenced by a promissory note from Practice to Business Manager, the terms of
which shall provide for an interest rate equal to the prime rate publicly
announced by First National Bank of Chicago on the date of the closing of the
repurchase, with interest and principal payments payable quarterly in arrears to
Business Manager.
7.7 Rights and Remedies. In the event of a material breach of this
-------------------
Management Services Agreement by either party hereunder, the nonbreaching party
shall have, in addition to any other rights and remedies contained in this
Management Services Agreement, all rights and remedies available to such party
at law or equity (including the right of specific performance). Without
limiting the generality of the foregoing, the parties acknowledge and agree that
Business Manager
35
entered into this Management Services Agreement with the understanding that the
Term of this Management Services Agreement would be forty years. In the event of
a material breach hereunder by Practice, the parties acknowledge and agree that
the actual damages to be suffered by Business Manager will be difficult to
ascertain. Practice recognizes that, in the event Practice shall fail to
perform, observe or discharge any of its duties, obligations or liabilities
under this Management Services Agreement, any remedy at law may prove to be
inadequate relief to Business Manager. Therefore, Practice agrees that, if
Business Manager so elects and in addition to any other remedies available at
law or equity, Business Manager shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages, or to specific performance of any provision hereof. In addition to all
other remedies of Business Manager for any material breach hereunder by
Practice, and without limiting any and all rights set forth herein, Business
Manager may set-off any and all amounts which are due or which Business Manager
reasonably believes will become due and owing to Business Manager under this
Agreement within the next sixty (60) days, against any and all amounts which are
due and owing under the Note. Such rights of set-off shall be governed by the
terms and conditions set forth in the Note.
7.8 Interpretation. The purpose and intent of this Article VII is to
--------------
establish the limited instances in which a party may terminate this Management
Services Agreement. Unless the parties mutually agree to terminate this
Management Services Agreement, neither party shall be entitled to terminate this
Management Services Agreement prior to the expiration of the Term unless a
party's breach gives rise to a termination "for cause" pursuant to Section
7.2(a) or (b) hereof, as the case may be. Nothing in this Agreement (including
Section 7.4 hereof) shall be construed as permitting Practice to terminate this
Agreement without cause.
ARTICLE VIII
MISCELLANEOUS
8.1 Administrative Services Only. Nothing in this Management Services
----------------------------
Agreement is intended or shall be construed to allow Business Manager to
exercise control or direction over the manner or method by which Practice and
its Physicians and Optometrists perform Medical Services or other professional
health care services. The rendition of all Medical Services, including, but not
limited to, the prescription or administration of medicine and drugs shall be
the sole responsibility of Practice and its Physicians and Optometrists, and
Business Manager shall not interfere in any manner or to any extent therewith.
Nothing contained herein shall be construed to permit Business Manager to engage
in the practice of medicine, it being the sole intention of the parties hereto
that the services to be rendered to Practice by Business Manager are solely for
the purpose of providing nonmedical management and administrative services to
Practice to enable Practice to devote its full time and energies to the
professional conduct of its medical practice and provision of Medical Services
to its patients and not to administration or practice management.
8.2 Status of Contractor. It is expressly acknowledged that the parties
--------------------
hereto are "independent contractors," and nothing in this Management Services
Agreement is intended and nothing shall be construed to allow either party to
exercise control or direction over the manner or method by which the other party
performs the services that are the subject matter of this Management Services
Agreement; provided that the services to be provided hereunder shall be
furnished in a manner consistent with the standards governing such services and
the provisions of
36
this Management Services Agreement. Each party understands and agrees that (i)
neither party will withhold on behalf of the other party any sums for income
tax, unemployment insurance, social security or any other withholding pursuant
to any law or requirement of any governmental body or make available any of the
benefits afforded to its employees, (ii) all of such payments, withholdings and
benefits, if any, are the sole responsibility of the party incurring the
liability, and (iii) each party will indemnify and hold the other harmless from
any and all loss or liability arising with respect to such payments,
withholdings and benefits, if any.
8.3 Notices. Any notice, demand or communication required, permitted or
-------
desired to be given hereunder shall be in writing and shall be served on the
parties at the following respective addresses:
Practice:
Dominion Eye Associates, P.C.
Richmond Medical Park
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, M.D.
with a copy to:
Arent Fox Xxxxxxx Xxxxxxx & Xxxx
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx Xxxxx, Esq.
Business Manager:
NovaMed Eyecare Management, LLC
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
Xxxx X. Xxxxxxxx, Xx.
with a copy to:
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
or to such other address, or to the attention of such other person or officer,
as any party may by
37
written notice designate. Any notice, demand, or communication required,
permitted or desired to be given hereunder shall be sent either (a) by hand
delivery, in which case notice shall be deemed received when actually delivered,
(b) by prepaid certified or registered first class mail, return receipt
requested, in which case notice shall be deemed received five calendar days
after deposit, postage prepaid in the United States Mail, (c) by facsimile if
also delivered by hand, or deposited in the United States Mail, postage prepaid,
registered or certified mail, on or before two (2) business days after its
delivery by facsimile, in which case notice shall be deemed received one (1)
business day after the facsimile transmission, or (d) by a nationally recognized
overnight courier, in which case notice shall be deemed received one business
day after prepaid deposit with such courier.
8.4 Governing Law. This Management Services Agreement shall be governed
-------------
by the laws of the Commonwealth of Virginia applicable to agreements to be
performed wholly within the Commonwealth of Virginia.
8.5 Assignment. Except as may be herein specifically provided to the
----------
contrary, this Management Services Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective legal representatives,
successors and permitted assigns; provided, however, Practice may not assign
this Management Services Agreement without the prior written consent of Business
Manager, which consent may be withheld in Business Manager's discretion. The
sale, transfer, pledge or assignment of any of the voting shares of Practice
held by any shareholder of Practice or the issuance by Practice of common or
other voting shares to any other person, or any combination of such transactions
within a period of one (1) year, such that the existing shareholders in Practice
immediately prior to such transactions or the beginning of the one-year period,
as applicable, fail to maintain a majority of the voting interests in Practice
shall be deemed an attempted assignment by Practice, and shall be null and void
unless consented to in writing by Business Manager prior to any such transfer or
issuance. Any breach of this provision, whether or not void or voidable, shall
constitute a material breach of this Management Services Agreement, and in the
event of such breach, Business Manager may terminate this Management Services
Agreement upon twenty-four (24) hours' notice to Practice. The parties agree
Business Manager or any transferee shall have the right to (i) assign its rights
and obligations hereunder to any third party, provided that in the event such
third party is an Affiliate of NovaMed, such assignment shall not release
NovaMed, and (ii) collaterally assign its interest in this Management Services
Agreement and its other rights hereunder to any financial institution or other
third party without the consent of Practice (which assignment shall not release
NovaMed from its obligations hereunder).
8.6 Arbitration. Except as expressly provided in Section 6.7 hereof,
-----------
the parties shall negotiate in good faith to resolve any controversy, dispute or
disagreement arising out of or relating to this Management Services Agreement or
the breach of this Management Services Agreement. Any matter not resolved by
negotiation shall be submitted to binding arbitration and such arbitration shall
be governed by the terms of Article IX of the Stock Purchase Agreement, which,
as it applies to the parties hereto, is incorporated herein by reference in its
entirety; provided, however, that nothing contained in this Section 8.6 shall
prevent either party hereto from pursuing any right or remedy afforded it under
Section 7.7 hereof.
8.7 Waiver of Breach. The waiver by either party of a breach or
----------------
violation of any provision of this Management Services Agreement shall not
operate as, or be construed to constitute,
38
a waiver of any subsequent breach of the same or another provision hereof.
8.8 Enforcement. In the event either party resorts to legal action to
-----------
enforce or interpret any provision of this Management Services Agreement, the
prevailing party shall be entitled to recover the costs and expenses of such
action so incurred, including, without limitation, reasonable attorneys' fees.
8.9 Gender and Number. Whenever the context of this Management Services
-----------------
Agreement requires, the gender of all words herein shall include the masculine,
feminine and neuter, and the number of all words herein shall include the
singular and plural.
8.10 Additional Assurances. Except as may be specifically provided
---------------------
herein to the contrary, the provisions of this Management Services Agreement
shall be self-operative and shall not require further agreement by the parties;
provided, however, at the request of either party, the other party shall execute
such additional instruments and take such additional acts as are reasonable, and
as the requesting party may reasonably deem necessary, to effectuate this
Management Services Agreement.
8.11 Consents, Approvals, and Exercise of Discretion. Whenever this
-----------------------------------------------
Management Services Agreement requires any consent or approval to be given by
either party, or either party must or may exercise discretion, and except where
specifically set forth to the contrary, the parties agree that such consent or
approval shall not be unreasonably withheld or delayed, and that such discretion
shall be reasonably exercised.
8.12 Force Majeure. Neither party shall be liable or deemed to be in
-------------
default for any delay or failure in performance under this Management Services
Agreement or other interruption of service deemed to result, directly or
indirectly, from acts of God, civil or military authority, acts of public enemy,
war, accidents, explosions, earthquakes, floods, failure of transportation,
strikes or other work interruptions by either party's employees, or any other
similar cause beyond the reasonable control of either party unless such delay or
failure in performance is expressly addressed elsewhere in this Management
Services Agreement.
8.13 Severability. The parties hereto have negotiated and prepared the
------------
terms of this Management Services Agreement in good faith with the intent that
each and every one of the terms, covenants and conditions herein be binding upon
and inure to the benefit of the respective parties. Accordingly, if any one or
more of the terms, provisions, promises, covenants or conditions of this
Management Services Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be as narrowly construed as possible,
and each and all of the remaining terms, provisions, promises, covenants and
conditions of this Management Services Agreement or their application to other
persons or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this
Management Services Agreement is in violation of applicable law, then the
parties agree to negotiate in good faith to amend the Management Services
Agreement, to the extent possible consistent with its purposes, to conform to
law.
8.14 Divisions and Headings. The divisions of this Management Services
----------------------
Agreement into
39
articles, sections and subsections, and the use of captions and headings in
connection therewith is solely for convenience and shall not affect in any way
the meaning or interpretation of this Management Services Agreement.
8.15 Amendments and Management Services Agreement Execution. This
------------------------------------------------------
Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of Practice and Business Manager by their
respective duly authorized officers. Each multiple copy shall be deemed an
original, but all multiple copies together shall constitute one and the same
instrument.
8.16 Entire Management Services Agreement. With respect to the subject
------------------------------------
matter of this Management Services Agreement, this Management Services Agreement
supersedes all previous contracts and constitutes the entire agreement between
the parties. Neither party shall be entitled to benefits other than those
specified herein. No prior oral statements or contemporaneous negotiations or
understandings or prior written material not specifically incorporated herein
shall be of any force and effect, and no changes in or additions to this
Management Services Agreement shall be recognized unless incorporated herein by
amendment as provided herein, such amendment to become effective on the date
stipulated in such amendment. The parties specifically acknowledge that, in
entering into and executing this Management Services Agreement, the parties rely
solely upon the representations and agreements contained in this Management
Services Agreement and no others.
40
IN WITNESS WHEREOF, Practice and Business Manager have caused this
Management Services Agreement to be executed by their duly authorized
representatives, all as of the day and year first above written.
PRACTICE:
DOMINION EYE ASSOCIATES, P.C.,
a Virginia professional corporation
By: /s/ Xxxxxxx X. Xxxx, M.D.
---------------------------------------
Name: Xxxxxxx X. Xxxx, M.D.
-------------------------------------
Title: President
------------------------------------
BUSINESS MANAGER:
NOVAMED EYECARE MANAGEMENT, LLC,
a Delaware limited liability company
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx,
President and Chief Executive Officer
41
EXHIBIT 1.6
BUDGET
See attached.
EXHIBIT 1.30(g)
EQUIPMENT
See attached.
EXHIBIT 1.43
PREEXISTING OBLIGATION PAYMENTS
None.
EXHIBIT 3.1
MEMBERS OF INITIAL POLICY BOARD
BUSINESS MANAGER DESIGNEES
Xxxxxx X. Xxxxxxx
T. Xxxxx Xxxxx
REGIONAL PRACTICE DESIGNEES
Xxxxxxx X. Xxxx, M.D.
[To be appointed]
EXHIBIT 4.8
POWER OF ATTORNEY
See attached.
EXHIBIT 5.1
FORM OF EMPLOYMENT AGREEMENT (SHAREHOLDERS)
See attached.
EXHIBIT 5.1A
LIST OF INITIAL PHYSICIAN-SHAREHOLDER
Xxxxxxx X. Xxxx, M.D.
EXHIBIT 5.1B
FORM OF BUY-SELL AGREEMENT
See attached.
EXHIBIT 5.2A
FORM OF EMPLOYMENT AGREEMENT (NONSHAREHOLDERS)
See attached.
EXHIBIT 5.3
HOSPITALS AND HEALTH CARE FACILITIES
The Cataract and Refractive Surgery Center.
