EXHIBIT 10.15
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
MIDSOUTH PRACTICE MANAGEMENT, INC.,
AND
FOUNDATION MEDICAL GROUP, PLLC
Dated as of September 22, 1997
TABLE OF CONTENTS
PRELIMINARY STATEMENTS ..........................................6
ARTICLE 1. INTERPRETATION ..................................6
Section 1.1. Definitions .............................6
Section 1.2. Effect of Definitions ..................12
Section 1.3. This Agreement .........................12
Section 1.4. Case and Gender ........................13
ARTICLE 2. RELATIONSHIP OF THE PARTIES ....................13
Section 2.1. Independent Relationship ...............13
Section 2.2. Responsibilities of the Parties ........13
Section 2.3. Practice Matters .......................13
Section 2.4. Patient Referrals ......................13
Section 2.5. Professional Judgment...................14
ARTICLE 3. ADMINISTRATIVE AND MANAGEMENT SERVICES
OF MIDSOUTH.....................................14
Section 3.1. Management Services and Administration..14
Section 3.2. Budgets and Finances....................17
Section 3.3. Financial Statements and Audits ........17
Section 3.4. Inventory and Supplies..................17
Section 3.5. Management Team Chief Executive.........18
Section 3.6. Personnel...............................18
Section 3.7. Capital Expenditures and Loans..........18
Section 3.8. Compliance with Applicable Law..........19
Section 3.9. Quality Assurance.......................19
Section 3.10. Ancillary Services......................19
Section 3.11. New Medical Services and Additional
Practice Offices........................19
Section 3.12. Manner of Performance...................20
ARTICLE 4. OBLIGATIONS OF THE PRACTICE.....................20
Section 4.1. Physicians..............................20
Section 4.2. Provision of Medical Services...........20
Section 4.3. Professional Standards..................20
Section 4.4. Billing Information.....................21
Section 4.5. Medical Practice........................21
Section 4.6. Additional Physicians...................21
Section 4.7. Utilization Review: Quality Assurance ..21
Section 4.8. Non-discrimination: Compliance with
Applicable Law .........................21
Section 4.9. Standards, Accreditation, Surveys and
Inspections ............................21
Section 4.10. Contracts ..............................21
Section 4.11. Organization and Area of Care ..........22
Section 4.12. Records and Reports ....................22
Section 4.13. The Practice to Provide Necessary
Billing Information ....................22
Section 4.14. Continuing Education ...................22
Section 4.15. Referrals ..............................22
Section 4.16. Provider Numbers .......................22
ARTICLE 5. FACILITIES OF THE PRACTICE .....................22
Section 5.1. The Practice Facilities ................22
Section 5.2. Right to Use Property ..................23
ARTICLE 6. COMPENSATION ...................................23
Section 6.1. Fees ...................................23
Section 6.2. Purchase of Accounts Receivable ........24
Section 6.3. Early Termination of Physician Members..28
ARTICLE 7. RESTRICTIVE COVENANTS AND ENFORCEMENT ..........29
Section 7.1. Exclusive Arrangement ..................29
Section 7.2. Restrictive Covenants by the Practice...29
Section 7.3. Restrictive Covenants By Current
Physician Employees ....................30
Section 7.4. Restrictive Covenants By Future
Physician Employees ....................30
Section 7.5. Physician Employee Liquidated Damages ..31
Section 7.6. Rights of MidSouth .....................31
Section 7.7. Excluded Activities . ..................31
Section 7.8. Enforcement ............................31
ARTICLE 8. DUTIES OF THE MANAGEMENT TEAM ......... ........32
Section 8.1. Formation and Operation of the
Management Team .......................32
Section 8.2. Duties and Responsibilities of the
Management Team ........................32
ARTICLE 9. INSURANCE AND INDEMNITY ........................33
Section 9.1. Insurance to be Maintained by the
Practice ..............................33
Section 9.2. Insurance to be Maintained by MidSouth..34
Section 9.3. Tail Insurance Coverage ................34
Section 9.4. Additional Insured .....................34
Section 9.5. Indemnification ........................34
ARTICLE 10. TERM AND TERMINATION ..........................35
Section 10.1. Term of Agreement ......................35
Section 10.2. Extended Term ..........................36
Section 10.3. Termination by the Practice ............36
Section 10.4. Termination by MidSouth ................36
Section 10.5. Actions after Termination ..............37
Section 10.6. Closing of Repurchase by the Practice
and Effective Date of Termination ......38
ARTICLE 11. INTELLECTUAL PROPERTY AND RECORDS .............38
Section 11.1. Proprietary Information ................38
Section 11.2. Ownership of MidSouth's Business Records
and Systems ............................39
Section 11.3. Maintenance and Access of Records.......39
Section 11.4. Patient Records ........................39
Section 11.5. Access to Records ......................40
ARTICLE 12. REPRESENTATIONS AND WARRANTIES OF THE
PRACTICE AND PHYSICIAN Members ................40
Section 12.1. Validity ..............................40
Section 12.2. Litigation ............................40
Section 12.3. Permits ...............................40
Section 12.4. Power and Authority....................40
Section 12.5. Compliance with Applicable Law ........41
Section 12.6. Health Care Compliance ................41
Section 12.7. Fraud and Abuse .......................41
Section 12.8. Practice Compliance ...................42
Section 12.9. Rates and Reimbursement Policies ......42
Section 12.10. Accounts Receivable ...................42
Section 12.11. Full Disclosure .......................44
Section 12.12. Exhibits ..............................45
ARTICLE 13. REPRESENTATIONS AND WARRANTS OF MIDSOUTH.......45
Section 13.1. Organization...........................45
Section 13.2. Authority .............................45
Section 13.3. Absence of Litigation .................45
Section 13.4. Transactions with Affiliates ..........45
Section 13.5. Full Disclosure........................45
Section 13.6 Exhibits and Schedules ................45
ARTICLE 14. COVENANTS OF THE PRACTICE AND
PHYSICIAN Members .............................45
Section 14.1. Merger, Consolidation and Other
Arrangements ..........................45
Section 14.2. Necessary Authorizations/Assignment of
Licenses and Permits...................46
Section 14.3. Transaction with Affiliates ...........46
Section 14.4. Compliance with All Applicable Law ....46
Section 14.5. Third Party Payor Programs ............46
Section 14.6. Change in Business or Credit and
Collection Policy......................46
Section 14.7. Treatment of Accounts Receivable ......46
Section 14.8. Security Interest .....................47
ARTICLE 15. MISCELLANEOUS .................................47
Section 15.1. Assignment ............................47
Section 15.2. This Agreement ........................48
Section 15.3. No Practice of Medicine................48
Section 15.4. Non-Waiver ............................48
Section 15.5. Waivers ...............................49
Section 15.6. Amendments ............................49
Section 15.7. Severability ..........................49
Section 15.8. Successors.............................49
Section 15.9. Third Parties..........................49
Section 15.10. Saturdays, Sundays and Holidays........49
Section 15.11. Joint Preparation......................49
Section 15.12. Captions ..............................49
Section 15.13. Notices ...............................49
Section 15.14. Counterparts ..........................50
Section 15.15. Further Assurances ....................50
Section 15.16. Attorneys' Fee ........................50
Section 15.17. Time is of the Essence ................50
Section 15.18. Confidentiality .......................50
Section 15.19. Contract Modifications for Prospective
Legal Events and Cost Reductions ......51
Section 15.20. Remedies Cumulative....................51
Section 15.21. No Obligation to Third Parties ........51
Section 15.22. Compliance with Federal Applicable Law.51
Section 15.23. Force Majeure .........................51
Section 15.24. Communications ........................51
Section 15.25. Governing Applicable Law...............51
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") dated as of September
22, 1997, by and between MIDSOUTH PRACTICE MANAGEMENT, INC., a Tennessee
corporation ("MidSouth"), Foundation Medical Group, PLLC, a Tennessee
professional limited liability company (the "Practice") and the Physician
Members set forth on Schedule 1 for the Limited purposes as set forth herein.
PRELIMINARY STATEMENTS
1. The Practice is a newly formed professional limited liability company
for the practice of medicine in the Memphis, Tennessee area which provides
professional medical care to the general public through the operation of a
several clinics.
2. MidSouth is in the business of owning certain assets of and managing
and administering the businesses of medical practices.
3. The Practice desires for MidSouth to provide management and
administrative services for the Practice.
NOW, THEREFORE, in consideration of the foregoing and the promises
contained herein, and ten dollars (S10.00) and other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE 1. INTERPRETATION.
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SECTION 1.1. DEFINITIONS. For the purposes of this Agreement, the following
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definitions shall apply:
1.1.1. "Account Debtor" shall mean an account debtor or any other person
obligated in respect of an Account Receivable.
1.1.2. "Accounts" shall mean, with respect to the Practice, all Accounts
Receivable including any and all rights to payment of money or other forms of
consideration of any kind (whether classified under the Uniform Commercial Code
as accounts, chattel paper, general intangibles, or otherwise) for goods sold or
leased or for services rendered by the Practice, including, but not limited to,
accounts receivable, proceeds of any letters of credit naming the Practice as
beneficiary, chattel paper, insurance proceeds, contract rights, notes, drafts,
instruments, documents, acceptances, and all other debts, obligations and
liabilities in whatever form from any other person.
1.1.3. "Accounts Receivable" shall mean, with respect to the Practice, all
Accounts and any and all rights to payment of money or other forms of
consideration of any kind now owned or hereafter acquired (whether classified
under the Uniform Commercial Code as accounts, chattel
paper, general intangibles or otherwise) for goods sold or leased or arising out
of the delivery of medical, surgical, diagnostic or other professional medical
services rendered by the Practice, including, but not limited to, accounts
receivable, proceeds of any letters of credit naming the Practice as
beneficiary, chattel paper, insurance proceeds, contract rights, notes, drafts,
instruments, documents, acceptances and all other debts, obligations and
liabilities in whatever form from any other Person; provided that, cash, checks
and credit card purchases are not included in the definition of Accounts
Receivable.
1.1.4. "Applicable Law" shall mean all provisions of constitutions, laws,
statutes, codes, rules, regulations, ordinances and orders of all Governmental
Authorities and all orders and decrees of all courts, tribunals and arbitrators,
and shall include, without limitation, any Health Care Law applicable to a
person or an entity or its assets, liabilities or business.
1.1.5. "CHAMPUS" shall mean the Civilian Health and Medical Program of the
Uniformed Services.
1.1.6. "Collecting Bank" shall mean the main office of Union Planters
National Bank, 0000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000, or any other
financial institution agreed to by MidSouth for the collection of Purchased
Accounts Receivable.
1.1.7. "Contract" shall mean any material written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of any
kind or character, or other document to which any person is a party or by which
any person is bound.
1.1.8. "Corporation" shall collectively mean Internal Medicine Associates
of Xxxxxxx, P.C., and Walnut Grove Medical Group, P.C., a Tennessee
professionals corporations, which formerly owned the assets of and conducted the
medical practice now conducted by the Practice.
1.1.9. "Default" shall mean (i) any breach or violation of or default under
this Agreement or any Contract, order, or permit, (ii) any occurrence of any
event that with the passage of time or the giving of notice or both would
constitute a breach or violation of or default under any Contract, order or
permit, or (iii) any occurrence of any event that with or without the passage of
time or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any liability under, any Contract, order or permit.
1.1.10. "Disbursement Account" shall mean the bank account maintained by
MidSouth for payment of the Practice Expenses and the Service Fees.
1.1.11. "Effective Time" shall mean that date, as defined in the Merger
Agreement, when the Merger becomes effective with the Secretary of State of the
State of Tennessee.
1.1.12. "Excluded Activities" shall mean: (i) teaching at any educational
institution and attending patients as a part of the Physician Employee's duties
as are normal and customary for such
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faculty position; provided, however, such services must be incident to the
academic/teaching aspects of the institution and not incident to the regular
examination of patients for a fee, whether billed in the name of the institution
or the name of the Physician Employee; (ii) authoring text books, research
papers, or newspaper articles, or appearing on radio or television shows or any
other provision of medical advice via broad mediums; (iii) engaging in research
and development the material components of which do not constitute medical
practice management; (iv) serving as medical director or administrative employee
of any organization offering medical care, but not providing clinical services
or which is not in competition with the Practice; (v) serving as an expert
witness; and (vi) working in a urgent care center as defined in Section 7.3.
1.1.13. "Excluded Expenses" shall be defined pursuant to Schedule 1.1.13.
1.1.14. "Excluded Revenue" shall mean revenue earned by the Physician
Employees or the Practice from Excluded Activities.
1.1.15. "Finance Charge Rate" means a rate of interest equal to the lesser
of (i) eighteen percent (18%) per annum or (ii) the maximum rate of interest
allowed by Applicable Law in effect at the usage.
1.1.16. "GAAP" shall mean generally accepted accounting principles as set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in any other
statements by any other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession. For purposes of
this Agreement, GAAP shall be applied in a manner consistent with the historical
practices used by MidSouth or the Practice, as applicable.
1.1.17. "Governmental Authority" shall mean any national, state or local
government (whether domestic or foreign), any political subdivision thereof or
any other governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, board, body, agency, bureau or entity or any
arbitrator with authority to bind a party.
1.1.18. "Governmental Lockbox Account" shall mean the account established
at the Collecting Bank by the Practice into which all proceeds of the Practice's
Governmental Receivables are remitted.
1.1.19. "Governmental Receivables" shall mean the Accounts Receivable of
the Practice which (i) arise in the ordinary course of business of the Practice,
(ii) have as their third party payor the United States of America or any state
or any agency or instrumentality of the United States of America or any state
which makes any payment with respect to Medicare or Medicaid or with respect to
any other program (including CHAMPUS) established by Applicable Law, and (iii)
are required by federal or state law to be paid to the Practice as a healthcare
provider. Governmental Receivables
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shall not, however, refer to amounts payable by private insurers under contract
to provide benefits under the Federal Employee Health Benefit Program.
1.1.20. "Health Care Law" shall mean any Applicable Law regulating the
acquisition, construction, operation, maintenance or management of a health care
practice, facility, provider or payor, including without limitation, 42 U.S.C.
(S)1395nn and 42 U.S.C. (S)1320a-7b.
1.1.21. "HMO" shall mean health maintenance organization; an entity that
combines health care services delivery and financing in one prepaid capitated
benefit plan.
1.1.22. "Lender" shall mean any lender of MidSouth that has a security
interest in the Purchased Accounts Receivable from time to time.
1.1.23. "Lockbox Agreements" shall mean that certain lockbox operating
procedural agreement for Governmental Receivables to be entered into between the
Collecting Bank, Lender and Practice, in a form acceptable to counsel for
MidSouth as to Governmental Receivables and that certain lockbox operating
procedural agreement for Non-Governmental Receivables to be entered between the
Collecting Bank, Lender and Practice, in a form acceptable to counsel for
MidSouth as to Non-Governmental Receivables.
1.1.24. "Managed Care Payments" shall mean all payments actually recorded
whether on a prepayment or accrual basis for (i) capitation payments to the
Practice from managed care organizations where payment is made periodically on a
per member basis for the partial or total medical care needs of a patient, co-
payments and all HMO incentive bonuses, including hospital incentive bonuses,
and (ii) fees and revenue recorded by or on behalf of the Practice, whether from
the assumption of institutional or professional risk in managed care risk
assumption arrangements or otherwise, including bonus, incentive and surplus
payments from capitated services.
1.1.25. "Management Team" shall mean a committee consisting of four (4)
members established pursuant to and functioning in accordance with the
guidelines set forth in Article 8.
1.1.26. "Management Team Chief Executive" shall mean the MidSouth employee
who shall manage and administer all of the day-to-day business functions of the
Practice subject to the terms of this Agreement.
1.1.27. "Material Adverse Effect" shall mean an event, change or occurrence
which, individually or together with any other event, change or occurrence, has
a material adverse impact on (i) the financial position, business or results of
operations of any party and its subsidiaries, taken as a whole, or (ii) the
ability of such party to perform its obligations under this Agreement or the
transactions contemplated by this Agreement, provided that Material Adverse
Effect shall not be deemed to include the impact of (x) changes in Applicable
Law or interpretations thereof by courts or Governmental Authorities, (y)
changes in GAAP, and (z) the Merger and compliance with the provisions of this
Agreement on the operating performance of the parties or actions taken pursuant
to or required by this Agreement.
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1.1.28. "Medicaid" shall mean any state program pursuant to which health
care providers are paid or reimbursed for care given or goods afforded to
indigent persons and administered pursuant to a plan approved by the Health Care
Financing Administration under Title XIX of the Social Security Act.
1.1.29. "Medicare" shall mean any medical program established under Title
XVIII of the Social Security Act and administered by the Health Care Financing
Administration.
1.1.30. "Merger" shall mean the merger of the Corporation with and into
MidSouth pursuant to the Merger Agreement.
1.1.31. "Merger Agreement" means that certain Merger Agreement document
dated as of September 17, 1997, by and among MidSouth, the Corporation and
Physician Members.
1.1.32. "MidSouth" shall mean MidSouth Practice Management, Inc., a
Tennessee corporation.
1.1.33. "MidSouth Expenses" shall be as set forth on Schedule 1.1.33.
1.1.34. "Misdirected Payments" means payments made by an Account Debtor to
a location other than as provided in the Notification Letter or that the
Practice otherwise receives on Purchased Accounts Receivable under the terms of
this Agreement.
1.1.35. "Monthly Adjustments" shall mean adjustments to the estimated
payments that are made pursuant to Section 6.1 or Section 6.2 to reconcile the
estimated payments made pursuant to Section 6.1 or Section 6.2 with the actual
amounts due under Section 6.1 or 6.2. The Monthly Adjustments shall be made on a
monthly basis beginning on the last day of the month immediately following the
month for which the initial calculation is made.
1.1.36. "Necessary Authorizations" shall mean with respect to the Practice,
all certificates of need, authorizations, certificates, consents, approvals,
permits, licenses, notices, accreditations and exemptions, filings and
registrations, and reports required by Applicable Law, which are necessary or
reasonably useful to the lawful ownership and operation of the Practice's
business.
1.1.37. "Non-Governmental Lockbox Account" shall mean the account
established by MidSouth with the Collecting Bank into which all proceeds from
the Purchased Accounts Receivable, under which a third party is the Account
Debtor (other than Governmental Receivables), are remitted.
1.1.38. "Non-Governmental Receivables" shall mean Accounts Receivable which
are not Governmental Receivables.
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1.1.39. "Notification Letter" shall mean a written notification, in a
form acceptable to counsel for MidSouth, from the Practice to third party payors
informing such third party payors that all proceeds due under the Practice's
Accounts are to be remitted to the Non-Governmental Lockbox Account or the
Governmental Lockbox Account, as the case may be.
1.1.40. "Physician Employees" shall mean those individuals (A) who are
employees or members of the Practice, on a full-time or part-time basis or are
otherwise under contract with the Practice to provide professional services to
patients of the Practice, (B) whose services are billed or billable by and in
the name of the Practice and (C) who are duly licensed as physicians to provide
professional medical services in the State.
1.1.41. "Physician Extender Employees" shall mean (i) nurse anesthetists,
physician assistants, nurse practitioners, podiatrists, psychologists and (ii)
any other service provider that generates a professional charge and whose
services are billed or billable by and in the name of the Practice and who is
duly licensed to provide professional medical services in the State.
1.1.42. "Physician Members" shall mean those physicians who are members
of the Practice.
1.1.43. "PPO" shall mean preferred provider organization; a joint venture
by providers to obtain contracts with payors by agreeing to give the payor a
discount in order to participate in the payor's plan.
1.1.44. "Practice" shall mean Foundation Medical Group, PLLC, a Tennessee
professional limited liability company.
1.1.45. "Practice Account" shall mean that bank account maintained by the
Practice for payment of Excluded Expenses; receipt and disbursal of the Purchase
Price; and any other receipts or disbursements deemed appropriate by the
Practice which do not violate the terms of this Agreement.
1.1.46. "Practice Expenses" shall be as set forth in Schedule 1.1.46.
1.1.47. "Practice Facilities" shall mean the properties and facilities
owned by the Practice as described in Schedule 1.1.47 and properties and
facilities subsequently acquired by the Practice and managed by MidSouth.
1.1.48. "Practice Net Revenue" shall mean Practice Revenue less Practice
Expenses.
1.1.49. "Practice Revenue" shall mean all fees or Managed Care Payments
actually recorded each month by or on behalf of the Practice as a result of
professional medical services personally furnished or to be furnished to
patients by Physician Employees or other professionals under control of the
Practice and other fees or income generated in their capacity as professionals,
whether rendered in an inpatient or outpatient setting, and any revenue
generated from the sale of goods. Practice Revenue shall not include Excluded
Revenue. It is the intent of the parties that Practice
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Revenue shall reflect the net realizable value of fees recorded each month.
1.1.50. "Purchase Price" shall mean the face amount of the Accounts
Receivable recorded each month, less any non-allowed contractual adjustments and
net of any reserve for uncollectible Accounts Receivable based on the most
recently completed six (6) month historical experience of the Practice or the
predecessor of the Practice, calculated on a rolling basis as the case may be,
as determined by MidSouth. It is the intent of the parties that the Purchase
Price reflect the actual net reliable value of the Purchase Accounts Receivable.
1.1.51. "Purchased Accounts Receivable" shall mean all Accounts Receivable
of the Practice purchased by MidSouth pursuant to this Agreement.
1.1.52. "Restricted Area" shall mean a thirty (30) mile radius from any
Practice Facility.
1.1.53. "Service Fee" shall mean the monthly fee equal to ten percent
(10%) of Practice Net Revenue plus the amount of the Practice Expenses paid by
MidSouth; the calculation of the Service Fees shall not include Excluded
Revenue, Excluded Expenses, or MidSouth Expenses.
1.1.54. "Settlement Date" shall mean the day MidSouth pays for the
Purchased Accounts Receivable which shall not be later than the fifteenth (15th)
day of each month following the month in which the Account Receivable is
created.
1.1.55. "State" shall mean the State of Tennessee.
1.1.56. "Technical Employees" shall mean individuals who provide billable
services on behalf of the Practice and are employees of the Practice.
1.1.57. "Term" shall mean the period from which this Agreement is commenced
until August 31, 2022, unless terminated earlier pursuant to the terms of this
Agreement.
1.1.58. "Third Party Payor Programs" shall mean Medicare, Medicaid,
CHAMPUS, insurance provided by BlueCross and/or Blue Shield, managed care plans,
and any other private health care insurance programs and employee assistance
programs as well as any future similar programs.
1.1.59. "Yearly Adjustments" shall mean final adjustments based on audited
year-end financial statements for the Practice which reconcile the estimated
payments made pursuant to Section 6.1 and Section 6.2 with the actual amounts
due under Section 6.1 and Section 6.2.
SECTION 1.2. EFFECT OF DEFINITIONS. The definitions set forth in Section
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1.1 above or referenced herein shall apply equally to the singular, plural,
adjectival, adverbial, and other forms of any of the words and phrases defined
regardless of whether they are capitalized.
SECTION 1.3. THIS AGREEMENT. This Agreement consists of the information set
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7
forth herein, the schedules attached hereto and the certificates, documents and
other instruments required to be delivered hereunder and any reference to this
Agreement shall refer to all of the constituents. The date first set forth above
shall be deemed to be the date hereof for all purposes.
SECTION 1.4. CASE AND GENDER. In this Agreement words in the singular
---------------
number include the plural, and words in the plural number include the singular;
and words of the masculine gender include the feminine and the neuter, and when
the sense so indicates words of the neuter gender may refer to any gender.
ARTICLE 2. RELATIONSHIP OF THE PARTIES.
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SECTION 2.1. INDEPENDENT RELATIONSHIP. The Practice, the Physician Members
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and MidSouth intend to act and perform as independent contractors, and the
provisions hereof are not intended to create any partnership, joint venture,
agency or employment relationship between the parties. Notwithstanding the
authority granted to MidSouth herein, MidSouth, the Practice, and the Physician
Members agree that the Practice and the Physician Employees shall retain all
authority to direct the medical, professional, and ethical aspects of the
Practice and the Physician Employees' medical practices. Each party shall be
solely responsible and shall comply with all Applicable Law pertaining to
employment taxes, income withholding, unemployment compensation contributions
and other employment related statutes applicable to that party, including the
payment of any applicable payment for employees; it being understood that
MidSouth shall provide services to the Practice to assist the Practice in
satisfying its obligations described above.
SECTION 2.2. RESPONSIBILITIES OF THE PARTIES. As more specifically set
-------------------------------
forth herein, MidSouth shall manage Practice's offices and facilities and
provide the Practice with offices and facilities, equipment, supplies, certain
support personnel, management, financial and advisory services. As more
specifically set forth herein, the Practice shall be responsible for the
recruitment and hiring of physicians and all issues related to the professional
practice of medicine, medical practice patterns and documentation thereof.
Notwithstanding anything herein to the contrary, no "designated health service,"
as defined in 42 U.S.C. (S) 1395nn, including any amendment or successor
thereto, shall be provided by MidSouth under this Agreement. MidSouth shall
neither exercise control over nor interfere with any physician-patient
relationship, which shall be maintained strictly between the physicians of the
Practice and their patients.
SECTION 23. PRACTICE MATTERS. Matters involving the internal agreements and
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finances of the Practice, including the disposition of professional fee income,
tax planning, and investment planning (and expenses relating solely to these
internal business matters) shall remain the sole responsibility of the Practice.
SECTION 2.4. PATIENT REFERRALS. The parties agree that the benefits to the
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Practice and Physician Members hereunder do not require, are not payment for,
and are not in any way contingent upon the admission, referral or any other
arrangement for the provision of any item or service offered by MidSouth to any
of the Practice's patients.
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SECTION 2.5. PROFESSIONAL JUDGMENT. Each of the parties acknowledges and
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agrees that the terms and conditions of this Agreement pertain to and control
solely the business and financial relationship between and among the parties and
do not pertain to and do not control the professional and clinical relationship
between and among the Practice, the Physician Employees, the Practice's
employees and the Practice's patients. Nothing in this Agreement shall be
construed to alter or in any way affect the legal, ethical, and professional
relationship between and among the Practice, Physician Employees and the
Practice's patients, nor shall anything contained in this Agreement abrogate any
right, privilege, or obligation arising out of or applicable to the physician-
patient relationship.
ARTICLE 3. ADMINISTRATIVE AND MANAGEMENT SERVICES OF MIDSOUTH.
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SECTION 3.1. MANAGEMENT SERVICES AND ADMINISTRATION.
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(a) General Authority. The Practice hereby appoints MidSouth and MidSouth
-----------------
shall serve as the exclusive manager and administrator of all daily business
functions of the Practice. The Practice agrees that the purpose and intent of
this Agreement is to relieve the Practice and Physician Employees to the maximum
extent possible of the administrative, accounting, and other business aspects of
their practice, with MidSouth assuming responsibility and being given all
necessary authority to perform these functions including, without limitation,
the authority to incur obligations in the name of the Practice to be paid by
Practice as Practice Expenses in accordance with the policies and procedures
adopted by the Management Team. MidSouth shall have the sole authority to
perform the administrative, accounting and business aspects of the Practice as
set forth herein and pursuant to the policies and procedures adopted by the
Management Team. The Practice hereby appoints MidSouth to be its true and
lawful attorney-in-fact to incur all expenses and to perform all functions in
the name and on behalf of the Practice. MidSouth will have no authority,
directly or indirectly, to perform, and will not perform, any medical function.
MidSouth may, however, advise the Practice to the relationship between the
Practice's performance of medical functions and the overall administrative and
business functioning of the Practice. To the extent that a MidSouth employee
assists Physician Employees in performing medical functions, such employees
shall be subject to the professional direction and supervision of Physician
Employees and in the performance of such medical functions shall not be subject
to any direction or control by, or liability to, MidSouth, except as may be
specifically authorized in writing by MidSouth.
(b)(l) Billing and Collecting. MidSouth shall, on behalf of the Practice,
----------------------
xxxx patients and Third Party Payor Programs and collect the fees for medical
services rendered by the Practice regardless of when or where such services are
rendered. All xxxxxxxx for Technical Employees' and Physician Employees'
services shall be made in the name of and under the provider number of the
Practice. The Practice hereby appoints MidSouth for the term hereof to be its
true and lawful attorney-in-fact, for the following purposes: (i) to xxxx
patients in the Practice's name and on its behalf; (ii) to collect Accounts
Receivable resulting from billing in the Practice's name and on its behalf;
(iii) to receive payments and prepayments from Third Party Payor Programs; (iv)
to take possession of and endorse in the name of the Practice (and/or in the
name of an individual physician, the payment intended for purpose of payment of
a xxxx) any notes, checks, money orders, insurance
9
payments and other instruments received in payment of Accounts Receivable; and
(v) at the direction of the Management Team to initiate the institution of legal
proceedings in the name of the Practice to collect any Accounts Receivable and
monies owed to the Practice, to enforce the rights of the Practice as creditors
under any Contract or in connection with the rendering of any service, and to
contest adjustments and denials by governmental agencies (or its fiscal
intermediaries) as third party payors. All adjustments made for uncollectible
accounts, professional courtesies and other activities that do not generate a
collectible fee shall be performed in a reasonable and consistent manner
approved by the Management Team.
(b)(2) Bank Accounts. All cash, checks and credit card purchases paid at
-------------
the time of the delivery of medical services by the Practice and all Managed
Care Payments which do not represent payment on a Purchased Accounts Receivable
shall be remitted to the Practice Account. All payments received by the Practice
with respect to the Purchased Accounts Receivable shall be deposited into the
respective Governmental Lockbox Account or Non-Governmental Lockbox Account.
MidSouth will transfer monies from the Disbursement Account to the Practice
Account for the payment of the Purchase Price. The Practice shall establish and
maintain a separate account for the Practice, which is the Practice Account. The
Practice Account shall be controlled solely by the Practice. The Practice shall
use the monies in the Practice Account to pay all the Excluded Expenses.
MidSouth will remit, on a monthly basis, the Purchase Price for the Purchased
Accounts Receivables into the Practice Account. MidSouth will provide to the
Practice a full accounting and reconciliation of the Governmental Lockbox
Account and the Non-Governmental Lockbox Account on a monthly basis, and, upon
the reasonable request of the Practice, MidSouth shall supply to the Practice at
all other times, as the Practice shall deem necessary, an accounting and
reconciliation of the Governmental Lockbox Account and the Non-Governmental
Lockbox Account.
(c) Files and Records. MidSouth shall design, supervise and maintain, at
-----------------
the premises of the Practice, all files and records relating to the operation of
the Practice, including, but not limited to, accounting, billing, patient
medical records, and collection records. Patient medical records shall remain
the property of the Practice and shall be located at the premises of the
Practice so the medical records are readily accessible for patient care. The
management of all files and records shall comply with the Applicable Law. The
Physician Employees shall have the obligation to oversee the preparation and
maintenance of patient medical records, and to provide any medical information
as shall be necessary and appropriate to the records' clinical function and to
sustain and ensure the availability of Third Party Payor Program reimbursement
for services rendered. MidSouth shall use its reasonable efforts to preserve the
confidentiality of patient medical records and use information contained in the
records only for the limited purpose necessary to perform the services set forth
herein.
(d) Miscellaneous Services. MidSouth shall arrange for necessary clerical,
----------------------
accounting, bookkeeping and computer services, printing, postage and copier
services, medical transcribing services and any other ordinary, necessary or
appropriate service for the operation of the Practice, all of which shall be
Practice Expenses.
10
(e) Marketing. Subject to approval by the Management Team, MidSouth shall
---------
supervise the design and implementation of an appropriate marketing program on
behalf of the Practice, with appropriate emphasis on public awareness of the
availability of the services of the Practice. The costs of any marketing
services shall be a Practice Expense. The marketing program shall be conducted
in compliance with Applicable Law, regulations and applicable canons or
principles of professional ethics governing the Physician Employees or Physician
Extender Employees.
(f) Tax Returns. MidSouth shall provide the data necessary for the Practice
-----------
to prepare its annual federal and state income and general excise tax returns
and upon the request of the Practice shall arrange for the preparation of all
returns. The cost of preparing the data and tax returns shall be a Practice
Expense. MidSouth shall have no responsibility for the payment of the income
taxes and the Practice's income taxes shall not be a Practice Expense.
(g) Recruitment of Physicians. Subject to the provisions of Section 4.6,
-------------------------
MidSouth shall assist the Practice in recruiting additional physicians, carrying
out all administrative functions as may be appropriate, including, but not
limited to, advertising for and identifying potential candidates, checking
credentials, and arranging interviews; provided, however, the Practice shall
interview and make the ultimate decision as to the suitability of any physician
to become associated with the Practice. All physicians recruited by MidSouth and
accepted by the Practice shall be the sole employees of the Practice, to the
extent the physicians are hired as employees. Any expenses incurred in the
recruitment of physicians, including, but not limited to, employment agency
fees, relocation and interviewing expenses shall be budgeted as a Practice
Expense and shall be payable by the Practice.
(h) Managed Care Contracts. MidSouth shall negotiate and administer all
----------------------
managed care Contracts on behalf of the Practice and shall consult with the
Practice on all professional or clinical matters relating thereto. The Practice,
at its discretion, shall have the right to enter into or reject such contracts
negotiated by MidSouth. Such contracts shall be and will remain the property of
the Practice.
(i) Legal and Accounting Services. Subject to the provisions of Sections
-----------------------------
3.3 and 3.1(f), MidSouth shall arrange for legal and accounting services
related to operations of the Practice, as approved by the Management Team,
incurred in the ordinary course of business, including the attorneys' fees and
other costs of enforcing any physician employment agreement containing
restrictive covenants and attorneys' fees and other costs and expenses of
litigation, arbitration or other proceedings for malpractice suits against the
Practice and its personnel to the extent the fees, costs and expenses by not
covered by insurance, provided the services shall be approved in advance are the
Management Team Chief Executive. The legal and accounting services expenses
shall be Practice Expenses.
(j) Maintenance. MidSouth shall supervise the proper cleanliness of the
-----------
premises of the Practice Facilities, and maintenance and cleanliness of the
equipment, furniture and furnishings located upon the premises of the Practice,
which shall be a Practice Expense.
11
(k) Licensing. MidSouth shall pay all professional licensure fees and board
---------
certification fees of Physician Employees and Physician Extender Employees
associated with the Practice, and governmental filings for any and all licenses
and certifications for the Practice, all of which shall be a Practice Expense.
(1) Reports. MidSouth shall supervise the preparation and filing of all
-------
Medicare cost reports and other governmental reports, which shall be a Practice
Expense.
(m) Insurance. MidSouth shall negotiate for the insurance provided for in
---------
Section 9.1. Premiums and deductibles with respect to the insurance policies
shall be a Practice Expense.
SECTION 3.2. BUDGETS AND FINANCES. MidSouth shall prepare annual capital
--------------------
and operating budgets (the "Budgets") reflecting in reasonable detail the
anticipated revenue and expenses, and sources and uses of capital for growth in
the Practice and medical services rendered at the Practice. Said budgets shall
reflect amounts, if any, allocated for capital purchases, improvements,
expansion and any new leasing arrangements. Within sixty (60) days of the date
of this Agreement, MidSouth shall submit a proposed budget to the Management
Team for its approval. In subsequent years, not later than thirty (30) days
prior to the end of the fiscal year, MidSouth shall submit a budget for the
upcoming fiscal year to the Management Team. In the event that the Management
Team does not approve the budget submitted by MidSouth, then the budget for the
"unapproved" year shall be the budget for the most recent agreed year adjusted
on an item-by-item basis by the all cities consumer price index with the items
of the most recent agreed budget as the base year. The budget shall be binding
upon MidSouth and the Practice. MidSouth shall consult with the Practice and the
Management Team in the preparation of all budgets. MidSouth and the Practice
acknowledge and agree that once a budget has been approved, neither MidSouth nor
the Practice shall make capital expenditures or incur capital expenses in excess
of budgeted amounts without the prior approval of the Management Team. In
addition, neither party shall pay operating expenses in excess of the budgeted
amounts without the approval of the Management Team.
SECTION 33. FINANCIAL STATEMENTS AND AUDITS. MidSouth shall prepare annual
-------------------------------
financial statements for the operations of the Practice and, in its sole
discretion, may cause the financial statements to be audited by a certified
public accountant selected by MidSouth. The Practice shall cooperate fully in
such audit. The cost of such audit shall be a Practice Expense. If MidSouth
elects to have the financial statements audited by a certified public accountant
with a big six accounting firm, the resulting audited financial statements shall
be binding on the Practice and MidSouth. If MidSouth elects not to have the
Practice's financial statements audited by a big six accounting firm, the
Practice shall have the option to obtain such an audit, by a certified public
accountant with a mutually acceptable big six accounting firm. MidSouth shall
fully cooperate in such audit. The cost of such audit shall be a Practice
Expense. In such event, MidSouth and the Practice shall be bound by the
resulting audited financial statements. All parties shall be entitled to copies
of any information provided to or by the auditors by or to any party.
Additionally, MidSouth shall prepare monthly unaudited financial statements
containing a balance sheet and statements of income from the Practice
operations, which shall be delivered to the Practice within thirty (30) business
days after the close of each calendar month.
12
SECTION 3.4. INVENTORY AND SUPPLIES. MidSouth shall order and purchase all
----------------------
inventory, supplies, and other ordinary, necessary or appropriate materials
reasonably necessary for the operation of the Practice which are requested by
the Practice and are within the Budget for the applicable fiscal year. Items
ordered hereunder shall be purchased by the Practice, which shall be a Practice
Expense. MidSouth shall not purchase inventory, goods or supplies from any
affiliate of MidSouth without approval of the Management Team after full
disclosure of all terms to the Management Team.
SECTION 3.5. MANAGEMENT TEAM CHIEF EXECUTIVE. Subject to the provisions of
-------------------------------
Section 8.2.10, MidSouth shall hire and appoint the Management Team Chief
Executive who shall serve as an employee of MidSouth and who shall manage and
administer all of the day-to-day business functions of the Practice. MidSouth
shall determine the salary and fringe benefits of the Management Team Chief
Executive. At the direction, supervision and control of MidSouth, the Management
Team Chief Executive, subject to the terms of this Agreement, shall implement
the policies established by the Management Team and shall generally perform the
duties and have the responsibilities of a chief executive officer.
SECTION 3.6. PERSONNEL.
---------
3.6.1. Physician Employees and Physician Extender Employees shall be
employees of the Practice, and any and all salaries, benefits, (including
contributions under any employee benefits plan), severance benefits and other
direct or indirect costs of all employees shall be payable by the Practice,
which shall be an Excluded Expense. If requested to do so in writing by the
Practice, MidSouth shall advance to the Practice the amount necessary to
compensate the Physician Extender Employees and the Physician Employees, who are
not Physician Members, for the first month of the term of this Agreement in an
amount equal to the regular payroll payments made to such Physician Extender
Employees and Physician Employees, who are not Physician Members. The sum
advanced shall be divided into twelve (12) equal parts and deducted from
Purchase Price paid to Practice each month until the advance is repaid. The
advance shall not be a Practice Expense.
3.6.2. Subject to the provisions of Article 2, all other personnel
necessary to carry out the duties of MidSouth hereunder or reasonably necessary
for the conduct of the Practice shall be employees of MidSouth and shall be
under the supervision of the Management Team Chief Executive or his designee.
MidSouth shall determine the salaries and fringe benefits of all personnel,
within the budget policies and procedures adopted by the Management Team, the
cost of which will be payable by the Practice as a Practice Expense. Personnel
performing patient care services shall be subject to the professional
supervision of the Physician Employees. If the Practice is dissatisfied with the
services of any person, the Practice shall consult with MidSouth. MidSouth shall
in good faith determines whether the performance of that employee could be
brought to acceptable levels through counsel and assistance, or whether the
employee should be terminated.
SECTION 3.7. CAPITAL EXPENDITURES AND LOANS. All capital expenditures shall
------------------------------
be approved by the Management Team. MidSouth shall determine whether approved
capital expenditures shall be funded by MidSouth through borrowings, leases,
loans, or other financing methods through
13
independent third-party financial institutions, or investments by MidSouth for
reinvestment.
SECTION 3.8. COMPLIANCE WITH APPLICABLE LAW. MidSouth shall comply with all
------------------------------
Applicable Law, including, but not limited to, federal, state and local laws,
regulations and restrictions in the conduct of its obligations under this
Agreement affecting billing and reimbursement, referrals, patient privacy and
confidentiality, management of hazardous materials and infectious waste.
MidSouth shall implement procedures designed to detect and deter potential
violations of Applicable Law including (i) distributing annually a set of
guidelines for Physician Employees and Physician Extender Employees regarding
proper compliance with all Applicable Law; (ii) establishing a Compliance
Committee" with representatives from the Management Team and MidSouth; and (iii)
engaging qualified professional advisors to review operations and acquisitions
by MidSouth or its subsidiaries. MidSouth shall comply with Applicable Law
including, without limitation, Health Care Law including, without limitation,
federal, state and local laws and regulations affecting billing and
reimbursement, referrals, patient privacy and confidentiality, and management of
hazardous materials and infections waste. In the event that changes in such laws
occur, resulting in a need for modification of the manner in which MidSouth
operates, MidSouth shall make such appropriate modifications to maintain
compliance with such laws. MidSouth shall discharge its obligations under this
Agreement consistent with reasonable industry standards and practices.
SECTION 3.9. QUALITY ASSURANCE. MidSouth shall assist the Practice in
-----------------
fulfilling its obligations to its patients to maintain a professionally
recognized quality of medical and professional services.
SECTION 3.10. ANCILLARY SERVICES. MidSouth shall operate ancillary services
------------------
as approved by the Management Team upon the receipt of an opinion from counsel
that the proposed ancillary service does not violate any Applicable Law,
including, but not limited to, 42 U.S.C. (S)1395nn ("Xxxxx I and Xxxxx 1I").
SECTION 3.11. NEW MEDICAL SERVICES AND ADDITIONAL PRACTICE OFFICES. If the
---------------------------------------------------
Practice desires to have a new ancillary service provided at any of the
Practice's offices or desires to establish a new Practice office, a proposal of
such ancillary service or the establishment of such new office shall be
submitted to the Management Team. Should the Management Team approve the
provision of such new ancillary service or the establishment of such new
Practice office, MidSouth at its option, shall have the exclusive right to: (i)
provide services necessary to support the Practice in the Practice's delivery of
such new ancillary services at the Practice office or new Practice office, as
applicable, and (ii) invest and have ownership in any new ancillary services for
which facility fees may be generated; provided, however, if the type of service
is an ancillary service that would be improper under any Applicable Law for
MidSouth to offer to the Practice's patients, then MidSouth shall not have the
option to provide such service. Should MidSouth decline to provide the necessary
support service or ownership for the new ancillary service or new Practice
office, the Practice shall be entitled to perform such service at the Practice's
own expense and the revenue therefrom shall not be Practice Revenue under this
Agreement.
14
SECTION 3.12. MANNER OF PERFORMANCE. MidSouth shall provide (or cause to be
---------------------
provided) to the Practice the services set forth above. MidSouth shall
efficiently manage the Practice and perform its duties hereunder in the manner
as it deems appropriate, exercising reasonable judgment, to meet the daily
requirements of the operations of the Practice in accordance with the provisions
of this Agreement and the general standards approved by the Management Team. The
Practice shall not act in a manner which would prevent MidSouth from efficiently
managing the Practice.
ARTICLE 4. OBLIGATIONS OF THE PRACTICE.
---------------------------
In providing its professional services to patients, the Practice shall have the
following obligations:
SECTION 4.1. PHYSICIANS. The Practice shall notify MidSouth, upon execution
----------
of this Agreement, of the identities of the Physician Employees and their
respective areas of practice. A list of the Physician Employees and the practice
are shall be attached hereto as Schedule 4.1. The Practice shall enter into
physician employment agreements with all Physician Employees. Any new employment
agreements shall be reviewed prior to execution, and MidSouth shall promptly be
provided with copies of the executed employment agreements and any revisions or
amendments thereto. All Physician Employees shall be licensed in all states in
which the Physician Employee practices.
SECTION 4.2. PROVISION OF MEDICAL SERVICES. The Practice shall perform, or
-----------------------------
subcontract to perform as necessary, all medically necessary services for
patients, including managed care patients, in accordance with the terms of
managed care agreements and subject to the utilization review protocols. All
subcontracts shall be reviewed by MidSouth prior to their execution.
SECTION 4.3. PROFESSIONAL STANDARDS. The Practice and its Physician
----------------------
Employees shall provide the professional services to patients described in
Section 4.2. above in compliance at all times with ethical standards, Applicable
Law and regulations relating to the Practice's professional practice. The
Practice shall also make all reports and inquiries to any national practitioners
data bank and/or any state data bank required by Applicable Law. The Practice
shall use its best efforts to determine that each Physician Employee and
Technical Employee associated with the Practice, who provides medical care to
patients of the Practice, is licensed by the state or states in which he or she
renders professional services. If any disciplinary or medical malpractice action
is initiated against any such individual, the Practice shall immediately provide
MidSouth with copies of any third-party documents served on the Practice or
letters delivered to the Practice (not otherwise privileged). The information
shall be deemed confidential information and shall, notwithstanding disclosed,
remain subject to all privileges and immunities provided by Applicable Law.
MidSouth shall take all steps reasonably necessary to assure that their
privileges and immunities remain intact. Pursuant to Section 4.9, the Practice
shall carry out a program to monitor the quality of medical care provided by the
Practice.
SECTION 4.4. BILLING INFORMATION. The Practice shall promptly provide
-------------------
MidSouth with all
15
billing information reasonably requested by MidSouth to enable MidSouth to xxxx
and collect the Practice's charges, and the Practice shall procure consents to
assignments and other approvals and documents necessary to enable MidSouth to
obtain payment or reimbursement from third party payors and/or patients.
SECTION 4.5. MEDICAL PRACTICE. The Practice shall use and occupy the
----------------
Practice Facilities exclusively for the practice of medicine and shall comply
with all Applicable Law and standards of medical care. It is expressly
acknowledged by the parties that the medical practice or practices conducted at
the Practice Facilities shall be conducted solely by physicians or medical
practitioners associated with the Practice, and no other physician or medical
practitioner shall be permitted to use or occupy the Practice Facilities without
the prior written consent of MidSouth.
SECTION 4.6. ADDITIONAL PHYSICIANS. The Practice shall use its best efforts
---------------------
to provide any additional physicians required by the level of patient activity
anticipated by the MidSouth and communicated to the Practice.
SECTION 4.7. UTILIZATION REVIEW; QUALITY ASSURANCE. The Practice shall
-------------------------------------
contractually bind each Physician Employee and Physician Extender Employee to
cooperate with and participate in applicable programs and systems of quality of
care assessment, grievance procedures, peer review and utilization review.
Information developed in the course of physician quality assurance and peer
review activities shall be maintained by the Practice as privileged and
confidential, except where its disclosure is consented to by the Practice or is
required by Applicable Law.
SECTION 4.8. NON-DISCRIMINATION; COMPLIANCE WITH APPLICABLE LAW. All
--------------------------------------------------
employment policies, standards and procedures of the Practice shall be in
accordance with non-discrimination provisions of the Applicable Law. In the
event that any government Contract or regulation requires reports or disclosures
of MidSouth and its contractors, the Practice, upon MidSouth's request, shall
make, execute and deliver all reports, disclosures or other written information,
guarantees or assurances as may be reasonably requested by MidSouth to assure
timely compliance.
SECTION 4.9. STANDARDS, ACCREDITATION, SURVEYS AND INSPECTIONS. The
-------------------------------------------------
Practice shall meet all medical practice, licensure and ethical standards, which
are pertinent to its activities or which by Contract it has agreed to abide. The
Practice shall in good faith cooperate with inspections and on-site surveys of
the Practice as may be conducted by governmental agencies, accrediting
organizations or payors. MidSouth shall, to the extent possible, give the
Practice advance notice of the inspections and surveys and schedule the
inspections during reasonable business hours.
SECTION 4.10. CONTRACTS. The Practice, the Physician Employees and the
---------
Physician Extender Employees shall abide by the terms of any Managed Care
Agreements entered into by on behalf of and with the consent of the Practice,
including, without limitation, self-insured, PPO, HMO and similar agreements.
16
SECTION 4.11. ORGANIZATION AND AREA OF CARE. The Practice shall comply with
-----------------------------
policies end procedures pertinent to scheduling, billing, reconciliation of
capitation, and other administrative matters relating to the organization of the
non-professional aspects of the delivery of care as may be established, from
time to time, by MidSouth after consultation with the Practice.
SECTION 4.12. RECORDS AND REPORTS. The Practice shall assist MidSouth in
-------------------
maintaining and, where required by Applicable Law or legal process, in divulging
records and information concerning its health care services. The Practice shall
give MidSouth full access to all of its medical and financial records for the
Practice Account.
SECTION 4.13. THE PRACTICE TO PROVIDE NECESSARY BILLING INFORMATION. The
-------------------------------------------------------
Practice agrees to provide MidSouth with all billing information for fee-for-
service and managed care patients, including, but not limited to, the name of
the patient, the date of service, the nature and extent of services provided and
any supporting medical information necessary to obtain payment or reimbursement
for services.
SECTION 4.14. CONTINUING EDUCATION. The Practice shall ensure that all
--------------------
Physician Employees and Physician Extender Employees maintain competence in, and
remain currently well-informed as to recent developments about, their particular
areas of medical practice, interest and specialization. Accordingly, subject to
the Practice at all times providing sufficient physicians to care for the needs
of patients, the Physician Employees and Physician Extender Employees shall
attend seminars, keep current with journals and take other reasonable steps to
remain proficient in their particular specialties. All seminars necessary to
maintain licensure or competence shall be the responsibility of the Practice and
the individual Physician Employees and Physician Extender Employees. At a
minimum, the Practice shall ensure that each Physician Employee and each
Physician Extender Employee participates in such continuing medical education as
is necessary for the Physician Employee and each Physician Extender Employee to
remain licensed.
SECTION 4.15. REFERRALS. The Practice and the Physician Employees shall
---------
make referrals to specialists in a manner consistent with (a) the terms and
conditions of government programs or managed care agreements applicable to the
care of the patient, and (b) any Applicable Law, including, but not limited to,
Xxxxx I and Xxxxx II, as amended.
SECTION 4.16. PROVIDER NUMBERS. The Practice shall procure and maintain
----------------
medical group provider numbers, including without limitation, Medicare and
Medicaid provider numbers, necessary or appropriate to obtain payment or
reimbursement on the Practice's behalf.
ARTICLE 5. FACILITIES OF THE PRACTICE.
--------------------------
SECTION 5.1. THE PRACTICE FACILITIES. MidSouth agrees to maintain in good
-----------------------
order the properties and facilities owned by the Practice on the date of this
Agreement and/or more fully described in Schedule 1.1.47 attached hereto (the
"Practice Facilities"), and shall pay for lease payments, costs of repairs,
maintenance and improvements, utility (telephone, electric, gas, water)
17
expenses, normal janitorial services, refuse disposal and all other costs and
expenses reasonably incurred in conducting operations of the Practice during the
term of this Agreement. All of these costs shall be Practice Expenses; however,
the costs of debt service on any real property owned by the Practice shall not
be a Practice Expense. Nothing contained herein is intended to require MidSouth
to provide the foregoing services if the services are required to be provided by
the landlord (without cost) under a lease for a specific property. The
Management Team shall make all determinations regarding the condition, use and
needs for the offices, facilities and improvements. The Management Team shall
determine any changes to the office and facility locations of the Practice.
MidSouth shall use its best efforts to create comparable properties and
facilities if the Practice Facilities are damaged by fire or other casualty or
taken through eminent domain.
SECTION 5.2. RIGHT TO USE PROPERTY. MidSouth shall have access to the
----------------------
Practice Facilities during the term of this Agreement, or, with respect to
property leased by the Practice, during the term of any lease or sublease of the
premises and any additional premises leased, subleased or acquired by the
Practice during the term of this Agreement. The Practice shall not enter into
any new leases or subleases or agree to amend any currently existing lease or
sublease without the express written consent of the Management Team. The right
to have access to the premises shall not constitute a lease or sublease of the
premises, shall not constitute an assignment of any of the Practice's rights
under existing leases, and shall not be construed as an assignment or other
transfer of any rights of the Practice to its owned property or any rights under
any existing leases.
ARTICLE 6. COMPENSATION.
------------
SECTION 6.1. FEES. MidSouth shall be paid as follows:
----
(a) The Practice shall pay to MidSouth a Service Fee equal to ten percent
(10%) of Practice Net Revenue plus the amount of Practice Expenses incurred by
MidSouth.
(b) The amounts to be paid to MidSouth under this Section 6.1 shall be
payable monthly, at the time that MidSouth pays the Practice for the Purchased
Accounts Receivable as described in Section 6.2 below. The amount of the Service
Fee payable shall be estimated based upon the previous month's operating results
of the Practice. Any amounts due to MidSouth as a result of a Monthly Adjustment
to the Service Fee shall be paid by the Practice on the next succeeding date on
which MidSouth purchases Accounts Receivable from the Practice. The Yearly
Adjustments to the Service Fee and any amount owed shall be paid within ninety
(90) days following date upon which the Practice receives notice of the amount
of the Yearly Adjustment. The Physician Members acknowledge and agree that they
are parties, individually, to this Agreement and that if the Practice fails to
pay the Service Fees herein described, MidSouth shall have the right, subject to
the following sentence, to collect the Service Fees from the Physician Members
severally and not jointly. The Management Team shall establish the relative
amount of the Service Fees applicable to each Physician Shareholder and no
Physician Member shall be required to pay to MidSouth any amount in excess of
such applicable Service Fee.
18
SECTION 6.2. PURCHASE OF ACCOUNTS RECEIVABLE AND OTHER PAYMENT
-------------------------------------------------
Section 6.2.1 During the Term of this Agreement, the Practice hereby agrees
to sell and assign to MidSouth and MidSouth agrees to purchase, all of the
Practice's Accounts Receivable each month ("Purchased Accounts Receivable").
Purchased Accounts Receivable shall not include, and MidSouth shall not
purchase, any cash, checks or credit card receivables (not related to previous
Purchased Accounts Receivable) received by the Practice, all of which shall be
deposited into the Practice Account.
Section 6.2.2. The purchase price for the Purchased Accounts Receivable
(the "Purchase Price") will be equal to the face amount of the Accounts
Receivable recorded each month in a final billable form, less (i) any non-
allowed contractual adjustments imposed by Third Party Payor Programs, and (ii)
any reserve for uncollectible Accounts Receivable. The Purchase Price will be
estimated each month to take into account contractual adjustments and
uncollectible Accounts Receivable based on the most recently completed six (6)
month historical experience of the Practice or the predecessor of the Practice,
calculated on a rolling basis, as reasonably determined by MidSouth. It is the
intent of the parties that the Purchase Price reflect the actual net realizable
value of the Accounts Receivable.
Section 6.2.3. The Practice will sell all Accounts Receivable to MidSouth
and each purchase will be deemed to be made on the day after which the Accounts
Receivable are created. MidSouth shall pay the estimated Purchase Price for the
Purchased Accounts Receivable no later than the 15th day of each month following
the month in which the Purchased Accounts Receivable are created (the
"Settlement Date"). In the event the Yearly Adjustments to the Purchase Price
indicate that MidSouth has underpaid the Practice for the Purchased Accounts
Receivable, MidSouth shall remit the amount of the underpayment to the Practice
on the next date on which MidSouth purchases Accounts Receivable from the
Practice. In the event the Yearly Adjustments to the Purchase Price indicate
that MidSouth has overpaid for Purchased Accounts Receivable, the Practice shall
remit to MidSouth the amount of such overage on the next date on which MidSouth
purchases Accounts Receivable from the Practice. MidSouth shall pay the Practice
for all Purchased Accounts Receivable by check, wire transfer or intrabank
transfer to the Practice Account. The purchase of Accounts Receivable shall be
evidenced by the Practice sending MidSouth (i) a copy of each invoice with
respect to each third-party payor on the Purchased Accounts Receivable; and (ii)
any other information or documentation (including all required Uniform
Commercial Code ("UCC") releases or financing statements) MidSouth may
reasonably need to identify the Purchased Accounts Receivable and obtain payment
from the Account Debtors; provided that the failure to send any documentation
shall not affect the obligation of the Practice to sell the Purchased Accounts
Receivable or MidSouth to purchase the Purchased Accounts Receivable. As
consideration for the acquisition of the Purchased Accounts Receivable by
MidSouth pursuant to this Section 6.2, MidSouth promises to pay and shall be
obligated to pay the Purchase Price for the Purchased Accounts Receivable at the
time and in the manner provided above. To the extent permissible by Applicable
Law, the Practice will be deemed to have sold to MidSouth all of the Practice's
right, title and interest in the Purchased Accounts Receivable and in any
proceeds thereof, and MidSouth will be the sole and absolute owner thereof and
will own all of the Practice's rights and remedies
19
represented by the Purchased Accounts Receivable (including, without limitation,
rights to payment from the respective Account Debtors on the Purchased Accounts
Receivable), and MidSouth will have obtained all of the Practice's rights under
all guarantees, assignments and securities with respect to all of the Purchased
Accounts Receivable.
Section 6.2.4. Upon expiration or termination of this Agreement for any
reason; (i) all Accounts Receivable purchased by MidSouth shall remain the
property of MidSouth; and (ii) all Accounts Receivable purchased and not paid
for at the termination or expiration of this Agreement shall be paid for by the
15th day of the following month for all Purchased Accounts Receivable as of the
date of the expiration or termination date, less the amount of any Service Fees
earned by MidSouth at the termination or expiration pursuant to Section 6.1 of
this Agreement.
Section 6.2.5. In connection with the initial purchase of Accounts
Receivable by MidSouth and pursuant to this Agreement, the Practice will execute
all financing statements or amendments under the UCC (naming MidSouth as secured
party and Lender as assignee) as MidSouth may reasonably request with respect to
any Purchased Accounts Receivable.
Section 6.2.6. The Practice agrees to cooperate with MidSouth in the
collection of the Purchased Accounts Receivable transferred pursuant to Section
6.2. At the option of and upon the request of MidSouth, the Practice shall
execute any and all documentation necessary for the transfer of amounts
constituting Purchased Accounts Receivables and/or the establishment of the
Lockbox Agreement as follows:
(A) COLLECTION OF GOVERNMENTAL RECEIVABLES. With respect to payments on
--------------------------------------
Governmental Receivables, at the request and option of MidSouth, the Practice
agrees that the following procedures shall apply:
(i) The Practice shall enter into a Lockbox Agreement applicable to
Governmental Receivables in a form acceptable to counsel for MidSouth and in a
form reasonably acceptable to the Practice which shall establish a Governmental
Lockbox Account. The Governmental Lockbox Account shall be an account in the
name of the Practice. All payments with respect to the Practice's Governmental
Receivables are to be made directly to the Governmental Lockbox Account. In the
event MidSouth exercises this option, the Practice shall instruct each Account
Debtor with respect to the Practice's Governmental Receivables to remit all such
payments directly to such Governmental Lockbox Account pursuant to a
Notification Letter. In addition, the Practice shall attach written instructions
to each invoice representing such Governmental Receivables generated subsequent
to the date of this Agreement which will instruct such third-party payor or
Account Debtor that-payment under such invoice is to be paid to the Governmental
Lockbox Account. So long as this Agreement has not been terminated pursuant to
Section 10.3 or so long as any Purchased Accounts Receivable remains
outstanding, the Practice agrees that it shall not deposit any funds other than
payments on Governmental Receivables into, nor make any withdrawals from, the
Governmental Lockbox Account without the prior written consent of MidSouth. The
Practice
20
further agrees that it shall not during the term of this Agreement terminate,
modify or amend in any manner the Lockbox Agreement applicable to the
Governmental Lockbox Account.
(ii) In accordance with the Lockbox Agreement pertaining to Governmental
Receivables, the Practice shall instruct the Collecting Bank to transfer
automatically on a daily basis all amounts deposited in Governmental Lockbox
Account constituting good funds to the Disbursement Account. The Practice shall
have no right or interest in the Disbursement Account. The Practice shall not,
so long as any Purchased Accounts Receivable remains outstanding, change or
cancel such automatic transfer order at any time, or, without the prior written
consent of MidSouth, change either the identity of Governmental Lockbox Account
or the instructions to each Account Debtor on the related Governmental
Receivable regarding making payments to such account. Any such action shall be
considered a breach of this Agreement for which MidSouth shall be entitled to
all remedies at Applicable Law and in equity, including obtaining an injunction.
(iii) The Practice will cooperate with MidSouth and its agents in the
identification of sums deposited into Governmental Lockbox Account, which
cooperation shall continue until all Purchased Accounts Receivable sold
hereunder have been collected.
(iv) The Practice agrees to pay, on demand, a finance charge equal to the
Finance Charge Rate, on any payment on a Governmental Receivable received by the
Practice that is not deposited into the Governmental Lockbox Account within two
(2) business days after receipt by the Practice.
(B) COLLECTION OF NON-GOVERNMENTAL RECEIVABLES. With respect to
------------------------------------------
payments on Non-Governmental Receivables, at the request and option of MidSouth,
the Practice agrees that the following procedures shall apply:
(i) Prior to the acquisition of the Purchased Accounts Receivable,
MidSouth, the Collecting Bank and Lender (if requested by Lender) shall enter
into the Lockbox Agreement applicable to Non-Governmental Receivables in a form
acceptable to counsel for MidSouth and MidSouth shall establish the Non-
Governmental Lockbox Account. All payments with respect to the Non-Governmental
Receivables are to be made directly to the Non-Governmental Lockbox Account. If
MidSouth exercises its option herein, the Practice shall instruct each Account
Debtor with respect to the Practice's Non-Governmental Receivables to remit all
payments directly to the Non-Governmental Lockbox Account pursuant to a
Notification Letter. In addition, the Practice shall attach written instructions
to each invoice representing a Non-Governmental Receivable generated subsequent
to the date of this Agreement instructing such third-party payor or Account
Debtor that payment under the invoice is to be paid to the Non-Governmental
Lockbox Account.
(ii) In accordance with the Lockbox Agreement, Practice shall instruct the
Collecting Bank to transfer automatically on a daily basis all amounts deposited
in the Non-Governmental Lockbox Account constituting good funds to the
Disbursement Account. The Practice shall not, so long as any Purchased Accounts
Receivable remains outstanding, and in any event, during the term of this
Agreement, at any time, or, without the prior written consent of MidSouth,
change the instructions
21
to each Account Debtor on the related Non-Governmental Receivable regarding
making payments to the Lockbox Account. Any action shall be considered a breach
of this Agreement for which MidSouth shall be entitled to all remedies under
Applicable Law and in equity, including obtaining an injunction.
(iii) The Practice will cooperate with MidSouth and its agents in the
identification of sums deposited into the Non-Governmental Lockbox Account,
which cooperation shall continue until all Purchased Accounts Receivable sold
hereunder have been collected.
(iv) The Practice agrees to pay, on demand, a finance charge equal to the
Finance Charge Rate, on any Non-Governmental Receivable received by the Practice
that is not deposited in the Non-Governmental Lockbox Account within two (2)
business days after receipt by the Practice.
(c) PROCEDURES WITHOUT LOCKBOX. It is MidSouth's intention to utilize the
--------------------------
Governmental Lockbox Account and Non-Governmental Lockbox Account procedure as
provided in Section 6.2.6(a) and (b) unless circumstances change which would
make the Governmental Lockbox Account and Non-Governmental Lockbox Account
procedures inappropriate. The procedures under this subsection (c) for the
collection of Accounts Receivable without a lockbox will not be instituted
without approval of the Management Team. The Practice and MidSouth shall
instruct the Collecting Bank to transfer automatically all amounts constituting
good funds in the account or accounts of the Practice established for the
collection of Governmental Receivables and Non-Governmental Receivables to the
bank account established with the Lender pursuant to a standing order in a form
acceptable to MidSouth's legal counsel (the "Bank Account"). In the event
MidSouth exercises this option, the Practice shall instruct each Account Debtor
with respect to the Purchased Accounts Receivable to remit all payments directly
to the Collecting Bank account or accounts pursuant to a Notification Letter. In
addition, the Practice shall attach written instructions to each invoice
representing the Purchased Account Receivable generated subsequent to the date
of this Agreement instructing such third-party payor or Account Debtor that
payment under the invoice is to be paid to the Collecting Bank account or
accounts. The Practice shall not, so long as any Purchased Accounts Receivable
remain outstanding, change or cancel such standing order at any time, or,
without the prior written consent of MidSouth, change the instructions to each
Account Debtor on each Governmental Receivable and Non-Governmental Receivable
to make its payments to such account. Any such action shall be considered a
breach of this Agreement for which MidSouth shall be entitled to all remedies
under Applicable Law and in equity, including obtaining an injunction.
(d) MISDIRECTED PAYMENTS. (i) If after the date of this Agreement, an
--------------------
Account Debtor shall make a payment on the Purchased Accounts Receivable to a
location other than is provided in the Notification Letter or the Practice
otherwise receives payments on Purchased Accounts Receivable under the terms of
this Agreement ("Misdirected Payments"), the Practice (at its own cost and
expense) shall promptly take all necessary steps to effect collection of the
Misdirected Payment from any other party claiming an interest therein or having
possession thereof and (A) hold the Misdirected Payment in trust for MidSouth,
(B) segregate the Misdirected Payment, (C) use its
22
best efforts not to commingle the Misdirected Payment with the Practice's own
funds or other assets, and (D) deliver the Misdirected Payment no later than two
(2) business days from the day of receipt to the Collecting Bank account or
accounts, as applicable.
(ii) The Practice agrees to pay, on demand, the Finance Charge Rate on any
Misdirected Payment received by the Practice that is not deposited in the
appropriate account within two (2) business days after receipt by the Practice.
(e) All Purchased Accounts Receivable of the Practice pursuant to this
Section 6.2 hereof will, as the Purchased Accounts Receivable are purchased, be
treated as Practice Revenues for accounting and financial purposes.
SECTION 6.3. EARLY TERMINATION OF PHYSICIAN MEMBERS. The Physician Members
--------------------------------------
hereby acknowledge that the terms and conditions of this Agreement are based
upon numerous factors, including the Physician Members continuing to practice
medicine in the future. In connection therewith, each Physician Shareholder
agrees as follows:
(a) RETIREMENT. If at any time during the Term hereof, a Physician
----------
Shareholder desires to retire, or assume full-time teaching responsibilities,
the Physician Shareholder shall notify MidSouth in writing at least twelve (12)
months prior to the date of such retirement or start of teaching position;
provided, however, that if such retiring physician elects to, and has located a
replacement physician suitable to the Practice, MidSouth shall waive the
remaining months of said twelve (12) month notice period, and such retirement
shall be effective upon the earlier of twelve (12) months from the date of
notice or commencement of the replacement physician's employment. Upon such
retirement or start of the teaching position, the Physician Shareholder shall
have no further obligations under this Agreement; provided, however, the
restrictive covenants provided for under Article Section 7 shall remain in full
force and effect. In fulfilling any such full-time teaching responsibilities,
the Physician Shareholder will be permitted to attend patients in a manner
normal and customary for such faculty position; provided, however, such services
must be incident to the academic/teaching aspects of the institution, and not
incident to the regular examination of patients for a fee whether billed in the
name of the institution or the name of the attending physician. It is not the
intent of the parties to permit a retired physician to conduct a medical
practice through an academic institution.
(b) PHYSICIAN SHAREHOLDER CHANGE IN PRACTICE/GROUP AFFILIATION. In the
----------------------------------------------------------
event that a Physician Shareholder leaves the employment of or terminates his or
her affiliation with the Practice, the terminating Physician Shareholder may
join or establish another group/practice which has or will enter into a service
agreement with MidSouth, subject to any other existing agreements between
Physician Shareholder and Practice. Upon entering into such new service
agreement with MidSouth, the terminating Physician Shareholder shall, except as
limited by separate employment agreements between the Practice and the Physician
Members, be released from any obligation under this Agreement. In the event the
(i) Practice consents to MidSouth entering into a new service agreement; (ii)
service agreement will not adversely affect the operations and earnings of
MidSouth; and (iii) new group/practice can satisfy the representations and
warranties set forth in Article 12
23
hereof, then MidSouth will not unreasonably withhold or refrain from entering
into a new service agreement with the terminating Physician Shareholder's new
group/practice. Except as set forth herein, in the event the Physician
Shareholder affiliates with a new group/practice that is not a party to a
service agreement with MidSouth, then MidSouth, will terminate this Agreement
solely with respect to the terminating Physician Shareholder; provided, however,
that the provisions of Article 7 hereof shall apply. In the event that MidSouth
does not enter into a new service agreement, then MidSouth shall terminate this
Agreement with respect to the Physician Shareholder, and the terminating
Physician Shareholder shall be obligated as set forth in Article 7 hereof
(c) DEATH OR DISABILITY. In the event that a Physician Shareholder dies or
-------------------
becomes disabled, then the Physician Shareholder shall have no continuing
obligations under this Agreement; provided, however, in the event of disability,
the restrictive covenants described in Article 7 hereof shall remain in full
force and effect.
ARTICLE 7. RESTRICTIVE COVENANTS AND ENFORCEMENT.
-------------------------------------
MidSouth and the Practice recognize that the benefits each is to receive
under this Agreement shall be realized only if the Practice operates an active
medical practice to which the physicians associated with the Practice devote
their full time and attention to the extent of their arrangement with the
Practice. Accordingly, MidSouth and the Practice desire to set forth the
following reasonable restrictions and agreements regarding competition by the
physicians during the term of this Agreement and after the termination of this
Agreement.
SECTION 7.1. EXCLUSIVE ARRANGEMENT. During the term of this Agreement,
---------------------
MidSouth shall be the Practice's and the Physician Members' sole provider of the
management services described in this Agreement and neither the Practice, the
Physician Members nor any of the Practice's or the Physician Members' employees
shall provide similar management services. During the term of this Agreement,
the Practice and the Physician Members agree that neither the Practice nor
Physician Members will enter into any similar agreement with any physician
practice management company or entity.
SECTION 7.2. RESTRICTIVE COVENANTS BY THE PRACTICE. The Practice agrees
-------------------------------------
that, during the term hereof, neither the Practice or its Physician Employees
will engage, directly or indirectly, as a principal owner, shareholder (other
than a holder of fewer than 5% of the outstanding shares of a publicly-traded
company), partner, joint venturer, employee, agent, equity owner, or in any
other capacity whatsoever, in any corporation, partnership, joint venture, or
other business association or entity that operates ambulatory surgery or
diagnostic centers, imaging centers, physical therapy centers, or rehabilitation
centers, or provides management services of the nature provided by MidSouth
pursuant to this Agreement in the Restricted Area. Provided that this Agreement
may allow any Physician Employee to own any ownership interest in the above
facilities which was acquired prior to the execution this Agreement. If this
Agreement is terminated by MidSouth for breach by the Practice, pursuant to 10.4
hereof, neither the Practice nor its current or future Physician Employees shall
establish, operate, or provide physician services at any medical office, clinic,
24
ambulatory surgery or diagnostic centers, imaging centers, physical therapy
centers, rehabilitation centers or other health care facility providing services
substantially similar to those provided by the Practice within the Restricted
Area for a period of twenty-four (24) months ("Restricted Period") after the
termination of the Agreement.
SECTION 7.3. RESTRICTIVE COVENANTS BY CURRENT PHYSICIAN EMPLOYEES.
----------------------------------------------------
Contemporaneous with the execution of this Agreement, the Practice shall obtain
formal agreements from its current Physician Employees, pursuant to which each
agrees during the term of their respective employment and for the Restricted
Period after any termination of employment with the Practice, they will not (i)
establish, operate or engage, directly or indirectly, as a principal owner,
shareholder (other than a holder of fewer than 5% of the outstanding shares of a
publicly-traded company), partner, joint venturer, employee, agent, equity
owner, or in any other capacity whatsoever, in any corporation, partnership,
joint venture, or other business association or entity that operates ambulatory
surgery or diagnostic centers, imaging centers, physical therapy, or
rehabilitation centers providing services similar to those provided by the
Practice within the Restricted Area; or (ii) solicit, induce or attempt to
induce any Practice patient, employee, consultant or other persons associated or
affiliated with MidSouth or any Affiliate of MidSouth to leave the care of a
Physician Employee, to leave the employment of, or to discontinue their
association with the Practice, MidSouth or such affiliate of the Practice or
MidSouth within the Restricted Area. Provided that the employment agreements may
exclude from the restrictive covenant the employment of Physician Employees in
facilities that have historically been deemed emergency room facilities once the
Physician Employee's employment has been terminated if the Physician Employee
has no private practice. The employment agreements shall provide that MidSouth
is an intended third-party beneficiary to such agreements and that such third-
party beneficiary rights may be assigned to any Lender. The Practice agrees to
enforce the restrictive covenants. The cost and expense of such enforcement
shall be a Practice Expense, and all damages and other amounts recovered thereby
shall be considered Practice Revenue. In the event that after a request by
MidSouth, the Practice does not pursue any remedy that may be available to it by
reason of a breach or Default of a restrictive covenant, such event shall not be
a Default or breach of this Agreement and upon the request of MidSouth, the
Practice shall assign to MidSouth such causes of action and/or other rights it
has related to such breach or Default and shall cooperate with and provide
reasonable assistance to MidSouth with respect thereto; in which case, all costs
and expenses incurred in connection therewith shall be MidSouth Expenses, and
MidSouth shall be entitled to all damages and other amounts recovered thereby.
If the Practice and/or any Physician Employee violate the covenants set forth in
this Section 7.3, then the duration of the restrictions contained in this
Section 7.3 shall be extended an additional month against the violator for each
month during which such violation occurred but was not discovered by MidSouth,
beginning upon the date that MidSouth learns of the violation and so notifies
the Practice and/or the Physician Employee in writing.
SECTION 7.4. RESTRICTIVE COVENANTS BY FUTURE PHYSICIAN EMPLOYEES. The
---------------------------------------------------
Practice shall obtain and enforce formal agreements from each of its future
Physician Employees hired or contracted, pursuant to which each agrees to be
bound by an agreement containing the terms and conditions as contained in
Section 7.3 hereof.
25
SECTION 7.5. PHYSICIAN EMPLOYEE LIQUIDATED DAMAGES. The restrictive
-------------------------------------
covenants described above may provide that the Physician Employees (current or
future) may be released from their Restrictive Covenants by paying liquidated
damages in an amount as follows:
(a) if the Practice were the breaching party or the party desiring to be
released from the covenant, the Practice shall be liable to MidSouth for an
amount equal to the reasonably estimated fee payable to MidSouth hereunder for
one hundred twenty (120) months following the termination; and
(b) if a Physician Employee was the breaching party or the party desiring
to be released from the covenant, then S200,000.00 per breaching party or party
desiring to be released from the covenant must be paid to MidSouth in order to
obtain Physician Employee's release from Article 7 of this Agreement.
SECTION 7.6. RIGHTS OF MIDSOUTH. During the term of this Agreement and
------------------
thereafter, MidSouth shall at all times of this Agreement have the right to
enter into additional service agreements with other physicians and practices,
regardless of where such physicians and/or practices are located, providing for
management services and facilities to such physicians and/or practices.
SECTION 7.7. EXCLUDED ACTIVITIES. Physician Employees shall be allowed to
-------------------
participate in Excluded Activities and retain Excluded Revenues, at any time so
long as the Excluded Activities do not materially interfere with any rights,
responsibilities or obligations as contained in this Agreement or any employment
agreement by and between the Practice and the Physician Employee.
SECTION 7.8. ENFORCEMENT. MidSouth, the Practice and the Physician Members
-----------
acknowledge and agree that since a remedy under Applicable Law for any breach or
attempted breach of the provisions of this Article 7 shall be inadequate,
MidSouth shall be entitled to specific performance and injunctive or other
equitable relief in the event of any breach or attempted breach, in addition to
whatever other remedies may exist under Applicable Law or in equity. If any
provision of Article 7 relating to any applicable Restrictive Period, scope of
activity restricted or the Restricted Area described therein shall be declared
by a court of competent jurisdiction to exceed the maximum time period, scope of
activity restricted or geographical area the court deems reasonable and
enforceable under Applicable Law, the time period, scope of activity restricted
and/or area of restriction held reasonable and enforceable by the court shall
thereafter be the Restrictive Period, scope of activity restricted and/or the
Restricted Area applicable to the restrictive covenant provisions in this
Article 7. The invalidity or non-enforceability of this Article 7 in any respect
shall not affect the validity or enforceability of the remainder of this Article
7 or of any other provisions of this Agreement.
26
ARTICLE 8. DUTIES OF THE MANAGEMENT TEAM.
-----------------------------
SECTION 8.1. FORMATION AND OPERATION OF THE MANAGEMENT TEAM. The parties
----------------------------------------------
shall establish a Management Team which shall be responsible for developing
management and administrative policies for the overall operation of the
Practice. No party shall have the authority to undertake any actions described
in Section 8.2 below without the authority of the Management Team. The
Management Team shall consist of four (4) members. MidSouth shall designate, in
its sole discretion, two (2) members of the Management Team, one of which shall
be the Management Team Chief Executive; provided, however, in MidSouth's sole
discretion, MidSouth may replace the Management Team Chief Executive as one of
its designees in the event MidSouth institutes disciplinary measures against the
Management Team Chief Executive in connection with his employment with MidSouth.
The Practice shall designate, in its sole discretion, two (2) physician members
of the Management Team. The chairman of the Management Team shall be a designee
of the Practice selected by the Practice. Except as may otherwise be provided
herein, the act of a majority of the members of the Management Team shall be the
act of the Management Team. Attached hereto as Schedule 8.1 are the initial
"Policies and Procedures" to be used by the Management Team until the Management
Team amends the Policies and Procedures. The chairman of the Management Team
shall be responsible for organizing the agenda for the Management Team meetings
referred to in this Article 8. In the event that a deadlock occurs on a matter
brought before the Management Team, then the relative parties, duties and
responsibilities with respect to such matter shall remain status quo.
SECTION 8.2. DUTIES AND RESPONSIBILITIES OF THE MANAGEMENT TEAM. The
--------------------------------------------------
Management Team shall have the following duties and obligations:
8.2.1. Capital Improvements and Expansion. Any renovation and expansion
----------------------------------
plans and capital equipment expenditures with respect to the Practice shall be
reviewed and approved by the Management Team and shall be based upon economic
feasibility, physician support, productivity and then current market conditions
and the budget. If the Management Team determines that the acquisition of
additional equipment or facilities is appropriate, then MidSouth shall use its
best efforts to arrange for the financing and acquisition of the property.
8.2.2. Annual Budgets. All annual capital and operating budgets prepared by
--------------
MidSouth, as set forth in Section 3.2, shall be subject to the review and
approval of the Management Team.
8.2.3. Exceptions to Inclusion in the Revenue Calculation. The exclusion of
--------------------------------------------------
any revenue from Practice Revenue, whether now or in the future, shall be
subject to the unanimous approval of the Management Team, and the treatment of
any expense as Practice Expense which is not otherwise addressed herein or in
any budget shall be subject to the unanimous approval of the Management Team.
8.2.4. Advertising. All advertising and other marketing of the services
-----------
performed at the Practice Facilities or any hospital or similar facility shall
be subject to the prior review and approval of the Management Team.
27
8.2.5. Fees. As a part of the annual operating budget, in consultation with
----
the Practice and MidSouth, to the extent allowed by Applicable Law, the
Management Team shall review the fee schedule or capitation arrangement for all
hospital, physician and ancillary services rendered by the Practice. In
addition, the Management Team shall approve the credit collection policies of
the Practice and MidSouth for the Practice's Accounts Receivable.
8.2.6. Provider and Payor Relationships. Decisions regarding the
--------------------------------
establishment or maintenance of relationships with institutional health care
providers and payors shall be made by the Practice in consultation with the
Management Team.
8.2.7. Strategic Planning. The Management Team shall develop long-term
------------------
strategic planning objectives.
8.2.8. Capital Expenditures. The Management Team shall determine the
--------------------
priority of major capital expenditures.
8.2.9. Physician Hiring. The Management Team shall recommend the number and
----------------
type of physicians required for the efficient and effective operation of the
Practice.
8.2.10. Management Team Chief Executive. The retention, and/or selection of
-------------------------------
the Management Team Chief Executive pursuant to Section 3.5 by MidSouth shall be
subject to the reasonable input of the Management Team. If the Practice is
dissatisfied with the services provided by the Management Team Chief Executive,
the Practice shall refer the matter to the Management Team. MidSouth and the
Management Team shall each in good faith determine whether the performance of
the Management Team Chief Executive could be brought to acceptable levels
through counsel and assistance, or whether the Management Team Chief Executive
should be terminated.
8.2.11. Grievance Referrals. The Management Team shall consider and make
---------------------
final decisions regarding grievances pertaining to matters not specifically
addressed in this Agreement as referred to it by the Practice's Board of
Directors.
ARTICLE 9. INSURANCE AND INDEMNITY
-----------------------
SECTION 9.1 INSURANCE TO BE MAINTAINED BY THE PRACTICE. Throughout the term
-------------------------------------------
of this Agreement, subject to the provisions of Section 3.1(m) providing for
malpractice premiums and deductibles to be a Practice Expense, the Practice
shall maintain comprehensive professional liability insurance with limits of not
less than $1,000,000 per claim and with aggregate policy limits of not less than
$3,000,000 per Physician Employee and Physician Extender Employee and a separate
limit for the Practice with the carrier which shall be determined by Practice
upon recommendation by the MidSouth. The Practice shall be responsible for all
liabilities in excess of the limits of the policies, and under no circumstances
shall any excess be deemed a Practice Expense. MidSouth shall have the option,
with Management Team approval, of providing the professional liability insurance
through an alternative program, provided the program meets the requirements of
the Insurance
28
Commissioner of the State. If the Practice's existing professional liability
insurance program is canceled and replaced by a professional liability insurance
program initiated by MidSouth, MidSouth shall pay over to the Practice any
unearned professional liability insurance premiums paid by the Practice to the
extent the Practice's carrier pays the amounts to MidSouth. Any insurance
program for the Practice shall include director and officer liability insurance
for the Practice, and the cost of the coverages shall be a Practice Expense.
SECTION 9.2. INSURANCE TO BE MAINTAINED BY MIDSOUTH. Throughout the term of
--------------------------------------
this Agreement, MidSouth shall, unless determined not necessary by the
Management Team, provide and maintain, as a Practice Expense, comprehensive
general liability and property insurance covering the Practice premises and
operations.
SECTION 9.3. TAIL INSURANCE COVERAGE. Tail insurance coverage shall be
-----------------------
purchased in the following manner:
9.3.1. The Practice will cause each Physician Employee associated with the
Practice to enter into an agreement with the Practice that upon termination of
the physician's relationship with the Practice, for any reason, tail insurance
coverage will be purchased by the individual physician to the extent that it can
not be purchased by the Practice. The provisions may be contained in employment
agreements, restrictive covenant agreements or other agreements entered into by
the Practice and the Physician Employees, and the Practice hereby covenants with
MidSouth to enforce the provisions relating to the tail insurance coverage or to
provide the coverage, which will be a Practice Expense.
9.3.2. The Practice shall obtain continuing liability insurance under
either a tail policy or an acts policy with the same limits and deductibles as
the comprehensive professional liability insurance at the time of the
termination of this Agreement pursuant to Article 10, which will not be a
Practice Expense.
SECTION 9.4. ADDITIONAL INSURED. The Practice and MidSouth agree to use
-----------------
their renewable best efforts to have each other named as an additional insured
on the other's respective professional liability insurance programs, which will
be a Practice Expense.
SECTION 9.5. INDEMNIFICATION.
---------------
9.5.1. The Practice Indemnification.
----------------------------
(a) The Practice shall indemnify, hold harmless and defend MidSouth, its
officers, directors, shareholders and employees, from and against any and all
liability, loss, damage, claim, causes of action, and expenses (including
reasonable attorneys' fees), to the extent not covered by insurance in the name
of the Practice or MidSouth, caused or asserted to have been caused, directly or
indirectly, by or as a result of the performance of medical services or the
performance of any intentional acts, negligent acts or omissions by the Practice
and/or its members, agents, employees and/or subcontractors (other than MidSouth
or any other party engaged by MidSouth) during the
29
term hereof, or as a result of a breach of the representations and warranties
contained in Article 12 of this Agreement or a breach of any covenant in Article
14 of this Agreement.
(b) The Practice shall not be liable to MidSouth for any claims under
Section 9.5.1(b)(ii) above until the claims exceed in the aggregate $25,000.00
that would otherwise be subject to indemnification under said provisions, and
then only for the amount by which the claims exceed $25,000.00.
9.5.2. MidSouth Indemnification. MidSouth shall indemnify, hold harmless
------------------------
and defend the Practice, its officers, members, directors and employees, from
and against any and all liability, loss, damage, claim, causes of action, and
expenses (including reasonable attorneys' fees), to the extent not covered by
insurance in the name of MidSouth, caused or asserted to have been caused,
directly or indirectly, by or as a result of the performance of any intentional
acts, negligent acts or omissions by MidSouth and/or its members, agents,
employees and/or subcontractors (other than the Practice) during the term of
this Agreement or as a result of a breach of the representations and warranties
contained in Article 13 of this Agreement. In addition, MidSouth shall
indemnify, hold harmless and defend the Practice, its officers, members,
directors and employees, from and against any and all liability, loss, damage,
claim, causes of action, and expenses (including reasonable attorneys' fees)
caused by any claim against the Practice relating to liabilities of the Practice
assumed by MidSouth as a result of the Merger which were disclosed by the
Practice in the Merger Agreement and for which the Practice does not have an
obligation to indemnify MidSouth as provided above.
9.5.3. Indemnification Payment Escrow. In the event that either party makes
------------------------------
a claim for indemnification under either the Merger Agreement or this Agreement
(the "Indemnified Party"), then the party who must provide indemnity (the
"Indemnifying Party"), shall have the right, to the extent it owes
indemnifications, to pay amounts owed to the Indemnified Party under the Merger
Agreement or this Agreement into an escrow account (established pursuant to an
escrow agreement to be agreed upon by the parties) to be held by the escrow
agent in an interest bearing account until a determination by either (i) the
parties, (ii) a court of proper jurisdiction or (iii) an agreed upon panel of
arbitrators, has been made regarding the Indemnified Party's right to
indemnification. In the event that the Indemnified Party is entitled to
indemnification, then such escrowed funds shall be paid to the Indemnified Party
in partial or complete satisfaction of such indemnification obligation. Any
excess funds remaining in the escrow account after the payment of the
indemnification obligation or any funds held in escrow account if it is
determined that no indemnification obligation is owed shall be paid to the
Indemnifying Party.
ARTICLE 10. TERM AND TERMINATION.
--------------------
SECTION 10.1. TERM OF AGREEMENT. This Agreement shall commence on the date
-----------------
hereof and shall expire on August 31, 2022 unless earlier terminated pursuant to
the provisions hereof (the "Term").
SECTION 10.2. EXTENDED TERM. Unless earlier terminated as provided for in
-------------
this Agreement, the term of this Agreement shall be automatically extended for
an additional term of five (5) years
30
and for a new term thereafter, unless either party delivers to the other party,
not less than one hundred eighty (180) days prior to the expiration of the
preceding term, written notice of the party's intention not to extend the term
of this Agreement.
SECTION 103. TERMINATION BY THE PRACTICE. The Practice may terminate this
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Agreement as follows:
(a) In the event of the filing of a petition in voluntary bankruptcy or an
assignment for the benefit of creditors by MidSouth, or upon other action taken
or suffered, voluntarily or involuntarily, under any federal or state Applicable
Law for the benefit of creditors by MidSouth, except for the filing of a
petition in bankruptcy by or against MidSouth which is dismissed within ninety
(90) days thereafter, the Practice may give notice of the immediate termination
of this Agreement;
(b) In the event MidSouth shall Default in the performance of any duty or
obligation imposed upon it by this Agreement and the Default continues for a
period of ninety (90) days after written notice thereof has been given to
MidSouth by the Practice (or in the event the Default cannot be cured within the
period and MidSouth is diligently pursuing a cure in the Practice's reasonable
opinion, the period shall be extended so long as MidSouth diligently and in good
faith continues to cure the Default until completion), or if MidSouth shall fail
to remit the payments due as provided in this Agreement and the failure to remit
continues for a period of two (2) business days after written notice thereof,
the Practice may terminate this Agreement;
(c) In the event that MidSouth shall intentionally or in bad faith violate
Applicable Law resulting in a direct, continuing material adverse effect on the
operations, earnings and cash flow of the Practice; or
(d) In the event that MidSouth has not has not successfully completed an
initial public offering of MidSouth common stock or MidSouth has not merged with
a publicly traded entity with an initial market price of stock or if the market
price of the merged stock is not greater than five (5) dollars per share, within
thirty-six (36) months from the date of this Agreement, the Physician Members
may, at that time, terminate this Agreement and be released from the restrictive
covenants contained in Article 7.
SECTION 10.4. TERMINATION BY MIDSOUTH. MidSouth may terminate this
-----------------------
Agreement as follows:
(a) ln the event of the filing of a petition in voluntary bankruptcy or an
assignment for the benefit of creditors by the Practice, or upon other action
taken or suffered, voluntarily or involuntarily, under any Applicable Law for
the benefit of creditors by the Practice, except for the filing of a petition in
involuntary bankruptcy against the Practice which is dismissed within ninety
(90) days thereafter, MidSouth may give notice of the immediate termination of
this Agreement;
(b) In the event the Practice shall Materially Default in the performance
of any duty or obligation imposed upon it by this Agreement, and the Default
continues for a period of ninety (90)
31
days after written notice thereof has been given to the Practice by MidSouth (or
in the event the Default cannot be cured within the period, the period shall be
extended so long as the Practice diligently and in good faith continues to cure
the Default until completion), or the Practice fails to remit the payments due
as provided in this Agreement and the failure to remit continues for a period of
thirty (30) days after written notice thereof, MidSouth may terminate this
Agreement; or
(c) In the event the Practice's Medicare or Medicaid provider number shall
be terminated or suspended as a result of the action or inaction of the Practice
or a Physician Employee, and such termination or suspension continues for thirty
(30) days after notice of the termination or suspension, MidSouth may give
notice of the immediate termination of this Agreement, unless the Practice, at
that time, is acting in good faith (and shall provide reasonable evidence of the
action being taken) to reverse such termination or suspension. Notwithstanding
any good faith effort on the part of the Practice to reverse such termination or
suspension, if such termination or suspension is not reversed within ninety (90)
days after notice of the termination or suspension of the Medicare or Medicaid
provider number by Medicare or Medicaid, MidSouth shall have the right to
terminate this Agreement immediately.
SECTION 10.5. ACTIONS AFTER TERMINATION. Upon termination of this Agreement
---------------------------
by either party or upon expiration of this Agreement, the Practice (and/or its
Physician Members) shall:
(a) If this Agreement is terminated by MidSouth pursuant to Section 10.4 or
upon the expiration of the Term of this Agreement, purchase from MidSouth at
book value all intangible assets acquired in the Merger, as adjusted through the
last day of the month most recently ended prior to the date of the termination
or expiration to reflect amortization or depreciation of the "service agreement
costs" and intangibles in accordance with GAAP. If the Agreement is terminated
by Practice for MidSouth's breach pursuant to Section 10.3, all intangible
assets acquired in the Merger shall be repurchased at the fair market value as
if the termination of this Agreement had occurred immediately prior to such
valuation;
(b) Purchase all improvements, additions or leasehold improvements to
Practice Facilities which have been made by MidSouth and which relate solely to
the performance of its obligations under this Agreement at book value;
(c) Assume all debt and all contracts, payables incurred as Practice
Expenses and leases which are obligations of MidSouth and which relate
principally to the performance of its obligations under this Agreement or the
properties subleased by MidSouth; and
(d) Purchase from MidSouth at book value all of the equipment acquired in
the Merger, including all replacements and additions thereto made by MidSouth
pursuant to the performance of its obligations under this Agreement, and all
other tangible assets, including inventory, and supplies, as adjusted through
the last day of the month most recently ended prior to the date of the
termination or expiration in accordance with GAAP to reflect operations of the
Practice depreciation and other adjustments of such tangible assets.
32
SECTION 10.6. CLOSING OF REPURCHASE BY, THE PRACTICE AND EFFECTIVE DATE OF
------------------------------------------------------------
TERMINATION. Except as provided in this Section 10.6, the Practice shall pay
-------------
cash to repurchase the practice assets as provided in Section 10.5 (the
"Repurchase Price"). The Repurchase Price shall be reduced by the amount of debt
and liabilities of MidSouth assumed by the Practice and shall also be reduced by
any payment MidSouth has failed to make under this Agreement. The Practice and
any physician associated with the Practice shall execute all documents as may be
required to assume the liabilities set forth in Section 10.5, to remove MidSouth
from any liability with respect to the repurchased assets and with respect to
any property leased or subleased by MidSouth, and to consummate the transactions
contemplated by Section 10.5. The closing date for the purchase shall be
determined by the Practice, but shall in no event occur later than ninety (90)
days from the date of the notice of termination. The termination or expiration
of this Agreement shall become effective upon the closing of the sale of the
assets. On the date of termination or expiration, but only in the event the
termination or expiration of the Agreement was the result of the expiration of
the Term of this Agreement or a termination pursuant to Section 10.3, the
Practice shall be released from the restrictive covenants provided from in
Article 7. From and after any termination or expiration, each party shall
provide the other party with reasonable access to books and records then owned
by it to permit the requesting party to satisfy reporting and contractual
obligations which may be required of it. Except as otherwise provided herein,
the restrictive covenants contained in Article 7 shall survive the expiration or
earlier termination of this Agreement. MidSouth shall give the Practice credit
towards the Repurchase Price for the fair market value of any of MidSouth's
Common Stock tendered to MidSouth in exchange for such assets. As used in this
Section 10.6, the term "fair market value" with respect to a single share of
MidSouth Common Stock shall mean; (i) in the event this Agreement is terminated
for any reason prior to an initial public offering of MidSouth's Common Stock or
MidSouth's merger into a publicly traded company, five dollars ($5.00) per
share; (ii) in the event MidSouth terminates this Agreement pursuant to the
terms of Section 10.4 subsequent to an initial public offering of MidSouth's
Common Stock or MidSouth's merger into a publicly traded company, five dollars
per share ($5.00); or (iii) in the event the Practice terminates this Agreement
pursuant to the terms of Section 10.3 or the Term of this Agreement expires
subsequent to an initial public offering of MidSouth's Common Stock or
MidSouth's merger into a publicly traded company, the closing "asking price" for
a single share of MidSouth's Common Stock as of the date on which the repurchase
is consummated, as reported on a securities exchange or quoted on a national
quotation system upon which the MidSouth Common Stock is traded or quoted.
ARTICLE 11. INTELLECTUAL PROPERTY AND RECORDS.
---------------------------------
SECTION 11.1. PROPRIETARY INFORMATION. The Practice acknowledges that
------------------------
MidSouth possess significant proprietary and confidential know-how, technology
and business information, including but not limited to, utilization protocols,
practice guidelines and proprietary management software and data ("Proprietary
lnformation"), which MidSouth has developed and will continue to develop on its
own, in its relationship with vendors, practitioner groups, integrated delivery
systems and other providers. The Practice and MidSouth acknowledge that one of
their mutual objectives is the development of Proprietary Information to be used
in connection with MidSouth's operations or which MidSouth intends to use or
license in its relationship with third parties, including other
33
medical groups, integrated delivery systems and other providers. In addition,
the Practice acknowledges that as of the Closing Date, by virtue of execution
and delivery of the Merger Agreement, MidSouth will have acquired all of the
Practice's existing Proprietary Information, excluding patient medical records.
Therefore, the parties agree that MidSouth shall own all new Proprietary
Information, as well as existing Proprietary Information, excluding patient
medical records, regardless of whether the new Proprietary Information is
developed by one or more physicians in the Practice or Affiliates. The Practice
agrees to execute and deliver such documentation as may be requested by MidSouth
from time to time to evidence such ownership. During the term of this Agreement,
MidSouth shall license and provide access to all existing Proprietary
Information to the Practice.
SECTION 11.2. OWNERSHIP OF MIDSOUTH'S BUSINESS RECORDS AND SYSTEMS. All
----------------------------------------------------
business records, information, software and systems of MidSouth relating to the
provision of its services under this Agreement shall remain the property of
MidSouth and may be removed by MidSouth upon any termination of this Agreement;
provided, however, that the Practice shall be entitled, upon reasonable written
request, to access such records and make copies or extracts thereof to the
extent necessary to prosecute or defend against any tax or other liabilities
imposed on the Practice by any Governmental Authority or other party.
SECTION 11.3. MAINTENANCE AND ACCESS OF RECORDS. Except as otherwise
---------------------------------
provided in this Agreement, the parties shall safeguard all records maintained
by them pursuant to this Agreement for a period of time specified by the
Management Team from the date of the last activity recorded in such records. In
particular, the parties agree, to the extent necessary to permit receipt of
reimbursement for services by the Practice, to make available to the Secretary
of the United States Department of Health and Human Services, the Comptroller
General at the General Accounting Office, or their authorized representatives,
any books, documents and records in their possession relating to the nature and
extent of the costs of services hereunder for a period of four (4) years after
the provision of such services. Each party further agrees that, if it contracts
with any third party to provide services that are valued in excess of $10,000,
it shall require the contracting party to comply with the requirements of the
previous sentence. During the term of this Agreement, and thereafter, the
Practice or its designee shall have reasonable access during normal business
hours to the Practice's and MidSouth's financial and accounting, including, but
not limited to, records of collections, expenses and disbursements as kept by
MidSouth in performing MidSouth's obligations under this Agreement, and the
Practice may copy any or all records at its expense. Nothing in this Section
11.3 constitutes the waiver of any attorney-client privilege, and neither party
shall be required hereunder to give the other party document if, as a result, an
existing attorney-client privilege would be waived.
SECTION 11.4. PATIENT RECORDS. Upon termination of this Agreement, the
---------------
Practice shall retain all patient medical records maintained by the Practice or
MidSouth in the name of the Practice.
SECTION 11.5. ACCESS TO RECORDS. During the term of this Agreement, and
-----------------
thereafter, the Practice or its designee shall have reasonable access during
normal business hours to the Practice's and MidSouth's financial records,
including, but not limited to, records of collections, expenses and
34
disbursements as kept by MidSouth in performing MidSouth's obligations under
this Agreement, and the Practice may copy any or all records at its expense.
ARTICLE 12. REPRESENTATIONS AND WARRANTS OF THE PRACTICE AND
------------------------------------------------
PHYSICIAN Members.
------------------
The Practice and the Physician Members jointly and severally represent,
warrant, covenant and agree with MidSouth regarding subsection 12.1, 12.2, 12.4,
12.5 and 12.7 and Practice agrees with MidSouth regarding all other subsections
contained in Article 12 that:
SECTION 12.1. VALIDITY. The Practice is a professional corporation and is
--------
duly qualified to do business as a foreign professional corporation where such
qualifications is necessary or required. The Practice has the full power and
authority to own the Practice property, to carry on the Practice business as
presently being conducted, to enter into this Agreement, and to consummate the
transactions contemplated hereby. Each Physician Shareholder is an adult citizen
and resident of the State of Tennessee [or the State of Mississippi.] Each
Physician Shareholder has the full power and authority to own his or her
property, carry on his or her business as presently conducted, to enter into
this Agreement, and to consummate the transactions contemplated hereby.
SECTION 12.2. LITIGATION. Except as disclosed pursuant to the Merger
----------
Agreement, there is no suit, action, proceeding at Applicable Law or in equity,
arbitration, administrative proceeding or other proceeding pending, or
threatened against, or affecting the Practice or any Physician Employee, or to
the best of the Practice's and each Physician Shareholder's knowledge, any
provider or other health care professional associated with or employed by the
Practice as pertains to any claim involving the provision of health care related
services, and there is no basis for any of the foregoing.
SECTION 123. PERMITS. The Practice and all health care professionals
---------
associated with or employed by the Practice have all permits and licenses and
other Necessary Authorizations required by all Applicable Law, except where
failure to secure such licenses, permits and other Necessary Authorizations does
not have a Material Adverse Effect; have made all regulatory filings necessary
for the conduct of Practice's business; and are not in violation of any of said
permitting or licensing requirements.
SECTION 12.4. POWER AND AUTHORITY. The Practice has the full authority to
---------------------
execute and deliver this Agreement and to carry out and consummate the
transactions contemplated hereby on the Closing Date. The execution and delivery
of this Agreement, the performance by the Practice of its obligations hereunder,
and the transactions contemplated hereby, have been duly authorized and approved
by all necessary actions of the Practice and Members. This Agreement
constitutes, and all agreements and other instruments and documents to be
executed and delivered by the Practice pursuant to this Agreement, will
constitute, legal, valid and binding obligations of the Practice, enforceable in
accordance with its terms and conditions except as enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditor's rights generally, and is subject to general principles of equity
(regardless of whether any enforceability is considered in a proceeding in
equity or at law).
35
SECTION 12.5. COMPLIANCE WITH APPLICABLE LAW. To the best of the Practice's
-------------------------------
and each Physician Shareholder's knowledge and belief, the Practice and each
Physician Employee has operated in compliance with all Applicable Law and
neither the Practice nor any provider associated with or employed by the
Practice has received payment or any remuneration whatsoever to induce or
encourage the referral of patients or the purchase of goods and/or services as
prohibited under 42 U.S.C. (S) 1320a-7b(b) or 42 U.S.C. (S)1395nn, or otherwise
perpetrated any Medicare or Medicaid fraud or abuse, nor has any fraud or abuse
been alleged within the last five (5) years by any Governmental Authority, a
carrier or a third party payor.
SECTION 12.6. HEALTH CARE COMPLIANCE. The Practice is presently
----------------------
participating in or otherwise authorized to receive reimbursement from or is a
party to Medicare, Medicaid, and other Third Party Payor Programs. All necessary
certifications and contracts required for participation in such programs are in
full force and effect and have not been amended or otherwise modified,
rescinded, revoked or assigned as of the date hereof, and no condition exists or
to the knowledge of the Practice no event has occurred which in itself or with
the giving of notice or the lapse of time or both would result in the
suspension, revocation, impairment, forfeiture or non-renewal of any Third Party
Payor Program. The Practice is in full compliance with the Material requirements
of all the Third Party Payor Programs applicable thereto.
SECTION 12.7. FRAUD AND ABUSE. The Practice, the Practice Employees and
-----------------
other persons and entities providing professional services for the Practice have
not, to the knowledge of the Practice and each Physician Shareholder, after due
inquiry, engaged in any activities which are prohibited by or are in violation
of the rules, regulations, policies, Contracts or Applicable Law pertaining to
any Third Party Payor Program, or which are prohibited by rules of professional
conduct ("Governmental Rules and Regulations"), including but not limited to the
following: (a) knowingly and willfully making or causing to be made a false
statement or representation of a Material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a Material fact for use in determining
rights to any benefit or payment; (c) failing to disclose knowledge by a
claimant of the occurrence of any event affecting the initial or continued right
to any benefit or payment on the Practice's own behalf or on behalf of another,
with intent to fraudulently secure such benefit or payment; or (d) knowingly and
willfully soliciting or receiving any remuneration (including any kickback,
bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in
kind or offering to pay or receive such remuneration (i) in return for referring
an individual to a person for the furnishing of arranging for the furnishing of
any item or service for which payment may be made in whole or in part by
Medicare or Medicaid, or (ii) in return for purchasing, leasing, or ordering or
arranging for or recommending purchasing, leasing, or ordering of any good,
facility, service or item for which payment may be made in whole or in part by
Medicare or Medicaid.
SECTION 12.8. PRACTICE COMPLIANCE. The Practice has all licenses necessary
--------------------
to operate the Practice in accordance with the requirements of any Applicable
Law and has all Necessary Authorizations for the use and operation of the
Practice, all of which are in full force and effect. There are no outstanding
notices of deficiencies relating to the Practice issued by any Governmental
Authority or third party payor requiring conformity or compliance with any
Applicable Law or
36
condition for participation of the Governmental Authority or third party payor,
and after reasonable and independent inquiry and due diligence and
investigation, the Practice has neither received notice nor has any knowledge or
reason to believe that the Necessary Authorizations may be revoked or not
renewed in the ordinary course.
SECTION 12.9. RATES AND REIMBURSEMENT POLICIES. The jurisdiction in which
--------------------------------
the Practice is located does not currently impose any restrictions or
limitations on rates which may be charged to private pay patients receiving
services provided by the Practice. The Practice does not have any rate appeal
currently pending before any Governmental Authority or any administrator of any
Third Party Payor Program. The Practice has no knowledge of any Applicable Law
which has been enacted, promulgated or issued within the eighteen (18) months
preceding the date of this Agreement or any legal requirement proposed or
currently pending in the jurisdiction in which the Practice is located which
could have a Material Adverse Effect on the Practice or may result in the
imposition of additional Medicaid, Medicare, charity, free care, welfare, or
other discounted or government assisted patients at the Practice or require the
Practice to obtain any necessary authorization which the Practice does not
currently possess.
SECTION 12.10. ACCOUNTS RECEIVABLE. To the best of Practice's knowledge and
--------------------
information with respect to the Purchased Accounts Receivable, as of the date of
purchase:
12.10.1. All documents and agreements relating to the Purchased Accounts
Receivable that have been delivered to MidSouth with respect to the Purchased
Accounts Receivable are true and correct; the Practice has billed the applicable
Account Debtor and the Practice has delivered or caused to be delivered to the
Account Debtor all requested supporting claim documents and, if any error has
been made, the Practice will promptly correct the same and, if necessary, rebill
or, if requested by MidSouth, cooperate with MidSouth to rebill the Purchased
Accounts Receivable.
12.10.2. The Purchased Accounts Receivable are exclusively owned by the
Practice and there is no security interest or lien in favor or any third party,
or the recording or filing against the Practice, as debtor, covering or
purporting to cover any interest of any kind in any Purchased Accounts
Receivable, except as has been released by each party holding the adverse
interest in the Purchased Accounts Receivable. Upon payment of the Purchase
Price with respect to the Purchased Accounts Receivable and with respect to
Governmental Receivables, to the extent permissible by Applicable Law, all
right, title and interest of the Practice with respect thereto shall be vested
in MidSouth, free and clear of any lien, security interest, claim or encumbrance
of any kind, and the Practice agrees to defend the same against the claims of
all persons.
12.10.3. The Purchased Accounts Receivable (i) are payable, in an amount
not less than their face amount, as adjusted pursuant to the provisions of
Article 6, by the Account Debtor identified by the Practice as being obligated
to do so, (ii) are based on an actual and bona fide retention of services or
sale of goods to the patient by the Practice in the ordinary course of business,
(iii) are denominated and payable only in legal currency of the United States,
and (iv) are accounts or general intangibles within the meaning of the UCC of
the state in which the Practice has its principal place of business, or are
rights to payment under a policy of insurance or proceeds thereof, and are not
37
evidenced by any instrument or chattel paper. There are no payors other than the
Account Debtor identified by the Practice as the payor primarily liable on any
Purchased Accounts Receivable.
12.10.4. The Purchased Accounts Receivable are not (i) subject to any
action, suit, proceeding or dispute (pending or threatened), set-off,
counterclaim, defense, abatement, suspension, deferment, deductible, reduction
or termination by the Account Debtors other than routine adjustments and
disallowances made in the ordinary course of business, (ii) past or within sixty
(60) days of, the statutory limit for collection applicable to the Account
Debtor, (iii) subject to an invoice which provides for payment more than forty-
five (45) days from the date of such invoice, (iv) an account which arises out
of a sale or other transaction by and between the Practice or an affiliate of
Practice, (v) an account in which the Account Debtor has commenced a voluntary
case, or an involuntary proceeding has been instituted, under the federal
bankruptcy Applicable Law, as now constituted or hereafter amended, or made an
assignment for the benefit or creditors, or an account in which a decree or
order for relief has been entered by a court having jurisdiction in the premises
in respect to the Account Debtor, (vi) an account in which the goods giving rise
to the Purchased Accounts Receivable have not been shipped and delivered to and
accepted by the Account Debtor or the services giving rise to the Purchased
Accounts Receivable have not been performed by the Practice and accepted by the
Account Debtor or the Purchased Accounts Receivables otherwise do not represent
a final sale, (vii) is evidenced by an instrument or chattel paper unless such
instrument or chattel paper is delivered to MidSouth with all appropriate
endorsements in favor of MidSouth, or (viii) other than a complete bona fide
transaction which requires no further act under any circumstances on the part of
Practice to make the Purchased Accounts Receivable payable by the Account
Debtor.
12.10.5. The Practice does not have any guaranty of, letter of credit
providing credit support for, or collateral security for, the Purchased Accounts
Receivable, other than any such guaranty, letter of credit or collateral
security as has been assigned to MidSouth, and any such guaranty, letter of
credit or collateral security is not subject to any lien in favor of any other
person.
12.10.6. The goods or services provided and reflected by the Purchased
Accounts Receivable were medically necessary for the patient in the opinion of
the Practice and the patient received such goods or services.
12.10.7. The face amount of the Purchased Accounts Receivable for the
services constituting the basis for the Purchased Accounts Receivable are
consistent with the usual, customary and reasonable fees charged by other
similar medical service providers in the Practice's community for the same or
similar service.
12.10.8. Each Account Debtor with respect to the Purchased Accounts
Receivable purchased by MidSouth (i) is not currently the subject of any
bankruptcy, insolvency or receivership proceeding, nor is it generally unable to
make payments on its obligations when due, (ii) is located in the United States,
and (iii) is one of the following: (w) the individual, or party legally
responsible for the individual, who received the health care services; (x) a
party which in the ordinary course of its business or activities agrees to pay
for healthcare services received by individuals, including,
38
without limitation, Medicare, Medicaid, governmental bodies, commercial
insurance companies and non-profit insurance companies (such as Blue Cross and
Blue Shield entities) issuing health, personal injury, workers compensation or
other types of insurance; (y) employers or unions which self-insure for employee
or member health insurance, prepaid healthcare organizations, preferred provider
organizations, health maintenance organizations or any other similar person, or
(z) a third party payor of the type described in the definition of Governmental
Receivables.
12.10.9. The proceeds of the sale of the Purchased Accounts Receivable
purchased by MidSouth pursuant to Article 6 will be used for the business and
commercial purposes of the Practice. The sale of the Purchased Accounts
Receivable hereunder is made in good faith and without actual intent to hinder,
delay or defraud present or future creditors of the Practice.
12.10.10. Except with respect to Governmental Receivables, the insurance
policy, Contract or other instrument obligating an Account Debtor to make
payment with respect to the Purchased Accounts Receivable (i) does not contain
any provision prohibiting the transfer of such payment obligation from the
patient to the Practice, or from the Practice to MidSouth, (ii) has been duly
authorized by the Practice and to the knowledge of the Practice has been duly
authorized by the Account Debtor and, together, with the Purchased Accounts
Receivable, constitutes the legal, valid and binding obligation of the Account
Debtor in accordance with its terms, (iii) together with the applicable
Purchased Accounts Receivable, does not contravene in any Material respect any
requirement of Applicable Law applicable thereto, and (iv) was in full force and
effect and applicable to the patient at the time the services constituting the
basis for the Purchased Account Receivable were performed.
The Purchased Accounts Receivable are purchased without recourse, except
for the representations, warranties and covenants made by the Practice and the
Physician Members with respect thereto. None of the foregoing representations
and warranties with respect to the Purchased Accounts Receivable shall be deemed
to constitute a guaranty by the Practice that the Purchased Accounts Receivable
will be collected by MidSouth. The Practice shall not be responsible for any
damages for any breach of a representation or warranty under this Section 12
until MidSouth has suffered a loss on the purchase of Purchased Accounts
Receivable. Damages for such breach shall be limited to the amount of MidSouth's
loss on the purchase of the Purchased Accounts Receivable.
SECTION 12.11. FULL DISCLOSURE. When considered in the context of all
---------------
information contained herein, to the knowledge of the Practice no representation
or warranty made by the Practice in this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
SECTION 12.12. EXHIBITS AND SCHEDULES. All the facts recited in Exhibits
----------------------
and Schedules annexed hereto shall be deemed to be representations of fact by
the Practice as though recited in this Article 12.
39
ARTICLE 13. REPRESENTATIONS AND WARRANTIES OF MIDSOUTH.
-----------------------------------------
SECTION 13.1. ORGANIZATION. MidSouth is a corporation duly organized,
------------
validly existing and in good standing under the Applicable Law of the State of
Tennessee. MidSouth has the full power to own its property, to carry on its
business as presently conducted, to enter into this Agreement and to consummate
the transactions contemplated hereby.
SECTION 13.2. AUTHORITY. MidSouth has taken all necessary action to
--------
authorize the execution, delivery and performance of this Agreement, as well as
the consummation of the transactions contemplated hereby. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, violate any provisions of the charter or bylaws of
MidSouth or any indenture, mortgage, deed of trust, lien, lease, agreement,
arrangement, Contract, instrument, license, order, judgment or decree or result
in the acceleration of any obligation thereunder to which MidSouth is a party or
by which it is bound.
SECTION 13.3. ABSENCE OF LITIGATION. No action or proceeding by or before
---------------------
any court or other Governmental Authority has been instituted or is, to the best
of MidSouth's knowledge, threatened with respect to the transactions
contemplated by this Agreement.
SECTION 13.4. TRANSACTIONS WITH AFFILIATES. MidSouth shall not enter into
----------------------------
any transaction or series of transactions, whether or not related to or in the
ordinary course of business, with any Affiliate of the Practice or MidSouth,
other than on terms and conditions substantially as favorable to MidSouth as
would be obtainable by MidSouth at the time in a comparable arm's-length
transaction with a person not an Affiliate.
SECTION 13.5. FULL DISCLOSURE. When considered in the context of all
---------------
information contained herein, to the knowledge of the MidSouth no representation
or warranty made by the MidSouth in this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
SECTION 13.6. EXHIBITS AND SCHEDULES. All the facts recited in Exhibits and
----------------------
Schedules annexed hereto shall be deemed to be representations of fact by the
MidSouth as though recited in this Article 13.
ARTICLE 14. COVENANTS OF THE PRACTICE AND PHYSICIAN MEMBERS.
-----------------------------------------------
SECTION 14.1. MERGER, CONSOLIDATION AND OTHER ARRANGEMENTS. The Practice
--------------------------------------------
shall not incorporate, merge or consolidate with any other entity or individual
or liquidate or dissolve or windup the Practice's affairs or enter into any
partnership, joint ventures or sale-leaseback transactions or purchase or
otherwise acquire (in one or a series of related transactions) any part of the
property or assets (other than purchases or other acquisitions of inventory,
materials and equipment in the ordinary course of business) of any other person
or entity.
40
SECTION 14.2. NECESSARY AUTHORIZATIONS/ASSIGNMENT OF LICENSES AND PERMITS.
-----------------------------------------------------------
The Practice and each Physician Employee, and each Physician Extender Employee
shall maintain all licenses, permits, certifications, or other Necessary
Authorizations and shall not assign or transfer any interest in any license,
permit, certificate or other Necessary Authorization granted to it by any
Governmental Authority, nor shall the Practice or any Physician Employee assign,
transfer, or remove or permit any other individual or entity to assign, transfer
or remove any records of the Practice or any Physician Employee, including
without limitation, patient records, medical and clinical records (except for
removal of such patient records required under any Applicable Law).
SECTION 14.3. TRANSACTION WITH AFFILIATES. Neither the Practice nor any
---------------------------
Physician Shareholder shall enter into any transaction or series of
transactions, whether or not related or in the ordinary course of business, with
any Affiliate of the Practice or MidSouth, other than on terms and conditions
substantially as favorable to the Practice or the Physician Shareholder, as
would be obtainable by the Practice or the Physician Shareholder at the time in
a comparable arms-length transaction with a person not an Affiliate.
SECTION 14.4. COMPLIANCE WITH ALL APPLICABLE LAW. The Practice and each
----------------------------------
Physician Shareholder shall use their best efforts to comply with all Applicable
Law and regulations relating to the Practice's practice and the operation of any
facility, including, but not limited to, all Applicable Law relating to the
acquisition or operation of a health care practice. Furthermore, neither the
Practice nor any Physician Shareholder shall intentionally violate any
Applicable Law.
SECTION 14.5. THIRD PARTY PAYOR PROGRAMS. The Practice shall maintain its
--------------------------
compliance with the requirements of all Third Party Payor Programs in which
Practice will be participating or authorized to participate.
SECTION 14.6. CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The
--------------------------------------------------
Practice shall not make any change in the character of Practice business or in
the credit and collection policy, which change would, in either case, impair the
collectability of any Purchased Accounts Receivable or any Accounts Receivable
received by MidSouth pursuant to the Merger or otherwise modify, amend or extend
the terms of any such account other than in the ordinary course of business.
SECTION 14.7. TREATMENT OF ACCOUNTS RECEIVABLE. The Practice will (i) treat
--------------------------------
transfers to MidSouth of Purchased Accounts Receivable hereunder as a sale for
all purposes, including tax and accounting (and shall accurately reflect such
sale in its financial statements), and will advise all persons who inquire about
the ownership of the Purchased Accounts Receivable that they have been sold to
MidSouth; (ii) not treat any Purchased Accounts Receivable as an asset on the
Practice's books and records; (iii) record in the Practice's books, records and
computer files pertaining thereto that the Purchased Accounts Receivable have
been sold to MidSouth; (iv) pay all taxes, if any, relating to the transfer of
the Purchased Accounts Receivable after the same have been purchased by
MidSouth; (v) not impede or interfere with MidSouth's collection of the
Purchased Accounts Receivable; (vii) not amend, waive or otherwise permit or
agree to any deviation from the terms or conditions of the Purchased Accounts
Receivable; (viii) use all reasonable efforts to obtain all
41
consents from patients which are required by Applicable Law in order for
MidSouth, or any servicing entity retained by MidSouth, to secure information
needed to obtain or to expedite payment from the respective Account Debtors; and
(ix) have billed the Purchased Accounts Receivable on the same bases and using
the same policies and practices that it has used in the past unless MidSouth has
been advised in writing of a change prior to the purchase of the Purchased
Accounts Receivable. MidSouth or its designated representatives from time to
time may verify the Purchased Accounts Receivable, inspect, check, take copies
or extracts from the Practice's books, records and files, and the Practice will
make the same available to MidSouth or such representatives at any reasonable
time for such purposes.
SECTION 14.8. SECURITY INTEREST. If, contrary to the mutual intent of the
-----------------
Practice and MidSouth, any purchase of Purchased Accounts Receivable is not
characterized as a sale, the Practice shall, effective as of the date hereof, be
deemed to have granted and the Practice does hereby grant to MidSouth a first
priority security interest in and to any and all of the Purchased Accounts
Receivable and the proceeds thereof to secure the repayment of all amounts
advanced to the Practice hereunder with accrued interest thereon, and this
Agreement shall be deemed to be a security agreement. With respect to such grant
of a security interest, MidSouth may at its option exercise from time to time
any and all rights and remedies available to it under the UCC or otherwise. The
Practice agrees that five (5) days shall be reasonable prior notice of the date
of any public or private sale or other disposition of all or part of the
Purchased Accounts Receivable. The Practice represents and warrants that the
location of the Practice's principal place of business, and all locations where
the Practice maintains records with respect to its accounts are set forth under
its name in Section 15.12 hereof. The Practice agrees to notify MidSouth in
writing thirty (30) days prior to any change in any such location. The exact
name of the Practice is as set forth at the beginning of this Agreement, and
except as set forth on the signature page hereof, the Practice has not changed
its name in the last five (5) years, and during such period the Practice did not
use, nor does the Practice now use, any fictitious or trade name. The Practice
shall notify MidSouth in writing thirty (30) days prior to any change in any
such name.
ARTICLE 15. MISCELLANEOUS.
-------------
SECTION 15.1. ASSIGNMENT. MidSouth shall have the right to assign without
----------
the consent of the Practice all of its rights hereunder to any person, firm or
corporation (i) under common control with MidSouth, (ii) to any lending
institution, for security purposes or as collateral, from which MidSouth obtains
financing, or (iii) that is an affiliate of MidSouth, including, but not limited
to, a parent, subsidiary, or brother-sister corporation, and MidSouth shall have
the right to assign with the consent of the Practice (which shall not be
unreasonably withheld) all rights hereunder to any firm, person or corporation
that merges, reorganizes, or otherwise consolidates with MidSouth and further
agrees that upon receipt of notice from such assignee, the Practice shall pay to
the assignee or cause to be paid to the assignee all amounts due and payable to
MidSouth pursuant to this Agreement. Without limiting the foregoing, the
Practice acknowledges that, as collateral for certain obligations, MidSouth has
assigned all of its rights hereunder to a Lender as Agent (the "Agent") for
itself and other banks and institutional lenders from time to time (collectively
the "Banks") and has granted the Agent for the benefit of the Banks a lien and
security interest upon all real and personal property
42
owned by MidSouth ("Pledged Assets"). As an inducement for the Banks to extend
or continue the extension of credit to MidSouth, the Practice (i) acknowledges
that the collateral assignment to the Agent covers all rights of MidSouth
hereunder, including, but not limited to, rights arising from warranties and
representations made by the Practice, rights to enforce covenants made by the
Practice, and rights to receive all payments due MidSouth; (ii) agrees to regard
the Agent as the owner of any and all of the assigned rights upon written notice
to the Practice of this election from the Agent; (iii) agrees that neither the
Agent nor any of the Banks has obligation for the performance of the duties of
MidSouth hereunder, and shall not assume any such duty by the exercise of rights
as a secured lender; (iv) agrees to give the Agent written notice of any
Material Default hereunder on MidSouth's part at the address provided in writing
to Practice by the Agent and to allow cure periods as provided in Section 10.3
thereafter for the cure of Default before the Practice terminates this
Agreement; (v) agrees that the rights of the Practice under this Agreement,
including, but not limited to, the right to the use of the Pledged Assets, are
and shall be junior to any security interest that the Agent and the Banks, their
successors or assigns may have in the Pledged Assets at any time; (vi) agrees
that the benefits of the above undertakings in favor of the Agent and Banks
shall further extend to all successors and assigns of the Agent and Banks,
provided that any notices given by the Practice under this Section 15.1 shall be
given to the Agent at the foregoing address unless the Practice has received
written notice of a change thereof; and (vii) agrees that this Section 15.1 may
not be modified, and no provision of this Section 15.1 may be waived, absent the
written approval of the Agent and Banks. Further, if a majority of the
shareholders of MidSouth entitled to vote on a sale of all of the assets or
substantially all of the assets or common stock of MidSouth authorize the sale
or transfer of all or substantially all of the assets or common stock of
MidSouth to a third party (the "Acquiring Party"), this Agreement shall be
deemed automatically assigned and transferred to the Acquiring Party without the
necessity of obtaining the consent of the Practice. Except as set forth above,
neither MidSouth nor the Practice shall have the right to assign their
respective rights and obligations hereunder without the written consent of the
other party.
SECTION 15.2. THIS AGREEMENT. This Agreement sets forth the entire
----------------
agreement of the parties with respect to the subject matter hereof and it
supersedes and discharges all prior agreements (written or oral) and
negotiations and all contemporaneous oral agreements concerning the subject
matter. There are no oral conditions precedent to the effectiveness of this
Agreement.
SECTION 15.3. NO PRACTICE OF MEDICINE. The parties acknowledge that
-----------------------
MidSouth is not authorized or qualified to engage in any activity which may be
construed or deemed to constitute the practice of medicine. To the extent any
act or service required of MidSouth in this Agreement should be construed or
deemed by any Governmental Authority or court to constitute the practice of
medicine, the performance of said act or service by MidSouth shall be deemed
waived and unenforceable to the minimum extent required to comply with
Applicable Law.
SECTION 15.4. NON-WAIVER. Neither the failure of nor any delay by any party
----------
to this Agreement to enforce any right hereunder or to demand compliance with
its terms is a waiver of any right hereunder. No action or inaction taken
pursuant to this Agreement on one or more occasions is a waiver of any right
hereunder or constitutes a course of dealing that modifies this Agreement.
43
SECTION 15.5. WAIVERS. No waiver of any right or remedy under this
-------
Agreement shall be binding on any party unless it is in writing and is signed by
the party to be charged. No waiver of any right or remedy under any term of this
Agreement shall in any event be deemed to apply to any subsequent Default under
the same of any other term contained herein.
SECTION 15.6. AMENDMENTS. No amendment, modification or termination of this
----------
Agreement shall be binding on any party hereto unless it is in writing and is
signed by the party to be charged.
SECTION 15.7. SEVERABILITY. The terms of this Agreement are severable and
--------------
the invalidity of all or any part of any term of this Agreement shall not render
invalid the remainder of this Agreement or the remainder of the term. If any
term of this Agreement is so broad as to be unenforceable, the term shall be
interpreted to be only so broad as is enforceable.
SECTION 15.8. SUCCESSORS. The terms of this Agreement shall be binding upon
----------
and inure to the benefit of the parties, their respective successors, assigns,
heirs and beneficiaries.
SECTION 15.9. THIRD PARTIES. Nothing herein expressed or implied is
-------------
intended or shall be construed to give any person other than the parties hereto
any rights or remedies under this Agreement.
SECTION 15.10. SATURDAYS, SUNDAYS AND HOLIDAYS. Where this Agreement
-------------------------------
authorizes or requires a payment or performance on a Saturday, Sunday or public
holiday, the payment or performance shall be deemed to be timely if made on the
next succeeding business day.
SECTION 15.11. CAPTIONS. The captions and section numbers appearing in this
--------
Agreement are inserted only as a matter of convenience. They do not define,
limit or describe the scope or intent of the provisions of this Agreement.
SECTION 15.12. NOTICES. All notices required or permitted by this Agreement
---------
shall be in writing and shall be deemed to have been given (a) when received if
given in person, (b) on the date of acknowledgment of receipt if sent by telex,
facsimile or other wire transmission, (c) one business day after being sent by
overnight delivery service, or (d) three (3) days after being deposited in the
United States mail, certified or registered mail, postage prepaid, addressed as
follows:
To MidSouth Practice Management, Inc.: 000 Xxxxx Xxxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxx Xxxxxxxx
44
With a copy to: Black Bobango & Xxxxxx
A Professional Corporation
000 Xxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
To Practice: Foundation Medical Group, PLLC
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
With a copy to: Xxxxx Xxxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Good, Esq.
or to such other address as either party shall notify the other.
SECTION 15.13. COUNTERPARTS. This Agreement may be executed in any number
------------
of counterparts, all of which shall constitute one and the same instrument, and
any party hereto may execute this Agreement by signing one or more counterparts.
SECTION 15.14. FURTHER ASSURANCES. Each of the parties hereto agrees to
------------------
execute any document or documents that may be requested from time to time by the
other party to implement or complete the party's obligations pursuant to this
Agreement.
SECTION 15.15. ATTORNEYS' FEES. If legal action is commenced by either
---------------
party to enforce or defend its rights under this Agreement, the prevailing party
in the action shall be entitled to recover its costs and reasonable attorneys'
fees in addition to any other relief granted.
SECTION 15.16. TIME IS OF THE ESSENCE. Time is hereby expressly declared to
----------------------
be of the essence in this Agreement.
SECTION 15.17. CONFIDENTIALITY. Except for disclosure to its bankers,
---------------
underwriters or lenders, or as necessary or desirable for conduct of business,
including negotiations with other acquisition candidates, neither party hereto
shall disseminate or release to any third party any information regarding any
provision of this Agreement, or any financial information (past, present or
future) regarding the other that was obtained by the other in the course of the
negotiation of this Agreement or in the course of the performance of this
Agreement, without the other party's written approval; provided, however, the
foregoing shall not apply to information which (i) is generally available to the
public other than as a result of a breach of confidentiality provisions; (ii)
becomes available on a non-confidential basis from a source other than the other
party or its affiliates or agents, which source was not itself bound by a
confidentiality agreement, or (iii) which is required to be disclosed by
Applicable Law, including securities Applicable Law or pursuant to court order.
45
SECTION 15.18. CONTRACT MODIFICATIONS FOR PROSPECTIVE LEGAL EVENTS AND COST
------------------------------------------------------------
REDUCTIONS. In the event Applicable Law, now existing or enacted or promulgated
----------
after the effective date of this Agreement, are interpreted by judicial
decision, a regulatory agency or legal counsel in a manner so as to indicate
that the structure of this Agreement may be in violation of Applicable Law or
regulations, the Practice and MidSouth shall amend this Agreement as necessary.
To the maximum extent possible, any amendment shall preserve the underlying
economic and financial arrangements between the Practice and MidSouth. In
addition, the parties agree that in the event an opportunity is presented to
reduce the tax costs of either party, the parties will present the matter to the
Management Team, and the parties will cooperate with each other to reduce the
costs to the other party, including considering and negotiating in good faith
amendments to this Agreement.
SECTION 15.19. REMEDIES CUMULATIVE. No remedy set forth in this Agreement
-------------------
or otherwise conferred upon or reserved to any party shall be considered
exclusive of any other remedy available to any party, but the same shall be
distinct, separate and cumulative and may be exercised from time to time as
often as occasion may arise or as may be deemed expedient.
SECTION 15.20. NO OBLIGATION TO THIRD PARTIES. None of the obligations and
------------------------------
duties of MidSouth or the Practice under this Agreement shall in any way or in
any manner be deemed to create any obligation of MidSouth or of the Practice to,
or any rights in, any person or entity not a party to this Agreement, except as
related to assignments pursuant to Section 15.1.
SECTION 15.21. COMPLIANCE WITH FEDERAL APPLICABLE LAW. Notwithstanding
---------------------------------------
anything herein to the contrary, any clinical laboratory or other service shall
be operated in full compliance with Section 6204 of the Omnibus Budget
Reconciliation Act of 1989, as amended.
SECTION 15.22. FORCE MAJEURE. Neither party shall be liable to the other
-------------
for failure to perform hereunder in the event of strikes, lock-outs, calamities,
acts of God, unavailability of supplies or other events over which the party has
no control for so long as the events continue, and for a reasonable period of
time thereafter.
SECTION 15.23. COMMUNICATIONS. The Practice and MidSouth agree that good
--------------
communication between the parties is essential to the successful performance
of this Agreement, and each pledges to communicate fully and clearly with the
other on matters relating to the successful operation of the Practice.
SECTION 15.24. GOVERNING APPLICABLE LAW. The validity, interpretation and
------------------------
performance of this Agreement shall be governed by and construed in accordance
with the Applicable Law of the State of Tennessee. Each of the parties submits
to the jurisdiction of any state or federal court sitting in Memphis, Tennessee,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect to the action or proceeding may be heard and
determined in any such court. Each party agrees not to bring any action or
proceeding arising out of or relating to this
46
Agreement in any other court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto.
[REMAINDER OF THE PAGE IS INTENTIONALLY LEFT BLANK]
47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
MIDSOUTH PRACTICE MANAGEMENT, INC.
a Tennessee corporation
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Name:
----------------------------
Title:
---------------------------
Address:
-------------------------
-------------------------
-------------------------
FOUNDATION MEDICAL GROUP, PLLC
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
------------------------------
Name:
----------------------------
Title:
---------------------------
Address:
-------------------------
-------------------------
-------------------------
48
JOINDER AGREEMENT
The following Physician Members hereby agree to be bound to the Management
Services Agreement by and between MidSouth Practice Management, Inc. and
Foundation Medical Group, PLLC dated as of September 17, 1997 solely for the
purposes of being bound by Articles I, Section 6.3, Article 7, and Section 10.5
of this Agreement.
Physician Members:
/s/ Xxxxxxx X. Xxxxxxx, Xx., M.D.
--------------------------------
Xxxxxxx X. Xxxxxxx, Xx., M.D.
/s/ Xxxx X. Xxxxxxx, M.D.
--------------------------------
Xxxx X. Xxxxxxx, M.D.
/s/ Xxxxx X. Xxxxxx
--------------------------------
Xxxxx X. Xxxxxx, M.D.
/s/ Xxxxxxx Xxxxxxx, M.D.
--------------------------------
Xxxxxxx Xxxxxxx, M.D.
/s/ Xxxxx Xxxxxxxx, M.D.
--------------------------------
Xxxxx Xxxxxxxx, M.D.
/s/ Xxxxxx X. Xxxxxx, M.D.
--------------------------------
Xxxxxx X. Xxxxxx, M.D.
/s/ Xxx X. Xxxxx, M.D.
--------------------------------
Xxx X. Xxxxx, M.D.
/s/ Xxxx Xxxxxx, M.D.
--------------------------------
Xxxx Xxxxxx, M.D.
49
SCHEDULE 8.1
MANAGEMENT TEAM POLICIES AND PROCEDURES
8.1.1. Number, Tenure and Qualification. The Management Team shall consist
--------------------------------
of four (4) members. MidSouth shall designate, in its sole discretion, two (2)
members of the Management Team. The Practice shall designate, in the Practice's
sole discretion, two (2) members of the Management Team. One of MidSouth's
designees shall be the Management Team Chief Executive; provided, however, that
MidSouth may replace the Management Team Chief Executive, in its sole
discretion, as one of its Management Team designees if MidSouth institutes
disciplinary measures against the Management Team Chief Executive arising out of
his employment by MidSouth. The initial Management Team shall be chosen at the
time of the closing of the Merger. Thereafter, the respective Management Team
members shall be chosen at such time and in such manner as shall be determined
by the respective party making the appointment.
8.1.2. Duties and Responsibilities of the Management Team. The Management
-------------------------------------------------
Team shall have the duties and responsibilities more particularly described in
Article 8 of this Agreement.
8.1.3. Regular Meetings of the Management Team. Regular meetings of the
---------------------------------------
Management Team shall be held on the first Monday of each calendar quarter at
such times and places as the Management Team by resolution may determine and
specify, and if so determined no notice thereof need be given.
8.1.4. Special Meetings. Special meetings of the Management Team may be
----------------
held at any time or place whenever called by written request of at least two (2)
Management Team members, notice thereof being given to each Management Team
member by the Management Team members calling the meeting, or they may be held
at any time without formal notice provided all of the Management Team members
are present or those not present shall at any time waive or have waived notice
thereof.
8.1.5. Notice. Notice of any special meeting shall be given at least ten
------
(10) days previously thereto by written notice delivered in accordance with the
provisions of 15.13 of the Agreement.
8.1.6. Meetings by any Form of Communication. The Management Team shall
-------------------------------------
have the power to permit any and all Management Team members to participate in a
regular or special meeting by, or conduct the meeting through the use of any
means of communication which all Management Team members participating may
simultaneously hear each other during the meeting. A Management Team member
participating in a meeting by this means is deemed to be present in person at
the meeting.
8.1.7. Quorum. All of the members of the Management Team as constituted
------
from time to time shall constitute a quorum for the transaction of business, but
a lesser number may adjourn any meeting and the meeting may be held as adjourned
without further notice. When a quorum is present at any meeting, a majority of
the members present thereat shall decide any question brought before such
meeting, except as otherwise provided by this Agreement or by these policies and
procedures.
50
The fact that a Management Team members has an interest in a matter to be voted
on at the meeting shall not prevent his vote from being counted for purposes of
a quorum.
8.1.8. Vacancies. Any vacancy occurring in the Management Team shall be
---------
filled by the party which chose the vacated Management Team member(s).
8.1.9. Removal. Any Management Team member may be removed without cause by
-------
the party which chose the Management Team member.
8.1.10. Committees. The majority of the Management Team may appoint an
----------
executive committee or such other committees as it may deem advisable, composed
of one (1) or more Management Team members, and may delegate authority to such
committees as is not inconsistent with this Agreement. The members of such
committee shall serve at the pleasure of the Management Team.
8.1.11. Presumption of Assent. A Management Team member who is present at a
---------------------
meeting of the Management Team at which action on any matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the secretaries of the MidSouth and the Practice immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
Management Team who voted in favor of such action.
8.1.12. Informal Action by Management Team Members. Any action required to
-------------------------------------------
be taken at a meeting of the Management Team, or any other action which may be
taken at a meeting of the Management Team, may be taken without a meeting if all
Management Team members consent to taking such action without a meeting. If all
Management Team members consent to taking such action without a meeting, the
affirmative vote of a majority of the Management Team members is the act of the
Management Team. The action must be evidenced by one or more written consents
describing the action taken, signed by each Management Team member, indicating
each signing Management Team member's vote or abstention on the action, and
shall be included in the minutes or filed with the Management Team records
reflecting the action taken.
51
SCHEDULE 1.1.46
PRACTICE EXPENSES
"Practice Expenses" shall include:
(a) Salaries, benefits, (including contributions under any MidSouth
employee benefits plan, severance benefits as set by the Management Team and
other direct costs of all employees of the Practice (other than Physician
Employees and Physician Extender Employees) and MidSouth working at the Practice
Facilities.
(b) Direct costs of all outside consultants, without xxxx-up, retained by
MidSouth with the advance approval of the Management Team to provide services at
or in connection with the Practice.
(c) Obligations of MidSouth or the Practice under leases or subleases for
the Practice Facilities and any personal property used by the Practice.
(d) The expenses and charges incurred for the Practice Facilities,
including without limitation, utilities, telephone charges, etc.
(e) Personal property and intangible taxes assessed against MidSouth's
assets utilized by the Practice from and after the date of the Agreement.
(f) The costs of any goods purchased for resale by or on behalf of the
Practice.
(g) Interest expense on indebtedness incurred by MidSouth to (i) satisfy
the obligations of the Practice if any, assumed under the Merger Agreement, (ii)
establish any new ancillary services on behalf on the Practice; or (iii)
purchase equipment on behalf of the Practice.
(h) Insurance expenses to the extent provided in Section 3.1(m) and
Article 9.
(i) Other expenses incurred by MidSouth in carrying out its obligations
under this Agreement or incurred by the Practice which are budgeted as Practice
Expenses.
(j) Except as excluded in part (4) of Schedule 1.1.13, the depreciation as
determined in accordance with GAAP, for any equipment or depreciable property
owned by MidSouth and used at the Practice Facilities by the Practice to be
billed to the Practice on a monthly basis and paid to MidSouth at the same time
MidSouth pays for the Practice's Accounts Receivable pursuant to Section
6.2; and
(k) Any marketing or presentation expense of any kind, including slide
production, travel, meals, entertainment or similar expenses incurred at the
direction of the Management Team.
52
SCHEDULE 1.1.13
EXCLUDED EXPENSES
"Excluded Expenses" shall be the sole obligation of the Practice and shall
mean pursuant to GAAP applied on a consistent basis:
(1) Salaries, advances or other distributions made to Physician Employees
or Physician Extender Employees;
(2) Expenses of Physician Employees and Physician Extender Employees to
meet continuing education requirements, including related travel expenses; and
(3) Any indemnification obligation of the Practice.
(4) Any other items specifically designated as Excluded Expenses elsewhere
in this Agreement including but not limited to the following items:
(a) Accounting, legal and other professional fees attributed to the
Practice or to Physician Employees; provided, however, legal and accounting
expenses incurred in the ordinary course of Practice's business and approved by
the Management Team will be the Practice Expenses.
(b) Contribution expenses, cash or non-cash, which include, but are
not limited to costs of sponsoring sports teams, political contributions,
unapproved marketing expenses, and contributions to hospitals and staff.
(c) Automobile expenses including payments, repairs and maintenance,
mileage, depreciation, etc.
(d) Except as provided in Schedule 1.1.46(k), entertainment expenses
of any kind.
(e) Benefits including health insurance, life insurance, (except to
the extent allowed under subparagraph h of the definition of Practice Expenses,
etc.) vacation time, sick time, paid leave of absence, contributions to and
administration of physician retirement plans (pension, 401(k), XXX, others),
etc. for Physician Members, Physician Employees and Physician Extender
Employees, but excluding malpractice insurance which shall be a Practice
Expense.
(f) Employment tax expenses including Federal and State Unemployment
taxes, FICA taxes, Medicare taxes, etc. for Physician Members, Physician
Employees and Physician Extender Employees.
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(g) Home office expenses including the acquisition costs,
depreciation, repairs and maintenance, and ongoing operating expenses of
computers, software, copying machines, fax machines, telephones and telephone
lines, cellular telephones, etc.; and the costs of having an office in one's
home including allocated rent, utility and depreciation expenses.
(h) Meal expenses.
(i) Medical supplies and drugs either used or distributed by a
Physician Employee without billing for such supplies and drugs at standard
rates.
(j) Except as provided in Schedule 1.1.46(k), presentation expenses of
any kind including, professional services, slide production, travel, meals,
entertainment, etc.
(k) Personal postage expenses.
(l) Personal laundry expenses.
(m) Personal assistant expenses (including the time staff spends on
personal errands for Physician Employees).
(n) Uninsured damages or claims paid or expenses related thereto from
any Applicable Lawsuit or claim against the Practice, or any Physician
Shareholder, or Physician Employee, including but not limited to malpractice
claims or litigation.
(5) Any expenses or responsibilities of the Practice which are not
expressly designated herein as Practice Expenses.
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[SCHEDULE 1.1.47]
LIST OF PRACTICE FACILITIES
---------------------------
WALNUT GROVE MEDICAL GROUP, P.C.
SOLE FACILITY: Baptist Memorial Hospital Professional Building
0000 Xxxxxx Xxxxx Xxxx
Xxxxx #000
Xxxxxxx, Xxxxxxxxx 00000
INTERNAL MEDICINE ASSOCIATES OF XXXXXXX, P.C.
SOLE FACILITY: Xxxxxxx Medical Plaza
0000 Xxxxxx Xxx
Xxxxx #000
Xxxxxxx, Xxxxxxxxx 00000
XXXX XXXXXX, M.D.
SOLE FACILITY: 0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
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SCHEDULE 1.133
MIDSOUTH EXPENSES
"MidSouth Expenses" shall mean, pursuant to GAAP applied on a consistent basis:
(a) Any corporate overhead charges of MidSouth and other items incurred
by MidSouth that are not incurred specifically for the purpose of
providing services to the Practice or are not directly attributable
to the Practice, as reasonably determined by MidSouth, including,
without limitation, salaries and benefits of the executive officers
of MidSouth, except as otherwise provided in the definition of
Practice Expenses;
(b) Any amortization of any intangible asset resulting from the Merger;
(c) Any depreciation attributable to increases in the book value of
tangible depreciable assets resulting from the Merger,
(d) Any legal and/or accounting expenses incurred by MidSouth in
connection with the merger; and
(e) All taxes of MidSouth, including but not limited to, state and
federal employee taxes related solely to MidSouth employees who
provide services directly to the Practice at the Practice
Facilities, property taxes on assess used by the Practice and other
taxes specifically included in Practice Expenses.
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[SCHEDULE 4.1]
LIST OF PHYSICIAN EMPLOYEES
---------------------------
1. XXXXX XXXXXXXX, M.D.
2. XXXXXX X. XXXXXX, M.D.
3. XXX X. XXXXX, M.D.
4. XXXXXXX X. XXXXXXX, XX., M.D.
5. XXXX X. XXXXXXX, M.D.
6. XXXXX X. XXXXXX, M.D.
7. XXXXXXX XXXXXXX, M.D.
8. XXXX X. XXXXXX, M.D.
9. XXXXXX X. XXXXXX, M.D.
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